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Operator: Good morning, ladies and gentlemen, and welcome to Flotek Industries, Inc. Fourth Quarter and Full Year 2025 Earnings Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If anyone has any difficulties hearing the conference, I would now like to turn the conference call over to Mike Critelli, Director of Finance and Investor Relations. Please go ahead. Mike Critelli: Thank you, and good morning. We are thrilled to have you with us for Flotek Industries, Inc.'s fourth quarter and full year 2025 earnings conference call. Today, I am joined by Ryan Ezell, Chief Executive Officer, and Bond Clement, Chief Financial Officer. We will begin with prepared remarks on our operational and financial performance, followed by Q&A. Yesterday, we released our fourth quarter and full year 2025 results, along with an updated investor presentation, both available on the Investor Relations section of our website. This call is being webcast with a replay available shortly after. Please note that the comments made on today's call may include forward-looking statements, which include our projections or expectations for future events. Forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control. These risks and uncertainties can cause actual results to differ materially from those projected in forward-looking statements. We advise listeners to review our earnings release and most recent 10-Ks and 10-Q filings for a more complete description of risk factors that could cause actual results to materially differ from those projected in forward-looking statements. Please refer to the reconciliations provided in the earnings press release and investor presentation, as management will be discussing non-GAAP metrics on this call. I will now turn the call over to our CEO, Ryan Ezell. Ryan Ezell: Thank you, Mike. Good morning, everyone. We appreciate your interest in Flotek Industries, Inc. and your participation today as we review our Q4 and full year 2025 operational and financial results. In the fourth quarter, we saw North American operators maintain the cautious posture initiated in the second quarter as they continued to navigate the return of OPEC+ spare capacity and persistent global trade volatility. Despite the dynamic geopolitical and macroeconomic challenges that have injected uncertainty within the market, the Flotek Industries, Inc. team remains steadfast in the execution of our corporate strategy, driving transformation, and delivering our third consecutive year of significant gross profit and adjusted EBITDA improvement. Through the powerful convergence of innovative real-time data and chemistry solutions, as shown on slide 3, Flotek Industries, Inc. has laid the foundation for a data-driven growth trajectory built on diverse recurring revenue, high-margin services, and proprietary technologies that create value for our customers and improve returns for our shareholders. Transitioning to slide 4, Flotek Industries, Inc. extended its track record of transforming the company into a data-as-a-service business model as our industrial pivot continues to gain momentum while expanding the total addressable market for future growth of the company. Furthermore, we delivered standout performance throughout 2025, resulting in increased market share in both of our complementary business segments. Data Analytics grew exponentially while Chemistry outpaced the market in a challenging environment through an unwavering commitment to safety, service quality, innovation, and total value creation. With that, I would like to touch on some key highlights for the quarter referenced on slide 7 that Bond will discuss later in the call. Q4 and full year 2025 saw the highest quarterly and annual revenues since 2017. The Data Analytics segment achieved its highest ever quarterly and annual revenue in company history. Our gross profit climbed 24% versus 2024 and 52% as compared to full year 2024. The Data Analytics gross profit accounted for 48% of the total company gross profit during 2025 as compared to only 8% in the quarter a year ago. Adjusted EBITDA grew over 123% year-over-year, while 2025 net income improved 191%. Finally, we completed the onboarding of our PowerTech assets and the strategic entry into Power Services in 2025. This sets the stage for high-margin recurring revenue growth in 2026 and beyond. All of these results were achieved with zero lost time incidents in the field operations, with our Prescriptive Chemistry Management and Raceland NTI team surpassing over 10 years without a lost time incident. I want to thank all of our employees for their hard work and commitment to safety and service quality, achieving these outstanding results. Now, turning to the larger picture for the energy and infrastructure sector, we share the viewpoint that despite the near-term volatility and uncertainty created by the ongoing conflicts in the Middle East, the fundamentals for hydrocarbon demand will continue to grow from the medium to long term. A rebalance of supply and demand is expected due to the combination of steeper decline rates for large percentages of unconventionals, diminishing overall reservoir quality, and minimal exploration success, which will create potential tailwinds for energy and infrastructure services. Substantial investment will be required to maintain current production levels, while additional spending would be needed to meet the expanding power demand driven by AI data centers and industrial reshoring, combined with the reliability issues of an aging transmission infrastructure. Our legacy pressure pumping customers continue to capitalize on the portfolio diversification opportunity provided by the demand for remote power generation. Flotek Industries, Inc. is poised to support these emerging opportunities with products and services that help protect their assets while optimizing their operational performance and fuel efficiency. With multiyear waiting lists for turbines and reciprocating engines, protecting these capital-intensive investments is critical, along with enabling reliability standards that exceed greater than 99% uptime requirements. Transitioning from the macro, let us dive into the details starting with slide 11 of the earnings deck. I want to spotlight the remarkable progress in our Data Analytics segment, which saw service revenues increase 381% in 2025 versus Q4 2024, elevating gross profit to 73% in Q4 2025 versus only 39% the same quarter a year ago. This transformational growth in data-driven service revenue is empowered by three upstream technology applications: Power Services, Digital Valuation, and Flare Monitoring, all of which are fueling significant advancements for our organization while generating recurring revenue backlog. The first is our Power Services, which has evolved from a novel analytical approach into a transformative solution for the energy infrastructure sector that we call PowerTech. What began as advanced analytics has grown into a comprehensive end-to-end fuel management platform, redefining performance standards and operations within the sector. Looking at slide 13, at the heart of PowerTech is our VariX analyzer, which goes beyond data collection to deliver custody transfer-grade measurements. It provides precise BTU, methane number, and volume reporting for royalties, invoicing, and performance guarantees. Complementing this, our patented conditioning and distribution trailers actively remove liquids and contaminants, conditioning high-BTU hydrocarbon feeds to meet exact turbine or engine specifications. But PowerTech is more than just a technology. It is about control. Our cloud-based portal enables the monitoring of live BTU trends, H2S alerts, Coriolis flow meter readings, and automated CNG blend controls, combined with custom alarm thresholds to automatically isolate off-spec hydrocarbon feeds and protect high-value turbines or reciprocating engines from catastrophic damage, thus minimizing downtime and operational risk while enhancing safety. More importantly, our velocity of measurement enables direct communication to the OEM engine to automatically adjust engine operating parameters and optimize engine performance. We do not believe there is another analyzer technology capable of executing at this level of real-time automation today. Finally, our 35+ Data Analytics patents position Flotek Industries, Inc. as a leader across the natural gas value chain. When considering our capabilities, we deliver unmatched monitoring, control, and safety for field gas operations. On 03/03/2026, Flotek Industries, Inc. announced its first contract within the utilities infrastructure sector, seen on slide 14. Leveraging our proprietary PowerTech platform, Flotek Industries, Inc. will partner with leading distributed power service providers to coordinate the installation of up to 50 megawatts of state-of-the-art power generation equipment, including advanced gas distribution and smart conditioning systems, to support critical federal disaster recovery initiatives. The impacted area was struck by a destructive wind event, which caused significant damage to local power infrastructure. This deployment harnesses real-time data analytics for unparalleled efficiency, ensuring resilient power that drives the community recovery forward. Under the contract, Flotek Industries, Inc. will supply and mobilize cutting-edge smart conditioning skids and advanced gas distribution equipment alongside natural gas-powered gensets. The gas distribution skid provides independent fuel control to each genset, allowing seamless maintenance without interrupting the power flow and guaranteeing uptime even in the harshest conditions. This week, we have boots on the ground evaluating the site selection and continue to work with engineers and customers to determine the site design, exact power demand, and full deployment schedule. Now let us transition to slide 15, where we will dive into our upstream application, Digital Valuation. This groundbreaking use case sets a new standard in the oil and gas industry, delivering unprecedented transparency and minimizing enterprise risk for producing wells like never before through real-time digital twinning of the custody transfer process. By monitoring hydrocarbon quality and composition in real time, we have unlocked a new market for the industry and for Flotek Industries, Inc. On 10/29/2025, Flotek Industries, Inc. reported a historic milestone in natural gas measurement. The XBEG spectrometer became the first optical instrument to achieve the stringent reproducibility and repeatability requirements of the oil and gas industry standard for custody transfer, GPA 2172. The XBEG measurement unit is designed to enable more accurate volume and compositional data, thereby delivering greater transparency for royalty owners, operators, and midstream companies than traditional methods. We believe the XBEG speed, accuracy, durability, and qualification under the rigorous measurement standards outlined in GPA 2172 will provide a significant advantage in discussions with prospective customers as we aggressively expand this manufacturing field deployment. Since completing our XBEG pilot program in the third quarter of 2025, we exited the year with over $12.02 million per month in recurring high-margin revenue. Furthermore, 2026 is off to a great start with opportunities on the horizon, each of which can more than double our deployed active XBEG units. Let us move to our third upstream application, the Verical Flare Monitoring solution. We continued to experience strong operational demand in February 2025, with total Flare Monitoring revenue for the full year exceeding $2 million. As we proactively navigate the evolving regulatory landscape, particularly the EPA's flare monitoring and methane emission standards, we are deepening strategic partnerships with leading operators and flare technology developers. This collaborative approach not only ensures seamless compliance, but also delivers substantial operational efficiencies, meaningful methane reductions, and enhanced environmental performance for our clients. It is clear that our transformational strategy to grow the Data Analytics segment through upstream applications is gaining traction. We increased our upstream revenues from $2.1 million in 2024 to over $21 million in 2025, with gross profits expanding from $1.2 million in 2024 to $18.4 million in 2025. But what is most important is what it means for our stakeholders and investors. Our DAS-driven strategy ensures predictable recurring revenue and cash flow, delivering stability and long-term value. Our proprietary data technologies and superior measurement accuracy enable velocity and decision control and establish a high barrier to entry, secure client loyalty, and support our value-based service model. Finally, long-term high-margin subscriptions position Flotek Industries, Inc. for sustained growth and margin expansion, delivering significant shareholder value over time. Now, lastly, looking at our Chemistry Technology segment, it continues to deliver robust performance driven by the differentiation of our Prescriptive Chemistry Management services and our expanding international presence. Slide 18 highlights the resilient performance of our Chemistry segment, which delivered a 25% increase in total revenue for full year 2025 compared to 2024, excluding OSP payment, despite a 24% decline in the average North American frac fleet count over the same period, from 201 at year-end 2024 to 154 at year-end 2025, according to Primary Vision data. While we anticipate potential near-term commodity price volatility, we see encouraging indicators for cautious optimism in the back half of 2026 and beyond, and we continue to closely monitor operational and supply chain risks for international operations amid the ongoing conflicts in the Eastern Hemisphere. It is evident that our Chemistry team has executed our strategy flawlessly despite the near- to medium-term headwinds. While uncertainties around near-term activity levels persist due to macro factors that could affect the completion of the Chemistry market, we remain focused on defining these challenges and delivering differentiated chemistry and data services to provide our customers with industry-leading returns on their investment. Looking ahead, I am more confident than ever in Flotek Industries, Inc.'s momentum and our ability to drive sustained, profitable growth as we execute our transformative corporate strategy. We are firmly positioning Flotek Industries, Inc. as a high-growth technology leader in the energy and infrastructure sectors, accelerating innovation through the powerful integration of real-time data analytics and advanced chemistry solutions tailored precisely to our customers' evolving needs. I will now turn the call over to Bond Clement to provide key financial highlights. Bond Clement: Thanks, Ryan. Good morning, everybody. Our fourth quarter results cap an exceptional year in which we generated meaningful value for our shareholders. As highlighted in yesterday's presentation on slide 7, we achieved several important milestones, including our highest quarterly revenue since 2017, driven in part by the largest quarterly contribution from ProFrac in the more than four-year life of our supply agreement, and the first quarter in which our Data Analytics segment surpassed $10 million in revenue. The continued expansion of Data Analytics revenue is translating directly into enhanced product profitability. As Ryan noted, in the fourth quarter, DA accounted for 48% of total company gross profit, a significant increase from just 8% in the prior-year period. Two really impressive metrics stand out as highlighted on slide 11. One, our Data Analytics gross profit for 2025 totaled just over $18 million, which represents more than two times the growth versus last year's total Data Analytics revenues. And second, the Data Analytics revenue during the fourth quarter exceeded DA revenue for the entire year of 2024. Both of these metrics highlight the exceptional growth that we realized in 2025. Total company revenue grew 33% from the year-ago quarter and benefited from a $22 million, or approximately 80%, increase in related-party revenue as compared to the fourth quarter of last year. Approximately $15 million of the ProFrac revenue increase was Chemistry-related, while $6.7 million was associated with the PowerTech lease agreement. External customer Chemistry revenue declined 30% from the year-ago quarter due in large part to slowing activity levels in November and December. However, external Chemistry revenues were still up an outstanding 26% for the full year versus 2024, despite the numerous headwinds in the upstream completion markets that Ryan touched upon earlier. Data Analytics had another solid quarter, with product revenue and service revenue up significantly from the year ago, driving the segment's highest quarterly and annual revenue ever. Data Analytics segment revenue represented 15% of total company revenue in the fourth quarter, up from just 5% in the year-ago quarter. PowerTech revenues totaled $15.8 million during 2025, and as shown on slide 11, since closing the PowerTech acquisition in the second quarter, these assets have been a clear catalyst for margin and profitability expansion, driving improvements not only within the DA segment, but also at the corporate level. As a reminder, based on the contractual terms of the lease agreement, PowerTech revenues in 2026 are expected to be north of $27 million, or an approximate 70% increase from 2025. So we continue to expect these assets to be a significant contributor to our 2026 results. Gross profit increased 24% and 52%, respectively, as compared to the year-ago quarter and fiscal year. Fourth quarter gross profit as a percentage of revenue totaled 22.5% and was impacted by a combination of product mix, as well as the approximate $5 million sequential reduction related to the shortfall penalty, which is a byproduct of the huge quarter of revenue we achieved with ProFrac. SG&A expenses increased compared to the fourth quarter of last year, primarily reflecting higher personnel costs, including stock compensation, as well as elevated professional fees, a portion of which relate to the company's first-time integrated audit requirement. Importantly, as revenue scaled, SG&A declined to 11% of revenue from 13% in the prior-year quarter, demonstrating improving operating leverage and the efficiency of our cost structure as the business grows. Net income for the quarter totaled $3 million, or $0.08 per diluted share, compared to $4.4 million, or $0.14 per diluted share, in the prior-year quarter. It is worth pointing out that the current quarter net income and diluted earnings per share as compared to the year-ago quarter were impacted by higher depreciation and interest costs, which are primarily related to the PowerTech acquisition, as well as a higher effective tax rate driven by non-cash adjustments related to the company's valuation allowance on deferred tax assets. The effective tax rate for the fourth quarter was approximately 35% compared to 7% in the year-ago period. We do expect the effective tax rate to normalize closer to 21% going forward, and we do not expect to pay cash taxes over the next few years other than minor amounts related to state income taxes. Earnings per share for the 2025 periods as compared to the year-ago periods also included a higher share count, a result of the 6 million share warrant issued in connection with the PowerTech acquisition. Although the warrant has not been exercised, the shares have been included in both basic and diluted share counts since the acquisition closed in the second quarter. As noted in yesterday's release, as of 2025, we elected to change our calculation of adjusted EBITDA to better align with the SEC's guidance on non-GAAP financial metrics. What this means is that for external reporting purposes, we will no longer add back non-cash amortization of contract assets to our adjusted EBITDA. All adjusted EBITDA references in the earnings release reflect the revised computational methodology. To compute adjusted EBITDA consistent with our prior methodology for purposes of comparison to our original adjusted EBITDA guidance, simply add the non-cash amortization of contract assets as disclosed in the press release to the revised adjusted EBITDA balances shown. That math suggests that adjusted EBITDA for 2025 under our previous methodology was approximately $10.1 million. Using the revised calculation, adjusted EBITDA was up 40% versus the year-ago quarter and grew 123% for the full year. Using either methodology, we were near the top end of the original or revised methodology guidance range on adjusted EBITDA. Wrapping up my comments, touching briefly on the balance sheet, we ended the year with $5.7 million in cash and $3.3 million drawn on our ABL. You will note that total assets increased to just over $220 million at year end, primarily as a result of the release of the valuation allowance allowing us to reflect our deferred tax assets on the balance sheet. With that, I will turn the call back to Ryan for closing remarks. Ryan Ezell: Thanks, Bond. Our 2025 results build upon our now multiyear track record of consistently posting improved financials as we successfully transform the organization to enter a new data-driven frontier. Our Data Analytics segment continues to deliver explosive growth with triple-digit revenue increases, expanding recurring revenue streams, and a robust multiyear backlog that provides strong visibility into future cash flows and margin expansion. Combined with our resilient Prescriptive Chemistry Management services, Flotek Industries, Inc.'s ability to execute strategic wins, advance asset integrations, and differentiate on a technology and returns basis will enable further capture of market share and delivery of continued top- and bottom-line improvement. We remain fully committed to shaping the industry's digitalized, sustainable future by leveraging chemistry as the common value collision platform, unlocking higher returns for our customers, and generating compelling opportunities for shareholder value creation. With our proven execution, expanding high-margin capabilities, and clear pathway to scalable growth, Flotek Industries, Inc. is poised for an exciting next phase of value delivery to our investors. Operator, we are now ready to open the floor for questions. Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. If you wish to cancel your request, please press star followed by the 2. If you are using a speakerphone, please lift the handset before pressing any keys. Once again, that is star 1 should you wish to ask a question. Your first question is from Jeffrey Scott Grampp from Northland Capital Markets. Your line is now open. Jeffrey Scott Grampp: Good morning, guys. I was curious to start on the Power Services side, and congrats on the recent contract win there. Outside of that opportunity, can you just touch on the current pipeline of opportunities that you guys are working through? Curious with the maturity level of those conversations, what stage we are at, and how you are kind of viewing other opportunities potentially going into the full year for the rest of the year? Thanks. Ryan Ezell: Yes, Jeff, I would be glad to provide a little bit of color on that, because we are pretty excited about the advancements, and I will kind of refer back to some of the comments I made on our end-of-quarter call at Q3. We set up our PowerTech advancement of our business development units around three major steps. One is proving the validation of the measurement, then moving to levels of various control and integration, and then the final thing we do is full distribution and conditioning. I am proud to say that we moved into seven new customers successfully on the measurement side, with executed POs and successful field trials, and they are moving into longer-term duration contracts and looking at placing our new advanced NGS or smart skids as well as ESD. We have right now ongoing about six different operations in the field, and it is on top of our most recent announced win on the industrialized infrastructure component for utilities. So it is going really, really well. We have also begun, we have kind of brought forward what we are looking at on capital spend at building new pieces of equipment to go out to location, and so from that standpoint, I think we are still on track to hit that run rate of doubling the size of the fleet by the end of the year, if not maybe a little bit sooner. All those opportunities, and I think that the unique capabilities of our technology in some of these harsh conditions is opening up some unique pathways for us to hit some of these really stranded disaster relief power locations. That has been an interesting opportunity for us to unlock here at Flotek Industries, Inc. Jeffrey Scott Grampp: Great. I appreciate that. And on a related question, with the business model or kind of contract approach, if you will, on the utility infrastructure deal, do you guys view that as kind of a one-off specific to this customer need, or is that something you guys view as more repeatable for some of the other opportunities that you are discussing with customers? Ryan Ezell: No, I believe it is 100% repeatable, Jeff. I think that where our wheelhouse of strength is the monitoring, conditioning, and the setting up of the power generation equipment to be not only successful but operate safely, and the fact that we can do this in some of the harshest conditions on the planet for field gas, no matter isolation or how we look at it with a field gas, is that this allows us to work with some of the larger suppliers of power to pull them through jointly with what we do and work alongside of them and provide this power. So I think there are going to be a multitude of opportunities very similar to this, and we are hoping that the development of work of some additional power providers opens up some additional opportunities for us inside the data center and some of the more established infrastructure components around AI. Right now, I would say that the horizon looks that direction. It has worked to our liking so far, and we hope to have some more exciting updates on that as it progresses throughout Q1. Jeffrey Scott Grampp: Sounds great, Ryan. I appreciate the details. I will turn it back. Operator: Thank you. Your next question is from Rob Brown from Lake Street Capital Markets. Your line is now open. Rob Brown: Good morning. Congratulations on all the progress. On the Power Services contract, or the PowerTech contract, could you kind of clarify how that contract works? I think you said an initial six-month term, and then options beyond that, and I think you quoted kind of $1 million per megawatt, but just a sense of how that revenue flows and the timing of how you expect that to flow in? Ryan Ezell: Yes. I will tell you we are going to be providing continuous updates on this. Like a lot of these remote power gen processes, we are looking at a little bit of a conservative ramp. Our team has been on location all week. We are expecting to start to see this revenue probably in the starting parts to middle part of Q2, which would be initial mobilization and setup. The power will probably be split over two locations. One is providing power to the current community and its infrastructure and some of the services there, particularly the hospitals and things. Then there is a secondary location that will be powering additional housing that will be built to recover from what was destroyed. That is going to come in, I think, two phases. For us, we expect most of that to start the mobilization pieces in Q2 and start to build throughout the year. It does appear that on our initial offsets, this will have a high probability of progressing past six months, just for the sheer fact it will take longer than that to build the temporary structures of houses. Plus, they are looking at a full installation of an additional power plant at the end. So we are expecting this to get extended and be a good contract win for us. The unique model is that we were initially approached because of our unique capability in terms of conditioning any types or variable types of gas so that they can provide safe fuel source for operational gensets, and I think that allowed us to help go out and work with, call it, these power providers to bring and pull through. So I think we will see a similar model in these disaster relief components. I do not know how much that model works when we look at data centers because those are the big megawatt-type installations, but for these remote areas, it is a favorable business model for us to help work with the power providers on doing that. The other side would just be the pure conditioning aspect. Rob Brown: Okay. Got it. And then just to clarify, I think you said the PowerTech contract that you had was $27 million in revenue. Did that include some of this new award, or would that new award be incremental to that? Ryan Ezell: Yes. The new award is incremental. That is just the original work that we have on a dry lease program for five years, $27 million annually on those, plus an extension in year six at a market rate. The new industrial, or I should say utility services, contract is completely additive on top of that. Rob Brown: Okay. Great. Thank you. I will turn it over. Operator: Your next question is from Gerard J. Sweeney from Roth Capital. Your line is now open. Gerard J. Sweeney: Good morning, Ryan, Bond, Mike. Thanks for taking my call. Ryan Ezell: Hey, Gerard. How are you? Gerard J. Sweeney: I am doing well, thanks. I wanted to touch upon an area that I think you mentioned in your prepared remarks. You are doing, your systems can communicate directly with the engine, and that offers a unique ability to improve engine flow, efficiency, life of the engine. I think you are working with some important engine and turbine manufacturers. Can you go into a little bit more detail on what is happening on that front, and how that opportunity could emerge a little bit further in 2026 and 2027? Ryan Ezell: Yes. This is a really exciting platform for us when we look at applications inside of PowerTech. Without dropping any specific names, I will say the majority of the OEMs that we are working with are the nameplate companies that you see on the majority of these power gen sites, particularly on the reciprocating engine side. Essentially, what we have is, whether you are using a VariX or an XBEG unit, because most of these engines like to see a gas quality measurement once a day or once every few days just to see that they are in an operating realm where they set setpoints for potential adjustment, our capabilities allow data to be fed directly to the OEM engine every five seconds. This allows a closing in of setpoints and operational efficiency to where they really get tuned and dialed in to the best operational parameters to not only improve fuel efficiency and emission standards, but also reduce R&M costs for the engines. For us, there is potential for one unit to feed multiple engines, or we reduce it down to a simplified version of our XBEG units per engine. These projects have been solely focused on engine optimization and improving the overall performance. We would still be able to independently run our gas conditioning upstream from that, where we condition the gas prior to coming to the engine. Technically, it is a separate revenue stream. We have projects with four different OEMs on that at various levels. The longest-standing one has been in the works and research for about 18 months and has progressed pretty far down the road in the advanced field trials. We are hoping to have a little bit more clarity on what a potential long-term relationship looks like there and what that may come back here in 2026. We referenced some of these in a recent social media post with some of the success of the testing here at Flotek Industries, Inc. We are excited about that and do believe those will start to be monetized here probably by midyear, if not the back half of the year, as a potential addition onto a lot of these reciprocating engine operations. Gerard J. Sweeney: Is this a little bit different approach? The power side, obviously you have data centers, fuel gas, or frac fleets, etcetera, but this almost sounds as though this is purely an efficiency opportunity for the engines and improves— Ryan Ezell: 100% correct. The value proposition is there is what the NGS, ESDs, and NGSD do on the broad variety of conditioning, perfect horrible gas into much better operational parameters, and then there is what these individual units do per engine, optimizing the timing, firing sequence, fuel mixture, and everything to work them at their optimum rate to minimize derating or different components there, and then also help them in terms of the potential to reduce R&M maintenance throughout the year. Gerard J. Sweeney: Got it. Switching gears, you are starting to highlight opportunities that you have in the field or deployments. At some point, would you be able to break out or tell us how many Data Analytics units you have in the field for tracking purposes, or would this ever occur, or is that asking too much? Bond Clement: It could be asking too much. Ryan Ezell: It is our intent. We are going to get, and then probably where we are at the end of Q1, we are going to come back with where we are updated on the total number of, when I look at PowerTech, I would say the number of types of skids that we have out and operating, and then also combined with where we are doing measurements to improve distribution and PRV, pressure reduction valve units, etcetera. We will start talking a little bit more about these growth numbers, but what I would say is that if you look at our initial contract we had with the original PowerTech assets, we are progressing nicely to get to that doubling of the fleet in 2025. We will probably, as we start to initiate our guidance like we traditionally do at Q1, give an update on where that stands so it will help you align the guidance. Gerard J. Sweeney: Got it. I appreciate it. Congrats on a good quarter too. Thank you. Bond Clement: Yep. Thanks. Operator: Thank you. Your next question is from Donald Crist from Johnson Rice. Your line is now open. Donald Crist: Morning, guys. Ryan, on that last point of the PowerTech units, just to be clear, I believe you bought 22 or so from ProFrac, but then they were delivering another 8, so the doubling would be off that 30 number, right? Ryan Ezell: Yes. We actually received, we had all 30 units by, I am going to say, November time frame of Q4 is when we had taken them all in. So the number we are talking about, Don, is we have 30 individual units that make up what we call 15 pairs of operating assets, and our goal is to double that number based on the 30, or 15 pairs. Donald Crist: Okay. Just to be clear, and I wanted to touch more broadly on just the construction of whether it would be custody transfer units or skids or the carts that you put out for the flares. Just how is all that going? And I guess one for Bond, in addition to that, is how do we look at CapEx for this year? I am guessing it will not be that big, but just any kind of rough parameters would be helpful. Ryan Ezell: What I would say in terms of lead times here is that the absorption of XBEG units and our newer technology that we call the 2C unit, which is a dual-channel VariX, have been well received post the GPA 2172 passing of the standard. We have seen great progress. We sold out of the 2C units by February, and so we have advanced capital builds on a multitude of those, as well as XBEG units. We have advanced capital to those to start, really, because we are seeing some strong deployments where traditionally, Don, when we first had acquired or brought the Data Analytics division in, we were selling these things one to two off at a time. We are now starting to receive POs of double-digit numbers at a time. Some unique things about the way our operating system VariX works, some of the advancements we made in the software really helps to integrate these units and show day-to-day, within-the-hour value creation of those. We are seeing significant adoption and absorption of those. I would say we are not at a supply constraint yet, but what we are doing is we are making aggressive steps to rapidly expand that ahead of what we were thinking by this time in the year, and so we are allocating capital. Bond Clement: Yes, Don. Certainly, I think 2026 is going to be the largest year of CapEx we have had in quite a long time. I think our CapEx in 2025 was somewhere around $2 million. Just rough numbers, we would expect CapEx for 2026 to be somewhere between $10 million and $15 million. Obviously, from a funding perspective, we have the OSP, and then as it relates to equipment financing, we are evaluating options there as well. Donald Crist: Right. And that OSP should— Bond Clement: And that OSP should— Donald Crist: Right. More than double cover that $10 million to $15 million that you have to put out, right? And that should all come in the first quarter. Bond Clement: It will not double. The OSP, remember, we had a $7 million offset related to the PowerTech transaction, which was effectively deferred consideration. When you look at what the net OSP is at the end of the year, it is right at $20 million. But it surely goes a long way and satisfies from a cash or equipment perspective. Donald Crist: Right. And you will have cash flow through the year as well. So not a big deal there. And Ryan, I did want to ask, there is a lot of impact in the Middle East right now from what is going on with the hostilities, but you have spent a lot of time over there, and you sell a lot of chemicals into there. Just an update on how much product you have on the ground and the options of moving shipments, rather than going through the Strait, to other ports, maybe Egypt or something like that, and then shipping them in. Any kind of thoughts around that? Ryan Ezell: What I would say is I kind of stage these in pieces. Number one, the current operations have been going very well. We have had our operation teams on the ground, and we picked up some of that unconventional work that we have been speaking of, particularly in the Kingdom. It has picked up and is running very well, probably to the upper end of our expectation, and we are seeing a solid growth there. Just as we are starting to see that, we are starting to see, as you can imagine, the supply constraints in all the traditional sailing vessel methods that we would deliver, whether coming from inside the GCC and/or us bringing other chemicals in. Some of our specialty stuff has been a bit strained as of late, particularly due to the Straits and Houthi pressure, etcetera. We are identifying alternative pathways that will probably, in the near term, have a little bit of additional cost because they have to be touched twice. But our goal is to be a solid working partner for our customers there, and we have been ahead of this by about a month or two because we were concerned that this might happen. I do think right now our supply is relatively stable at this point, but there is no doubt that we are going to be all hands on deck, and we are going to utilize the multiyears of experience that we have in global supply chain and our expertise of being on the ground there and from the past to understand how we get there and level out. I do think we are going to use an alternative delivery method than the traditional sailing routes that we were doing, which will probably include a cross-country trucking methodology. We have done this before, Don. Also, the initial move out of there, we had some issues around COVID when we first sent chemicals in. We are familiar with this alternative pathway. It is just not the best on the margin profile, but we will make it work in the near term to make sure that we stay rolling with that revenue opportunity. Donald Crist: Okay. But just to be clear, other than some excess shipping costs, activities basically are unchanged right now, right? Things will move. Ryan Ezell: We have not seen much disruption in KSA. We have seen a few things that we were doing on the Data Analytics side, some measurement installs in UAE, and a few of those get pushed back a few weeks just because of the location and different pieces. Right now, we are having calls—Leon and the team are having calls basically every morning—and we are steadily running in KSA right now because the majority of this Jafarah field is used locally for energy inside the country. It will keep running pretty steady. Our bigger customers there, I would say it is business as usual, all things considered with the instability to their neighboring countries, but they are full speed ahead right now. Bond Clement: I will just caveat that a little bit. That is based upon what we know today, Don. It could change if this thing expands or extends. Donald Crist: Right. I get it. That is what I am hearing too, it is pretty much business as usual unless you are really on the coast. That is about it. I appreciate the color, guys. I will turn it back. Operator: Thank you. Your next question is from Josh Jain from Daniel Energy Partners. Your line is now open. Josh Jain: Good morning. Thanks for taking my questions. First one is just on the Chemistry side. Obviously, commodity prices are volatile, but wherever oil settles out over the next few weeks, hopefully in the next few weeks, any thoughts on how operators are ultimately likely going to handle sort of a higher commodity price deck than they were thinking coming into this year? I know you have not given guidance yet for the rest of the year, but I think the world was thinking sort of flattish CapEx, and that is what these guys have announced. Maybe just any insight, are you seeing more demand for Chemistry heading into the back half of this year and 2026 than you might have been thinking three to six months ago? Maybe just some thoughts there. Ryan Ezell: That is a great question, and it probably is as in-depth as I could look into the hazy crystal ball. Let me talk about things that I do see in the industry. I talked about them a little bit in terms of when you look globally around, you are going to see we still see the potential for demand to increase in that medium to long term, if not a little bit sooner, and you see that supply rebalance. What we are seeing is that there is definitely a reduction in the decline curve contribution because you have such a large percentage of unconventionals contributing to that stack. You are also seeing a little bit of decline in reservoir quality, which would tell me what they are focused on is getting the most out of what work they are doing, which means leaning in towards advanced technology, creating technologies, or stuff that improves overall performance. All those things lay into the wheelhouse of what we do well by providing real-time data measurements, making choices for that in our prescriptive engineering process with our PCM business. All those things work really well with what we want to do. Not only that, when you look at product margin basis, they typically run at a little bit better margin for us throughout the cycle. The interesting part is there is no doubt when you look at the products that we sold in Q4 of this year, we saw the frac fleet get to the lowest that it was since probably Q2 2021 coming out of COVID. We saw commodity prices around the same thing, but our revenue was eight times more than it was then, and we made significantly better gross profit. We have shown that resiliency through the cycle, and what I believe is we are going to continue in this near term to see a little bit of softness in the demand for the Chemistry parts, but I think we see that upside potential maybe in the back half of the year to start to answer some of the call here, and I think that will require some of the advanced technologies that Flotek Industries, Inc. is poised to position. The level of that, it is hard to say right now, but I do see a little bit of silver lining in the back half of the year and as we look at 2027. Bond Clement: I will just add one thing, Josh. I think it is going to be interesting to see how producers react relative to the hedge market. Obviously, the curve is still pretty backwardated, but I think, generally, even looking out past the spike out to the latter months, those numbers are probably a good bit higher than what expectations were for oil coming into the year. If operators have the opportunity and go ahead and lock in those prices over a longer term, obviously that underwrites higher CapEx. Josh Jain: For sure. I appreciate the color. Thanks for taking my question. Operator: Thank you. Your next question is from Gao Xi from Singular Research. Your line is open. Gao Xi: Good morning, gentlemen. Can you all hear me? Ryan Ezell: Yes. Gao Xi: Congrats on a strong year and continued execution. On your expected Data Analytics drive to be more than half of the company profitability, if we think about that qualitatively, how sensitive is that mix target to the timing of a few large PowerTech wins, or is that 50% threshold achieved even if a couple of projects slip right to the end of the calendar? Bond Clement: If you look at the fourth quarter, we were effectively there at 48% gross profit from Data Analytics. Just thinking about how the PowerTech lease agreement, which we talked about, will be 70% higher in 2026 versus 2025 just due to longer duration for the full year versus a partial year last year, we feel extremely confident we are going to exceed 50% in 2026 on the DA side. Operator: Thank you. There are no further questions at this time. I will now hand the call back over to Mike Critelli for the closing remarks. Mike Critelli: Thanks, Jenny. Join us at some of our upcoming investor events. On March, we will be at the 38th Annual ROTH Conference at Dana Point, California, taking one-on-one meetings with investors and participating in energy industry fireside chats. On May 26 to the 28th, you can catch us at the Louisiana Energy Conference taking meetings and giving an investor presentation. For all other events and the latest info, look at the events section of our website. We would like to thank everyone for joining us today, and stay with us as we continue on our convergence of real-time data and chemistry solutions. Thank you. Operator: Thank you, ladies and gentlemen. The conference has now ended. Thank you all for joining. You may disconnect your lines.
Operator: Ladies and gentlemen, thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome you to the DICK'S Sporting Goods, Inc. Fourth Quarter and full year 2025 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question at that time, simply press star then the number one on your telephone keypad. And if you'd like to withdraw your question, again, star one. I would now like to turn the conference over to Nathaniel Gilch, Vice President of Investor Relations. Nate, the floor is yours. Good morning, everyone. Nathaniel Gilch: And thank you for joining us to discuss our fourth quarter and full year 2025 results. On today's call will be Edward Stack, our Executive Chairman; Lauren Hobart, our President and Chief Executive Officer; and Navdeep Gupta, our Chief Financial Officer. A playback of today's call will be archived on our Investor Relations website located at investors.dicks.com for approximately 12 months. As a reminder, we will be making forward-looking statements which are subject to various risks and uncertainties that could cause our actual results to differ materially from these statements. Any such statements should be considered in conjunction with cautionary statements in our earnings release and risk factor discussions in our filings with the SEC, including our last annual report on Form 10-K, as well as cautionary statements made during this call. We assume no obligation to update any of these forward-looking statements or information. Please refer to our Investor Relations website to find the reconciliation of our non-GAAP financial measures referenced in today's call. And finally, a couple of admin items. First, a quick reminder on our comparable sales reporting. Foot Locker will be included in our comp calculations beginning in Q4 2026, which will mark the start of their 14th full month of operations post acquisition. And second, for future scheduling purposes, we are tentatively planning to publish our first quarter 2026 earnings results on 05/27/2026. I will now turn the call over to Edward Stack. Edward Stack: Thanks, Nate. Morning, everyone. As we shared this morning, we closed the year with another strong quarter for the DICK'S business, delivering comps over 3% and double-digit non-GAAP EPS growth. Our team's execution and our ability to consistently deliver a differentiated, on-trend product assortment and best-in-class omnichannel athlete experience continue to produce strong results and market share gains. We believe these fundamentals position the DICK'S business for long-term profitable growth. Now I would like to turn to the transformational opportunity we have with Foot Locker, where we continue to make significant progress in strengthening the business. We have now owned Foot Locker for about six months, and I will tell you, our excitement and our conviction in the long-term opportunity here continue to grow. We have moved quickly to test and learn in North America through what we call our Fast Break initiative. This is the evolution of the 11-store pilot we discussed last quarter. While it is still early, we are very encouraged by what we are seeing. During Q4, our Fast Break stores drove very strong positive comps, actually meaningfully exceeding the DICK'S business, while also delivering strong gross margin improvement. The improvement is coming from the basics: clearer storytelling, better presentation, and a more focused assortment where we removed roughly 30% of the styles on the shoe wall that were unproductive and eliminated the run-on sentence that we have been talking about that was not showing the customer what product was important. Based on the strength of the pilot results, we have already expanded Fast Break to an additional 10 stores in LA before the NBA All-Star Game, and we are very pleased with the strong early performance. Now looking ahead, we are excited to rapidly scale Fast Break by back-to-school 2026. As discussed last quarter, our first priority was to clean out the garage, starting with addressing unproductive inventory. The team moved quickly and decisively to get this done, and we are pleased to report that the inventory cleanup is now essentially complete. That work drove the fourth quarter profitability results we told you to expect. As part of this process, we also leveraged DICK'S value chain to efficiently clear product. We are also pleased that Q4 sales came in better than expected. We believe that Foot Locker's inventory is now well positioned. With this heavy lift behind us, we are set up to play offense and deliver the inflection point we expect to see in this business starting with back-to-school. Another key part of cleaning out the garage is our review of the global Foot Locker business store fleet. We continue to assess underperforming locations, but we anticipate our closure list is now much smaller than we initially estimated. We have identified opportunities to reposition and improve profitability in a meaningful number of stores, informed in large part by the success we are seeing in our Fast Break locations. Importantly, one of the many things that gives us great confidence in the future of the Foot Locker business is what we are seeing from our brand partners. They are leaning in, aligned with our vision, and eager to support a thriving, growing Foot Locker. You can see that already in moments like our NBA All-Star activation with Nike, Jordan, Adidas, and others, where we partnered closely to bring a series of sought-after launches that drove exceptional sell-throughs. We also had NBA talent appearances and community experiences for the Foot Locker consumer throughout LA. Our team executed exceptionally well, and together with the support of our brand partners, we drove sales that meaningfully eclipsed last year's event. At DICK'S, we have built an industry-leading business by focusing on product, performance, innovation, and customer loyalty, always with a long-term view. We are applying that same proven playbook to the Foot Locker business and making the choices we believe will create the most long-term value for our shareholders. For 2026, we expect Foot Locker to deliver growth and comp sales of between 1% to 3% and operating income in the range of $100,000,000 to $150,000,000. We continue to anticipate an inflection point for both sales and profitability beginning with the back-to-school season. In closing, we remain very confident that DICK'S and Foot Locker are stronger together. This combination gives us more scale, deeper relationships with the most important brands in our industry, access to consumers we did not reach before, and a global footprint. For Foot Locker, the benefits of our combination come through in very real ways. Brands matter. Product matters. Execution matters. And people matter. When those things come together, we believe Foot Locker will be restored to its rightful place in the industry. Before I turn it over to Lauren, I want to thank our more than 100,000 teammates across the globe for their commitment and their execution every day. I will now turn the call over to Lauren Hobart. Lauren Hobart: Thank you, Ed, and good morning, everyone. I want to emphasize Ed's comments and recognize the incredible work of our teams across our entire company who contributed to our success throughout this past year. I am so proud of what we achieved together in 2025. Looking specifically at the DICK'S business, our teammates' passion, their commitment to our athletes, and a relentless focus on execution powered another strong quarter and holiday season and a terrific year overall. Their hard work continues to bring our four strategic pillars to life: a compelling omnichannel athlete experience, a differentiated on-trend product assortment, a deep engagement with the DICK'S brand, and the strength of our teammates and our culture. These pillars remain the foundation of our success and guide our strong performance. For the full year, we are very pleased to have delivered record sales of $14,100,000,000 for the DICK'S business. Our comps increased 4.5% and exceeded the high end of our expectations, driven by growth in average ticket and transactions as we continue to gain market share. We drove gross margin expansion and achieved double-digit operating margin of 11.1%. We delivered non-GAAP EPS of $14.58, also above the high end of our outlook and up from $14.50 in 2024. Our fourth quarter marked a strong finish to the year for the business. Our Q4 comps increased 3.1%, building on last year's 6.6% increase and delivering a two-year comp stack of nearly 10%. We saw more athletes purchase from us, and they spent more each trip compared to the prior year. Our Q4 gross margin expansion accelerated sequentially and we drove operating margin of 11%, and non-GAAP EPS of $4.05, both well ahead of last year. Today, the intersection of sport and culture has never been stronger, and excitement continues to build. This momentum kicked off with the expanded college football playoffs, record-breaking interest in women's sports, and a strong Team USA performance in the recent Winter Olympics. And with most of the 2026 World Cup matches on US soil this June and July, the 2028 Summer Olympics in LA on the horizon, and the Ryder Cup returning to the US in 2029, we are entering one of the most compelling multiyear periods for sport in this country's history. Our athletes are energized. They are investing in the products and experiences that fuel their passion. And DICK'S sits squarely at the center of that intersection. With this position of strength, we entered 2026 with tremendous conviction in the opportunity ahead, and our priorities for the DICK'S business are clear. We continue to drive growth across our key categories. This is fueled by the powerful relationships that we have with our national brand partners, the energy from new and emerging brands, and the continued momentum of our vertical brands. We are also continuing to reposition and elevate our real estate and store portfolio through House of Sport and Fieldhouse. Now five years into this journey, our conviction in these innovative concepts has never been stronger. House of Sport and Fieldhouse have redefined the athlete experience, strengthened our relationships with existing brand partners, opened doors to new partnerships, and delivered strong financial performance. This past year, we made tremendous progress on this front. We opened 16 new House of Sport locations, ending the year with 35 locations nationwide, and also opened 15 new Fieldhouse locations, bringing the total to 42 across the country. We are really excited to see the impact of scaling these powerful concepts. Looking ahead, landlord interest remains extremely strong, giving us access to some of the best retail locations in the country. In 2026, we plan to open approximately 14 House of Sport locations and approximately 22 Fieldhouse locations. In addition, our focus on serving athletes is very strong, and we are really accelerating our work here. Our common purpose is to make sure that athletes feel confident and excited before, during, and after they engage with our team, our products, and our experience. We are creating more consistency across channels in how we help our athletes find the right solutions. Whether they are using better search and reviews online, tapping into new digital tools in the store or in the app, or working directly with our teammates, their experience is becoming more personalized and more connected. In our stores, we are evolving our service and selling culture. We are putting a bigger emphasis on relationship building and giving teammates better training and tools. And while this is very much an ongoing journey, the feedback has been incredibly encouraging. Lastly, as part of our broader digital strategy, we are harnessing the power of our athlete data and continue to be enthusiastic about the long-term opportunities we see with GameChanger and the DICK'S Media Network. With all this in mind, for 2026, we expect to drive continued comp growth, strategic expansion of our square footage, and strong profitability for the DICK'S business. We anticipate our comp sales to be in the range of 2% to 4%, which at the midpoint represents a 7.5% two-year comp stack. We expect operating margins for the DICK'S business to be approximately 11.1% at the midpoint. At the high end of our expectations, we expect to drive approximately 10 basis points of operating margin expansion on a non-GAAP basis. At the consolidated company level, we expect full-year non-GAAP earnings per diluted share in the range of $13.50 to $14.50. In closing, we are entering 2026 with powerful momentum in the DICK'S business, and our focus here is unwavering. The opportunity ahead for DICK'S remains tremendous, and we are firmly positioned to capture it. With that, I will now turn the call over to Navdeep Gupta to share more detail on our financial results and our 2026 outlook. Navdeep, over to you. Navdeep Gupta: Thank you, Lauren, and good morning, everyone. To start, I want to echo Ed and Lauren's excitement as we enter 2026 with real strength and momentum. Now let us begin with some highlights for full year 2025 results. Consolidated net sales increased 28.1% to $17,220,000,000, driven by a $3,110,000,000 sales contribution from a partial year of owning the Foot Locker business and a 4.5% comp increase for the DICK'S business as we continue to gain market share. These strong comps were driven by a 4.2% increase in average ticket and a 0.3% increase in transactions. On a two-year and a three-year stack basis, comps for the DICK'S business increased 9.7% and 12.3%, respectively. Consolidated non-GAAP operating income was $1,520,000,000, or 8.81% of net sales, compared to $1,500,000,000, or 11.14% of net sales last year. This includes operating income of $1,570,000,000, or 11.12% of net sales for the DICK'S business, driven by strong comps and gross margin expansion, and a $52,200,000 operating loss from a partial year of owning the Foot Locker business. Consolidated non-GAAP earnings per diluted share were $13.20, which included just over 20 weeks of results for the Foot Locker business and a diluted share count of 85,100,000. Looking specifically at the DICK'S business, we delivered non-GAAP earnings per diluted share of $14.58 based on the share count of 81,200,000, which excludes the dilutive effect of the shares issued in connection to the acquisition of Foot Locker. That exceeded the high end of our guidance and is up 3.8% from our earnings per diluted share of $14.05 last year. Now moving to our results for Q4. Consolidated Q4 net sales increased 59.9% to $6,230,000,000, driven by a $2,180,000,000 sales contribution from the newly acquired Foot Locker business and a 3.1% comp increase for the DICK'S business. These strong Q4 comps were on top of last year's 6.6% comp and were driven by a 4.4% increase in average ticket, partially offset by a 1.3% decline in transactions. On a two-year and a three-year stack basis, comps for the DICK'S business increased 9.7% and 12.6%, respectively. In terms of the category performance, we saw broad-based strength across our three primary categories of footwear, apparel, and hardlines. For reference, pro forma comp sales for the Foot Locker business in Q4 decreased 3.4%. On a non-GAAP basis, consolidated gross profit for the fourth quarter was $1,990,000,000, or 31.93% of net sales, down 303 basis points from last year. For the DICK'S business, gross margin expansion accelerated sequentially, increasing 67 basis points, driven entirely by higher merchandise margin. Notably, the year-over-year decline in consolidated gross margin was driven entirely by the mix impact from the Foot Locker business. On a GAAP basis, in connection with cleaning out the garage, our actions to optimize Foot Locker's inventory that align with our go-forward vision unfavorably impacted gross profit by $218,000,000. This was in line with our expectations. On a non-GAAP basis, consolidated SG&A expenses for the fourth quarter increased 60.5%, or $579,200,000, to $1,540,000,000, and deleveraged nine basis points compared to last year's non-GAAP results. $549,500,000 of this consolidated increase was driven by the Foot Locker business. For the DICK'S business, SG&A expense dollars increased 3.1% and leveraged 22 basis points. Consolidated non-GAAP operating income for the fourth quarter was $438,600,000, or 7.04% of net sales, compared to $393,000,000, or 10.09% of net sales last year. For the DICK'S business, operating income was $444,500,000, or 10.97% of net sales. This quarter's consolidated results included a $5,900,000 operating loss from the Foot Locker business, which was in line with our expectations. Moving down the P&L, consolidated non-GAAP income tax expense was $114,800,000 at a rate of 26.8%. This was favorable to our expectations largely due to the mix of earnings across jurisdictions resulting from investments we are making in Foot Locker's EMEA business to improve its future profitability. In total, we delivered consolidated non-GAAP earnings per diluted share of $3.45 for the quarter. These results included non-GAAP earnings per diluted share of $4.05 for the DICK'S business, based on the share count of 81,200,000, which excluded the dilutive effect of the shares issued in connection with the Foot Locker acquisition. This is up 11.9% from earnings per diluted share of $3.62 for Q4 last year. At the consolidated level, the DICK'S business results were partially offset by the contribution from the Foot Locker business, which includes a $0.44 negative impact from higher share count due to the acquisition and a $0.16 negative impact from Foot Locker operations. On a GAAP basis, our earnings per diluted share were $1.41. This includes $235,500,000 of pretax Foot Locker acquisition-related costs and a $13,400,000 pretax asset write-down. For additional details, you can refer to the non-GAAP reconciliation tables from our press release that we issued this morning. Now looking to our balance sheet, we ended the year with approximately $1,350,000,000 of cash and cash equivalents and no borrowings on our $2,000,000,000 unsecured credit facility. We ended the year with approximately $4,910,000,000 of inventory, which includes the Foot Locker business, and represents a 47% increase compared to last year. For the DICK'S business, inventory levels increased 1% compared to last year. We believe our inventory is well positioned to continue to fuel our sales momentum, which we expect to carry into 2026. Turning to fourth quarter capital allocation. Net capital expenditures were $302,000,000 and we paid $108,000,000 in quarterly dividends. We also repurchased 218,000 shares of our stock for $43,000,000 at an average price of $199.51. Before I move to our outlook, I want to address a few key expectations surrounding the Foot Locker acquisition. First, as we discussed last quarter, our immediate priority has been to clean out the garage and optimize the inventory assortment and store portfolio of the Foot Locker business. As part of these actions and broader merger and integration work, we previously estimated and continue to expect total pretax charges of $507,150,000,000. During 2025, we recognized $390,000,000 of these charges. The remaining pretax charges will be incurred over 2026 and the medium term as we complete this work. Approximately $150,000,000 of these remaining charges are expected in 2026 and are excluded from today's non-GAAP EPS outlook. Second, we remain confident in achieving the previously announced $100,000,000 to $125,000,000 of cost synergies over the medium term, primarily from procurement and direct sourcing efficiencies. A portion of these synergy benefits are expected in 2026, which have been reflected in our outlook. Now moving to our outlook for full year 2026. Our guidance reflects continued strength and momentum of the DICK'S business and the turnaround efforts underway at Foot Locker, all within the context of the dynamic geopolitical and macroeconomic environment. Beginning with the DICK'S business in 2026, total sales are expected to be in the range of $14,500,000,000 to $14,700,000,000, and as Lauren mentioned, we anticipate comp sales growth of the DICK'S business in the range of 2% to 4%. From a pacing standpoint, we expect slightly higher comps in the first half, driven in large part by the timing of the World Cup. Preopening expenses are expected to be approximately $90,000,000 for the full year. We expect operating margin for the DICK'S business to be approximately 11.1% at the midpoint. And at the high end of our expectations, we expect to drive approximately 10 basis points of operating margin expansion on a non-GAAP basis. From a pacing standpoint, we expect operating margins for the DICK'S business to decline in the first half and expand in the second half due to the timing of the planned investments and synergy savings. Now turning to the Foot Locker business in 2026. As Ed discussed, we remain confident in the value creation of this business. Total sales are expected to be in the range of $7,600,000,000 to $7,700,000,000. Pro forma comp sales for the Foot Locker business are expected to be in the range of 1% to 3%. We expect operating income for the Foot Locker business to be in the range of $100,000,000 to $150,000,000. And from a pacing standpoint, we expect operating income performance to be back-half weighted as the pro forma comps and gross margins start to strengthen from back-to-school onwards. At the consolidated company level, we expect full-year non-GAAP operating income in the range of $1,680,000,000 to $1,810,000,000 and non-GAAP earnings per diluted share in the range of $13.50 to $14.50. Our earnings guidance is based on approximately 91,000,000 average diluted shares outstanding, which includes the dilutive impact of 9,600,000 shares issued in connection with the Foot Locker acquisition. We anticipate a consolidated company effective tax rate of approximately 25.5% for the full year. We expect interest expense of approximately $70,000,000 and interest income to be in the range of $20,000,000 to $25,000,000. I will now discuss our capital allocation priorities. For 2026, our capital allocation plan includes net capital expenditures of approximately $1,500,000,000. Starting with the DICK'S business, as we continue to reposition our real estate and store portfolio, our investments will be concentrated in store growth, relocations, and improvements in our existing stores, plus some ongoing investments in technology and supply chain. As Lauren noted, we are very excited to open approximately 14 House of Sport locations and approximately 22 DICK'S Fieldhouse locations in 2026. In addition, we plan to begin construction on approximately 18 House of Sport locations that are expected to open in 2027. House of Sport and DICK'S Fieldhouse remain two of our most powerful and long-term growth drivers, and we will continue expanding these formats with discipline. In 2026, we are also excited to grow the footprint of our 15 Golf Galaxy Performance Center locations. Now turning to the Foot Locker business. Capital expenditures in 2026 will be focused on reenergizing our store fleet, including the rapid expansion of our Fast Break initiative. We also remain committed to returning significant capital to our shareholders through our quarterly dividend and opportunistic share repurchases. Today, we announced a 3% increase in our quarterly dividend to an annualized payout of $5.00 per share, or $1.25 on a quarterly basis. This marks the twelfth consecutive year that our shareholders have benefited from a dividend increase. Our 2026 plan includes our expectation for share repurchases to offset normal-course dilution, the effect of which is included in our EPS guidance. In closing, we enter 2026 with powerful momentum in the DICK'S business and a clear path to improve performance at Foot Locker. We remain focused on execution, committed to creating durable value, and confident in the year ahead. This concludes our prepared remarks. Thank you for your interest in DICK'S Sporting Goods, Inc. Operator, you may now open the line for questions. Operator: Thank you. We will now begin the question and answer session. We kindly ask that you limit yourself to one question and one follow-up. Any additional questions, please re-queue. Your first question comes from the line of Brian Nagel with Oppenheimer. Please go ahead. Brian Nagel: Hi. Good morning. Congratulations on a nice quarter. Nice progress here. Again, I want to ask you maybe a two-part question, with both parts focused on core DICK'S business. So first, if you look at the guidance you laid out for sales growth for DICK'S, it is very solid, above the current public Street forecast. I guess the question I had there is, and you talked about this a little bit, maybe elaborate further, what is giving you that confidence in the underlying momentum? And then the follow-up question also on DICK'S. When you look at the fourth quarter, not to be too nitpicky here, but obviously a very solid quarter, there was a modest deceleration within sales growth of the core DICK'S business from what we saw in the third quarter. Maybe you can discuss what was behind that. Lauren Hobart: Thanks, Brian. I appreciate the question. We had a fantastic quarter in Q4. We are really proud of the quarter we just put up. We had a 3.1% comp growth and, importantly, we were on top of the prior year 6.6% comp. So on a two-year stack basis, we actually exceeded our internal expectations. We were close to 10%. So it was a really strong quarter from a comp standpoint. We also expanded gross margin and operating margin in the business. So overall, really proud of how the team navigated through Q4. But I think why that gives me confidence as we look to the future is that the momentum in our business remains incredibly strong. And in this past Q4, we saw growth across all of our key categories: footwear, apparel, hardlines. And we are finding that consumers are doing very, very well. So we have seen growth across all income demographics. We have not seen trade down. And we are finding that when a consumer sees something that is new, or innovative, or technically impactful, it is resonating with them, and they are coming. We think that is only going to continue as we look to the year and the incredible excitement around sport and the influence it has on culture as we head into the World Cup coming up—well, March Madness and then the World Cup. So we are really, really confident. The two-year stack going forward is a 7.5% comp, so 2% to 4% on top of our 4.5%. And we are really thrilled with the momentum we have to deliver that. Brian Nagel: Thanks, Lauren. I appreciate all the color. Operator: Your next question comes from the line of Adrienne Yih with Barclays. Please go ahead. Adrienne Yih: Good morning, and I will add my congratulations. Very well done. Great way to end the year and start the new one. Thank you. It sounds like there is a lot of exciting work underway at Foot Locker to reposition the business for its turn in 2026. On top of that, the Q4 results came in better than you saw, particularly sales, and margins were in line. So my question centers around the cleaning out of the garage, which you expressed last quarter as your top priority. It sounds like inventory is nice and clean. How would you characterize where you are? Is there more work to do? And how many stores will be in this Fast Break that you can touch this year? And then I will have a follow-up. Thank you. Edward Stack: Thanks, Adrienne. I can tell you that the team across the globe did a great job to clean out the garage. There was a lot of excess inventory there, inventory that was not very productive. Like we said in the Fast Break stores, we took out roughly 30% of the SKUs and kind of fixed that run-on sentence that was the Foot Locker shoe wall. The team across the globe—North America, Europe, Asia—really got behind this whole clean out the garage objective and did that. To be honest with you, that work is done. That is behind us. We cleaned out the garage with markdowns in the stores and moved product through the Foot Locker stores and the Champs stores. We also utilized—I think this is one of the benefits of the acquisition between DICK'S and Foot Locker—we actually utilized the DICK'S value chain of Going, Going, Gone to clean out a lot of that inventory. We were able to recover a higher cash amount by putting it through the DICK'S value chain than if we sent that out through a jobber, and we are really well positioned. This inventory of Foot Locker is probably cleaner than it has ever been. And that should bode well for our margins and our sales going forward, returning this chain to growth with a comp of 1% to 3%. We should have margin expansion here. We are confident of that. So all in all, to clean out the garage, the team did a great job, and we are done. Adrienne Yih: Fantastic. Follow-up, Lauren. As you look at the innovation pipeline throughout 2026, particularly in technical running and performance basketball, are you seeing a meaningful shift back toward iconic must-have products from your biggest traditional partners, or should we expect growth still to be driven by the addition and growth of new, smaller niche brands? Thank you. Lauren Hobart: Yes. Thanks, Adrienne. We are seeing growth across the board. We are seeing great growth from our strategic partners, and we are very excited about things like running footwear, the innovation that we are seeing, the new Run Construct from Nike doing very well, and across the board running is really doing well. Signature basketball is also doing really, really well. And that is true, of course, of DICK'S and Foot Locker. With DICK'S, we are particularly excited about the excitement around women's sports, and Sabrina and A'ja have done so well, and then we look forward and Caitlin coming is going to be a lot of excitement. Team sports are also driving incredible buzz in a way that it used to be footwear launches that used to drive this kind of excitement. We are seeing that in team sports and all aspects of our business. And so between new and emerging brands, we are adding through the House of Sport partnerships with really exciting brands. We have Gymshark, where we are their first US wholesale partner, and a lot of brands who have come in through the House of Sport who are now widening into Fieldhouse locations and then even beyond to the entire DICK'S format. So I would say what is great about the growth is it is across the board in all categories, and it is also across the board between our strategic partners, our emerging partners, and our vertical brands. Edward Stack: If I could just add on to that, as Lauren said, Nike is doing very well. We are really pleased with them. Adidas, and we are leaning into the World Cup with Adidas, and we think the World Cup is going to be great. And with Fanatics, we have really partnered on the collectibles and the card side of the business, the trading card business. We will have collectible shops in all House of Sport stores going forward, bringing those into some of the Fieldhouse concepts. So this whole idea of collectibles and trading card business, which we have not been in before, will certainly be accretive to our sales number. Operator: Your next question comes from the line of Simeon Gutman with Morgan Stanley. Please go ahead. Simeon Gutman: Hey, good morning, everyone. So the business is performing solidly. If we step back, call it three months ago, I would have suggested or thought that the core business margin might be a little stronger given some of the House of Sport penetration and the continued gross margin gains. And then Foot Locker, I would expect a little bit more EBIT to get to that accretion number. Curious how you react to all of that. Is that fair? And is that different versus the way you see it? Edward Stack: Let me jump in on the Foot Locker piece first, Simeon. We could have guided Foot Locker to be higher if we had based it on our original projections. But what has happened is we have gone through this Fast Break process. We have got the original 11 Fast Break stores. We added 10 Fast Break stores in LA around the All-Star Game. We have got a couple of Fast Break stores in Europe right now. And what we found is some of those underperforming stores that are losing money or just marginally profitable right now—based on what we are seeing we can do from a Fast Break standpoint and renovating these stores—we can make these stores very profitable. So we are closing fewer stores than we had originally anticipated. If we had decided to close those stores, Foot Locker could have been a bit more profitable in Q1 and Q2. It is going to take us a little time to get these Fast Break stores done and get to all of them that we want to get to. But we will get to probably 250 of these stores by back-to-school. It is a herculean effort, but we are really confident that we can do that. So the reason the Foot Locker outlook is where it is right now is because Fast Break, and the optimism we have for Foot Locker, is even greater than it was originally because some of these marginally profitable or money-losing stores, if we feed them the right inventory, we can make them profitable. We think that is the right thing to do on a longer-term basis. Navdeep Gupta: I will just build on quickly. The guidance that we provide always balances the optimism and the confidence that we have against the overall macroeconomic and geopolitical situation. As you can see, it is very dynamic, and so that was another thing that we factored into our guidance. Quickly touching on your gross margin expansion in Q4, we were very happy with the results we posted here. And like Lauren said, 3.1% comp on top of a 6.6% comp, in a quarter that is typically very promotional. We were very happy with the 67 basis points of margin expansion we posted here in Q4. And keep in mind, this 67 basis points of margin expansion all came from merchandising margin. So our merchants and the inventory management team did a phenomenal job to finish the year strong from a clean inventory and driving top-line momentum as well as gross margin expansion. Edward Stack: And I think, Simeon, also, it was more promotional out there than we had anticipated, and I think the team did a fabulous job managing our margin rates and the profitability of the business and the operating margins in an environment that was as promotional as it was. Simeon Gutman: That is helpful. And just to clarify, I guess when I meant the margin, I was actually looking more towards 2026, like the full year. I think the fourth quarter was quite solid. But the follow-up is first half or second half. I do not know if you would share what you have thought about for World Cup, if there is an explicit top-line impact? And then are some of the investment spending related to core? Or is there some spend even ahead of World Cup where your margin ends up ramping more in the second half than the first half? Navdeep Gupta: Yes. So, Simeon, in what we gave in my prepared comments today is that we expect the comps to be slightly higher in the DICK'S business in the first half because of the World Cup benefit. We did not explicitly guide to the exact number associated with it, but that is what was assumed in our guidance that we have shared. And then we expect the operating margins to decline in the first half due to two big reasons. One, we are making appropriate levels of investments in the business to continue to position the business for the long term. And second, the synergy benefits that we are looking at will be more back-half weighted, and so that is the other benefit that kicks in more in the second half than in the first half. Operator: Your next question comes from the line of Kate McShane with Goldman Sachs. Please go ahead. Kate McShane: Hi. Good morning. Thanks for taking our question. We wanted to ask about GameChanger and retail media. I know you mentioned it in the prepared comments a little bit, but we wondered if there was any way you could talk about any new initiatives maybe with either business, and then just in terms of what we can expect from margin contribution from that this year. Lauren Hobart: Thanks, Kate. GameChanger and DMN are both really important, powerful new assets that we have in our portfolio. I will start with GameChanger. As you know, GameChanger is the market leader in the multibillion-dollar tech sports space, and it continues to drive really strong comps—nearly 40% CAGR—and strong profitability. It is a SaaS system, and it continues to drive strength and profit. So you can look at it that way and say GameChanger is fantastic. But then when you step out and look at the impact that GameChanger and DICK'S can have together—the fact that we can be embedded in youth sports lives at the moment when they are preparing and playing—we can be involved with parents and grandparents. We can have kids get their stats and their highlight reels. It just makes us really embedded in youth sport culture. The other thing, and it is related to your second part of your question, is that from a DICK'S Media Network standpoint, GameChanger is unique in the marketplace where it has live sports in a way that really nobody else can provide. And so it is a big asset for our DICK'S Media Network, and it is appealing to our brand partners as well as to our non-endemic partners who want to be a part of youth sports. In terms of newness, we did just unleash a bunch of features in GameChanger. For those of you who watch, the video quality is high definition—really incredible, really crisp, really clear. And we are going to continue to launch. We have coaches’ tools that we just launched. And with DMN, the tech team has done an amazing job really building automation so we can attribute sales to our partners’ investment. So all in all, really exciting parts of the business. Navdeep Gupta: And, Kate, I will just build on what Lauren said. The underlying drivers of the gross margin that we have talked about for some time now continue to remain in place in terms of the product that we have access to—not only just in 2026, but what we see in the pipeline—the work that our vertical brands team is doing as well as GameChanger and DMN. These are still the inherent drivers of the gross margin confidence that we have for 2026. We are balancing that in 2026 against the exciting opening of the sixth distribution center in 2026, so that is contemplated in our guidance expectation. Operator: Your next question comes from the line of Christopher Horvers with JPMorgan. Please go ahead. Christopher Horvers: Thanks. Good morning. My first question for you, Ed, is what did you learn from Foot Locker and this 11-store test? Can you talk about how applicable the changes are to the rest of the chain? The 11 stores, were they more city center locations like Times Square versus suburban-based mall locations that people tend to associate with Foot Locker? What was the receptivity to running and brands like Hoka and On to that core Foot Locker customer relative to basketball? In the 200 locations that you are targeting by back-to-school, what is the commonality among these locations relative to the 11-store test that you targeted, and then the much larger chain? Edward Stack: Thanks, Chris. The 11-store test was really a broad-based test. We did some more urban stores. We did suburban stores. We pulled some high-volume stores. We obviously pulled some lower-volume stores, which is why we are not closing as many stores as we anticipated. So it was really a broad-based test on that original 11. The 10 in LA would be more urban stores that we have done. What was common to them is we put a common merchandise presentation theme across all of these banners, which really was to take out a lot of the unproductive inventory that was sitting on the wall that the consumer did not want, cleared up the wall. As I have used the phrase, the footwear wall was a run-on sentence. So we took that run-on sentence down, took roughly 30% of the choices out of the store, relaid out the wall with the key product, so the consumer can walk in and see what is important—whether it is an Air Force 1 in color, whether it is a new New Balance launch, whatever it might be. We have the ability to clearly communicate to the consumer what is new and what is the high-heat product. And when we did that, these comps have been extremely strong—strong enough that this is the game plan that we are going to roll out. Roughly 250 stores by back-to-school. Those 250 stores, again, will be a cross-section of stores. They will be urban stores. They will be suburban stores. They will be some mall stores. And we will take a look at this on a store-by-store basis, and it will be a great cross-section of the business again. We are also going to be doing this in Europe. We have a couple in Europe, and we are very pleased with the results we are seeing in Europe. We will be rolling out the Fast Break stores in Europe, and the 250 includes the US and Europe. If you think about it, we are pretty conservative. If we were not highly confident that this Fast Break concept would be highly successful, we would not be rolling out 250 of them by back-to-school. That should give everybody confidence that we have a game plan here and we have proven that it will work. Christopher Horvers: Thank you. That is very helpful. And then I guess a two-part follow-up. Traffic is always a red flag in retail, and it did turn negative in the core DICK'S business in the fourth quarter. I get the two-year stack math, but your ASP or your ticket is going to get harder as the year progresses. Presumably, there was some inflation from tariffs as well. So how should we think about looking at that traffic number going forward? As you think about running that two-year stack, how applicable are traffic headwinds earlier versus traffic rebounding later and ticket moderating? Lauren Hobart: Thanks, Chris. The transactions in Q4—again, on a two-year stack basis, if you look, they were positive. If you look at the full year, they were positive. We were up against such a strong comp from the year before that I think you have to take that into consideration. We have been driving strong basket and AUR, and that just speaks to our differentiated product assortment, really not due to inflation. It is due to the fact that we are increasingly getting access and allocation to really great products that are resonating with people. Looking ahead, our guidance projects 2% to 4% comps on top of the 4.5%. So we are not concerned about traffic or transactions. Operator: Your next question comes from the line of Paul Lejuez with Citi. Please go ahead. Paul Lejuez: Curious on synergies, if you expect that number that you shared to grow past the medium term. Also curious how you are thinking about what is the medium term. And then second, kind of related perhaps, on Foot Locker. That business used to achieve $700,000,000 of operating income if you look prior to 2020—$700 million plus. I am curious how much progress you think you can make towards that level and over what period? Navdeep Gupta: Paul, thanks for the question. Let me start with synergies. We have reiterated today that we continue to expect $100,000,000 to $125,000,000 over the medium term, and we continue to remain very confident. As you can imagine, we are six months into this transaction. We are working cross-functionally across both organizations, and the level of detail that the teams have created is fantastic. So as we learn more, we will definitely share if there are any updated expectations. As of today, we will reiterate the outlook that I had shared. In terms of what medium term means, there is a portion that is definitely in 2026 for the synergies that has been included in the guidance, and I would say the medium term would be maybe a couple of years after that. In terms of the $700,000,000 of operating income for Foot Locker, I think it is a little bit too early to be able to give a long-term outlook, but we feel really confident in what Ed talked about—the momentum that we have built, the focus that we have in returning this business to growth from the 1% to 3% comp that we have guided and returning this business back to profitability. So six months in, we are really enthusiastic about the underlying momentum as well as the team that is driving these results. We will share more in due course of time about the longer-term outlook. Operator: Your next question comes from the line of Mike Baker with D.A. Davidson. Please go ahead. Michael Baker: Great. Thanks. Just on the Fast Break and improvement in Foot Locker and the profit trends, just a little more color on the pace throughout the year. Do we expect them to be negative in the first quarter and second quarter until the back-to-school improvement kicks in? Just wondering on the expectations of how Foot Locker progresses throughout the year. Navdeep Gupta: Mike, I will say that we expect both the sales and profitability to be back-half weighted. As you can imagine, we said that the real inflection in this business will come from when we are able to source the buys effectively the way we wanted. That happens from the back-to-school timeframe. And as Ed referenced, the Fast Break stores being in position will also be during the back-to-school timeframe. So we expect comps to be back-half weighted, and we expect the profitability also to be second-half weighted. Keep in mind on profitability, we also will have the benefit of the synergies that will kick in into 2026. Michael Baker: Makes sense. Thanks. If I could completely switch gears for a follow-up—so maybe not really a follow-up—talk to us about agentic AI or how you are dealing with that. Do you think there has been any impact? Do you feel like you are well suited in that kind of environment? Just curious your view on how that works. Lauren Hobart: Thanks, Mike. We are absolutely looking into all aspects of artificial intelligence, including agentic. I think there are two opportunities in the way our teams are looking at it. There is the opportunity to make our teammates more efficient and to remove a lot of manual work. Examples of that: we have some MarTech technology that we are building that can remove a lot of the manual work that they are doing. We are using AI right now in terms of store labor forecasting. We have a new AI-enabled tool in our app, and we are able to make more custom recommendations. So across the board, inventory management and making sure regional relevancy is happening is all factored with artificial intelligence. However, if you look to the future and you look at agentic, I think the biggest unlock in terms of our athlete experience is for us to really lean into what we call our common purpose and find ways to bring the power of our expertise and all of our opinion and knowledge that we have of sports and enable that to be available to people as they are working in the new world. We are working on that. More to come, but that is a big focus—to take all of our data, all of our knowledge, our teammates’ learnings over the years and make that available for consumers. So more to come. Operator: Your next question comes from the line of Joseph Civello with Truist. Please go ahead. Joseph Civello: Hey, guys. Thanks so much for taking my questions here. I have one on the DICK'S Media Network. Can you talk about the opportunities to sort of expand that to Foot Locker and what that timeline might look like, even though I know it is probably longer dated? Lauren Hobart: It is a little premature. As you know, we are maniacally focused at the DICK'S business on the DICK'S business and the Foot Locker business maniacally focused on the Foot Locker business. Certainly, there are long-term opportunities here, but we are each executing our plays right now. Joseph Civello: Got it. And maybe just a quick sort of mechanical question. You mentioned using the DICK'S Going, Going, Gone to clean out the garage. Can you talk about how that impacts the financials for each segment? Edward Stack: It actually helps. It gets rid of older, unproductive inventory, so it brings cash into the business, and it cleans up the store. We have done this on the DICK'S side, and we will expect to do it on the Foot Locker side. Cleaning up the store gives more room and space to be able to feature those newer products, the newer styles, that we can sell at basically full price. So it is very helpful to the margins. It is helpful to the sales, and it is helpful to the cash flow of the business. Joseph Civello: Got it. And is that contemplated in the synergies? Navdeep Gupta: That is not contemplated in the synergies. Our focus on synergies, like I said in my prepared remarks, is focused around the merchandising actions—primarily negotiations—as well as non-merch synergy negotiations. Operator: We have time for one more question. And that question comes from the line of Cristina Fernandez with Telsey Advisory Group. Please go ahead. Cristina Fernandez: Hi. Good morning. I had a couple of questions on the Foot Locker business. The negative 3.4% pro forma comp relative to the guidance for down mid- to high-single-digit—can you talk about what led to the better result? And then I also wanted to see if you could give a little bit more color on Foot Locker about the regions. I assume North America outperformed Europe. And whether the Fast Break merchandising test included work on some of the other banners like Champs or Kids Foot Locker, or those are just purely on the Foot Locker store fleet. Thanks. Edward Stack: The better performance at negative 3.4% versus what we had guided to was really a result of the Stripers and the team at Foot Locker really getting behind the whole idea of cleaning out the garage. They really wanted to clean out the garage. They wanted to get rid of that old inventory. They wanted to get the new product in. And they worked tirelessly to get rid of that product, and that helped drive better sales. We came in right in line from a margin rate standpoint. From a Foot Locker standpoint, by performance by region—North America and Europe—there was not a huge difference between how the two regions performed. I think that going forward, right now the US is a little bit ahead of Europe, but that is because we did more of the Fast Break stores in the US than we did in Europe. Europe is not very far behind. We are going to get Europe turned around also. We are pretty excited about what is going on in Europe. We brought in Matthew Barnes from Aldi to run this business. He has made some changes to his team. We have got a terrific team in Europe, and we could not be more confident in Matthew and his leadership to turn the whole international business around. Operator: I would now like to turn the conference back over to Lauren Hobart, President and CEO, for closing comments. Lauren Hobart: Thank you all for your interest in DICK'S and in Foot Locker, and we will look forward to seeing you next time. To all our teammates and Stripers and Blue Shirts listening, thank you for all of your hard work. See you next quarter. Operator: Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation and you may now disconnect.
Operator: Greetings, and welcome to the KLX Energy Services Holdings, Inc. Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press 0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ken Dennard. Thank you, Ken. You may begin. Ken Dennard: Thank you, operator, and good morning, everyone. We appreciate you joining us for the KLX Energy Services Holdings, Inc. conference call and webcast to review fourth quarter and full year 2025 results. With me today are Christopher J. Baker, President and Chief Executive Officer, and Jeff Stanford, Interim Chief Financial Officer. Following my remarks, management will provide commentary on its quarterly financial results and outlook before opening the call for your questions. There will be a replay of today's call that will be available by webcast on the company's website at klx.com. There will also be a telephonic recorded replay available until 03/26/2026, and, of course, there is more information on how to access these replay features that was in yesterday's earnings release. Please note that information reported on this call speaks only as of today, 03/12/2026, and therefore, you are advised that time-sensitive information may no longer be accurate as of the time of any replay listening or transcript reading. Also, comments on this call will contain forward-looking statements within the meaning of the United States federal securities laws. These forward-looking statements reflect the current views of KLX Energy Services Holdings, Inc. management; however, various risks, uncertainties, and contingencies could cause actual results, performance, or achievements to differ materially from those expressed in the statements made by management. The listener or reader is encouraged to read the Annual Report on Form 10-Ks, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K to understand certain risks, uncertainties, and contingencies. The comments today will also include certain non-GAAP financial measures. Additional details and reconciliations to the most directly comparable GAAP financial measures are included in the quarterly press release, which can also be found on the KLX Energy Services Holdings, Inc. website. I will now turn the call over to Christopher J. Baker. Christopher J. Baker: Thank you, Ken. And good morning, everyone. Before we discuss our results, I would like to take a moment to say our thoughts and prayers are with all of the military personnel serving in the Middle East in the midst of this significant conflict. KLX Energy Services Holdings, Inc. has very close ties to our military. There are almost 100 veterans that work for KLX Energy Services Holdings, Inc., and so many other veterans and their family members in the broader oilfield services space that we are all connected in some way. So, again, our thoughts and prayers to all of our men and women in the military for a safe return. We sincerely thank you for your service. Now for our 2025 performance. 2025 was another solid year for KLX Energy Services Holdings, Inc. despite a choppy market, and we finished the year on a high note. The fourth quarter delivered our strongest profitability of the year with adjusted EBITDA and adjusted EBITDA margin both at 2025 highs. Throughout 2025, we continued to optimize our corporate cost structure and thoughtfully invested in our product lines while leaning into gas-weighted asset allocation as we realigned certain product service lines and benefited from capacity rationalization in the industry. KLX Energy Services Holdings, Inc. continues to execute against the playbook that we have outlined on prior calls. We focus on higher-margin, technically differentiated work, lean into cost discipline, and are very intentional and diligent about where we strategically deploy capital and people. Operationally, the Northeast/Mid-Con segment was the standout in the quarter. Despite typical winter weather and year-end budget dynamics, that segment held revenue essentially flat sequentially and, again, expanded margins, driven by robust demand in our gas-directed work. Our dry gas exposure continued to grow as a share of the portfolio, and gas-levered revenue has steadily been marching back toward prior cycle peaks. In fact, dry gas revenue in this segment increased 5.3% quarter over quarter and 44% when you compare 2025 versus 2024, with broad-based gains across most of the product service lines we operate in this segment. On the other side of the ledger, the Rockies and Southwest reflected the realities of the macro environment. The Rockies were impacted by severe weather and customer budget exhaustion late in the year, and the Southwest experienced lower activity or reduced oil-directed rigs in the Permian. Even in that backdrop, Southwest margins expanded as we optimized our product and service mix, which is exactly the kind of blocking and tackling that is firmly within our control. Across the business, we continue to cut the suit to fit demand by aligning our footprint and cost structure with activity levels. We reduced headcount while protecting service quality. We maintained healthy metrics for revenue per rig and revenue per headcount, and we drove a meaningful reduction in our corporate costs year over year. Our efficiency metrics remain solid. In Q4, revenue per rig was approximately $297,000, the second-highest quarter of the year, and we delivered more than $40,000 of EBITDA per rig for the second time in 2025. Revenue per headcount also held up well, consistent with our focus on aligning staffing with activity. I would like to take this time to personally thank everyone at KLX Energy Services Holdings, Inc. for their hard work, dedication, and persistence, which allowed us to achieve the above results in an admittedly challenging macro environment. Our employees' commitment to safe, efficient, and quality work performance is what drives KLX Energy Services Holdings, Inc. and is the basis of the strong customer relationships that help us stand out from competitors. With that overview, I will now turn the call over to Jeff to review our financial results in greater detail, and I will return later in the call to discuss our outlook. Jeff? Jeff Stanford: Thanks, Chris. Good morning, everybody. Starting with the fourth quarter, we generated revenues of approximately $157 million, which was in line with our Q4 guidance. As expected, revenues decreased due to seasonality and budget exhaustion. We generated approximately $23 million of adjusted EBITDA, our highest quarterly adjusted EBITDA of the year, and an adjusted EBITDA margin of about 14%, also the high for 2025. The margin performance reflected favorable product line mix, ongoing cost reductions and normal fourth-quarter accrual unwind as well as impacts from our fleet refresh, asset rationalization, and other year-end items. By segment, Northeast/Mid-Con revenue was essentially flat sequentially at $69.6 million, up about 0.5%, while delivering another quarter of adjusted EBITDA margin expansion to 25.3% and $15.1 million of total adjusted EBITDA, driven by gas-directed activity. Within that segment, dry gas revenue increased 5.3% quarter over quarter, continuing the trend of our gas-levered revenue base growing as a share of the portfolio. In the Rockies, revenues declined to $46.3 million, roughly 9% sequentially, primarily due to weather, seasonality, and customer budget exhaustion. Adjusted EBITDA declined to $6.9 million, or 15%. In the Southwest, revenue declined about 10% to $50.9 million from the third quarter, mostly tied to budget exhaustion and softer oil-directed activity in the Permian. Adjusted EBITDA increased to $6.8 million, or 33%. On corporate costs, we made measurable progress. Corporate adjusted EBITDA loss improved to approximately $6.3 million in Q4, down from $6.6 million in Q3. For the full year, corporate adjusted EBITDA loss was around $26 million, bringing us back toward the 2021–2022 levels. This reflects structural G&A rightsizing, including approximately a 12% decline in total headcount when comparing average Q4 2025 headcount versus Q4 2024. Turning to capital allocation, net CapEx for 2025 was approximately $33 million. For 2026, we expect gross capital expenditures of approximately $40 million, down from $49 million in 2025, and net CapEx in the range of $30 million to $35 million, with the vast majority of that devoted to maintenance CapEx. Cash flow generation was strong in Q4, with cash provided by operating activities at $13 million, slightly lower than the $14 million in Q3 due to the aforementioned seasonality and budget exhaustion affecting the bottom line. Unlevered free cash flow was $15 million, a 43% increase over Q3. Total debt at year end was $258.3 million, including $222.3 million in senior notes and $36 million in ABL borrowings, down from Q3 total of $259.2 million. We ended the year with available liquidity of approximately $56 million, including availability of approximately $50 million on the December 2025 asset-based revolving credit facility borrowing base certificate and approximately $6 million in cash and cash equivalents. Of note, due to the New Year's Eve holiday timing, 12/31/2025, we drew approximately $8 million in cash to fund the first payroll of 2026. From a balance sheet perspective, our capital lease obligations grew from their low point in 2025 due to our previously discussed fleet refresh initiative but will amortize down quickly through 2026, and we expect a meaningfully lower capital lease balance at year end. In addition, our coil leases roll off at the end of 2026, which will eliminate approximately $8.2 million of annual lease payments from our cash outflows beginning in 2027 and create incremental cash flow. During the fourth quarter, the company paid senior note interest expense two-thirds in cash and one-third in PIK. We will evaluate future cash versus PIK decisions based on market conditions, and company leverage and liquidity. As of the first two months of 2026, the company paid 25% cash and 75% in PIK. We were in compliance with all covenants under our senior notes. At year end, our net leverage ratio was 4.07x versus a covenant of 4.5x, and the covenant was scheduled to step down to 4.0x at 03/31/2026. As we work through the 10-K filing, stress testing for market risk indicated a potential need for a covenant relief in future periods. We took the proactive step to amend the indenture and provide adequate cushion for the next five quarters. The amendment provides that the covenant will remain 4.5x through 03/31/2027, resuming to the original step-downs as of 06/30/2027. The amendment also excludes capital lease balances from the leverage ratio calculation during the same period, affording us incremental flexibility to fund CapEx, M&A, and other capital needs. With that, I will hand it back over to Chris for his concluding remarks. Christopher J. Baker: Thanks, Jeff. Let me start with the market backdrop and how we are thinking about 2026. We are approaching the year with a constructive but measured outlook. We expect the first quarter to be the low point for the year, reflecting the familiar seasonal combination of customer budget resets, slower restarts of completion programs, and weather-related disruptions. Beyond Q1, we see a path to a gradually improving market led by gas-directed basins, where we believe incremental rigs are more likely to show up before we see a more meaningful recovery in certain oil-directed markets. This, of course, is tenuous given the Middle East situation, and we will continue to monitor for oil-directed activity inflections. Our portfolio is increasingly aligned with that opportunity set. The Northeast/Mid-Con and other gas-focused basins have been areas of momentum for us, and we expect them to remain important contributors as potential areas of growth on a relative basis. In oil-directed basins, particularly the Permian, we are managing through what has been a slow, extended downturn by rightsizing our footprint and cost structure to current demand while maintaining the flexibility to respond when conditions improve. Finally, in terms of how we are framing 2026 revenue, our internal budget contemplates a year that is broadly flat to slightly up versus 2025, with the majority of improvement weighted toward the second half of the year, yielding results that trend toward the stronger run rate we delivered in 2025. That framework will be updated as the year progresses and we gain more visibility into customer plans and basin-level activity. From a Q1 perspective, we are forecasting revenue of $145 million to $150 million, down approximately 3% from 2025 despite rig count being down 8% over the same period. This forecast does include the impact of Winter Storm Firm, where we lost approximately four to five revenue days in many product service lines in certain districts. Looking forward to Q2 2026, we expect revenue to rebound to the $160 million to $170 million range, which is higher than Q1 2025. Industry consolidation and capacity rationalization remain important themes across the oilfield services landscape, and we believe KLX Energy Services Holdings, Inc. is well positioned to be a net beneficiary. We have seen a number of smaller competitors exit the market in the last several months, which helped remove inefficient capacity and support a more rational competitive environment. On capital and fleet readiness, our philosophy has not changed. We continue to invest at a level that maintains our asset base and keeps us ready for a market inflection. At the same time, our capital program is disciplined and predominantly maintenance-oriented, which we believe strikes the right balance between prudence and preparedness in the current environment. With that, we will now take your questions. Operator, thank you. Operator: We will now be conducting a question-and-answer session. If you would like to ask a question, please press 1 on your telephone keypad. You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from Steve Ferazani with Sidoti & Company. Christopher J. Baker: Please proceed with your question. Steve Ferazani: Good morning, Chris. Morning, Jeff. Appreciate all the two positive surprises, very similar to what you reported in 3Q, in that, at least compared to our estimates, Northeast/Mid-Con was stronger and your margins were much stronger than we were modeling. Can you provide— and you covered this in the call, but I was hoping for a little bit more color, particularly on the strength in Northeast/Mid-Con, which normally would expect to see some hit late in the year because of weather. Christopher J. Baker: Good— first of all, good morning, Steve. Appreciate the question. I think if you look at the segment as a whole, when you think about Mid-Con through our ArcoTex to the Northeast, it is a pretty geographically diverse segment. But if you look at segment-level rig count aggregated, rig count increased about 6% across that entire segment quarter over quarter. Our dry gas exposure, as we referenced in the call, increased 5.3%, and furthermore, to your question, I think all of the service lines held up exceptionally well. It is a continuation of the theme, and I think you asked a similar question last quarter. We saw an early start in the Northeast last year that sustained through Q4, and we were not sure how well it would sustain through November and December post-Thanksgiving because that is a very seasonally impacted business. But we saw the Mid-Con continue with completion programs through the year end. We continue to see wins in our accommodations business, our flowback business in East Texas. And so, yes, it held up exceptionally well. Margin, of course, held up well, and, yes, look, we would forecast a slight decrease in revenue in that segment in Q1, predominantly tied to the previously discussed Winter Storm Firm, which really hit the Mid-Con pretty hard. But overall, we expect continued improvements throughout 2026. Steve Ferazani: And then the overall margin improvement, how much of that do you owe to product line mix versus efficiencies versus what clearly has been some cost reductions? Is it very much a mix, or would you weigh it more towards one or the other? Christopher J. Baker: I think— it is a great question. In the Northeast/Mid-Con specifically, I think it is both, I guess. But, yes, it is really lack of white space, really absorption of fixed costs, staying sustainably busy, and product line mix. Steve Ferazani: Helpful. Switching to the Southwest, when I look at that revenue line, was that primarily the impact on your completion product lines, and I am assuming that continues at least through the first part of Q1. Christopher J. Baker: Yes. It is a combination. We actually saw some on the drilling side of the business. Rig count stayed pretty flat. I think it was up from a segment level when you combine all of the Southwest basins by about 2%. But, yes, we did see some budget exhaustion and completion programs tailing off going into the fourth quarter. Some of our PSL and asset realignment rotations that we referenced on the call were really pulling certain assets out of the Southwest segment, pushing them into the Haynesville, so that attributes to some of the revenue decline. Steve Ferazani: That makes sense. Okay. That is helpful. In terms of how you are thinking about CapEx and cash as we go into 2026, and knowing that we have markets that can move in different directions given the uncertainty that is out there, how are you thinking about CapEx and cash flow as we enter the year, knowing it can clearly change? Christopher J. Baker: Look, the world is in turmoil, and we are not budgeting for increases, clearly. Our budget was set before the events of eleven days ago, twelve days ago really kicked off. And so we are targeting gross capital spending of $40 million. That is down from $49 million on a year-over-year basis in a year when we think revenue is flat to up. And so I think that speaks to, A, we do not have a lot of end-up need for incremental CapEx in our business. We have continued to spend to support the business, and we think that we will continue to see some asset rationalization— DBR tools, lost-in-hole, etc.— that will drive net CapEx down into the $30 million to $35 million range. That is all subject to change based on market inflections, but I think we are doing the appropriate level of spending and being prudent, so we are staged and ready to go for any market inflection. Steve Ferazani: Got it. And if I could talk just about the PIK option, how you are thinking about that, and then the covenant relief. It looks— typically you have very significant working capital seasonality, and typically 1Q is your significant cash outflow. The covenant relief, is that primarily related to what we see as typically the working capital build in Q1, which would potentially put you at a closer point to where it was going to step down to? And how do you think about the relief now in your comfort level over the next few quarters? Jeff Stanford: Hey, guys. Good morning, Steve. This is Jeff Stanford. Great question on that. The waiver— we know, closing our books out, doing our year-end budget, going through the year-end audit— we are going through all these things at year end. We do look at stress testing of that, so you look at certain ramifications if this happens or that happens. Going through that stress testing, we entered into it more as a proactive measure, give us some cushion for the future periods, goes out five quarters or fifteen months, so we feel really good about that. It gives us a lot of cushion there. But a lot of things happen as you move forward. Working capital is one piece of that, but also, as you stress test the model, what does it look like? So that provided us a good proactive measure to make sure we had cushion for future periods. That is the main reason that we entered into the waiver. As far as the PIK option, I think your first question— we PIKed 75% in January and February of this year. We did PIK 33% of it in Q4. The PIK option on the note is designed for flexibility. We utilize that flexibility as we see fit. So, in this case, we PIK some, we pay some in cash, and we look at it, kind of throttle up and down as we need to. Market dynamics, liquidity, leverage considerations are taken into account in our algorithm. That is how we want to do it. That is what we did in the past and what we are doing the first two months of this year. That is how we look at the PIK option. We do like that flexibility and use it as needed. Steve Ferazani: Got it. That is helpful. And, Chris, I know it is way too early to really have an outlook on this, but what is your take on the potential impact from the Middle East conflict if it is extended? If it is not, what do you think— and I know there are a lot of different outcomes— but just how you are looking at it on your business and what the potential outcomes could be. Christopher J. Baker: It is a great question. Just one thing I want to clarify on the PIK, to Jeff's point. Recall our leverage ratio includes capital lease balances as debt. That capital lease balance at year end is going to amortize off pretty significantly this year. And so there is an amount that you can PIK where you can stay, all else equal, basically net-debt neutral. And so that is another consideration that we factor in when we think about overall leverage profile. Returning to your question, it is a great question regarding the Middle East conflict, and as we said at the outset, thoughts and prayers to the servicemen and women that are over there. If you think on a historical basis, Steve, we have typically seen a 60- to 90-day lag in activity increases or decreases post commodity prices moving. What we saw in April was almost an immediate reaction, but we definitely saw kind of 45–60 days, a material reduction in rig count post “Liberation Day” with the tariffs and when commodity prices change. We have not seen— so I think what that speaks to is the cycles have gotten shorter, and that is for a couple of reasons. Operators do not have a lot of duration and tenor in their rig contracts today. They are going pad to pad, well to well, etc., and so they react in much shorter time frames than they have historically. We have not really seen any reaction to $100 crude yet, and we think most operators are taking a wait-and-see approach. They just set their 2026 budgets. It is hard to say. What I will say is, as of this morning, the forward strip— you can do forward swaps at $72-plus in December ’26— but the strip, and the tail of the strip, is clearly much more conducive to Lower 48 activity. The other point would be, from a KLX Energy Services Holdings, Inc. perspective, we do not actually have to see incremental rig count to see increases in our own activity. If you think about our completion, production, intervention business line, we benefit from increases in refrac activity, workovers, well intervention, stimulation of existing wells. We have talked a lot over the last year about how the refrac market, specifically in the Bakken, to a lesser extent in the Eagle Ford, slowed down through 2025. We are keeping our ear to the ground, trying to stay close to customers. We will see how protracted the situation becomes, how much energy infrastructure in the Middle East is damaged, and what happens to commodity prices, and I think specifically the tail over the next month. But, as you know, KLX Energy Services Holdings, Inc. has the right asset base. We have the right technology and people. If customers elect to ramp activity, we will absolutely be there and be prepared to participate. Steve Ferazani: That is great. Thanks, Chris. Thanks, Jeff. Christopher J. Baker: Appreciate it, Steve. Thanks, Steve. Ken Dennard: Thanks, Steve. This is Ken. John Daniel— he had to drop, but he emailed me some questions, and so I am going to read them to you so that way, he will hear them on the replay. Fair enough. John Daniel: There continues to be a push by some operators to move to simulfrac operations. Can you speak to your frac business and customer base and let us know what trends you are seeing? Christopher J. Baker: At a high level, specifically in the Mid-Con, we have not seen the huge adoption of simulfrac relative— on the same pace— that we have seen in other basins. We clearly are participating in simulfrac in the Permian and other basins in a very material way with our frac rentals business, wellhead isolation business, etc. That is not to say that the Mid-Con has not adopted simulfrac, but I think there are numerous reasons for the slower adoption rate, one being the acreage profile, operator size, in some instances pad sizes, lack of electrical infrastructure when you think about comparing to the large electric spreads in the Permian. We have seen some adoption. I would say, on a stage count basis, if you think about our forecast for this year, we are probably somewhere between 25%–30% simulfrac, and that is up year over year, but it clearly does not have the propensity that you would see in the Permian. John Daniel: So if not mistaken, that is not a basin that has seen a lot of new capacity in some years. So would it seem that attrition would be a little more pronounced, or is that too optimistic on my part? Christopher J. Baker: John is always optimistic, but tying back to the first part of the question, simulfrac definitely adds a layer of complexity— incremental horsepower needs— that some providers just are not adept at managing either from a rate or pressure perspective. A lot of providers are limited to 100 barrels a minute under 10k. As you think about attrition within the basin— and I am sure John is on the call; I am sure he is aware— the general industry said there were about 10 spreads sold last year to international locations. Most of those spreads were Tier 2 equipment. There was some horsepower that left the basin. But as you think about the basin today, it is amply supplied. I do not think we are short horsepower by any stretch, and barring any material pickup in activity— back to Steve’s prior question around the Middle East situation, commodity prices— barring any material pickup in activity, I think John is probably optimistic that attrition is going to drive overall results. I think it is a pretty balanced basin today. John Daniel: Second topic is coiled tubing. We have heard at least one coiled tubing company suspending operations in recent months, and we believe some of those assets may be reconstituted by some other folks. At the same time, there are a very small number of units being built. Thus, on one hand are those who have struggled and those who are doing well. Can you give us your thoughts on the U.S. coiled tubing market? Do you see the sector beginning to rationalize itself, or is that something you expect will occur in the next year or two, if at all? Christopher J. Baker: That is a broad question. I will jump in on the first point. We have definitely seen some attrition of units. We have seen over the last couple years— one player exited the market about two years ago and that equipment candidly vanished. I am aware of the player that John is talking about. The majority of the optimal assets were reconstituted into and absorbed by a pretty sizable player in the business today. There were some assets that landed in a startup. We are aware of another situation that is currently active with another smaller player exiting the market altogether. So, yes, I think the business is shaking out, but for different market dynamics. If you think about the Bakken, that has shrunk as a coil market. We have seen players move equipment out of the Bakken, either back to Canada or down to the Permian and other basins, Waco, and so there has been a lot of coil decline in certain regions due to the length of the wellbores surpassing capacity of the units in those regions and the growth of snubbing and stick pipe. Pivoting to the second part of his question, from a new build perspective, John is correct. There are very few new build units that are under construction, and the ones that are are solely focused on ultra-deep, extended-reach laterals. That is where the market is heading. The routine frac screen-outs, wellbore cleanouts have become fewer and fewer, and so a provider has to have the expertise, the scale, to manage all of the technologies required to complete four-mile laterals with coiled tubing. That is multiple ERTs, coil connectors, string and fluid design— they all have to be optimized. Risk and pipe costs are increased, and operators are monitoring ROP KPIs in real time, and switching costs are candidly minimal as they are trying to think about the risk-reward and efficiency gains of coil versus alternatives. Candidly, I think that is where KLX Energy Services Holdings, Inc. has an advantage with our in-house proprietary mud motors, our extended reach tools, as well as additional technologies that we are bringing to bear to extend the commercially viable life of coiled tubing and expand the addressable wellbores. Operator: Good. Okay. This concludes our Q&A session. I would now like to turn the call back over to Christopher J. Baker for final comments. Christopher J. Baker: Thank you once again for joining us on this call today and for your continued interest in KLX Energy Services Holdings, Inc. We look forward to speaking with you next quarter. Operator: Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines and have a wonderful day.
Operator: Good day, everyone, and thank you for participating in today's conference call. I would like to turn the call over to Mr. John Ciroli as he provides some important cautions regarding forward-looking statements and non-GAAP financial measures contained in the earnings materials made on this call. John, please go ahead. John Ciroli: Thank you, and good day, everyone. Welcome to Montauk Renewables Earnings Conference Call to review the full year 2025 financial and operating results and development. I'm John Ciroli, Chief Legal Officer and Secretary of Montauk. Joining me today are Sean McClain, Montauk's President and Chief Executive Officer, to discuss business developments and Kevin Van Asdalan, Chief Financial Officer, to discuss our full year 2025 financial and operating results. At this time, I would like to direct your attention to our forward-looking disclosure statement. During this call, certain comments we make constitute forward-looking statements and as such, involve a number of assumptions, risks and uncertainties that could cause the company's actual results or performance to differ materially from those expressed in or implied by such forward-looking statements. These risk factors and uncertainties are further detailed in Montauk Renewables' SEC filings. Our remarks today may also include non-GAAP financial measures. We present EBITDA and adjusted EBITDA metrics because we believe the measures assist investors in analyzing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. These non-GAAP financial measures are not prepared in accordance with the generally accepted accounting principles. Additional details regarding these non-GAAP financial measures, including reconciliations to the most direct comparable GAAP financial measures can be found in our slide presentation and in our full year 2025 earnings press release issued and filed March 11, 2026, which is available on our website at ir.montaukrenewables.com. After our remarks, we will open the call to questions from analysts. We ask that you please keep to one question to accommodate as many questions as possible. And with that, I will turn the call over to Sean. Sean McClain: Thank you, John. Good day, everyone, and thank you for joining our call. I am pleased to report that despite the sale of one of our RNG facilities in 2024, we achieved growth in our 2025 RNG production. During 2025, our Pico project received its final tranche of increased contractual feedstock. Processed through our expanded digestion capacity, inlet feedstock averaged approximately 458,000 gallons per day, 17% in excess of our contractual minimum. Given these higher inlet averages, we are currently evaluating additional development expansion opportunities to ensure the beneficial processing of all available feedstock volumes. 2025 RNG production from our expanded redesigned facility was approximately 31.8% higher when compared to the previous year. To maximize the economic benefit from our increased production and from future development opportunities, we have negotiated the termination of the earn-out obligation related to the acquisition of the Pico facility. During 2025, we successfully completed the construction and commissioning of our second RNG processing facility at the Apex landfill. Though we continue to have excess available capacity with the second facility commissioned as the landfill host increases its waste intake, we produced approximately 7.8% more RNG in 2025 as compared to the previous year. Our GreenWave Energy Partners joint venture continues to address the limited capacity of RNG utilization for transportation by offering third-party RNG volumes access to exclusive, unique and proprietary transportation pathways. During 2025, GreenWave matched available dispensing capacity with available third-party RNG volumes, separated RINs and distributed RINs to the partners of GreenWave. Through our ownership percentage of GreenWave, we received 706,000 RINs and recorded income of $1.5 million during 2025. In September 2025, a joint motion was filed with the North Carolina Utilities Commission by various entities seeking to modify and delay certain aspects of the Clean Energy Portfolio Standards, specifically the portfolio standards relating to Swine RECs. In October 2025, Montauk filed response comments to the joint motion with the NCUC requesting that they grant modifications or delays only to individual power suppliers that have demonstrated need require power suppliers that have not achieved 100% compliance in 2025 to apply any cumulatively acquired swine RECs to the suppliers' unsatisfied 2025 pro rata obligation and modify the swine REC set aside for 2026 and beyond to match the requirement originally set by North Carolina in 2018. In January 2026, the NCUC denied the request for waivers and determined that the parties must use banked RECs to meet 2025 compliance targets with the ability to use soar RECs to fill any of the compliance shortage. Additionally, the compliance obligations for those utilities filing the September 2025 joint motion continue to increase through 2029. We are pleased to report that we have begun the commissioning of our Turkey, North Carolina facility. At first phase capacity, we anticipate the ability to process feedstock from approximately 400,000 to 450,000 hog spaces, which equates to approximately 35,000 tons of annual waste collection. We have entered into long-term agreements with over 40 separate farming locations to provide access to waste in support of our expected processing needs of our first phase of the project. We continue to install collection equipment at these separate farms to access the waste and intend to contract with additional farms to secure feedback sources for future expansion. We currently expect the first phase capital investment to be approximately $200 million and expect our production and revenue generation activities to commence in April 2026. In advance of our commercial operations, feedstock collection has begun with transportation to our facility for pelletization and storage. We are also pleased to announce that during March 2026, we completed a $200 million senior credit facility with HASI. This new facility restructures our existing debt, enables the completion of the first phase of our Turkey, North Carolina project and provides for future growth initiatives. Also during March 2026, we successfully negotiated a 5-year gas rights extension for our Raeger RNG facility. And with that, I will turn the call over to Kevin. Kevin Van Asdalan: Thank you, Sean. I will be discussing our full year 2025 financial and operating results. Please refer to our earnings press release and the supplemental slides that have been posted to our website for additional information. Our profitability is highly dependent on the market price of environmental attributes, including the market price for RINs. As we self-market a significant portion of our RINs, a decision not to commit to transfer available RINs during a period will impact our revenue and operating profit. We have entered into commitments to transfer all RINs from 2025 RNG production, which generated RINs that were separated in 2026. In 2026, we have transferred approximately 3.9 million RINs from the 2025 compliance year at an average realized price of approximately $2.41. Additionally, we have entered into commitments to transfer approximately 2.5 million RINs generated and available for sale from our 2026 RNG production at an average realized price of approximately $2.42. Total revenues in 2025 were $176.4 million, flat compared to $175.7 million in 2024. There was an increase in the number of RINs we self-marketed during 2025 due to a decision not to commit 6.8 million RINs in the fourth quarter of 2024. The 2025 average realized RIN price of $2.33 decreased approximately 29% compared to $3.28 in 2024. Natural gas index price increased approximately 51.1% during 2025, moving from $2.27 in 2024 to $3.43 in 2025. Total general and administrative expenses were $31.7 million for 2025, a decrease of $4.6 million or 12.5% compared to $36.3 million in 2024. Employee-related costs, including stock-based compensation were $18.4 million in 2025, a decrease of $4.7 million or 20.5% compared to $23.1 million in 2024. The decrease was primarily related to the accelerated vesting of certain restricted share awards as the result of the termination of employee in 2024 and other stock vesting time lines. Also, our corporate insurance fees decreased approximately $0.8 million or 15.4% in 2025 compared to 2024. Related to our investment in our joint venture, GreenWave, we have contributed $4 million in 2025. With our ownership of 51%, we account for this joint venture as an equity method investment. Related to the RIN separation services provided to third-party RNG producers, GreenWave records noncash related revenues from these separation activities. During 2025, GreenWave distributed approximately 706,000 RINs to us as a result of these activities. We sold these RINs and included approximately $1.6 million in our revenues in 2025. Additionally, when distributed, we recorded the fair value of these RINs as RIN inventory were approximately $1.7 million. Finally, from our ownership of GreenWave, we recorded $1.5 million as noncash income from our share of the results of GreenWave. We do not include within our operating highlights table the RINs, revenue from distributed RINs or the cost of the RIN inventory as we present in our operating highlights table various business metrics for the results of our core operations. Turning to our segment operating metrics. I'll begin by reviewing our Renewable Natural Gas segment. We reported growth in production in 2025, even after considering our 2024 fourth quarter sale of our Southern facility, which produced 85,000 MMBtu in 2024. We produced approximately 5.6 million MMBtu of RNG during 2025 compared to 5.6 million in 2024. Our Rumpke facility produced 218,000 MMBtu more in 2025 compared to 2024 as a result of increased volumes of feedstock gas. Our McCarty facility produced 76,000 MMBtu less in 2025 compared to 2024. Decrease is related to the landfill host wellfield bifurcation and changes to the wellfield collection system. Revenues from the Renewable Natural Gas segment in 2025 were $155.7 million, a decrease of $2.3 million or 1.4% compared to $158 million in 2024. Average commodity pricing for natural gas for 2025 was 51.1% higher than the prior year. During 2025, we self-marketed approximately 44.1 million RINs, representing a 7.5 million increase or 20.5% compared to 36.6 million in 2024. The increase was primarily related to market conditions as a decision -- and a decision to not self-market 6.8 million RINs generated and available for sale in the fourth quarter of 2024. Average realized pricing on RIN sales during 2025 was $2.33 as compared to $3.28 in 2024, a decrease of approximately 29%. This compares to the average D3 RIN index price for 2025 of $2.34 being approximately 24.9% lower than the average D3 RIN index price in 2024 of $3.12. At December 31, 2025, we had approximately 354,000 MMBtu available for RIN generation, 190,000 RINs generated and unseparated and no RINs generated and unsold. At December 31, 2024, we had approximately 291,000 MMBtu available for RIN generation and had approximately 6.8 million RINs generated and unsold. We have entered into commitments and transferred all of our RINs related to our 2025 RNG production. Operating and maintenance expenses for our RNG facilities in 2025 were $59.1 million, an increase of $5.7 million or 10.7% compared to $53.4 million in 2024. Our Apex facility operating and maintenance expenses increased approximately $2.3 million, primarily driven by increased utility expense, the timing of maintenance related to gas processing equipment, increased media change-outs and disposal costs as well as a wellfield operational enhancement program. Our Atascocita facility operating and maintenance expenses increased approximately $1.5 million, primarily driven by gas processing equipment maintenance, a wellfield operational enhancement program, media change-outs and utility expense. Our Rumpke facility operating and maintenance expenses increased approximately $1.3 million as a result of a wellfield operational enhancement program and increased utility expense. Our Raeger facility operating and maintenance expenses increased approximately $0.9 million as a result of a wellfield operational enhancement program and increased media change-outs and disposal costs. We also recorded approximately $3.4 million in environmental attribute expense related to the cost of RINs distributed from GreenWave and the costs related to dispensing associated with our RNG being dispensed through exclusive unique and proprietary transportation pathways, which are not included within our operating metrics table. There were no such environmental attribute expenses incurred during 2024 included with our operating and maintenance expenses for our RNG facilities. We produced 177,000 megawatt hours in renewable electricity in 2025, a decrease of approximately 9,000 megawatt hours or 4.8% compared to 186,000 megawatt hours in 2024. Our security facility produced 6,000 megawatt hours less in 2025 compared to 2024 as a result of us ceasing operations in connection with the first quarter of 2024 sale of the gas rights back to the landfill host. Our Bowerman facility produced approximately 2,000 fewer megawatt hours in 2025 compared to 2024, primarily related to the planned preventative engine maintenance that was completed in 2025. Revenues from renewable electricity facilities in 2025 were $17.2 million, a decrease of $0.6 million or 2.9% compared to $17.8 million in 2024. The decrease was primarily driven by the decrease in our security facility production volumes. Operating and maintenance expenses for our Renewable Electricity facilities in 2025 were $14.7 million, an increase of $1.9 million or 15.3% compared to $12.8 million in 2024. The primary driver of the increase were operating and maintenance expenses related to the Montauk Ag Renewables development project, which increased approximately $1.7 million as a result of the noncapitalizable costs. We calculated and recorded impairment losses of $3.2 million for 2025, an increase of $1.6 million compared to $1.6 million for 2024. The impairment losses in 2025 primarily relate to our Blue Granite development project for which the local utility is no longer accepting RNG into its distribution system. We continue to have the payment for the gas rights agreement award recorded for this RNG site, but we have paused development activities while we review alternatives for the site. The impairment losses in 2024 primarily related to the remaining book value of assets at the security facility, various RNG equipment that was deemed obsolete for current operations and RNG assets that were impacted under initial start-up testing for one of our REG construction work in process sites. We did not record any impairments related to our assessment of future cash flows. Other expenses in 2025 were $3.3 million, a decrease of $0.6 million or 15.4% compared to $3.9 million in 2024. The primary driver of the decrease was decreased interest expense of $0.5 million. In 2025, we recorded $1.5 million in income related to our joint venture investment in GreenWave. In 2024, we recorded proceeds of $1 million from the sale of our gas rights ahead of the fuel supply agreement expiration of our security facility. Operating profit in 2025 was $0.9 million, a decrease of $15.2 million compared to $16.1 million in 2024. RNG operating profit for 2025 was $38.2 million, a decrease of $17.8 million or 31.9% compared to $56 million in 2024. Renewable electricity generation operating loss for 2025 was $4.8 million, an increase of $2 million or 72.5% compared to $2.8 million in 2024. Turning to the balance sheet. At December 31, 2025, $44 million was outstanding under our term loan and $85 million was outstanding under our revolving credit facility. As we reported in our 2025 10-K, we completed a refinancing of our existing debt with a new lender on March 9, 2026. Under applicable accounting guidance, as we have the ability and intent to refinance our debt, we have classified $2.7 million as current debt and $126 million as noncurrent debt as of December 31, 2025. Our new senior credit facility consists of up to $200 million in senior indebtedness, of which $155 million is outstanding as of March 11, 2026. These proceeds were used to repay all outstanding debt of the company at the date of closing. Subject to various requirements as defined in the underlying agreement, the company expects to have an additional $25 million in proceeds drawn upon the conclusion of an engineering review over its Montauk Ag Renewables acquisition, our Turkey, North Carolina project. Also subject to various requirements as defined in the underlying agreement, the company expects the final proceeds to be dispensed at the commissioning and operation of its Montauk Ag Renewables Ag acquisition. Our new senior credit facility includes similar covenants as our old syndication, but our total net leverage ratio has increased to 4:1 from 3:1. This affords us the flexibility to continue our growth, and we expect our new lender to assist us with securing additional project-based financing for our in-progress development projects or new projects. The new senior credit facility has a 24-month availability period during which we only have to make quarterly interest payments. After the availability period, we will be subject to quarterly principal payments equal to 1.25% of the total outstanding principal balance. The facility has a fixed interest rate of 10.25% and matures in 2031. As of March 11, 2026, we had approximately $155 million outstanding under the new senior credit facility. New senior credit facility is subject to customary financial covenants and customary event of default as defined in the underlying agreement. Related to our Pico facility earn-out, we settled the earn-out obligation in December 2025, resulting in a payment of $4 million. We previously paid in July 2025 $0.2 million under this arrangement. As Sean mentioned, the settlement and termination of this earn-out will benefit us from continued improvement in growth at this facility. This is recorded through our RNG segment royalty expense. During 2025, our capital expenditures were approximately $116.5 million, of which $81 million was for Montauk Ag Renewables, $8.7 million was for the Rumpke RNG relocation project and $7.7 million was for the second Apex facility. For 2024, our capital expenditures were approximately $62.3 million, of which $27.8 million was for Montauk Ag Renewables, $12.6 million was for the second Apex facility and $8.8 million was for the Bowerman RNG project. For 2025, we expect our nondevelopment 2026 capital expenditures to range between $20 million and $25 million. The increase in our 2026 nondevelopment capital expenditures relate to our original equipment manufacturer required life cycle expenditures on our engines at our Bowerman Electric facility. We expect the original equipment manufacturer required life cycle expenditures to continue through 2027. Additionally, we currently estimate that our existing 2026 development capital expenditures could range between $100 million and $150 million. As of December 31, 2025, we had cash and cash equivalents of approximately $23.8 million and accounts and other receivables of approximately $9.2 million. We do not believe we have any collectibility issues within our receivables balance. Adjusted EBITDA for 2025 was $35.6 million, a decrease of $7 million or 16.5% compared to $42.6 million for 2024. EBITDA for 2025 was $32.3 million, a decrease of $8.7 million or 21.2% compared to EBITDA of $41 million in 2024. Net income for 2025 was $1.7 million, a decrease of $8 million or 84.5% compared to $9.7 million in 2024. Related to our old credit agreement, which was refinanced on March 9, 2026, on December 31, 2025, we entered into the sixth amendment to the agreement with Comerica Bank and certain other financial institutions. Under the old Amended Credit Agreement, we were required to maintain a total net leverage ratio of not more than 3.5:1 as of December 31, 2025. As of December 31, 2025, we were in compliance with all financial covenants related to the old credit agreement, which we refinanced on March 9, 2026. With that, I'll now turn the call back over to Sean. Sean McClain: Thank you, Kevin. In closing, while we don't provide guidance as to our internal expectations on the market price of environmental attributes, including the market price of D3 RINs, we would like to provide our 2026 outlook. It's important to note that our guidance ranges include internal assumptions that may or may not align with current market trends. We expect our RNG production volumes to range between 5.8 million and 6.1 million MMBtu and corresponding RNG revenues to range between $175 million and $190 million. We expect renewable electricity production volumes to range between 195,000 and 207,000 megawatt hours and corresponding renewable electricity revenues to range between $35 million and $41 million. Included within our Renewable Electricity segment are our expectations of production and revenues related to the Turkey, North Carolina development project. And with that, we will pause for any questions from analysts. Operator: [Operator Instructions] And our first question will be coming from the line of Betty Zhang of Scotiabank. Y. Zhang: Would you be able to discuss what's built into your 2026 RNG production outlook? Specifically, where is the growth coming from? And are you expecting to see any additional volumes from the 15-liter engines? Kevin Van Asdalan: Thanks, Betty, for the question. Generally, across our portfolio, we're seeing increases across all of our RNG sites related to our expectations of landfill improvements in our existing wellfield automation initiatives. And it's a portfolio increase. It's an increase across all the sites of our portfolio. Sean McClain: Betty indicated in our spend for 2025, there were a number of projects that we took on regarding nonlinear maintenance activities, wellfield investments, commissioning of facilities that when you look on a full year basis, the majority of the growth that you get year-over-year is the full year realization of those initiatives that are not only already complete and paid for, but are also already starting to show benefits as you get into the Q4 period of 2025. Operator: And our next question will be coming from the line of Tim Moore Clear Street. Timothy Michael Moore: I appreciate it and great job closing out the fourth quarter. I'm attempting to just triangulate your adjusted EBITDA potential growth. I know you don't specifically guide on it, but do you think it could grow at twice the percentage rate of revenue growth? Because you are lapping a lot of those CapEx, operating maintenance, preventative maintenance, wellfield enhancements, engines. And then you're going to have the RECs inflow from North Carolina and then -- if D3 pricing hangs in there. Just kind of trying to triangulate maybe how much of that one-off operating kind of preventative maintenance CapEx won't be repeated at the same amount this year? Kevin Van Asdalan: Thanks, Tim. Obviously, we provide guidance expectations around production and revenues for our 2 main operating segments. We don't provide external guidance around EBITDA. With the commissioning of our North Carolina Turkey project in the second quarter of this year, next -- beginning next month, there will be a significant uplift in EBITDA coming from that location. And we do -- while we do have wellfield enhancement initiatives that were started in 2025 at some of our sites that will continue through 2026, there's always that timing and consistency of nonlinear spend that as items roll off in 2025 and aren't replicated in 2026, there will be some new spend in 2026 that wasn't in 2025. However, I did want to highlight that though with the increase in our nondevelopment capital expenditures, specifically at our Bowerman location, it's a 0 hour of all the engines and an entire capital expense as opposed to operating expenses related to normal original equipment manufacturer recommended expenses that won't be incurred in 2026. Sean McClain: I think, Tim, if I understand the question, definitively, you'll see an uptick in cash flows because a number of the initiatives that you're hearing that are nonlinear are capitalized as opposed to embedded in your G&A and your operating expense. The areas that are expensed, both from OpEx and administrative costs, the areas that you would see things disproportionate as you head into this year, EBITDA was artificially suppressed in '25 because you had a mismatch between noncapitalizable costs that were in your Turkey, North Carolina development, but you didn't have any corresponding production in revenue. The other piece of it is there were a number that we called out throughout the year, a number of non-repeated noncash, primarily stock-based compensation adjustments that went through your administrative line associated with a number of employee matters that are not going to repeat themselves in 2026. Significant enough that you would see that disproportionate pickup in EBITDA. Operator: [Operator Instructions] Our next question will be coming from the line of Ryan Pfingst of B. Riley Securities. Ryan Pfingst: I wanted to ask a follow-up on guidance. For RNG revenues, does the $15 million range primarily reflect potential RIN price outcomes? Or are there other initiatives on the production side or elsewhere that could drive you towards the higher end of that range? Kevin Van Asdalan: Yes. Thanks for the question. At the beginning of the year, we're trying to cover off various expectations, not just from our production. But to your point, a potential range of RIN pricing. While we're not -- while we won't have a 2025 RIN hangover as we've already committed and transferred our vintage 2025 RINs and we're moving into 2026 commitments, we would anticipate potentially an elongated 2026 period that there's 2025 settlement of RINs from last year given the shutdown that occurred in the federal government last year. So we're trying to manage outcomes of our production ranges as well as though the RIN prices held steady over the last handful of months for either '25 vintage RINs or '26 vintage RINs, we're trying to accommodate a wide range of RIN pricing sitting here with the vast majority of our 2026 RIN availability not yet committed at pricing. Operator: And I would now like to turn the call back to Sean for closing remarks. Sean McClain: Thank you all for the questions, and thank you all for taking the time to join us on the conference call today. We look forward to speaking with you throughout 2026. Operator: And this concludes today's program. Thank you for participating. You may now disconnect.
Operator: Good morning. My name is Rob, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Dollar General Fourth Quarter 2025 Earnings Call. Today is Thursday, March 12, 2026. [Operator Instructions] This call is being recorded. Instructions for listening to the replay of the call are available in the company's earnings press release issued this morning. Now I'd like to turn the conference over to Mr. Kevin Walker, Vice President of Investor Relations. Kevin, you may begin your conference. Kevin Walker: Thank you, and good morning, everyone. On the call with me today are Todd Vasos, our CEO; and Donny Lau, our CFO. After our prepared remarks, we'll open the call up for your questions. And Emily Taylor, our Chief Operating Officer, will join us for the Q&A session. To allow us to address as many questions as possible in the queue, please limit yourself to one question. Our earnings release issued today can be found on our website at investor.dollargeneral.com under News & Events. Let me caution you that today's comments include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, such as statements about our financial guidance, long-term financial framework, strategy, initiatives, plans, goals, priorities, opportunities, expectations or beliefs about future matters and other statements that are not limited to historical fact. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These factors include, but are not limited to, those identified in our earnings release issued this morning under Risk Factors in our 2024 Form 10-K filed on March 21, 2025, and any later filed periodic reports and in the comments that are made on this call. You should not unduly rely on forward-looking statements, which speak only as of today's date. Dollar General disclaims any obligation to update or revise any information discussed in this call unless required by law. Now it is my pleasure to turn the call over to Todd. Todd Vasos: Thank you, Kevin, and welcome to everyone joining our call. I want to begin by thanking our teams in our stores, distribution centers, private fleet and our store support center for all their work to serve our customers and each other in 2025. We are proud of these efforts and pleased with our strong operating and financial results for both the fourth quarter and fiscal year 2025. We have not only stabilized our core business, but we've laid the groundwork to drive meaningful growth over both the near and longer term. For today's call, I will begin by recapping some of the highlights of our fourth quarter performance as well as sharing our latest observations on the consumer environment. After that, Donny will share the details of our financial performance, financial outlook for fiscal 2026 and updated thoughts on our long-term financial framework. I will then wrap up the call with an update on our strategy, including our strategic growth pillars. Turning to our fourth quarter performance. Net sales increased 5.9% to $10.9 billion in Q4 compared to net sales of $10.3 billion in last year's fourth quarter. We grew market share in both dollars and units in highly consumable product sales once again during the quarter, in addition to growing market share in nonconsumable product sales. Importantly, we believe our continuing growth in sales and market share demonstrate the relevance of our unique combination of value and convenience for our customers. Same-store sales increased 4.3% during the quarter and included healthy growth in customer traffic as well as average basket size. The growth in average basket was driven by an increase in average unit retail price per item, partially offset by a decrease in average number of items. From a monthly cadence perspective, while January was the strongest period of the quarter and included a benefit from consumer stock-up activity ahead of winter storms, all 3 periods delivered comp sales growth above 3.5%. For the fourth consecutive quarter, we delivered broad-based category sales growth with positive comp sales in each of our consumables, seasonal, home and apparel categories. Notably, sales in the combined nonconsumable categories outpaced a solid increase in consumable sales also for the fourth consecutive quarter. In addition, we finished 2025 with 3 consecutive quarters of meaningful growth in customer traffic, reflecting the essential role we play for our customer and communities as we help them save time and money every day. Customers across all income brackets continue to stress the importance of finding value as they shop, and we are meeting this need as we continue to grow penetration with households of all income levels. And while we continue to be pleased with our pricing position against competitors and other classes of trade, we know value is multifaceted, especially for our core customer. As a result, beyond our goal of keeping prices within 3 to 4 percentage points of mass retailers, we continue to offer compelling value through our extensive offering of more than 2,000 items at or below the $1 price point. These items are clearly resonating with the customer as evidenced by the strong performance of our Value Valley offering, which is comprised of more than 500 rotating items all priced at $1. In fact, during the quarter, this offering delivered a comp sales increase of 17.6%, once again outperforming the chain average. These results represent meaningful acceleration compared to prior quarters, further building on the strong results we've been delivering in this area. In addition, $1 items in our seasonal business for the quarter delivered our highest sell-through rates, reinforcing the value our customers continue to place on this important price point. Our strong value proposition is complemented by the convenience of nearly 21,000 stores located within 5 miles of approximately 75% of the U.S. population and a robust and growing digital presence to serve a wide variety of new and existing customers, all of which has uniquely positioned us as America's neighborhood general store. In summary, we're proud of our Q4 and 2025 results, which were well ahead of our expectations. We are well positioned to continue driving profitable sales growth and capturing growth opportunities while creating long-term shareholder value. Now let me turn the call over to Donny. Donny Lau: Thank you, Todd, and good morning, everyone. Now that Todd has taken you through the top line results for the quarter, let me take you through some of the other important financial details. Unless we specifically note otherwise, all comparisons are year-over-year, all references to EPS refer to diluted earnings per share, and all years noted refer to the corresponding fiscal year. For Q4, gross profit as a percentage of sales was 30.4%, an increase of 105 basis points. This increase was primarily attributable to a reduction in shrink, higher inventory markups and lower inventory damages, partially offset by an increased LIFO provision. Our shrink mitigation efforts once again contributed to strong gross margin expansion in the quarter as we delivered a 62 basis point improvement in shrink versus prior year, even while lapping a 68 basis point improvement in Q4 2024. For the full year, gross margin expanded by 107 basis points, driven by an 80 basis point reduction in shrink. Notably, this reduction positions us ahead of the goals embedded in our long-term financial framework, and we expect further improvement over time. Turning to SG&A, which as a percentage of sales was 24.9%, a decrease of 165 basis points. The primary expenses that were a lower percentage of sales in the quarter include impairment charges primarily due to the store portfolio optimization review completed in 2024 and retail salaries, partially offset by higher incentive compensation. Moving down the income statement. Operating profit for the fourth quarter increased 106% to $606 million. As a percentage of sales, operating profit increased 270 basis points to 5.6%. As a reminder, our Q4 2024 operating profit includes an approximate $232 million negative impact associated with the impairment charges I just mentioned. Net interest expense for the quarter decreased to $52.3 million compared to $65.9 million in last year's fourth quarter. Our effective tax rate for the quarter was 21.8% and compares to 16.2% in the prior year. Finally, EPS for the quarter increased 122% to $1.93, which exceeded the high end of our expectations. Our Q4 2024 results include an approximate $0.81 per share negative impact associated with the impairment charges I mentioned earlier. Turning now to our balance sheet and cash flow, where we continue to make significant progress in strengthening our financial position. Merchandise inventories were $6.3 billion at the end of Q4, a decrease of $379 million or 5.7% compared to the prior year and a decline of 7% on an average per store basis. Importantly, the team continues to do a terrific job reducing inventory while driving sales and improving in-stock levels. Overall, we're pleased with our inventory position and moving forward, are focused on growing inventory at a rate below our sales growth. In 2025, we generated significant cash flow from operations of $3.6 billion, which represents an increase of 21.3%. Our strong cash flow generation provides flexibility to reinvest in our business, while at the same time, further strengthen our balance sheet and liquidity position. In fact, as previously communicated, we redeemed $550 million of senior notes during the fourth quarter. This was well ahead of their scheduled November 2027 maturity and brings the total level of senior note redemptions in 2025 to $1.7 billion. We also paid a dividend of $0.59 per common share outstanding during the quarter for a total payment of approximately $130 million. Our capital allocation priorities continue to serve us well and remain unchanged. Our first priority is investing in the business, including our existing store base as well as other high-return growth opportunities such as new store expansion, remodels and other strategic initiatives. Next, we seek to return cash to shareholders through our quarterly dividend payment and when appropriate, share repurchases, all while maintaining our goal of less than 3x adjusted debt to adjusted EBITDAR in support of our commitment to middle BBB ratings by S&P and Moody's. Overall, we're pleased with our strong financial results in 2025, which were significantly ahead of our initial expectations for the year. These results are a testament to the strong execution by the team and the ongoing positive impact of key growth initiatives across the business. I'd like to now discuss our financial outlook for 2026. Our current outlook reflects continued progress against our key growth initiatives. It also considers our efforts to mitigate cost inflation and the potential for continued uncertainty, particularly in consumer behavior. In addition, keep in mind that we entered the year well ahead of schedule on several of the goals initially contemplated in our long-term financial framework, which we introduced on our Q4 2024 earnings call last March. Taking all this into account, for 2026, we expect net sales growth in the range of 3.7% to 4.2%. Same-store sales growth in the range of 2.2% to 2.7%, and EPS in the range of $7.10 to $7.35. Our EPS guidance assumes an effective tax rate of approximately 25% and includes an anticipated negative impact of about 150 basis points from the expiration of the Work Opportunity Tax Credit on December 31, 2025, resulting in an approximate $0.13 reduction to EPS. We expect capital spending in the range of $1.4 billion to $1.5 billion, which is in line with our capital allocation priorities and designed to support ongoing growth. In addition, our Board of Directors recently approved a quarterly cash dividend payment of $0.59 per share for Q1 2026. And while our guidance does not contemplate share repurchases this year, they remain an important part of our broader capital allocation strategy at the appropriate time. Now let me provide some additional context as it relates to our outlook for 2026. As a result of severe winter storm activity in the first 2 weeks of February, including periods of temporary store closures, sales results were negatively impacted to begin the year. Since that time, we've been pleased with the solid rebound in top line performance. With all of that in mind, we expect Q1 comp sales to be in the low 2% range. For the full year, we expect continued gross margin expansion though to a much lesser extent than 2025 as we lap the strong performance from prior year. We expect this improvement to be driven by our key gross margin drivers, which Todd and I will discuss in further detail shortly. On the expense side, we expect modest SG&A deleverage in 2026. While we expect to benefit from a more normalized incentive compensation level, this benefit will be partially offset by continued investments in key initiatives, including remodels and IT modernization. Overall, we're excited about our plans for 2026, particularly following our strong 2025 results, and we're confident in our strategy to deliver against our long-term financial framework goals. With that in mind, I will now provide an update on certain components of our long-term financial framework. I'll start with an update on how we currently see the path towards our 6% to 7% operating margin target over the next 3 to 4 years. Within gross margin, our plans include building on our efforts to further reduce shrinking damages. And while we have made significant progress on both fronts, particularly with shrink, we see opportunities for continued improvement as we move ahead. More specifically, we now anticipate shrink and damages combined will contribute approximately 50 basis points of incremental gross margin expansion as we continue to optimize our inventory position, improve in-store execution, and reduced store manager turnover. We're also executing against a combination of other gross margin drivers, including DG Media Network, nonconsumables merchandising, supply chain productivity, and category management. Importantly, many of these initiatives are still early in their maturity curves. In total, over the next 3 to 4 years, we expect these combined initiatives will contribute at least 120 basis points of gross margin improvement, including approximately 50 basis points from our DG Media Network. With regards to SG&A, we continue to target reductions through initiatives designed to simplify work and drive greater efficiencies, reduce repairs and maintenance expense and stabilize growth in depreciation and amortization. And while the goals in our framework assume a modest degree of SG&A deleverage, we're excited about the potential to deliver savings in these areas while supporting continued growth across the business. Finally, we are pleased to continue to return cash to shareholders through our strong dividend. We are also looking forward to resuming share repurchases at the appropriate time. Overall, our framework is centered on driving strong top and bottom line growth and improving profitability while continuing to invest in high-return growth initiatives and ultimately returning significant cash to shareholders. Importantly, we are working to further strengthen and accelerate where we see opportunity, our path to achieving these goals. In closing, we're pleased with our strong operating and financial results in 2025 and excited about our plans to drive continued growth in 2026 and beyond. We're confident in our business model and our long-term approach to driving sustainable growth while creating long-term shareholder value. With that, I'll now turn the call back over to Todd. Todd Vasos: Thank you, Donny. As we look to build on our momentum in 2026, we're focused on 4 strategic growth pillars: enhancing the customer experience, elevating our brand, driving greater enterprise-wide efficiencies, and extending our reach. I will take the next few minutes to discuss each of these and how we are working to accomplish our goals. First, with the customer at the center of everything we do, we are focused on enhancing the customer experience. We believe we have a tremendous opportunity to gain additional market share with both new and existing customers as we look to drive trips within both in-store and digitally. In store, we expect to further enhance the customer experience in 2026 with the introduction of a new store format and even more relevant merchandising programs, including our nonconsumable initiative. We have reimagined our traditional store format by creating a new layout in response to what customers have told us they want from their shopping trip. This new format is designed to be more open and inviting, resulting in greater browsing and treasure hunt shopping as customers are exposed to more categories as they navigate the store. We tested this new format in a portion of our 2025 remodel projects and are pleased with the incremental sales lift and relative sales outperformance compared to traditional remodels. Ultimately, we believe this format will help drive both increased transactions and ticket as the store provides for an even fuller fill-in trip. As we look to build on our success in 2025 and further increased penetration of nonconsumable sales, we have exciting plans to drive growth in our discretionary categories. More specifically, we're continuing to evolve and expand our offering. And following the highly successful brand expansion in 2025 with brands such as Dolly Parton, kathy ireland and others, we expect to launch at least 15 new brands in nonconsumable categories in 2026. In addition, as we look to showcase even more value in nonconsumable categories this year, while continuing to drive profitable sales growth, we also plan to capitalize on a number of other exciting opportunities in these areas, including building on our proven closeout buying strategy, launching a loyalty program in key nonconsumable categories and growing nonconsumable sales through shoppable social marketing. Notably, our goal is to increase nonconsumable sales penetration to as high as 20% by 2029. This would represent meaningful gross margin expansion and is an important component of our long-term financial framework. In addition to the multitude of in-store initiatives in place, we are also advancing our digital initiatives as we seek to further enhance the omnichannel consumer experience at Dollar General. We have established a robust digital ecosystem in recent years with more than 7 million monthly active users on our DG app and a total of more than 100 million marketable customer profiles. Our digital offerings are an important complement to our expansive physical store network and a key driver of incremental value and convenience for our customers. As we look to drive future growth, we are focused on scaling our delivery options, personalizing the experience for our customers and growing the DG Media Network. We have significantly expanded the reach of our delivery options available to customers and are now delivering customers through approximately 18,000 stores and with our own myDG delivery offering, as well as through third-party partners, DoorDash and Uber Eats. Collectively, these delivery options have significantly enhanced the convenience proposition for our customers with more than 80% of the orders delivered in 1 hour or less while also extending our value offering to a wide range of new customers who were previously underserved by delivery options in their community. As we continue to see larger basket sizes than an average in-store transaction and very strong repeat visit rates, our rapidly growing delivery platforms are becoming a more meaningful sales driver. In fact, we estimate delivery sales contributed approximately 80 basis points to our comp sales growth of 4.3% in Q4. Looking ahead, we have ample opportunity to further drive incremental sales growth through customer experience enhancements, increased customer awareness and expanded loyalty opportunities including a planned pilot of a subscription program. As we see continued growth in our digital properties, one of the most significant components of our digital initiative is our DG Media Network, which enables a more personalized experience for our customers while delivering a higher return on ad spend for our partners. Our DG Media Network strategy is focused on accelerating on-site performance through improved search, sponsored products and a stronger e-commerce experience while expanding our ability to capture emerging off-site spends across social, connected TV and video. We're also creating more opportunities for advertisers to participate inside our stores that are connecting digital and physical experiences. Over time, we believe this approach positions the -- our entire advertising network as a strategic lever to drive profitable sales growth, enhance the customer experience and strengthen loyalty across our myDG ecosystem. In 2025, as partners continue seeking access to our unique customer base, we delivered approximately $170 million in retail media network volume, which is highly accretive to gross margin. Overall, our digital strategy is an important component of our in-store customer experience and a key driver within our long-term financial framework. Our second strategic pillar is elevating our brand. We believe we can drive significant sales and margin growth in this area through strategically investing in our mature store base while diligently executing on the basics of retail. In turn, we expect to deliver an elevated experience for both our customers and employees. Our mature store investments will be centered around 2 established remodel programs, Projects Renovate and Elevate. As a reminder, Project Renovate is our traditional remodel program, which impacts 100% of the store and includes adding or replacing coolers as well as upgrading to the latest store format. These projects are focused primarily on stores that are 7 or more years removed from their last touch. In 2025, we introduced an incremental remodel program called Project Elevate, which is designed to further grow sales and market share in portions of our mature store base that are not yet old enough to be part of a full remodel pipeline. These projects include physical asset enhancements, merchandising updates, product adjacency adjustments and category refreshes, all of which impact up to 80% of the total store. We continue to target annualized comp sales lift of approximately 6% in Project renovate stores and approximately 3% in Project Elevate stores. In addition to higher sales, customer surveys indicate that both projects have had a positive impact on customer sentiment, each scoring more than 100 basis points higher post remodel as compared to the rest of the chain. Our store employees are also excited about the enhancements and the positive impact on their ability to serve our customers. In fact, following project completion, both remodel programs have lower store manager turnover rates compared to the chain average. Importantly, these improvements contributed to an overall reduction of more than 375 basis points in company-wide store manager turnover in 2025. We have ample opportunity to continue elevating our brand through these projects and continue to expect to execute 2,000 Project Renovate remodels and 2,250 Project Elevate remodels. Our third strategic growth pillar is driving greater enterprise-wide efficiencies. We are actively pursuing a number of opportunities to drive greater efficiencies and lower costs throughout the organization, including increased supply chain productivity, further simplification of our stores, inventory optimization, and increased use of artificial intelligence. Within our supply chain, we are committed to integrating technology that can enable improved execution and drive greater productivity while maintaining operational flexibility. In turn, we expect to see higher levels of employee engagement and lower employee turnover in our supply chain, which will further enhance productivity. Regarding transportation, we continue to leverage our private truck fleet for approximately half of our outbound transportation needs across the network. A private fleet truck represents savings of approximately 20% compared to the cost of a third-party provider, and we believe continued growth can drive substantial savings in the years ahead. Ultimately, our supply chain initiatives can support greater execution and efficiency while contributing significantly toward the operating margin goal in our framework. These efforts can also support work simplification in our stores, along with the continued focus on case pack fit, which reduces the amount of time spent stocking shelves as well as SKU rationalization and inventory optimization. Finally, while we are still early in our AI journey, we are building an AI operating system for the enterprise focused on reshaping our workflows to improve productivity and enablement. We believe that over time, these efforts can improve our customer-facing applications while accelerating our value delivery, decision automation and continuous process improvement, lowering SG&A per unit of work and driving efficiency and processes throughout the organization. Our final strategic growth pillar is extending our reach. We continue to extend our unique combination of value and convenience to new communities across the country. In 2025, we opened 581 new stores in the U.S. and we plan to open an additional 450 new stores in 2026. Approximately 80% of our stores are in rural communities of 20,000 or fewer people and we see substantial opportunities to continue growing our store count and serving new customers for many years to come. Importantly, these projects continue to be one of our best uses of capital and are an important part of our growth strategy. In addition to our new Dollar General store growth, we continue to test and learn and refine our strategy for international growth in Mexico. We had a total of 16 Mi Super Dollar General stores at the end of 2025 and now expect to open approximately 10 additional stores in 2026. While our core business proposition of value and convenience continues to resonate with customers in Mexico, we are leveraging our learnings and customer, real estate and merchandising insights to further extend our reach and capture more of these exciting growth opportunities. Finally, we are also pleased with the recent performance of our pOpshelf stores, which had strong comp sales that exceeded our plans in 2025. Importantly, we also continue to leverage learnings from pOpshelf and apply them to our nonconsumable approach in Dollar General stores, which has supported our strong growth in these categories. Looking ahead, we remain excited about these concepts and its potential to be a meaningful contributor as we further extend our reach with customers of both banners. Overall, we're excited about our plans for 2026 as well as our initiatives to drive long-term growth. We believe these strategic growth pillars provide even greater strategic focus and clarity as we continue to advance our progress toward the goals laid out in our long-term financial framework. As I conclude my prepared remarks, I want to reiterate that we are pleased with our strong performance, confident in our business model and financial framework and excited about the tremendous opportunity that we have in front of us. I want to thank our approximately 194,000 employees for their great work in delivering strong results in 2025, and I look forward to all that we will accomplish together in 2026. With that, operator, we would now like to open the lines for questions. Operator: [Operator Instructions] And the first question comes from the line of Matthew Boss with JPMorgan. Matthew Boss: Congrats on a nice quarter. So Todd, could you speak to the consistency of comps that you saw in the fourth quarter, drivers of acceleration in both the traffic and transaction and just elaborate on comp trends that you've seen in the first quarter outside of the impact from the storm? And then Donny, on the bottom line, could you just walk through the puts and takes for operating margins that you've embedded in this year's outlook, notably, the drivers you see remaining with gross margin? Just your confidence in the 6% to 7% operating margin by FY '28 plan. Todd Vasos: Great. I'll start. And Donny, I'll let you jump in. Yes. Matt, our comps, we felt really good about them in Q4. Actually, when you think about Q4, as my prepared remarks talked or Donny's, we were 3.5 at least across all 3 periods. I think it's important though to note that November and January were the strongest. And December, again, still above, right at that 3.5, but the weaker of the 3, if you will, if you call it, 3.5 weeks. So I would say that if you look past the storm impact in January, November and January were pretty consistent, quite frankly. So feel good about that comp. And I would tell you the drivers real quickly, really, it's value, value, value at this point for the [indiscernible] that we hadn't talked about leading up to Q4, but I would tell you as she moved through Q4, value became even more important depending on the areas that she was shopping, not only in our consumable areas but in our nonconsumable areas. What I'm proud of on the drivers is nonconsumables outshined again the strong consumable sales number. And that, for us, is very important, but also for our consumer, it shows that value is important to her. Here's how I would line up the importance of the sales line for Q4 and quite frankly, as we move into Q1. Private brands, the $1 price point and a strong everyday low price. Those are the benchmarks for what our customer is looking for. On that $1 price point, Matt, we saw a very strong take rate across both consumables and nonconsumables, highest sell rates -- sell-through rate, excuse me, on our nonconsumable areas in the $1 price point. And I would tell you that drumbeat has continued in Q1. In Q1, past the storm, we feel good about where the sales are, actually right back to where we thought they would be. So very good to see. But that first couple of weeks in January, due to the storm, set us back just a bit. But we're right back in the game, feel good about it. And I think that consumer really needs a Dollar General at this point as we look ahead with all of what's ahead of that consumer, including the macroeconomic pressures that are out there and the geopolitical pieces that we're all watching very closely. Donny Lau: And Matt, in terms of the margin drivers for 2026, before we jump into that, I thought I'd just touch quickly on Q4 because I do think it set a little bit of context as you think about 2026. And so from a Q4 perspective, especially pleased with the 105 basis points of expansion we saw during the quarter, and that's even with the 32 basis point headwind from LIFO. As you saw, the standout was once again shrink followed by markup. We liked what we saw in the damage line, which was a pretty meaningful contributor in the quarter as well. And I'll tell you, we're especially pleased with the 107 basis points of expansion for the full year, even with the 40 basis point LIFO headwind. And so overall, for Q4, we're really pleased with the performance exiting the quarter and really pleased to see the momentum we're building against our key margin drivers, which positions us well to move into 2026. On the SG&A line, the primary drivers really here were the prior year lap of the impairment charge. Just to be clear here, though, the majority of that, we do consider discrete. Some of it is a little bit more normalized. And we are lapping -- or we'll be lapping next year higher incentive comps. So pretty outsized in 2025, lapping a below normal rate in 2024. So as we think about that setup, as we move into 2026, we do expect another year of gross margin expansion to a much lesser -- to a lesser extent than 2025, just we are lapping that 107 basis point full year improvement from last year. In terms of tailwinds, we expect continued but more modest improvement in shrink. Again, we're lapping 80 basis points of improvement in the prior year. We expect continued improvement in damages, which again was a meaningful contributor in 2025, and continued momentum across our other gross margin drivers, which we touched on, including the DG Media Network, what we're seeing out on our consumables, we're seeing some nice contribution from supply chain and category management as well. In terms of the headwinds, we are watching the changing tariff environment. We are watching the potential for the changes in higher gas prices. But overall, we do continue to believe there are more tailwinds and headwinds and feel really good about the momentum we're seeing on this front. In terms of SG&A, we do expect modest deleverage on the SG&A line. We are lapping that, the higher incentive count so we expect more normalized incentive count, compensation levels this year, but we're also expecting continued investments in our key growth initiatives and IT modernization and remodels are a couple to call out. But overall, I'd say our expectations for SG&A are pretty much in line with the annual targets outlined in our long-term financial framework. The one thing I did want to touch on for 2026 is the tax. We anticipate a full year tax rate of 25%. That compares to 23% in 2025. As I alluded to in my prepared remarks, this includes about 150 basis point headwind from the exploration of the work opportunity tax credit at the end of 2025, and that will result in an approximate $0.13 reduction to EPS. And just as a reminder, the work opportunity tax credit, it's a federal tax credit available to employers who invest in job seekers or barriers to employment. So think veterans, some are youth employees, SNAP recipients and residents of rural renewal counties. The good news here is Congress has extended the program 3 times in the past 10 years. And so while there are no guarantees they'll do it again, there is precedent. In all cases, that extension has provided for full catch-up provisions. So more to come here, but we're watching it closely. And then just quickly, in terms of our confidence level in the op margin targets of 6% to 7%, what I'd tell you is we feel really good about our ability to deliver against that goal. I think one way to think about it, and Todd mentioned it in his prepared remarks, but we really do believe we stabilized the core business, stabilized the core business in 2025. And while there's still work to do, one of the things that's most encouraging to me is when you look across many of our key operating metrics, including things such as in-stock levels and on-time deliveries and inventory per store, among others, we're seeing strong improvement versus 2023 levels. And in many cases, we're seeing sequential improvement quarter-over-quarter, which tells us we're really building momentum across the business. And I think that's what was reflected in our strong Q4 and full year financial results. And so when you add it all up, seeing good momentum across many aspects of the business, we're ahead of schedule and some of the initial goals contemplated in our long-term framework. And importantly, we'll continue to accelerate our path to achieving these goals where we see opportunity. And one of the things that I think will be helpful as we move forward is as you think about our priorities for 2026 and beyond, they really are underpinned by the 4 strategic growth pillars that Todd alluded to. And in short, I think they're going to really help guide our decision and investment as we move ahead. And so overall, a lot of reasons to be optimistic as we move forward. And I really do believe we're well positioned to grow sales, enhance margin, increase profit and capture more share going forward. Operator: Our next question comes from the line of Simeon Gutman with Morgan Stanley. Simeon Gutman: As a follow-up to that last question, if you put the marginal together, we just don't have the interest, but it looks like it's kind of flattish year-over-year, maybe up a little bit. So if you look at operating margin, if you can just speak to that. And then, let's say, your comp comes in, I don't know, 3% or so. Are you leveraging expenses at that level? Does it need to be a bit higher? I'm not trying to be cute with 3%, but just trying to think about what are the tiers where we start to see more meaningful SG&A leverage such that whatever you've built into '26 ends up being better. Donny Lau: Yes. No, thanks, Simeon, for the question. I think you're thinking about things the right way. As I alluded to, we do expect gross margin improvement, but to a much lesser extent in -- versus 2025. And to your point, that will be partially offset by modest SG&A deleverage. And to your point also, the amount of SG&A deleverage will be somewhat dependent on our comp sales performance for the year. And more specifically, we do expect deleverage will occur until we're slightly ahead of that 3 points of comp. All that said, what I'll tell you is we feel really good about the guidance we provided today based on what we know today and especially in light of the evolving landscape, including some of the uncertainties that I mentioned, whether it's tariff rates or gas prices or consumer behavior. But keep in mind, we're well ahead of several of the goals contemplated in long-term financial framework. And just to contextualize, right? When we introduced the framework last March, we contemplated that the more meaningful contributors to gross margin in the first 2 to 3 years would be shrink and damages. So think more operational in nature. And we expect the benefits from other gross margin drivers ramping throughout this time frame and contributing more over time. And that expectation hasn't changed. What has changed is the margin recapture opportunity from shrink and damages has occurred at a much higher and faster rate than we initially contemplated. And the good news is we now expect even more benefit from these drivers than we initially thought. And the other gross margin drivers are progressing generally in line with our original expectations. And so in short, what's most encouraging for me is as you think about 2025, we were able to capitalize on opportunities to really accelerate our progress towards our long-term goals. And we're going to continue to focus on opportunities to further accelerate where we can. But overall, there's still a lot of the year left, but I like how we're positioned coming into 2026. And again, I think there's a lot of reasons to be optimistic as we move forward. Todd Vasos: And Donny, I would just add. On that SG&A rate, in that long-term framework, AI is not contemplated within that framework. And we've got a nice jump start there. And more to come as we continue to unfold the AI initiatives here at Dollar General. But I would tell you, they're squarely focused on 2 big areas, one being the customer and driving more sales and profitability with the customer, but also number two, the efficiencies that will come with -- through our supply chain, through our stores and, of course, all back of house with AI. So that should be a nice top spin as we move over the next couple of years as well. Operator: Our next question comes from the line of Robby Ohmes from Bank of America. Robert Ohmes: Actually two, just inflation. Can you talk about how much inflation helped in the fourth quarter? And then given the LIFO charges, maybe just walk us through what the inflation expectations are in consumables and nonconsumables and what's driving that for 2026? And then the second thing would just be I'd love to hear -- I know you guys started doing a lot of SKU reductions. What's been the benefit there? Is there more of that coming this year? And what are you -- how is that helping sales comps, margins, et cetera? Donny Lau: Yes. Maybe Robby, I'll take the first question. In terms of inflation, we are seeing inflation consistent with what others have referenced. So very low single digits as you think about consumables and nonconsumables. So pretty balanced there. I think in terms of the amount of inflation we're seeing, I mean, again, one way to think about that as a LIFO provision. It was a $45 million impact in the fourth quarter, so essentially 32 basis points. And so just as a reminder, LIFO reflects the cost increases, primarily based on the current tariff rates as well as what's been absorbed by vendors. And so something we're watching closely, but that's -- our expectations are embedded into our full year guidance. Todd Vasos: And what I'll do is just quickly start, but I'd like to pass over to Emily Taylor to talk a little bit about the SKU reduction. But it's been the cornerstone of part of our stabilization of retail. And I would tell you that the team has done just a fabulous job over the last 2 years, quite frankly, in reducing inventory. And there's more to come. So Emily, maybe if you were to talk about that. Emily Taylor: Sure. We've had aggressive SKU reduction plans really over the last few years, over 1,500 SKUs have been taken out the assortment. And I'll echo what Todd said. The team has done an excellent job of navigating that while also supporting growth in the business. We do have a net reduction plan for '26, and the team is well underway on getting that executed. Some of the benefits that come from it, and Todd mentioned inventory reduction, certainly has been helped with the SKU reduction in addition to a lot of other work that's gone around inventory optimization. But also, it ultimately supports the simplification effort that we've had, not just as it relates to our store activity but also our entire supply chain. And I'll call out a couple of other things that have really helped that effort. The team has also reduced floor stands pretty significantly in stores, which has helped reduce the overall really clutter inside our stores, and that continues to be executed as done. And then from a supply chain perspective, our DCs are executing more aggressive seasonal sorts, which helps to make sure stores are able to get product to the shelf faster, and we've seen great results there. Todd mentioned case fit earlier, that continues to be a focus of the team, which also supports overall SKU reduction inside the store. And it really does come together to support higher and better in-store conditions, which we're measuring in terms of clean, in-stock, recovered and engaged, and all metrics as it relates to that are up significantly versus prior year. So really excited about the results that the team's achieved and really believe it gives us momentum as we move forward to continue to drive these results. Operator: The next question is from the line of Rupesh Parikh, Oppenheimer. Rupesh Parikh: So two quick ones for me. So just from a modeling perspective, anything to highlight from a quarterly cadence perspective on the bottom line? And then with your nonconsumable efforts, just overall confidence in sustaining momentum, what's performed better than expected? And what are you assuming for trade in this year? Donny Lau: Yes. So I'm happy to take the first question, Rupesh. I think not a lot to add versus what we've already talked about in terms of the margin side of the house. Again, expect another year of margin expansion. We talked about the tailwinds and the headwinds. We talked a little bit about the SG&A and tax. The one thing maybe I will touch a little bit on is just overall, how we think about the headwinds and tailwinds for sales. And so from a tailwind perspective on the sales line, we are seeing great momentum across many of our initiatives, specifically what we're seeing out of remodels and nonconsumables. And as Todd alluded to, private label and digital, quite frankly. And all of this is really resonating with the customers. And I like the growth we're seeing with new customers and the trade-in customers and feel really good about our plans to retain a lot of them. And overall, spending remains pretty resilient from a consumer perspective. And also keep in mind, right, the OBBA, we do expect the tax relief to come in. We think that we'll be able to capture our fair share and hopefully more, and we're still early in the season there. In terms of headwinds, as Todd touched on, we also touched on in our prepared remarks, we do expect a modest impact, negative impact of sales just driven by the 2 weeks in Q1 by the winter storm activity, including temporary store closures. And consumer sentiment does remain cautious and stagnant, and inflation remains sticky and the macro environment continues to evolve, and we touched on tariffs and gas prices already. But overall, what I would tell you is really encouraged by our sales trends, feel good about the guidance we provided based on what we know today. And again, there's still a lot of year left. We'll see how things play out, but the goal is for us to be there for the customer, and we're really focused on delivering as much sales as possible. Todd Vasos: Rupesh, thanks for the second part of that question. I'm also going to pass it over to Emily in just a moment. But we're really proud of that nonconsumable business that we have cultivated and grown over the years, but definitely refocused over the last year and now leading into '26 with a lot of great momentum. I would tell you that with value being at front and center and the cornerstone of what the consumer is looking for, there's no better place to shop than Dollar General when you think of that especially in that nonconsumable world. And I would tell you that the customers really -- is really seeing that benefit. And then lastly, I would just tell you before I pass it over to Emily for some more detail is that our pOpshelf group has really done a nice job inside their stores, but also in helping inform our nonconsumable direction and businesses in the mother ship, if you will, or the Dollar General store. So that has really helped and will continue to help on both sides of the equation. Emily Taylor: Yes. And I would just say I'm very excited about the trajectory in the nonconsumable business. I mean Q4 is fourth consecutive quarter of positive same-store sales, fourth consecutive quarter of nonconsumables outperforming our strong results in the consumable area. And it really is a result of the great work that the merchant team has done to set up that area of our store. We are offering more for the customer today, not just in terms of value in this space, but also in terms of newness, and that's really helping to drive the results. So we've talked a lot about our brand partnerships, really focused on Dolly, kathy ireland, both very successful launches for us in '25. But as we move forward, the team has much more aggressive plans in place, and we're excited to bring that to life. I won't take you through the whole list, but 15 brands will launch this year, and I think it will resonate very strongly with the customer. Again, emphasizing that value component but also the surprise and delight that the team has worked so hard to bring to life in this space. In addition to assortment changes, though, I don't think it can be understated that launching shoppable social is a big game changer for us in this space. This is a brand-new way of shopping for a category that shoppers do tend to engage digitally more than with the rest of the store. And so bringing that to life through our delivery network that we built out in the nonconsumable space really changes the way our customer can interact with this area of our store. In addition to that, the team will keep working on making sure that we're bringing the right value to life, whether that's through direct purchase programs or through closeout buying, and the team looks at that closely. We think there's more opportunity on closeout again to drive even better value, but also find those surprise items, surprise brands perhaps that a customer wouldn't expect inside our store. So I think it all comes together to say, it helps explain the great trajectory that we're already on but also gives us a lot of confidence in building on that as we move ahead. Operator: The next question come from the line of Kate McShane with Goldman Sachs. Katharine McShane: We were wondering with regards to the delivery that you've been so successful at rolling out. It has seemed fairly seamless. But we wondered what you've had to do on your end to ensure the customer experience has continued to be positive. And if there's any kind of incremental labor that has been needed as a result of rolling this out. Todd Vasos: Kate, thanks for the question. Great to hear from you. I would tell you that it has been fairly seamless. Now as you would imagine, with a company our size and scope that we were paddling pretty hard on the backside to make it look seamless. The important thing is for the consumer, they have loved the initiative so far. As you imagine, we're only a couple of years into this. And last year, being quite frankly, a very strong year for us. And you heard that 80 basis points of our comp in Q4 was delivered through that delivery mechanism. I would say that as I look forward, the great thing about the delivery program for me is that the customer is already resonating and we're just getting started, right? And so we've been on the third-party journey for the last couple of years, but really just launched in earnest myDG delivery in 2025. And that's really where we'll get the majority of the leverage to include that media network, which has already contributed greatly to the gross margin, and we'll continue to do so. And Emily, you may want to give us just a couple of bullet points on delivery. Emily Taylor: Yes, sure. So from a delivery perspective, really excited about it. I'll address some of the focus areas for us in delivery. I mean, certainly, in stocks matter a lot as it relates to the ability to fulfill the delivery orders. And that's where our in-stocks in Q4 were up about 250 basis points above where they were same time period last year. So we'll continue that focus. And that, of course, helps our in-store business as well as delivery. We're also very focused on the digital experience for the customer. And so we have enhancements that are coming out that I think our customers are going to be very excited about, including an improved and expanded search capability, which is very important for the customer. It's also important for the media network. But all in, excited about what we're seeing out of delivery. I'll give a couple more points. We see our existing customers who use delivery shop us more often with this capability, which is exciting to us. We see new customers at a very high rate getting exposed to Dollar General through our delivery channels, and that's also very exciting. So what we really like is it's highly incremental to sales, and it is a profitable business for us. And then just as Todd mentioned, it supports our efforts around media network as well. And this has really helped to drive the business to the $170 million that we quoted in the prepared remarks. And as we move ahead, we see continued opportunity there as well. Advertisers love that we offer a unique and unduplicated reach into the communities that we serve for them. And we have a lot of initiatives underway to help drive this business forward as we move ahead, and the expansion of Media Network, of course, grows as we're able to grow our digital assets and delivery certainly helps us do that. So it's very much cojoined with our strategic priorities going forward. Donny Lau: Yes. And the thing that probably excites me the most, everyone, is really -- I do believe this represents 2 incremental profit pools for us, right? So as Emily alluded to, delivery is highly accretive from a sales and profit perspective, right? Media Network is highly accretive from a profit perspective. And the beauty of it is, right, they are self-reinforcing. And so as we continue to grow delivery, we'll continue to grow DG Media Network, which in turn should help fill even more delivery growth. And so really excited about what this could mean for the business. And the great news is we're still early days, but a lot of opportunities as we move ahead. Operator: Our next question is from the line of Kelly Bania with BMO Capital. Kelly Bania: Just wanted to go back to the bigger picture of the margin discussion. It sounds like shrink, obviously, the outlook is 50 basis points higher than your prior plan from last year. Can you just talk about the processes or reasons of why that should go higher? I think you also commented that inventory should maybe start to grow maybe less than sales, but albeit grow? And then on the flip side, I think it sounds like the DG Media contribution is maybe a little bit lower than what it was previously. Is that accurate? And can you just talk about what kind of digital penetration and growth you need in order to achieve the targets that you've outlined today? Todd Vasos: I'll start, and Emily, you could fill in a little bit on the Media Network and what we're seeing there. I would tell you that we feel really good, Kelly, about where we're headed on that shrink side and damage side. This is nothing new for Dollar General. We know what to do here. I said that over a year ago, and I said that when I first came back in the chair in 2023. And we've executed very, very nicely. We believe that there's still more to come. We were -- I wouldn't say conservative, but knowing that the macro environment had changed some since 2019, we leaned into that 2019 levels of shrink to be able to get back to. But we're starting to see where it could be back to 2017 type of levels even. And so the team has done a great job. But again, there's no big silver bullets there. It's really execution. It's taking the self-checkout units out, turning them into assisted lanes was a big win, staffing that front end 100% of the time, a big win. And then the inventory control is a huge opportunity, has been and will continue to be, especially as we move forward in the damage side of the equation while shrink has moved a lot faster in the positive for us, damages have moved positive, but not at the same pace. We believe that '26 is the year '26 here will be the time for damages to move at that quick rate. Matter of fact, just out of the chute, yes, only one period in, in Q1, we're already seeing that on the damage line and happy about what we're seeing there. So more to come, more to like there. And how I would think about that in totality is it gives us, and Donny mentioned, a much more confidence in achieving even at higher ends of the framework that we put out there. So that's how I would look at it as an investor. But Emily, you may want to just talk a little bit about the Media Network and all the great things that we've got there. Emily Taylor: Sure. So just first, as a reminder, we started the Media Network here at Dollar General back in 2018. The team has done a really nice job building it into the $170 million business than it is today, but we do see a big opportunity as we move ahead to continue to increase that. Some of the specific opportunities that we see would first be growth in owned and operated properties. So this is in our app, our website and our stores as well. From an app and website perspective, the search that I mentioned previously that matters so much to our customer is also very important to advertisers, and that is going to roll out this year, and we're excited to bring that to life. From an in-store perspective, we are rolling out new opportunities, including an in-store audio program this year. And in-store media overall, which is, of course, right at the point of purchase where our customers really appeals to the advertisers that we have in the network because of the high returns that they see and because of the scale that we can deliver with our 21,000 stores. And at the same time, as we're focused on growing owned and operated, we are expanding our off-site footprint as well, looking into more expanded social placements, connected TV and video. And as we roll that out, we do have in place closed-loop measurement for our advertisers so that they're able to see returns and, of course, so that we can monitor and measure and help drive those as well. So really a lot going on in the media network that gives us good confidence that we can continue to grow it. And as we said, growing delivery matters a lot as we increase our audience size. And so I do think that also gives us a tailwind as we continue to scale that business. Operator: Our last question will be coming from the line of Seth Sigman with Barclays. Seth Sigman: Great progress. I wanted to focus on free cash flow, which has increased pretty meaningfully over the last year again. A lot of things working. Can you talk a little bit more about that opportunity to further optimize inventory? But also payables, that's been a big benefit here. What's changing? How much more can that go? And then finally, related, how do you think about returning to the market for buybacks? How should we think about the time frame? Donny Lau: Yes. No, I appreciate the question. And maybe I'll just take a step back and talk a little bit more about capital allocation, which will kind of dovetail a little bit more in the cash flow generation ability of this business, which obviously is very substantial. Yes, as we alluded to in the prepared remarks, our capital allocation parties really haven't changed there at Dollar General. Yes, that the goal is really we want to ensure ample liquidity. I think about it as maintaining a fortress balance sheet. But we also want to obviously maintain the investment-grade credit rating. We're going to invest in high-return projects. We're going to maintain the dividend. And then we want to return excess cash to shareholders through share repurchases where appropriate. That said, the focus has been on deleveraging of the balance sheet in order to really further improve our leverage metrics while continuing to enhance our flexibility. And the great news is, right, just given the significant improvement in cash flow this year, again, as a reminder, operating cash flow was up 21%, $3.6 billion. And so even when you exclude CapEx, the cash flow yield of the business is pretty substantial. Just given the strength of that, it did provide us the opportunity to redeem a total of almost $1.7 billion in senior notes in 2025. And the beauty about this is it helps to further strengthen the balance sheet, reduce future interest expense and provide even more flexibility going forward. To your question on share repurchases specifically, while our guidance does not assume the repurchase of any shares this year. Share repurchases are an important component and driver of the long-term financial framework. And the model contemplates we restart our repurchase program in 2027. And so more to come here, but feel really good about the progress we're making from a balance sheet and liquidity perspective. And then in terms of cash flow, obviously, something we're very focused on. We think there's still opportunities to optimize inventory levels in our position. And we do expect continued AP leverage as we move ahead. But not to the extent that we saw in 2025. Operator: Ladies and gentlemen, this will conclude our question-and-answer session, and will also conclude today's conference. We thank you for joining us today and for your participation. You may now disconnect your lines, and have a wonderful day.
Operator: Good afternoon. Welcome to the Liquidmetal Technologies, Inc. Fiscal Year 2025 Conference Call. My name is Michelle, and I will be your conference operator this afternoon. Joining us on today's call is Mr. Tony Chung, Liquidmetal Technologies, Inc.'s Chief Executive Officer. Before we proceed, I would like to provide the company's safe harbor statement with important cautions regarding forward-looking statements made during this call as follows. All statements made by management during this call that are not based on historical fact are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include, but are not limited to, those made by Mr. Chung regarding the company's cash, revenue outlook, and technology development. While management has based any forward-looking statements made during the call on its current expectations, the information on which such expectations were based may change. These forward-looking statements rely on a number of assumptions concerning future events that are subject to a number of risks, uncertainties, and other factors, many of which are outside of the company's control, that could cause actual results to materially differ from such statements. Such risks, uncertainties, and other factors include, but are not necessarily limited to, those set forth under the Risk Factors in the company's Annual Report on Form 10-K for the year ended 12/31/2025. Accordingly, you should not place any reliance on forward-looking statements as a prediction of actual results. The company disclaims any intention and undertakes no obligation to update or revise any forward-looking statements. You are also urged to carefully review and consider the various disclosures in the company's Annual Report on Form 10-K for the year ended 12/31/2025, as well as other public filings with the SEC since such date. I would also like to remind everyone that this call will be available for replay starting later this evening via a link available in the Investor Relations section of the company's website at www.liquidmetals.com. I would now like to turn the call over to the company's Chief Executive Officer, Mr. Tony Chung. Sir, please go ahead. Tony Chung: Thank you, operator. And thank you to our investors for participating in today's call. As a reminder, please supplement the information provided during today's call with the financial statements and disclosures in our Form 10-K filed earlier today to get the latest full overview of our company operations. For today's call, I would like to provide more clarity on our company's pivotal events that occurred during 2025, especially as it relates to our Asia operation, and how these events tie into the overall future and vision for the company. If you have kept up with our press releases and blogs during 2025, we announced that our Chairman, Professor Lugee Li, was appointed as the head of our Asia operations and also announced our new manufacturing operations in Hangzhou, China. To illustrate the significance of these events, let me provide some historical perspective on our Chairman and how his involvement in amorphous alloys brought the technology to where it is today. Professor Li is a Chinese-born businessman, materials scientist, entrepreneur, and philanthropist, best known as the founder and former Chairman of Dongguan Eontec in China. Eontec is a manufacturing powerhouse which specializes in manufacturing advanced light alloy materials, including magnesium and aluminum, for the automotive industry. With his technical and academic foundation in materials and industrial design, Professor Li has been involved with research, industrialization of new materials, and precision manufacturing. He founded Eontec in 1993 and took the company public on the Shenzhen Exchange in 2012. Shortly thereafter, Professor Li became very interested in a revolutionary new material, amorphous alloys, and devoted a part of Eontec operations for the development and production of this intriguing new material. In 2014, he spun off a company from Eontec called Yeehaw Metal, which happens to be our current outsourced contract manufacturer, that was fully devoted to amorphous alloy manufacturing. While he was developing Yeehaw's manufacturing technology in China, Professor Li also set his sights on having a global presence for this new technology. In 2016, he took another major step towards control by taking a significant stake in Liquidmetal Technologies, Inc. to become our Chairman and to solidify his leadership in this industry. With his experience in advanced materials, precision die casting, and industrial transformation, he devoted himself fully to the development of amorphous alloy technology by, one, focusing on manufacturing technologies at Yeehaw; two, developing the worldwide amorphous alloy brand with Liquidmetal Technologies, Inc.; to complete the ecosystem for taking amorphous alloy technology to the masses. Since Professor Li's involvement with us, Liquidmetal Technologies, Inc.'s business model was to maintain our intellectual property, focus on sales, and outsource all manufacturing to Yeehaw. This model has served us well as it allowed us to conserve cash while allowing the manufacturing technology for amorphous alloys to mature and advance. While it is common knowledge that outsourcing manufacturing is an effective solution to allow expert manufacturers like Yeehaw to do what they do best and for companies like Liquidmetal Technologies, Inc. to focus on sales, the long-term drawback to this business model would be that the manufacturing advancements and know-how would be owned by the third-party manufacturer. You could say that we might face the same dilemma as America as a whole faces today, and that when we allow ourselves to utilize outsourced manufacturing overseas, we could end up losing our competitive edge. With the new opportunities in consumer products and physical AI, also known as humanoid robots, it is an optimal time for Liquidmetal Technologies, Inc. to itself advance amorphous alloy technology by venturing into our own manufacturing operations. As such, we are devoting our resources to creating new process know-how related to alloy, tooling design, injection molding conditions, post-processing steps, and other manufacturing processes for advancement. In that regard, we have developed and built our newly designed machine called Liquid Morphium that utilizes advanced injection molding technology. This new machine incorporates years of machine technology experience with a focus on part quality and cost reduction and will be part of the lineup for our new Hangzhou manufacturing plant. As a natural output of our R&D efforts on our Liquid Morphium platform and other advancements in manufacturing, we will develop new intellectual property all our own, which is why we announced recently that we have established a new IP holding company called Liquid Morphium LLC, all in the name of increasing the value of our company. Another benefit to manufacturing in-house is that we will have better cost control to allow for higher gross margin once scale is reached. We will also have the ability to price strategically for high-value applications. While capital expenditures will be higher upfront, unit economics will improve at scale for the long term, increasing the value of the company as a whole. One of the most vital aspects of making advancements in manufacturing is that our efforts will immediately attract established tier-one manufacturing companies that would want to partner with or invest into Liquidmetal Technologies, Inc. to further jointly develop amorphous alloy technology. As we devote more of our resources to R&D and technology advancements, Liquidmetal Technologies, Inc. ultimately increases its value by making it an attractive target for collaboration. This is a very significant component of our future success in that access to global customers will be significantly accelerated through collaborations with these tier-one manufacturing companies. In essence, we view manufacturing as a critical step in increasing the value of the company and broadening our appeal with other established manufacturing companies to better position the company for success. Our renewed focus on manufacturing makes sense overall, but many have asked how our in-house manufacturing venture will affect the relationship we have with Yeehaw Metal. In the short term, our relationship with Yeehaw will not change, and they will continue to be our outsourced contract manufacturer. For the long term, however, we view Yeehaw as a collaborator and an outsourcing partner. For amorphous alloy technology to be widely accepted as a viable solution for various applications, the market needs multiple sources of manufacturers to mitigate risks of relying on a single source. There are plenty of opportunities for both Liquidmetal Technologies, Inc., Yeehaw, and perhaps even other manufacturing companies to succeed together, whereby customers can order parts directly from either Yeehaw or Liquidmetal Technologies, Inc. We also envision outsourcing orders to each other to manage volume production. We note that Yeehaw has already achieved tier-one vendor status for a global mobile device company, as well as all the mobile device companies in China. To our benefit, we are currently working together to build out the supply chain even further and look forward to collaborating and building the amorphous alloy manufacturing ecosystem together. In summary, I view our new venture into manufacturing as a natural progression of our journey to make amorphous alloy technology available to the masses. Our focus on advancing manufacturing technology for quality parts and cost reduction will allow us to increase the value of our company by, one, developing an arsenal of new IP; two, reducing costs to attract well-established customers to adopt our technology; and three, fostering joint venture collaborations with tier-one manufacturing vendors who already have ties with global customers. Of course, we have Professor Li, who has divested his ownership and roles at Eontec and Yeehaw and is now free to fully devote himself to the success of Liquidmetal Technologies, Inc. He has a proven track record of building manufacturing operations from scratch and is proactively managing and operating our Hangzhou manufacturing plant through the mobilization of his network of collaborators, who were carefully cultivated during his tenure at Eontec. Looking into our future sales opportunities, we believe that there is unlimited potential. We have completed prototypes for one of the top-tier mobile device companies and are working towards designing production parts. We have made inroads into the medical device space with our current production orders. As announced in our recently updated website, we have highlighted the opportunities with foldable phone hinges and physical AI, and our foray into manufacturing will allow us to take full advantage of these opportunities ahead. Let us now switch gears and quickly go over the financial results for 2025. We ended 2025 with revenues of about $800,000 and a net loss of $2,400,000, with our EBITDA being about negative $1,800,000. We ended the year with about $20,000,000 of readily available liquid cash and investments. Our corporate office building has a market value that is more than double the current book value of $7,000,000, which may also be accessible for future operating needs if necessary. We are well positioned to fund our growth for the foreseeable future and have no going concern issues. In closing, we are in 2026. Our Hangzhou manufacturing plant buildout is progressing smoothly, and we hope to be fully operational toward 2026. We are aggressively pursuing sales opportunities in consumer products, physical AI, and the medical industry and working closely with tier-one manufacturers to transition their current products to Liquidmetal Technologies, Inc. applications. We will keep investors informed as these developments progress, and we look forward to announcing good news in the near future. Thank you for your time, and with the Lunar New Year upon us, I wish everyone good luck for 2026. I will now hand things over back to the operator. Operator: Thank you, Mr. Chung. At this time, this concludes today's call. You may now disconnect. Everyone, have a great day.
Operator: Greetings, and welcome to the Mineralys Therapeutics, Inc. Fourth Quarter and Full Year 2025 Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to your host, Dan Ferry of LifeSci Advisors. Please go ahead. Dan Ferry: Thank you, operator. I would like to welcome everyone joining us today for our fourth quarter and full year 2025 conference call. This afternoon, after the close of market trading, we issued a press release providing our fourth quarter and full year 2025 financial results and business updates. A replay of today's call will be available on the Investors section of our website approximately one hour after its completion. After our prepared remarks, we will open the call for Q&A. Before we begin, I would like to remind everyone that this conference call and webcast will contain forward-looking statements about the company. Actual results could differ materially from those stated or implied by these forward-looking statements due to risks and uncertainties associated with the company's business. These forward-looking statements are qualified by the cautionary statements contained in today's press release and our SEC filings, including our Annual Report on Form 10-Ks and subsequent filings. Please note that these forward-looking statements reflect our opinions only as of today, March 12, 2026. Except as required by law, we specifically disclaim any obligation to update or revise these forward-looking statements in light of new information or future events. I will now turn the call over to Jon Congleton, Chief Executive Officer of Mineralys Therapeutics, Inc. Jon Congleton: Thank you, Dan. Afternoon, everyone, and welcome to our fourth quarter and full year 2025 financial results and corporate update conference call. I am joined today by Adam Levy, our Chief Financial Officer, Doctor David Rodman, Chief Medical Officer, and Eric Warren, our Chief Commercial Officer. I will begin an overview of the business, our clinical programs, and recent milestones, followed by Adam, to review our fourth quarter financial results before we open up the call for your questions. We are pleased to have this opportunity to provide a corporate update. As this call comes on the heels of our announcing the FDA's acceptance of the NDA for lorundestat, the treatment of adult patients with hypertension in combination with other antihypertensive drugs. In connection with the acceptance, the FDA assigned a PDUFA target action date of December 22, 2026. This NDA submission followed a successful clinical program which culminated in the completion of five positive clinical trials that consistently demonstrated clinically meaningful blood pressure reduction, 24-hour control, and a favorable safety profile. This comprehensive data set has generated broad interest across the medical community, underscoring the significant clinical need in uncontrolled and resistant hypertension and the desire for innovative solutions that help patients meet their blood pressure goals. The NDA includes the positive data from the LAUNCH-HTN and ADVANCE-HTN pivotal trials, as well as the proof-of-concept trial EXPLORER-CKD and our open-label extension trial TRANSFORM-HTN. Each of these trials demonstrate that lorundestat maintains a durable and clinically meaningful response across diverse patient populations, a key consideration for its potential as a new treatment for patients with hypertension. Uncontrolled and resistant hypertension remain unmet needs affecting over 20 million people in the United States and attributed to nearly 700,000 deaths per year. As we have noted previously, roughly 30% of all hypertension patients have dysregulated aldosterone. We are progressively seeing research and updated guidelines that highlight the need to identify and address aldosterone dysregulation in these patients. Our clinical data highlight the differentiated value of targeting aldosterone with an aldosterone synthase inhibitor like lorundrostat, especially when compared to current third- and fourth-line treatment options. To catalyze the successful launch of lorundestat, we have begun market access planning and payer engagement to ensure the value proposition of lorundestat is understood and appreciated. We have also expanded our medical communications efforts, which will include increased peer-reviewed publications, a larger presence at scientific meetings, and an expanded team of field-based medical science liaisons which will support broader data dissemination for this potentially transformative therapy. These activities are intended to drive a rapid uptake of lorundrostat and feed into potential partnering opportunities. I would now like to briefly touch on the other development activities we are pursuing to enhance and extend the lorundrostat profile into hypertension with comorbid conditions, which are largely driven by inadequately controlled blood pressure and dysregulated aldosterone. Earlier this week, we issued a press release announcing the top-line results of our exploratory trial EXPLORER-OSA. This four-week trial, which enrolled 48 participants, evaluated the safety and efficacy of lorundestat in participants with moderate to severe obstructive sleep apnea and hypertension. This trial enrolled a high-risk population with an average body mass index of 38, an average apnea-hypopnea index, or AHI, of 48, and baseline systolic blood pressure of 142 millimeters of mercury. While lorundestat did not demonstrate clinically meaningful difference relative to placebo on the primary endpoint, AHI, the trial did show clinically meaningful reductions in blood pressure and a favorable safety profile in this population with difficult-to-control hypertension. In the pre-planned parallel-arm analysis of the first period, the trial demonstrated an 11.1 mmHg blood pressure reduction with lorundrostat and a 1.0 mmHg reduction with placebo at four weeks. There was a 6.2 mmHg placebo-adjusted reduction in blood pressure in the crossover analysis. Lorundrostat demonstrated a favorable safety profile and was well tolerated, with no serum potassium excursions above 5.5 millimoles per liter. Our analysis is ongoing for other endpoints in the trial, and will be reported in future publications or medical meetings. Our clinical development strategy has been and will continue to be focused on generating a comprehensive dataset that reflects the complexities that physicians face when treating their hypertension patients. We remain focused on fulfilling our mission to develop lorundrostat, a potential best-in-class therapy for patients with uncontrolled or resistant hypertension. We believe the strength of the lorundrostat data generated to date and the significant clinical needs for uncontrolled and resistant hypertension offer substantial opportunity as we prepare for the upcoming milestones. We are continuing to evaluate further clinical development for lorundrostat in comorbidities and other potential indications. We will keep you informed on our progress as appropriate. I will now turn the call over to Adam to review our financial results for the fourth quarter and full year 2025. Adam Levy: Thank you, John. Good afternoon, everyone. Today, I will discuss select portions of our fourth quarter and full year 2025 financial results. Additional details can be found in our Form 10, which will be filed with the SEC today, March 12. We ended the year with cash, cash equivalents, and investments of $656,600,000 as of 12/31/2025, compared to $198,200,000 as of 12/31/2024. We believe that our cash, cash equivalents, and investments will be sufficient to fund our planned clinical trials and regulatory activities as well as support corporate operations into 2028. R&D expenses for the year ended 12/31/2025 were $132,000,000, compared to $168,600,000 for the year ended 12/31/2024. R&D expenses for the quarter ended 12/31/2025 were $24,400,000, compared to $44,600,000 for the quarter ended 12/31/2024. The annual decrease in R&D expenses was primarily driven by a $49,300,000 reduction in preclinical and clinical costs largely attributable to the conclusion of lorundrostat’s pivotal program in 2025. The annual decrease was partially offset by increases of $9,900,000 in compensation expenses resulting from headcount growth, higher salaries and accrued bonuses, and increased stock-based compensation, as well as $3,000,000 in clinical supply and manufacturing and regulatory costs. G&A expenses were $38,600,000 for the year ended 12/31/2025, compared to $23,800,000 for the year ended 12/31/2024. G&A expenses were $13,900,000 for the quarter ended 12/31/2025, compared to $7,200,000 for the quarter ended 12/31/2024. The annual increase in G&A expenses was primarily attributable to $8,900,000 in higher compensation expense driven by headcount growth, higher salaries and accrued bonuses, and increased stock-based compensation. The annual increase was further attributable to $5,300,000 in higher professional fees and $600,000 in other general and administrative expenses. Total other income, net, was $16,000,000 for the year ended 12/31/2025, compared to $14,600,000 for the year ended 12/31/2024. Total other income, net, was $6,000,000 for the quarter ended 12/31/2025, compared to $2,800,000 for the quarter ended 12/31/2024. The annual increase was primarily attributable to higher interest earned on investments in money market funds and U.S. Treasuries, resulting from higher average cash balances invested during the year ended 12/31/2025. Net loss was $154,700,000 for the year ended 12/31/2025, compared to $177,800,000 for the year ended 12/31/2024. Net loss was $32,200,000 for the quarter ended 12/31/2025, compared to $48,900,000 for the quarter ended 12/31/2024. The annual decrease was primarily attributable to factors impacting our expenses described earlier. With that, I will ask the operator to open the call for questions. Operator? Operator: Thank you. We will now be conducting a question-and-answer session. You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question will come from Michael DiFiore with Evercore ISI. Michael DiFiore: Congrats on all the continued progress. Two commercial questions for me. Now that the potential launch of lorundrostat is roughly six months behind your direct competitor, what are you hoping to learn from this competitive launch that would optimize the success of lorundrostat’s launch? And second, can you offer any additional color on the prelaunch payer interactions you have been having? Have there been any unexpected changes in anticipated coverage, etc.? Thank you. Jon Congleton: Yeah, Mike. Thanks for the questions. We are obviously excited about the timeline we are on now. The Day 74 letter giving us the PDUFA date; we clearly see a significant market opportunity here with, as we stated before, about 20 million patients in the United States alone dealing with uncontrolled and resistant hypertension. We are obviously aware that AstraZeneca potentially is going to be launching in the second quarter. I think there will be some interesting things to identify as far as how they think about pricing and their footprint in the space. But fundamentally, we think this is a large market opportunity. There is certainly room for two novel therapeutics in what I think may be a transformative class overall. We clearly are very bullish on the profile that we have seen with lorundrostat with its best-in-class profile. As it relates to some of the dialogues that we have had with payers, we continue to feel bullish as it relates to access, particularly where we have targeted lorundrostat use. That is that third line or later. We think resistant is the natural opening space, and with experience, both from a physician standpoint and demand growing into the third-line usage. I think it is also important to point out, and I talked about it in my opening remarks, the comprehensive nature of the data set that we have built. When we think about resistant hypertension patients, it is rare that they are isolated to only be dealing with elevated blood pressure. There are so many comorbidities these patients are dealing with. Certainly, that is why we did the EXPLORER-CKD study. That is why we did the EXPLORER-OSA study. Even though we did not achieve a benefit on AHI, we know there is significant overlap, about 50% overlap, with resistant hypertension and OSA. Being able to show the kind of robust, safe benefit we have on blood pressure in this population, we think will have a significant translation into reduced cardiovascular risk for these patients. Michael DiFiore: Thanks so much. Thanks, Mike. Operator: And our next question comes from Richard Law with Goldman Sachs. Richard Law: Congrats on the PDUFA date and getting the NDA accepted. A couple of questions from me. So when you look at the results from the Phase II OSA study, do you think the design limited lorundrostat’s potential to show benefit in the AHI primary endpoint? I mean, the study was much shorter than the historical MRA studies with only four weeks, and you allowed CPAP and PAP use. And then the study population was also different from MRA trials. So it is not clear to me the study duration and design tested lorundrostat’s effects one way or the other. How confident are you on the finding, and where do you go from here with regards to OSA? And then I have a follow-up. Jon Congleton: Yeah, Rich. Let me give you some opening thoughts, and I will turn it to Dave. As I noted, the reason we did this study was because we think it is important for the prescribers who are going to be utilizing lorundrostat to have a clear sense of both efficacy and safety within these complex patients. Being able to show a really robust reduction in BP and doing so safely in these patients that clearly are high risk, particularly the ones we studied in EXPLORER-OSA with the BMI over 38, with AHI over 48, when severe OSA is ticked off above 30. These are patients that have a pretty high cardiovascular risk when you compound that with elevated blood pressure. For us, it was an important study to complete. Again, we believe that we are going to be able to operate with our existing label within this population, just given the fact that they have uncontrolled hypertension and elevated cardiovascular risk. I will have Dave talk about some of the design features and his thoughts. David Rodman: Thanks for the question, Rich. Good thoughts. I have a couple of things I want to say. First of all, was it long enough? It is unclear. It could have taken longer than the four weeks, but I think there is probably a major interaction between that and the actual study population demographics. In other words, we saw these people were extremely obese. They had extremely high AHIs, close to 50, and their BMIs were 38 on average. Their AHI was 48. BMI of 38. So we think the mechanism here is you are fluid overloaded; when you lay down, the fluid goes up into the veins of the neck, and that further obstructs the airway. In this population, there is so much extra adipose tissue that it may be that that compartment is already obstructing the airway enough just from that structural piece that you would not see any more with decreasing volume. So I think the thing to look at going forward, should we want to answer the question, is take a more representative population similar to the ones that were used in studies like eplerenone and spironolactone and test it again. But I want to make a different point, if you could just give me a minute, which is this: we did this because we wanted to know about AHI mainly because that is the easier way to register a drug if you want to claim treatment of OSA, but that is not necessarily our objective. Our objective is to know whether we are going to have a benefit on long-term outcomes in patients with OSA. And the interesting point is if you make AHI less than five with CPAP, it does not reduce your blood pressure and there is no compelling evidence that it makes your long-term cardiovascular outcomes any better. So it is really simply a way to look at the regulatory effect. On the other hand, the reduction in blood pressure we saw is comparable to, or predicts rather, and the agency gives you sort of the claim for improved outcomes. And at the 10 mmHg that we saw in the point estimate analysis, that has been shown to have about a 17% incidence of reduced coronary heart disease, 27% of stroke, and 28% of heart failure. So what we learned here was that we have the potential to be disease-modifying in sleep apnea. And as John mentioned, we can get to that point with the label we have or we are going to have already for treatment of uncontrolled or resistant hypertension; it has been reported that 80% of these patients have uncontrolled or resistant hypertension. So that is the long and the short of it. We do not need to prove it works in AHI because our objective is not to make a therapy for upper airway obstruction. It is to make a therapy that makes these people live longer, better lives. Richard Law: Okay. Got it. And then just for my second question, I know you guys are still exploring the partnership with the PDUFA date now set in December, which is about nine months from now. Can you discuss what kind of commercial capability you have been building, and how large is the commercial team now, and what commercial hires are you still holding back while you are continuing to explore the partnership? And then is there any urgency to build a full commercial capability now in case a partnership may not occur until after the PDUFA date? Thank you. Jon Congleton: Yeah. Thanks, Rich. I will take you back five years ago. We have always made discrete investment choices that support this molecule and put it in its best position to deliver value for the most appropriate patients possible. And so early days, it was CMC. That was ClinPharm. Where we are at now is we are making those right investment choices, and we began this late last year, as you are aware. We are continuing that now to ensure that we are preparing the market, and so that is why Eric and his team are beginning to have dialogues with payers. It is why we are expanding our medical affairs capabilities for continued data dissemination. We have just a wealth of clinical data that we accumulated last year and even as recently as the EXPLORER-OSA that we are going to continue to put in the public forum via medical meetings and publications. We are expanding our MSL team. I do not want to give numbers, Rich, other than to say we are continuing to do everything we can to ensure a rapid uptake on the potential approval of lorundestat for uncontrolled and resistant hypertension. And I think fundamentally, that is the right thing for us to do because it also becomes very informative and potentially catalyzes those partnering dialogues. And we have heard that from potential partners, that we need to make sure we are continuing to invest in this asset so upon approval it does have a rapid uptake and a rapid launch. Richard Law: Got it. Thank you. Thanks, Rich. Operator: We will go next to Seamus Fernandez with Guggenheim Partners. Seamus Fernandez: Thanks. So just to follow up on the commercial side of things, can you help us understand what you believe the number of reps would be to launch lorundrostat effectively versus AstraZeneca? And do you envision having a differentiated approach to market that Astra—if there is a differentiated approach, what would that be? Jon Congleton: Yeah. I am not going to give you a specific number, Seamus, and we are continuing to evaluate that. As you have heard us say before, when we look at where we have developed this molecule, third line or later, and in the United States who prescribes there, it is about 60,000 physicians that are responsible for half of the scripts third line or later. So that is kind of a broad way to look at the market. I do not want to give too much on our intended commercial strategy, but I will say that if you look at the comprehensive dataset that we have—ADVANCE-HTN confirmed hypertension (that was the study we did with the Cleveland Clinic), EXPLORER-CKD that looks at hypertension and comorbid chronic kidney disease, then if you look at the OSA population, the data that just came out of the EXPLORER-OSA—that is going to begin to inform how we think about subsegments of physicians that are treating specific types of hypertension with related comorbidities. And so we will begin to look at the broad IMS data, but then also in the context of these subsegments we think can give us rapid uptake within the resistant hypertension population, and then with experience, move rapidly into third line as well. Seamus Fernandez: Great. And then maybe just as a follow-up. Is there kind of a timing-related dynamic? How much of a derisking event, not just for Mineralys Therapeutics, Inc., but perhaps for strategics, would you say the availability of the assignment of a PDUFA date actually is, broadly speaking? Jon Congleton: Yeah. I think each step along this journey offers a level of derisking and a level of increasing value. That began last year with the readout of ADVANCE and LAUNCH. It continued with the submission of the NDA last year. I think the Day 74 both acceptance of and PDUFA date for lorundrostat further derisks the molecule and brings value nearer term. Maybe related to that, when is an ideal time to identify a partnership? I think that these partnerships have a life of their own, a timeline of their own. Our goal is to really identify a means to generate the greatest value with lorundrostat, which means getting the molecule in front of the most appropriate patients in the United States and, in due course, outside of the United States. So those are all of the things that go into the calculus as we think about maximizing the value of lorundrostat through partnering. Great. Thanks so much. Thanks, Seamus. Operator: Moving next to Jason Gerberry with Bank of America. Jason Gerberry: Just wanted to quickly follow up on the payer access discussions. I think the comment was maybe favorable access with a certain segment of payers. So I was wondering if you can expand upon that a little bit, just to get a sense of your confidence in breadth of quality coverage, 3L+ as I guess you have articulated in the past. And then one CFO question here. Just from an R&D perspective, thinking about 2026 R&D relative to 2025, should we be thinking about, I do not know, cash burn mitigation effort? Or is 2025 a good run rate for the company? And then last one for me is just on the OUS regulatory submissions—apologies if I missed this in past commentary from you guys—but is that in any way gated at all by the partnership discussions? If you can give us a sense of when you anticipate the OUS submissions. Jon Congleton: Yeah. Thanks. Let me maybe give some quick thought on payer, and then I will have Eric add some additional color. We have done a great deal of research in this area—obviously, probably one of the most critical vectors to ensure that we get lorundrostat to the appropriate patients with as few barriers as possible. I think we continue to feel very strong about the value proposition of lorundrostat, the need specifically in the resistant hypertension population, and so we believe that both the combination of appropriate price and rebate is going to create that access. But Eric, I do not know if you want to add some additional thoughts. I know your team continues to work aggressively on this. Eric Warren: Yeah. And, Jason, I am just back from a large payer conference in Orlando, PCMA. The team was engaging Medicare as well as commercial payers. I will say we are on their radar. They are very well aligned with the positioning that John spoke of, and we are now in the midst of scheduling these pre-approval information exchange, or PIE, discussions. So we have got a favorable footprint and interaction cadence with payers. Jon Congleton: And, Jason, I think to your second question, Adam, want to add some thoughts? Adam Levy: Yeah. So, Jason, we have not intended to give guidance on R&D, but I can tell you that in 2025, we were running a number of trials. We had LAUNCH-HTN, ADVANCE-HTN, EXPLORER-CKD for part of that year, EXPLORER-OSA, plus the open-label extension. So it was a heavy lift on R&D for us in 2025. When you roll into 2026, we have been wrapping up the costs on the OSA trial. We still have the open-label extension running. There may be other R&D that we decide to do this year, but I would expect that there is less R&D activity in 2026 than we had in 2025, at least with current or existing plans. Does that help? Jason Gerberry: Okay, thanks, John. Jon Congleton: And, Jason, to your last question, if I recall it right—ex-US and how do partnerships play within that? As we have spoken about in the past, our goal is certainly to try to get lorundrostat to as many patients in the United States as well as outside of the United States as appropriate. We know there are some complexities right now between MFN and tariffs that we are continuing to evaluate. Partnering may play a role in that, and it may play a role beyond just a co-promotion. This is where co-development becomes an interesting opportunity. I think David and his team have done such an excellent job of characterizing lorundrostat not just in hypertension but in so many of these related comorbidities. That creates an opportunity for us to assess what is the appropriate way to introduce lorundrostat outside of the United States. Is it as a monotherapy, as potentially a fixed-dose combination strategy? Those are still things we are evaluating, and once we have made a solid plan relative to that, we will certainly be communicating that. Thanks, Jason. Operator: Moving on to Annabel Samimy with Stifel. Annabel Samimy: Hi. Thanks for taking my question. Just a little bit more on the commercial side. Maybe you can help. I know it is probably too early to talk about pricing. But is there any scenario where your competitor can angle for third line while you are putting yourself in fourth line first? Are you thinking about the possibility of using pricing as a competitive lever? And what kind of things do you need to do to get yourself into third line? And then as a follow-up to that, just with EXPLORER-CKD and EXPLORER-OSA, are you actually seeking to put it in the label as a differentiating feature or just have the data available for presentation and publication? Thanks. Jon Congleton: Yeah. I think it is too early to give you too much specificity on pricing. I cannot really speak to where AstraZeneca may go from a pricing or line-of-treatment approach. I can tell you, as Eric alluded to and I did in my prior comments, that based on the research we have done with payers right now, the value proposition of lorundrostat certainly resonates fourth line, with some payers even third line. I think it is going to be, as I noted, a beachhead at fourth line. That is clearly where there is unmet need. That is clearly where the value resonates. With experience and demand, I think that begins to open up third line. We have talked in the past, Annabel, that as a guidance or a frame for pricing, we have always directed to probably more of an SGLT2-branded price point, Entresto price point, broadly at a WAC, but have not guided as it relates to rebates. To your second question, as I noted in my prepared remarks, we do anticipate having EXPLORER-CKD as part of the NDA application. That will be part of a negotiation as to what portion of that data may be reflected within the label. We believe that the blood pressure reduction data from EXPLORER-CKD is informative for prescribers. That will be part of our positioning from a negotiation standpoint. EXPLORER-OSA was not part of the original NDA application. That may be part of continued safety updates, but the actual data was not available at the time the NDA submission was made. But we do think both of those trials will be very informative to the medical community. We will be using medical meetings, publications, and our medical science liaison team to certainly convey the important messages contained within both of those studies. Annabel Samimy: Okay. And is there any possibility to share other comorbidities you might be interested in exploring that could be particularly impacted by hypertension-lowering agents? Jon Congleton: Yeah. I think I would go a little deeper than hypertension agents—specifically driven conditions. When we talk about 30% of hypertension patients have dysregulated aldosterone, I think by extension that goes into other conditions like CKD, like OSA, as David has spoken about before. Heart failure, we have mentioned, is a place where clearly aldosterone plays a significant role in the risk profile of those patients. There are some other indications that we continue to look at that we have not really spoken about yet, but as I said in a previous response to a question, we believe that there are significant opportunities. Some of those are ones that we would pursue on our own. I think some of those others are ones that we have thought about having partnering involvement with. But at this stage, lorundrostat is extremely well characterized for what it does to aldosterone, how it safely addresses that, and it opens up a lot of other opportunities. As we solidify those development plans, we will be sure to convey those to the market. Okay. Thank you. Thanks, Annabel. Operator: And our next question will come from Mohit Bansal with Wells Fargo. Mohit Bansal: Great. Thank you very much for taking my question and congrats on all the progress. Just one question. Just trying to double-click on the 60,000 prescriber number, John, you mentioned. Wondering, is this primary care heavy, or are these specialists that you would be targeting? And then what is the sort of role direct-to-consumer marketing-type of mechanism could play for a market like this? Thank you. Jon Congleton: Yeah. Mohit, I think it is important that there are two vectors that Eric and his team are looking at, and it is the broad prescriber data that everybody can look at, the IQVIA data, and that is where the 60,000 as a broad target comes from. It is about a 60/40 split, primary care/specialty, the bulk of the specialty being cardiologists. But then there is another vector that we are looking at, and that is for those resistant hypertension patients with comorbidities, who is managing those patients? So hypertension and CKD, hypertension and OSA, confirmed hypertension, and even the Black or African American population because we know we have done a considerable job to make sure we have proper representation within our clinical trials. And so we are taking the broad macro data from a prescribing standpoint, but also informing that with primary market research to see where are the true targets that can really ensure that we are getting lorundrostat as rapidly to as many appropriate patients as possible. And I am sorry, I think you had a second part of your question, Mohit. Mohit Bansal: Yeah. Thank you for this. The second part was more about the direct-to-consumer marketing sort of mechanism—what sort of a role it could play for a company like yours? Jon Congleton: Yeah. I do not know that we are in a position quite yet to talk about the consumer strategy, but obviously, we want to be speaking to patients, reiterating the importance of getting their blood pressure under control, seeking different means to do that, whether it is diet, exercise, or therapeutics, and the benefits specifically of lorundrostat, particularly if they have overlapping comorbidities where we have data that can speak to the opportunity for lorundrostat to help them get to goal and subsequently have hopefully longer lives and better lives. Very helpful. Thank you. Thanks, Mohit. Operator: We will go next to Rami Katkhuda with LifeSci Capital. Rami Katkhuda: Hey guys, thanks for taking my questions as well. I guess I know it was a small study, but did you observe any differential treatment effects in blood pressure reductions or AHI across any kind of key subgroups in EXPLORER-OSA? I guess a particular focus in those receiving and not receiving CPAP? Then maybe secondly, I know you touched upon potential future indications. Is the goal to be first in class for those indications, or are they large enough, similar-type indications, where it does not matter? David Rodman: Thanks, Rami. So we are in the midst of examining deeper into the data, and one of the things we are doing right now is looking at your question of subsets. You are right, it is a small trial, so it will be hypothesis-generating more than proving hypotheses, but that is still really useful. And we intend to present that kind of analysis at future publications and meeting presentations, so just stay tuned for that. In terms of the CPAP, about a third of the subjects, or a quarter, were on CPAP, and we did not see any difference between those groups. But again, they are pretty small numbers, so I do not want to hang my hat on that. Jon Congleton: Yeah. And, Rami, to your follow-up question as it related to—would you repeat it for me one more time? I want to make sure I address it specifically. Rami Katkhuda: Yeah. I just wanted to see if those indications—the goal is to be first in class there, or could you pursue larger indications? I know you mentioned heart failure—are they large enough to encompass multiple winners here in the ASI class? Jon Congleton: Yeah. I think what our intent is is to not be a follower. And what do I mean by that? We know that dapagliflozin is going to be generic potentially this year. I think some of what is being done with the ASIs tends to be more life-cycle management combined with an SGLT2. I do not know that we are looking to, frankly, get into that mud fight. I think there is going to be ample opportunity, and with the data that we have, for physicians to use lorundrostat with the SGLT2 of choice if patients have an overlapping comorbidity like CKD with their hypertension. As I noted in a previous response, we know that dysregulated aldosterone plays a significant role across the spectrum of cardiorenal metabolic disorders. That is what is informing how we think about where is the white space, where is the opportunity, for us to take what we believe to be the best-in-class aldosterone synthase inhibitor—either alone or in some distinct combinations—bringing forward solutions for those patients. Got it. Thank you very much. Operator: And going next to Dennis Ding with Jefferies. Dennis Ding: Hi. Thank you for taking our questions. This is Georgia Bank on the line for Dennis Ding. Maybe a little bit more on the potential partnerships and if you could talk about what an ideal partnership looks like in terms of capabilities and also creative deal structuring. Obviously, the commercial infrastructure is important, but what other nuances are important to you? Maybe in terms of R&D funding or bigger indications and payer relationships? I know that you mentioned that there is opportunity in pursuing some indications on your own and others maybe partnering on. Any color there would be helpful. Thank you. Jon Congleton: Thanks, George. It is a good question, and I will repeat what I have said in the past. We would love to find a partner that sees the opportunity with lorundrostat the way we do. And how is that? That is with the best-in-class aldosterone synthase inhibitor in the near term generating significant value for patients, for physicians, and for the health care community at large and helping to control uncontrolled and resistant hypertension; then also, more broadly, fully realizing the value of the asset from a development standpoint. So co-development—I am not going to talk about what kind of deal structures that would look like—but really extending the value of lorundrostat beyond hypertension and some of its related comorbidities. And then within that becomes addressing the complexity that exists just right now with branded assets that you want to get into the hands of patients outside of the United States. And so what has been informing the dialogues that we have had is finding a partner that thinks more holistically about the opportunity. As we have stated before, lorundrostat has excellent IP out to 2035; patent term extension, probably to 2039. There is a significant time period there to fully realize the value of this asset and bring that value to patients. Got it. Appreciate it. Thank you. Thanks, Georgia. Operator: And this concludes our question-and-answer session. I would like to turn the floor back over to Jon Congleton for closing comments. Jon Congleton: Thank you, operator. We believe the strength of the clinical results for lorundrostat show the potential benefit for uncontrolled and resistant hypertension and those related comorbidities. This is an exciting time for our team, the patients with hypertension who may benefit from treatment with lorundrostat, the physicians and researchers that have worked so hard in support of bringing lorundrostat through our clinical trial program, and our shareholders. We look forward to sharing updates with you in the coming quarters, and with that, I will say thank you, operator, and thank you to everyone for joining us today. We will now close the call. Operator: Ladies and gentlemen, thank you for your participation. This concludes today's teleconference. You may disconnect your lines, and have a wonderful day.
Operator: Good morning, and welcome to Ollie's Bargain Outlet Holdings, Inc. conference call to discuss financial results for the fourth quarter and fiscal year 2025. Please be advised that this call is being recorded and the reproduction of this call in whole or in part, is not permitted without the express written authorization of all these. I would now like to introduce our host for today's call, John Rouleau, Managing Director of Corporate Communications and Business Development for Olis. John, please go ahead. Unknown Executive: Good morning. Thank you, everybody. We appreciate your time and participation. Joining me on today's call from Ollie's are Eric van der Valk, President and Chief Executive Officer; and Robert Helm, Executive Vice President and Chief Financial Officer. Following their prepared remarks, we will open the call for questions. [Operator Instructions] Finally, let me remind you that certain comments made on today's call may constitute forward-looking statements, and these are made pursuant to and within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 as amended. Such forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements. Those risks and uncertainties are described in the company's earnings release and filings with the SEC, including the annual report on Form 10-K and the quarterly reports on Form 10-Q. Forward-looking statements made today are as of the date of this call, and the company does not undertake any obligation to update these statements. On today's call, the company will also be referring to certain non-GAAP financial measures Reconciliation of the most closely comparable GAAP financial measures to the non-GAAP financial measures are included in the company's earnings press release. With all of that said, it's now my pleasure to turn the call over to Eric. Eric van der Valk: Good morning, and thank you for joining us today. We had a strong fourth quarter to cap off an exceptional year. Both comparable store sales and earnings were ahead of our expectations and we delivered on all of our strategic objectives in 2025. We entered last year with a number of ambitious goals. Most notable of these was to accelerate our growth and capitalize on opportunities in the market including real estate, merchandise, customers and talent. All of this required considerable planning and execution, and our team delivered. We opened a record 86 stores last year which was significantly higher than our previous record of 50 stores. All stores were opened in the first 3 quarters, another first for us. We moved to a soft opening strategy which simplified the process and improved our execution. Our next goal was to enhance and drive growth in the Ollie's Army loyalty program. We added in Ollie's Army night in June, we made our Ollie's Days event exclusive to members only. We gave members advanced notice on special events, and we rolled out the Ollie's credit card. Our stores did an amazing job communicating the benefits and enrolling customers in the loyalty program. Great job team, your efforts paid off. The result was stronger customer acquisition growth the entire year. New memberships in our Ollie's Army loyalty program increased 23%, and our total customer file increased by more than 12%. On top of the accelerated membership growth, we are welcoming a wider breadth of customers, America loves a bargain. And as we grow from East to West, we are expanding our customer demographics. Our unprecedented deals simply cannot be beat, and we are clearly benefiting from consumers seeking value and trading down. It's not just trade down, however. We are also reaching a younger customer through digital marketing tactics. Finally, we are reinvesting in our stores and improving the customer shopping experience. All of this is driving an expanded customer base. Our next objective was to go after merchandise-related opportunities. Our mission is to sell good stuff cheap. We do this through a flexible off-price buying model that leverages our growing buying power across suppliers and manufacturers around the world. Our growing size and scale and continued consolidation in the retail industry has resulted in better access to merchandise, and our deal flow is off the charts. This gives us more control and flexibility in how we build our merchandise assortment. A good example of this were changes we made to the seasonal category. Seasonal Decor is an area that continues to grow in the marketplace, and there is a white space opportunity here. At the same time, Toys is an area that continues to evolve away from traditional to more interactive products. With this in mind, we increased our investments in seasonal decor and changed our approach to toys. These changes resonated with our customers and were big wins in the fourth quarter. Our last initiative was to continue reinvesting in our business to support future growth. We have strengthened our bench in many critical areas, including playing in allocation, marketing and new store development. We also increased our distribution center throughput through expansion and automation and we continue to improve our store and customer experience. Looking ahead, we will build on our momentum and progress in pursuing these initiatives in 2026. Our flywheel for growth starts with the opening of new stores and the availability of real estate continues to be strong. We are planning to open 75 stores this year, and these will be a mix of new and existing markets as we continue to expand contiguously. We recently celebrated entering our 35th state with the opening of our store in Austin, Minnesota. We celebrated the grand opening last week with a long line of enthusiastic customers that stretched down the side of the building. It was great to meet and talk to so many good people. Austin loves deals, and we are proud to be part of your community. Thank you, Austin and Minnesota, the birthplace of bargains has arrived with more stores coming soon. In addition to Minnesota, we will also be entering New Mexico later this year. With a total of 658 stores in 35 states, we are only at the halfway mark of our long-term goal of more than 1,300 stores. It's such an invigorating time to be with Ollie's with so much growth ahead of us. While new stores remain the quarterstone of our growth, we are also focused on driving comparable store sales through better execution, leveraging our growing size and scale and improving sales productivity. We touched on strengthening our product assortment. We are also seeing opportunities arise in areas such as real estate and talent. Would you combine this with the fact that we reinvested in the business every year because of our strong sales, profitability, cash generation and balance sheet, it feels like we have reached an inflection point. With these dynamics we are confident in our ability to continue executing the business and driving consistent results. Our growth and the continued consolidation of the retail sector is leading to more buying power and expanding our access to products. This gives us the ability to balance our value proposition with our margin profile and strengthen both over time. Based on the structural changes to our business, we feel a comp target of 2% and a gross margin target of 40.5% is sustainable and strikes the right balance between price and margin. We also believe that this stability and strong free cash flow now allows us to commit to returning higher levels of excess cash to shareholders through share repurchases. Combining 10% unit growth, 2% comp growth and a commitment to stepping up share repurchases, we are confident in delivering consistent mid-teens EPS growth while reinvesting back into the business to support profitable long-term growth and reach our target of 1,300 stores. In 2026, our focus will be on improving the in-store customer shopping experience, sharpening our dynamic marketing media mix model expanding our IT application development capabilities and further integrating technology and data analysis across the enterprise, including leveraging proven AI with appropriate solutions for our business model, growing our planning and allocation pension capabilities and increasing our distribution capacity by expanding our Texas and Illinois facilities and laying out plans for our fifth DC. There is so much potential to continue to develop and grow our business, but we are doing this in a calculated fashion, staying true to our business model, strong culture, and our new long-term growth algorithm. We are super proud of our achievements in fiscal 2025. We delivered against virtually every single metric and goal we set out for ourselves at the beginning of the year. But now that's behind us. We are focused on building on our success, seizing new opportunities, delivering another year of good stuff cheap to our customers and strong results for our shareholders. Let me wrap up by recognizing and thinking all of our dedicated associates and team members. Every one of you plays an important role in serving our loyal discount customers and fulfilling our mission, serving our communities by selling good stuff cheap is not just a tagline. It's our purpose, our passion and our reason for being. Thank you for everything you do. Now let me turn the call over to Rob. Robert Helm: Thanks, Eric, and good morning, everyone. We were very pleased with our fourth quarter results and the underlying trends in the business. Earnings were slightly ahead of our expectations, driven by solid comp growth, healthy margins and disciplined expense control. New stores and customer acquisition remain our 2 top priorities, and we continue to deliver on both of these. We opened a record 86 stores last year, an increase of more than 15% and membership growth in Ollie's Army remained strong, up more than 12% for the year to 17 million members. Now let me walk you through the P&L. Net sales increased 17% to $779 million, driven by new store openings and comparable store sales growth. Comparable store sales increased 3.6%, driven by an increase in both basket and transactions. Seasonal, consumables, hardware, stationery and sporting goods, were our top-performing categories. Our comp sales increase was above our expectations in the quarter, even more so when factoring in the impact of severe winter weather. Major storms around Black Friday weekend, the weekend of Ollie's Army Night, and the end of January caused a significant number of store closures and disruptions to the business. Given our store geography, we were particularly hard hit by the weather. While comp store sales were ahead of expectations, new store sales were slightly below our plan. This was a different trend than the rest of the year as our new stores outperformed expectations in the first 3 quarters. In hindsight, we underestimated the flattening of the reverse waterfall for the new stores in year 1 from the soft opening strategy. This proved to be more impactful in the fourth quarter than what we observed earlier in the year because of the higher engagement levels with our Ollie's Army members during the holiday season. The majority of our new stores be planned for this full year and the flattening of the reverse waterfall is something we continue to study. Gross margin of 39.9% was above plan for the quarter but approximately 80 basis points lower than last year which was largely due to planned investments in prices. SG&A expenses were well managed in the quarter. Excluding the $5 million of onetime expense related to the modification of equity awards for our Executive Chairman in last year's third quarter, SG&A expense as a percentage of net sales decreased 40 basis points to 24.2%. The decrease was primarily driven by the leverage of our fixed costs from the increase in comparable store sales and benefits from our optimization efforts and marketing. Preopening expenses decreased 53% to $2.3 million, driven by the earlier timing of new store openings this year versus last year. Moving down to the bottom line. Adjusted net income increased 16% to $85 million and adjusted earnings per share increased 17% to $1.39. Lastly, adjusted EBITDA increased 16% to $127 million, and adjusted EBITDA margin decreased 10 basis points to 16.3% for the quarter. Turning to the balance sheet. Our total cash and investments increased by more than 31% or $134 million to $563 million, and we had no meaningful long-term debt at the end of the quarter. We remain committed to maintaining a very strong balance sheet because of the credibility this gives us with our various partners across the industry. Inventories increased 18% year-over-year, primarily driven by our new store growth and strong deal flow. Capital expenditures were $18 million for the quarter, with the majority of the spending going towards the opening of new stores, the improvement of existing stores and, to a lesser degree, investments in our supply chain. We did pull some new stores forward in early 2026, which drove CapEx and preopening a little higher than our expectations. We bought back $34 million worth of our common stock in the quarter and $74 million for the full fiscal year. At year-end, we had $259 million remaining under our current share repurchase authorization. We are stepping up the buyback in 2026, and I will speak to this more in a moment. Lastly, let me run through the way we are thinking about the business and our initial outlook for fiscal year 2026. Let me start with tariffs. The tariff situation obviously remains very fluid, and the current lower levels could be temporary. Bigger picture, tariffs are just another form of disruption, and we benefit from disruption. Whatever happens, we would expect to mitigate any margin pressure from tariffs. Before running through our guidance for 2026, let me comment on how we are thinking about our new long-term growth algorithm that Eric quickly touched on. We operate a flexible and fluid business that generate stable returns and very strong cash flows. Our strong growth, along with the consolidation of retail gives us greater ability to scale and drive the business. With all of this, we feel confident in targeting annual comparable store sales growth of 2% and annual gross margin of 40.5% moving forward acknowledging that there will be some variability to comps and margin between the quarters based on deal flow, seasonality and a few other factors. The 40.5% annual gross margin target is our current baseline target. And our thought process is to reinvest anything over and above this back into our value proposition to our customers. Lastly, we are targeting to return approximately 50% of our free cash flow back to investors through share repurchases going forward. Our first and best use of cash is all -- is and will always be reinvesting into the business to support long-term growth. However, between our very strong balance sheet and stable cash generation, we are confident in committing to a higher level of share repurchases that benefits long-term EPS growth. Our initial guidance figures reflect these changes and are contained in the table in our earnings release posted this morning, and they include 75 new store openings, net sales of $2.985 billion to $3.013 billion, comparable store sales growth in the range of 2%, gross margin in the range of 40.5%, operating income of $339 million to $348 million and adjusted net income and adjusted net income per share of $270 million to $277 million, and $4.40 to $4.50, respectively. These estimates assume depreciation and amortization expenses of $63 million, inclusive of $15 million within cost of goods sold, preopening expenses of $22 million with the majority of this in the first half of the year, an annual effective tax rate of approximately 25%, which excludes the tax benefits related to stock-based compensation. The tax rate is slightly higher than 2025 due to higher levels of nondeductible compensation. Diluted weighted average shares outstanding of approximately $61.4 million, which includes a stepped-up share repurchase level of approximately $100 million. And finally, capital expenditures are expected to be in the range of $103 million to $113 million, which includes almost $20 million for the expansion of our Texas and Illinois distribution centers. Similar to last year, we expect our new store openings to again be front-end weighted with the majority of openings planned for the first half. In closing, let me also acknowledge and congratulate my fellow team members. While we continue to integrate technology into how we do things, we will always be a people-led business that relies on each and every team member to play their part. 2025 was a terrific year on all accounts. and I am excited about the opportunities that lie ahead for our team. Now let me turn the call back over to Eric. Eric van der Valk: Thanks, Rob. In closing, I'd like to share that we are well positioned and laser-focused on continuing to deliver profitable growth. We are committed to driving strong and consistent execution every hour of every day. We are proud of what we do in service of our customers. We are excited about the opportunities ahead. And last, but certainly not least, we are Ollie's. Operator, we are now ready for questions. Operator: [Operator Instructions] Our first question comes from the line of Peter Keith with Piper Sandler. Peter Keith: Thank you. Good morning, everyone. Interesting on algo change, certainly exciting from moving from the historic 1% to 2% comp annual target up to now 2%. So kind of subtle, but I would still say meaningful. Could you give us a thought process and why you're doing that now? And maybe, I guess, even what gives you the confidence you can sustain that going forward? Eric van der Valk: Sure. Peter, thanks for your question. We do believe we're at an inflection point with the accelerated growth last year and looking at $3 billion in sales for next year. Our growing size of scale is leading to better access to merchandise and deals. It's allowing us to steer our merchandise selection and our category mix much more deliberately than we were able to do in the past. Our flexible buying model allows us to get in and out of products and categories fluidly. So with more consistent access to incredible deals and the improvements we've made throughout the business on the organization, we feel like a 2% comp algo is sustainable. Operator: Our next question comes from the line of Chuck Grom with Gordon Haskett. Charles Grom: I'd read that chance, the 9.5%, I think, this morning, nice effort. My question is on sales productivity. You've noted changes being made to the size of certain assortments such as shrinking carpeting books and toys just now. Where are you guys in that journey and that in sales per square foot. I'm curious for your best stores where that productivity sits. And then last question would be in our field work, we've observed furniture in stores. Is that just a seasonal drop? Or are you guys leaning into that category more deeply? Eric van der Valk: Thanks, Chuck. Appreciate it. I think I was at 1.0 on the [indiscernible] it's all right. You could be a 9.5. Room or improvement. We like that, yes. That's right. In terms of space productivity, we are thinking about space productivity differently now than we have in the past. We first consider where we provide the best values in the most relevant merchandise categories where we can chase a closeout pipeline. So I would stress the fluidity, the flexibility of our business in the category mix is sometimes a following of the closeout pipeline. But our growing size and scale gives us better access to deals, which I said earlier, results in -- it's resulting in more long-term partnerships with the vendor community and more partnerships with the better community. The more expansive access to the merchandise is putting us to the driver seat in steering categories and assortments. We've also been on a journey thinking about this, how we value store space, how we drive higher space productivity within the box for multiple years at this point, beginning with some of the learnings that we took away from our remodel program several years ago, and it's resulted in our confidence to accelerate some investments in the business and to steer categories in a more deliberate way. We're also making investments, as I mentioned on the call, in planning allocation and stores to further seize these opportunities. Furniture is a great example. I'm glad you brought it up of a category that we've looked at, where there's tremendous white space in the market as a result of retail consolidation. So I throw out there, Big Lots, Value City, American Freight are good examples of retail consolidation that's happened sublet recently and it's opened up white space and what I would characterize as the deep discount furniture business with kind of opening price point. Living room furniture is kind of what we're going after with our opportunistic buy model, we are well positioned to chase the business and move in and out of categories. We begin testing expanded furniture last year, actually late last year in some stores, and we like the results of the test. We were looking forward at what we believe to be an outsized tax refund season it sees what we thought would be a unique opportunity to introduce the business in a very big way in almost every store at the same time as the tax refunds were coming in. But to answer your question about is this transitory? Is it deal? Are we driving it now? And what does it mean for the future? We're early innings at this, we're about 7 weeks or so into the introduction of the business. President's Day weekend was the kind of the grand introduction of it. We do believe it has a place in our stores long term. and we're going to stay at the business. It may not be every store, but it's probably most stores or at least more than half of the stores. This being said, the most challenging decisions that we make here are what not to buy, whether that's deals or categories. So those challenging decisions we have to make that we have made for about half the stores is that we're going to exit the wall to wall carpet business, which is relatively unproductive. And we like what we're seeing at furniture. We believe that's an adequate replacement and that we'll get more sales productivity out of furniture versus wall to wall carpet in, again, more than half of our stores. So again, early read, we like what we see. I wouldn't speak today about -- you quoted the $130 sales per square foot about what the road map looks like around that. At this point, we have strategies around category mix management. that will drive improved selling productivity. We're not making a specific commitment to what that looks like in future years today. Operator: Our next question comes from the line of Matthew Boss with JPMorgan. Matthew Boss: So Eric, on the inflection point that you cited to kick off the call. So 2 questions. First, could you elaborate on the comp strength relative to plan that you saw in November and December? How best to quantify the weather impact on the fourth quarter? And have you seen any change in comp momentum so far in the first quarter relative to the 3 to 4 comps that you delivered in the fourth quarter? And Rob, separately, I guess, could you just elaborate on the performance that you're seeing in your new stores relative to plan and just expectations for productivity that you embedded in the guide for this year relative to 2025? Robert Helm: This is Rob, I think I'll take all of that. So the comps at Q4, we were pleased with the comp results. It was driven by both increases in transactions and baskets -- it was back at led with basket taking 2/3 of it and transactions a third. The monthly cadence traded in a pretty tight range. We were pleased with the holiday season. We had a very nice holiday season. In January, our exit rate would have been the strongest comp of the quarter had it not been for the winter storm impact, which was very significant, where we had hundreds of stores closed for a number of days in that last week of the quarter. And momentum is spilled over into Q1. We're pleased with where we're positioned. We feel like we can deliver on our guidance. Our deal flow is amazing, and our assortment for the spring season is incredible. From a new store perspective, I think it's important to put all of it into context. First, the majority of our stores [ be ] planned for the full year. So we're very pleased with that result. Second, the new stores were impacted actually disproportionately from the comp stores during that last week of the quarter because of geographies. So that was also a piece. But in terms of trend and what we're seeing, what we saw in Q4 was the timing dynamic, which related to our soft opening strategy, which flat in the early sales curve, but it improved execution of these stores. This improved execution helped us open the stores earlier and really helped us step up from the historical cadence from 50 stores to 86 stores this last year. We knew this would impact the maturity curve in some way. But what we feel that it does is we feel that it impacts the shape of the curve, but not the long-term productivity, profitability or opportunity in any of these stores over the longer term. In terms of what we've embedded in guidance, we've considered this performance in the fourth quarter into our guidance, into our new store productivity. way that the Street calculates new store productivity is slightly higher this year versus last year because of the step-up in the 86 stores coming into the store base. But we're comfortable with our guidance, and we feel that we're in a good position to deliver. Operator: Our next question comes from Steven Shemesh with RBC Capital Markets. Steven Shemesh: Great. I appreciate you taking the -- there are obviously a lot of consumer cross currents at the moment. If we think about an evolving tariff landscape inflation may be picking up a bit on your tax refunds as you alluded to and now the Middle East situation impacting gas prices and consumer confidence. Anything you can share on the overall state of the consumer and kind of what you're seeing from a consumer behavior standpoint. And a related question, I mean, I think there's always an ongoing debate about closeout availability, you somewhat alluded to this in your response to an earlier question, but maybe just a state of the union there as well of you're confident in maintaining a high degree of quality in stores, especially as you ramp up store growth. Eric van der Valk: Sure. Thanks, Steve. Thanks for your questions. In terms of the state of the consumer, consumers are seeking value and we're here for them. The strength we're seeing in trade down has continued with our upper income cohorts. It's there's momentum there in trade down. The lower income -- the lowest of our cohorts a little bit weak, the trade down is more than offsetting the weakness in the lower income cohorts. We're also seeing strength in consumables, which is an indication of where the consumer's mind set is it's continuing to be a very strong business for us. The deal flow is lining up very, very nicely, which is a good segue into deal flow with the consumer demand consumables for us. Deal flow for us, it's off the charts. With the consolidation of retail that's taking place, definitely outsized consolidation in retail over the past year. We are seeing deal flow in just about every category that's off the charts. And again, I mentioned consumables, but that's definitely been a strong pipeline for us in consumables. So we're extreme value retailer. We're comfortable with where we are from a price gap standpoint very competitively positioned. So we're in good shape. Operator: Our next question comes from Steven Zaccone with Citi. Steven Zaccone: I wanted to ask about the real estate environment. Just help us understand how you're balancing new store growth versing investing in some of these initiatives to drive higher store productivity. And then this year calls for 75 new stores, which is slightly above 10% unit growth, should we expect this unit growth above 10% to continue for a couple of years. Robert Helm: Thanks, Steve. It's Rob. I'll take that question. The real estate environment remains strong, and availability is very good. 2025 was actually one of the biggest years of store closures that we've seen over the last 10. But we're focused on building a long-term durable business model that compounds earnings growth year after year. We feel that the best way to do this now is by balancing our new store growth with other initiatives to improve the in-store shopping experience across the remainder of our fleet. But touching on the go forward, we think that 10% unit growth is probably the right way to think about it. beyond 2026. 2025 and 2026 were really above algo because of the outsized consolidation of stores that we've seen in the last 12 to say, 24 months. Operator: Our next question comes from the line of Kate McShane with Goldman Sachs. Katharine McShane: Is there a way to quantify the comp growth of Ollie membership versus what is coming from new store growth. And we were wondering if the Ollie Army demographic is changing in line with what you're seeing just in the stores. Robert Helm: I'll take the first part, and then I'll hand it off to Eric for the second part. We haven't separated that out in the past historically. We think about Ollie's Army as a single metric. And we're looking to grow it through new stores predominantly. But what I would say is all vintages continue to comp on Ollie's Army store growth. And it's an important goal that we set for our store teams in communicating the benefits out to our customers each and every day. Eric van der Valk: Yes. I mean we're very pleased overall with the Ollie's Army performance on the quarter and on the year in terms of the growth, the excitement that our customers have around the program, the enhancements of the program, the conversion that our stores have driven with the customers, the new customers that are coming in to make them part of the Army to make them part of our loyal bargainauts, Ollie's family. So that's -- we're firing on all cylinders as it concerns Ollie's Army. Operator: Our next question comes from Anthony Chukumba with Loop Capital Markets. Anthony Chukumba: Congrats on a strong 2025 I was interested in the seasonal business in the fourth quarter, specifically, how much of that strength was close out as opposed to some of the direct source stuff that you did, particularly in terms of decorations and also gifts? Eric van der Valk: Sure. The seasonal business typically is more non closeout, more source, more production goods. Last year, we did see a fairly healthy pipeline of closeout goods of ex inhibitory that was out there as a result of retail consolidation with manufacturers and product that was left behind from retailers that are out of business that was in transit, et cetera. So it was a combination. I'm not going to quote the percentage on it, but it was actually a fairly healthy combination of closeouts that is somewhat unusual for that business. Gift is the same to the extent we don't usually get into specific deals on this call, but we did have outsized gift-related deals. A year ago, we were up against that were closeout related. Some of what we bought was closed out and so what we bought was production, and we had a very strong gift business this year. So we were able to comp our business that was a little bit more closeout driven in '24, with a little bit less closeout-driven product in '25, and we were very proud of our value proposition, our price gaps on that product. It does speak to the evolution of our business as we continue to grow, being maybe more like an off-pricer with close out is the most important driver of our value prop. And that's how we see our business as we move forward, especially as we continue to grow in size and scale. Operator: Our next question comes from the line of Simeon Gutman with Morgan Stanley. Simeon Gutman: Good job in '25. If you take the sort of this newer financial algo compared to previous, so two, it's a little bit higher than what you were comfortable underwriting. Gross margin is certainly higher. Can you just tell us then what happens on the other side of it? Are you saying that margin grows at a faster rate to an EPS grows faster? Or is there something inhibiting higher SG&A? I'm sorry if I missed that piece, but I'm trying to put on the before and after together. Robert Helm: This is Rob, Simeon. I'll take that question. We're not thinking about margin growth necessarily differently under the algo. What we're moving from is the 1% to 2% which shows the confidence that we have based on this inflection point based on our size and scale. Margin, we're thinking as the current baseline target. We're thinking not to exceed 40.5% in the short term. We think that this is the right balance between price and margin at the moment. And if we have the opportunity to exceed, we would reinvest that back into customer loyalty to drive additional market share at this moment. From an SG&A perspective, as the 2% comp, we would expect for 10 basis points of leverage, which is built into our guidance. And then EPS will grow in the mid-teens on the bottom line. And that will be supplemented by share repurchases, but that's not -- that's not how we're getting there. We're getting there through the core strength of the algo throughout the P&L. Eric van der Valk: Yes, Simeon, I just want to stress the point on margin about reinvesting in price. Nothing has changed here. We reinvested price, 40.5% is the new 40. Period. Operator: Our next question comes from Scott Ciccarelli with Truist. Joshua Young: This is Josh Young on for Scott. So how much benefit do you think you're capturing at this stage for big lots? And could we see sales slow in the back half as you cycle those orphan sales that you were able to capture? Robert Helm: This is Rob. I'll take that one. The stores that have overlapped the the former big loss locations, whether they closed never came back or they closed and reopened under the variety of wholesalers umbrella, are some of the strongest locations in our fleet over the past year. But similar to COVID, when we were talking about 2-year, 3-year, 4-year comstack, big losses in the rearview mirror and what they were is not coming back. We will continue to benefit from their absence in real estate, in access to product and sourcing and talent, all while continuing to wear share of wallet with our incredible deals and bargains -- but our model has always thrived on the long-term consolidation of retail and Big Lots is no different. Operator: Our next question comes from the line of Jeremy Hamblin with Craig-Hallum Capital Group. Jeremy Hamblin: And I'll add my congratulations on the really strong year. I wanted to ask about dark grant, which you saw impact in 2025. What was the total dark rent in '25? And if you have some dark rent that you're expecting in 2026, what would that amount be? And then also, you talked about returning capital to shareholders maybe in a little bit bigger way. You've got over $0.5 billion in cash and generated about $300 million of operating cash flow in '25. Would you think about stepping up like the share repurchase plan to a $300 million, $400 million level? Just something that given the cash flow that you generate and current balance and strong balance sheet. Just curious if that's under consideration. Robert Helm: Sure. This is Rob. I'll take those questions. Dark rent expense was $5 million for the Big Lots locations in 2025. Not all of this was incremental. And typically, our organic locations incur some level as dark rent. It's typically in the range of a month or so as we merchandise the store. We do have more normalized assumptions included within preopenness last year. But as you do the math, I think the piece that you're trying to solve for is our investment in improving the shopping experience and the remodel program, which we have now added back into 2026 has included our guidance numbers. So that's on the preopening side. On the buyback side, the way we're thinking about buybacks is it's a supplement to our algo. It's not a substitute for earnings growth. We're very comfortable with the commitment of returning 50% of our free cash flow generation back to the shareholders. The $100 million, we believe, is a conservative target. If we are able to generate higher levels of operating cash flow, we'll aim to stick to that 50% return of free cash flow. We're not looking to do a short-term pop. We're looking for steady compounding earnings growth over time. Operator: We have a question from Edward Kelly with Wells Fargo. Edward Kelly: Nice quarter. On the marketing side, I was hoping that you could touch on maybe some of the changes in the marketing strategy, and you mentioned optimization. And then related to this on the flyer, any shifts on the flyer that we should be thinking about this year or other special promotions for '26? Eric van der Valk: I love that you asked flyer questions and count offers and flyers as well. On the marketing question, before I get into flyers, we continue to optimize our marketing through our dynamic media mix model. It allows us to reallocate spend towards higher-return channels and it's more fluid in terms of timing. This has been a journey, multiyear journey at this point as we reduce our reliance on what I call the inevitable reduction of print media. It's been in decline for many, many years, continues to be a decline. It's really not about spending more, it's about using data to be more precise and more efficient. We've already seen the result of some of that work over the past 6 months, as you can see from a reduction of marketing spend over the last 6 months. Again, it's not about reducing, it's about a more efficient spend. We also have meaningfully reduced our print spend over time, a little ahead of the decline of the print media that's available to purchase, which is where all the reduction is coming from. The approach gives us much more flexibility, as I touched on. Digital is much more flexible, which helps facilitate responding to deal flow, seasonality. Customer engagement is much more fluid and flexible, it's a near real time and we can stay very disciplined on expense control. In terms of your flyer-related questions. We -- so we -- our history here is that flyers are big events in the material over the quarter. We're not thinking of it that way anymore. And I am not going to talk about changes to flyer timing going forward. I get a little bit concerned with our growing size and scale and approaching $3 billion in sales next year with, Uncle Ben from Spider-Man, "with great power comes great responsibility". And we have great buying power in the closeout business. And I'd rather not project to the vendor community and to our competitors out there, what we're doing with flyers or what we're doing with managing our mix on a go-forward basis, et cetera. So we're committed to the 2% algo period every quarter. So that's how we're looking at it. So that is the answer to your flyer question. Operator: Thank you. And ladies and gentlemen, this will conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: Good day, ladies and gentlemen, and thank you for standing by. Welcome to Abacus Global Management, Inc.'s fourth quarter and full year 2025 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press star then 2. Please note, this event is being recorded. I would now like to turn the call over to Robert Phillips, Abacus Global Management, Inc.'s senior vice president of Investor Relations and Corporate Affairs. Please go ahead. Robert Phillips: Thank you, operator. And thank you everyone for joining Abacus Global Management, Inc.'s fourth quarter and full year 2025 earnings call. Here with me today are Jay Jackson, Chairman and Chief Executive Officer, Elena Plesco, Chief Capital Officer, and William McCauley, Chief Financial Officer. This afternoon at 4:15 p.m. Eastern Time, Abacus Global Management, Inc. released its fourth quarter and full year 2025 results. This afternoon's call will allow participants to ask questions about our results. Before we begin, Abacus Global Management, Inc. refers participants on this call to the investor webpage ir.abacusgm.com, for the press release, investor information, and filings with the SEC for a discussion of the risks that can affect the business. Abacus Global Management, Inc. specifically refers participants to the presentation furnished today on Form 8-Ks with the Securities and Exchange Commission, and to remind listeners that some of the comments today may contain forward-looking statements and as such will be subject to risks and uncertainties, which if they materialize, could materially affect results. For more information on the risks, uncertainties, and assumptions relating to forward-looking statements, please refer to Abacus Global Management, Inc.'s public filing. During the call, we will reference certain non-GAAP financial measures. Although we believe these measures provide useful supplemental information about our financial performance, they are not recognized measures and do not have standardized meanings under U.S. generally accepted accounting principles or GAAP. Please see our public filings for additional information regarding our non-GAAP financial measures, including references to comparable GAAP measures. I will now turn the call over to Jay Jackson, Chief Executive Officer. Jay Jackson: Thank you, Rob, and good afternoon, everyone. Abacus Global Management, Inc. closed the year by delivering another exceptional quarter, our eleventh consecutive quarter of beating consensus. Today, I want to walk you through how we are executing against our vision and what the path forward looks like grounded, not in projections, but in what I would call our proof point: a track record of consistent, measurable outperformance. Eleven quarters ago, we made specific commitments to our shareholders about how we would scale the business. Every quarter since, we have delivered. Let me put that in concrete terms. We have exceeded guidance and beaten consensus every single quarter. Over that span, we have tripled adjusted net income and adjusted EBITDA, expanded margins from 48% to 60%, and grown our asset base more than 35-fold, from under $100 million to nearly $3.6 billion. We have executed disciplined capital allocation with ROE and ROIC consistently at 20% or higher. These are not aspirational figures, they are results, consistently delivered, independently verified, and compounding quarter after quarter. That track record is precisely why you should have confidence in what comes next. Today, we are initiating our full year 2026 outlook for adjusted net income of $96 million to $104 million. This range implies another year of exceptional double-digit growth, up to 22%, compared to full year 2025 adjusted net income of $85.7 million. This guidance is built on the same execution discipline that has defined every quarter of our public history. Before I walk through our next set of goals, I want to ground this discussion in what makes the Abacus Global Management, Inc. business model fundamentally differentiated. First, our assets are mortality-driven and completely uncorrelated to macro markets. They exhibit what we call positive theta, positive accretion over time. As the insured ages and mortality probability increases, asset value naturally appreciates. There is no interest rate sensitivity, no credit cycle dependency, and no reliance on market sentiment. Second, Abacus Global Management, Inc. is a data-driven business that is insulated from AI disruption, and in fact, positioned to benefit from it. We own proprietary mortality data that AI platforms need to source. As AI adoption accelerates, we become a more valuable data provider, not a displaced one. Third, our assets are backed by regulated A-rated insurance carriers, providing certainty of payment upon maturity. These are contractual obligations from some of the most creditworthy institutions in the financial system. Fourth, they are self-liquidating. Unlike real estate and private equity, we do not need to find a buyer or manufacture an exit. The asset matures by design. Fifth, typical unlevered, uncorrelated returns range from 8% to 12% with limited downside risk, a profile that is exceptionally rare in today's environment. This is why institutional capital continues to flow into the space. The return profile is predictable, durable, and genuinely diversifying. During periods of market uncertainty, our origination business actually accelerates because we provide liquidity to policyholders when they need it most. In 2025 alone, Abacus Global Management, Inc. paid nearly a quarter of $1 billion to policyholders. Here is the broader reality. There is approximately $5 trillion in permanent life insurance outstanding in the United States today. Roughly 75% of policies held by individuals 65 lapse without ever paying a claim. Most policyholders do not realize that life insurance is personal property with meaningful market value, often worth significantly more than surrender value. Millions of Americans unknowingly walk away from six- and seven-figure assets simply because they do not know an active secondary market exists. That is a massive, structurally underserved addressable market. And that is exactly what Abacus Global Management, Inc. was built to capture. So where are we going? Today, I am laying out the path from where we are now, a company that has tripled its revenue over the last two years, to become a mid-cap company, specifically a business operating at approximately $450 million in EBITDA with 70% recurring revenue over the next five years. For those newer to the Abacus Global Management, Inc. story, our strategy is built on four integrated verticals, each one feeding and strengthening the others, creating a flywheel where we control the entire asset value chain. Vertical one, Abacus Life Solutions, the foundation. Abacus Life Solutions is our origination engine and foundation of the entire platform. In a highly regulated industry, we have established ourselves as a clear market leader. In Q4 alone, we deployed a record $230 million of capital, bringing our full year 2025 deployment to over $580 million. Working with 78-plus institutional partners and over 30,000 financial advisers, we expect this momentum to continue accelerating in 2026. This segment delivers consistent, realized earnings while feeding the asset pipeline across all four verticals. Critically, it also generates approximately 10,000 excess leads per month, individuals seeking insurance-related advice who do not qualify for our core business but represent significant wealth management opportunities. That organic lead flow is the engine powering our private wealth vertical, without the expensive customer acquisition costs typical of the industry. Vertical two, Abacus Asset Group, the growth engine. Our asset group is the primary growth engine. We now manage over $3 billion in fee-paying AUM across our longevity funds and ETFs. In 2025, we generated nearly $34 million in management fees, and our longevity funds alone have attracted $630 million in capital inflows. Our new longevity interval fund, which we expect to launch this year, along with our asset-based finance strategy, are creating clear, executable pathways to reach $5 billion in fee-paying AUM by year-end 2026. This is not a stretch target. It is a natural extension of the institutional demand we are already seeing. Vertical three, data and technology are competitive moat. Our data and technology division, now operating as Abacus Intel, continues to grow at strong multiples, adding another durable leg to our recurring revenue strategy. Our flagship product, mVerify, has achieved 4x growth and now tracks nearly 3 million lives, an over 300% year-over-year increase, across 100-plus institutional systems, delivering 97% coverage with less than 1% error rate. To put this in perspective, government mortality systems such as Social Security can lag by up to nine months and carry lower accuracy. Our system identifies mortality events in approximately 48 hours with near complete accuracy. That data advantage is a genuine competitive moat. It enhances our underwriting, asset management, and wealth management capabilities simultaneously. Let me be clear how we leverage AI. We are not using AI to manage portfolios. We are using AI and large language models to aggregate, structure, and interpret health and medical data from policyholders and direct consumers. The result? Broader datasets delivered in usable, summary formats that accelerate underwriting, enhance fraud prevention, and optimize pension liability analysis faster than traditional methods. We are targeting over $3 million in technology revenue for 2026, with significant M&A upside as we expand into insurance, pension, and mortgage verticals. Today, we are already monetizing this data externally, packaging mortality analytics for state pension funds and generating recurring SaaS-like revenue streams. Vertical four, Abacus Wealth Advisors is our client-facing distribution channel, and we expect dramatic acceleration in 2026. Our team build-out and acquisition strategy are ahead of schedule. Over time, we expect private wealth to represent approximately 30% of our recurring revenue mix, supported by organic lead flow from our core business, not expensive external acquisition. And already putting that strategy into action. In a recent development, Abacus Global Management, Inc. has agreed to deploy approximately $50 million to acquire a minority position in Manning & Napier, a proven wealth advisory platform with over $18 billion in AUM, more than fifty years of trusted investment management, and historical EBITDA in excess of $25 million. This investment creates compelling, mutually reinforcing synergies across three dimensions: converting Abacus Global Management, Inc.'s existing policyholder relationships into managed wealth accounts in the Manning & Napier platform, sourcing new life insurance policies through Manning & Napier's adviser network, and accelerating distribution of Abacus Global Management, Inc.-related alternative investment products to Manning & Napier's client base. This investment represents a defining moment in Abacus Global Management, Inc.'s evolution from a life solutions originator to a fully integrated, longevity-focused alternative asset management platform. Combined with our proprietary LifeArc data and actuarial capabilities, the partnership completes the Abacus Global Management, Inc. flywheel, connecting our life solutions origination engine, our growing asset group, and now a dedicated wealth distribution channel. We are not simply acquiring a minority stake. We are building a longevity-focused wealth ecosystem that we believe will generate significant and durable value for our shareholders. With all four verticals now in place and executing, let me walk you through what the long-term financial picture looks like. This is illustrative, but it is grounded in the same execution discipline that has defined the past eleven quarters. Here is the pathway. Our 2028 milestones are targeting EBITDA growth to $250 million while maintaining approximately 50% margins, supported by $30 billion in total AUM. Recurring revenue divisions from 16% of revenue today to 60% of our total revenue mix. As we execute this shift, we align significantly closer to a peer set that commands materially higher valuations, and we expect that valuation gap to narrow accordingly. Our 2030 milestones: EBITDA approaches $450 million supported by $50 billion in AUM, recurring revenue divisions represent 70% of total revenue. That is an approximate 14x increase in AUM and a 3.5x increase in EBITDA from today, while maintaining approximately 50% EBITDA margins throughout. Our long-term goal is to extend this trajectory, and we are looking at approximately $2.5 billion in revenue, $1.5 billion in EBITDA, and roughly $150 billion in assets under management. These targets are not aspirational. They are backed by live pipelines, executed contracts, and the same underwriting discipline this team has demonstrated for two decades. Before I turn it over to Elena, I want to touch on capital allocation because it is central to how we create shareholder value. We deploy capital where risk-adjusted returns are highest, whether it is acquiring policies, funding asset management growth, or repurchasing shares. Following our Q3 earnings, we announced a $10 million buyback program. Most recently, we authorized an additional $20 million share repurchase program on top of that, in addition to paying a dividend derived from our recurring net income. This capital return to shareholders through both dividends and share repurchases reflects our continued confidence in the trajectory of this business. When the market presents opportunities to buy our own stock at, we believe, a significant discount to intrinsic value, we act. When policy acquisition spreads are attractive, we deploy there. It is dynamic, it is disciplined, and it is designed to maximize long-term shareholder value. I also want to address our securitization strategy because it represents an important lever for scaling capital efficiency. In October, we launched our inaugural securitization. That transaction was fundamentally about education, getting institutions, rating agencies, and market participants comfortable with the asset class and its structural characteristics. The underlying asset in our securitizations is a life insurance policy issued by an A-rated carrier that is cash reserved with a default ratio of near zero. This is a consistent, high-quality asset that institutions want to own. And critically, the yield is uncorrelated, mortality-driven, not debt-driven, like traditional private credit. That uncorrelated return profile is exactly what institutional portfolios are seeking in today's environment of elevated rates and credit uncertainty. Securitization creates additional financing and distribution channels, particularly with banks and insurance companies, while improving our capital efficiency and scalability. We expect this pattern to grow into a meaningful and recurring channel going forward. I will now turn the call over to Elena Plesco to walk through our investment performance and detailed KPIs, and then over to William McCauley for the financials. Elena Plesco: Thanks, Jay. I want to use my time today to walk through the current investment environment, how our balance sheet performed, and how we are continuing to build Abacus Global Management, Inc. as a durable, scalable investment platform with growing fee-related earnings, one where we see a clear path for recurring revenue to grow from approximately 16% of total revenue today to 70% over the next five years. We ended 2025 in an environment that reinforces the core thesis behind everything we do at Abacus Global Management, Inc. Traditional asset classes, equities and fixed income, have become increasingly correlated. As a result, institutional allocators are actively searching for return streams that behave differently. That search is structural, not cyclical. It is driven by pension funds, insurance companies, and endowments that need to meet long-duration liabilities with assets that are not tied to the same macro forces. Longevity-linked and asset-backed strategies fit squarely in that gap. Our returns are driven by actuarial outcomes and contractual cash flows, not by market sentiment or broader economic cycles. And it is why institutional demand for our strategies continues to grow. Turning to the performance of our balance sheet. For Q4, our annualized portfolio turnover was 2.6x, above our long-term target of 1.5x to 2.0x, driven by meaningful capital inflows into our longevity-based funds and execution of our first securitization. What matters most is what that number represents: a disciplined, repeatable cycle of originating at attractive cost basis, adding value through underwriting and seasoning, and monetizing at the right time. During Q4, the policies we sold were held for an average of 116 days compared to 269 days for policies still on our balance sheet. Over the last two quarters, we have acquired a larger than usual number of policies referencing an older insured population. We did not deem those assets to need incremental seasoning. Thus, a portion were also sold last quarter. The economics support that. Our average realized gain was 27% for the quarter and 32% for the full year. These margins reflect rigorous origination, accurate actuarial targets, and patience, while exceeding our target of 20%. Portfolio quality continues to be strong. Assets seasoned beyond 365 days had a weighted average life expectancy of 45 months and a weighted average insured age of 88 years, versus 49 months and 86 years for last quarter, respectively. These positions reflect conviction in our underwriting, and we expect them to generate attractive returns as they continue to season. During Q4, we deployed $230.7 million in capital off our balance sheet, bringing full year deployment to $580.8 million, up 82% year over year. Our origination platform reviewed more than 10,000 qualified policies during the year, and we remain highly selective. Our close rate of 12% vis-à-vis qualified policies reflects the selectivity we apply at the front end, which is ultimately what protects margins over time. As we enter 2026, our capital deployment pipeline is robust. Our longevity business remains the core of Abacus Global Management, Inc. At the same time, one of my priorities since joining has been to expand on that foundation in ways that are deliberate and additive. We launched our asset-based finance strategy led by Monty Cook, our head of private credit. Monty and I have partnered on strategies like this over a decade, and we designed our ABF strategy specifically to leverage what Abacus Global Management, Inc. already does well. Asset-based finance involves lending against or investing in pools of tangible and financial assets. Insurance-related structures, equipment, receivables, consumer credit, and other contractual cash flows. These investments generate current income, offer structural downside protection, and exhibit low correlation to traditional markets. What makes our positioning distinct is the intersection of three things. First, our longstanding relationships with insurance carriers and institutional investors, both clients of our longevity platform and natural allocators to asset-backed strategies. Second, over two decades of experience structuring and managing complex, data-driven asset pools where performance depends on granular analytics and disciplined risk selection. And third, our proprietary technology, including the actuarial modeling and insurance analytics infrastructure we have built through Abacus Intel, which gives us a differentiated risk assessment framework we intend to bring to ABF from day one. This is not a departure from our strategy. It is an extension of the same origination philosophy: identifying contractual, asset-based cash flows where we have a structural or informational edge, applied to a broader opportunity set. Asset-based finance is a $22 trillion market, and we believe this strategy will be a critical part of our AUM expansion story. When I step back and look at the business today, the story is straightforward. We have a core origination engine in Web Solutions that continues to perform at a high level, supported by disciplined underwriting and consistent monetization. On top of that, we are developing a scalable asset management platform designed to generate growing fee-related earnings for our longevity funds, ETFs, the ABF strategy, and continued expansion of our distribution capabilities. As of year-end, fee-paying AUM was approximately $3.3 billion and management fee revenue was $33.8 million. We are targeting more than $5 billion in fee-paying AUM by 2026, and we see a path to $50 billion by 2030. That trajectory is driven by three things: continued expansion of our existing strategies, the launch of new strategies like asset-based finance, and the strategic expansion of our wealth management and advisory capabilities. Growing fee-related earnings is a central priority, and it goes hand in hand with growing AUM. As we scale fee-paying assets across our strategies, we generate contractual, high-margin management fee income without requiring additional balance sheet capital. I mentioned at the top we see recurring revenue growing to 70% of total revenue over the next five years. That shift is intentional, and it is the single most important strategic objective for the company. It is about building a fee-related earnings base on top of a proven origination engine and positioning Abacus Global Management, Inc. to be evaluated the way other scaled alternative asset managers are evaluated. We are executing on this deliberately, step by step, with a long-term perspective, and we believe that approach will continue to create value for our shareholders. With that, I will turn it over to William McCauley. Thank you, Elena, and hello, everyone. William McCauley: As Jay mentioned, we closed out 2025 with another exceptional quarter of revenue growth and profitability. Our performance continues to be driven by the strength of our highly efficient origination while we also remain focused on expanding our verticals that we believe will contribute significant earnings growth over time. In 2025, capital deployed increased 82% to $230.7 million compared to $126.5 million in the prior year. As of 12/31/2025, supported by continued policy origination and capital deployment, Abacus Global Management, Inc. holds 804 policies with a balance sheet value of $469.8 million. Total revenue in the fourth quarter grew 116% to $71.9 million compared to $33.2 million in the prior year period. Our growth was primarily driven by strong performance in Life Solutions, higher asset management fees, and contributions from our technology services business. We continue to see substantial growth from within our asset management segment as we expand our product offerings and the demand for uncorrelated assets increases. For the full year 2025, revenue increased 110% to $235.2 million compared to $111.9 million in the prior year. Our Life Solutions segment continues to generate revenue growth at an impressive rate while we focus on diversifying our revenue mix moving forward into 2026 and beyond. Turning to expenses, total operating expenses excluding unrealized gains and losses from changes in the fair value of debt were approximately $41.1 million for 2025 compared to $45.5 million in the prior year. The year-over-year decrease was primarily driven by a drop in non-cash stock-based compensation partially offset by an increase in SG&A expenses. The increase in SG&A expenses is related to the acquisitions at 2024 and in mid-2025, along with increased marketing spend to strengthen our growth profile. On an adjusted basis, excluding non-cash stock compensation, business acquisition costs, amortization, and change in fair value of warrant liability, net income for 2025 grew 71% to $23 million compared to $13.4 million in the prior year. For the full year 2025, adjusted net income grew 84% to $85.7 million compared to $46.5 million in the prior year. Adjusted EBITDA for the quarter grew 132% to $38.6 million compared to $16.6 million in the prior year. Adjusted EBITDA margin was 54% for the quarter compared to 50% in the prior year. And for the full year 2025, adjusted EBITDA increased 115% to $132.6 million compared to $61.6 million for the prior year. Adjusted EBITDA margin for 2025 was 56% compared to 55% for the prior year. We are committed to growing the business responsibly, which is demonstrated in our ability to grow both revenue and EBITDA by over 100% while maintaining our EBITDA margins. GAAP net income attributable to stockholders for the quarter was $7.2 million compared to a net loss of $18.3 million in the prior year, primarily driven by the increase in revenue from our Life Solutions and asset management segments along with a decrease in SG&A expenses. Turning to our balance sheet metrics. For the full year 2025, adjusted return on equity and adjusted return on invested capital were both at 20%, underscoring our highly profitable business model. As of 12/31/2025, the company had cash and cash equivalents of $38.1 million, balance sheet policy assets of $469.8 million, and outstanding long-term debt of $405.8 million. As Jay mentioned in his remarks, in an effort to provide more insight into our business, we are initiating our full year 2026 outlook for adjusted net income to be between $96 million and $104 million. This range implies growth of up to 22% compared to full year 2025 adjusted net income of $85.7 million. In summary, we are very pleased with our strong performance in 2025 as we delivered exceptional top-line growth and significantly expanded profitability on an adjusted basis and maintained our EBITDA margin. We remain highly enthusiastic about the growth opportunities ahead and are well positioned to execute on our long-term plans. I will now turn it back to our CEO, Jay Jackson, for closing comments. Jay Jackson: Thanks, Bill. Let me close with this. We have conviction in our business model, we have confidence in our execution, and we have clarity on the path forward. The current market environment is playing directly to our strengths, and eleven consecutive quarters of outperformance are the proof. We recognize the disconnect between our fundamentals and our current valuation, but also view it as one of the most compelling opportunities in front of us. As we have discussed with our investors over the past several months, the challenge is not performance, it is perception. The real opportunity lies in helping the investment community fully understand what Abacus Global Management, Inc. is today, a data-driven platform operating across life insurance, asset management, technology, and wealth management, with a recurring revenue model, institutional-grade assets, and a track record that stands on its own. We are addressing that gap as it continues to close through transparent communication, proactive investor engagement, and relentless execution across every vertical of our business. That is our mandate for the next two to three years: continue delivering results while closing the education gap in the broader investment community. We are confident that as understanding deepens, the valuation will follow. Our dividend and expanded share repurchase programs send an unambiguous message. We have the financial strength, the cash flow generation, and the conviction to invest aggressively in growth while simultaneously returning meaningful capital to our shareholders. We do not ask investors to choose between growth and returns. We are delivering both. As we look ahead, our priorities remain clear and unchanged: deliver strong, consistent financial performance, deepen institutional adoption of longevity-based assets, educate the market on the massive, structurally underserved opportunity in front of us, and create enduring, compounding value for every shareholder. I am proud of what this team has built. The results speak for themselves. Our job now is to keep delivering. We will now open for questions. Operator: To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. First question comes from Patrick Davitt with Autonomous Research. Please go ahead. Patrick Davitt: Hi. Good afternoon, everyone. You mentioned in the deck that you expect to do another securitization in the first half, and I think you said last quarter you could have done a bigger one. So could you expand on how the investor demand side of the equation has evolved since then? And what that could mean for the size and frequency of these going forward. Thank you. Jay Jackson: Sure. Thank you, Patrick. The demand has continued to be there and, in fact, increase, and we are in, you know, process in Q1 of measuring that demand against building another product to put out via a securitization. And, you know, within that process, I think the demand has met or exceeded our expectations. And particularly in this market, right, one of the things we found really interesting is that with some of the recent volatility in the markets, the underlying asset that we have has actually increased in demand. But to couple that, or to go with that, it is interesting too. You know, we have seen uptick in origination as well. So as individuals may seek capital from their life insurance policies, you know, we are kind of seeing a positive response. So I think with the markets as they are today, you know, relatively around some uncertainty and some volatility, that has presented, I think, more opportunity for us to potentially do something even more sizable. We are still targeting first half versus Q1, but, you know, we feel pretty good about the outcome there. Patrick Davitt: Is it fair to assume it could be bigger than the first one just based on what you said last quarter or too early to say? Jay Jackson: That is yes. I think that is certainly the goal, and the target would be bigger. The first one was $50 million, and,you know, as we look forward, whether that is $100 million or larger, you know, those are some of the areas that we are targeting. And, you know, the demand is certainly there. I would add one thing as well. Whether it is in the securitization, which is great, you know, overall, I, you know, I like to point you to the fund flow. You know, if we look at, you know, the new inflows for, you know, Q4 that we reported, I mean, north of over $400 million should also give you a pretty good indication of the demand that we are seeing for the underlying asset. Patrick Davitt: Yep. And as a follow-up, I have a question on capital. I think you might have answered this in point two on Slide seven, but wanted to hear it from you. Before the stock sell-off last year, you know, episodic equity raises were a more consistent part of the growth algorithm. So now that your stock price has recovered, is that something we should keep in mind? Or do you think that the organic capital generation has kind of reached an escape velocity in terms of being able to address Life Solutions growth without equity raises. Jay Jackson: Yeah. We do not have any intent to put out more equity to fund balance sheet purchases related to policy purchases. You know, for us, you know, we are beating that velocity, and, again, driven by the demand for the asset from our own funds as well. So, you know, we are in a really good spot here and, you know, expect that to continue. And that is why when we put out our guidance for 2026, we are what we believe to be very optimistic. And so we expect that to continue. And from a fund flow perspective and what drives those capital needs, we are in a great spot here, and there is not any need to go to equity markets. Operator: The next question comes from Crispin Love with Piper Sandler. Please go ahead. Crispin Love: Thank you. Good afternoon, everyone. Appreciate taking my question. So on capital deployed, definitely a big quarter there, $230 million. I think that is 125%-plus growth versus just last quarter. And while Life Solutions revenue was strong, and, of course, it matched that growth too, can you walk through that a little bit? Did it come at a lower margin and how was that capital deployed different than past quarters? Just curious if there is any major differences. Jay Jackson: Right. No. There was not anything different. Now there was some, when we look at that gross capital number, you know, there was I think it was $408 million total of gross inflows. One thing that, yeah, you are right to pick up on at least from, you know, how we break that down, there was a little over $100 million that just on the ETF side. So, you know, that would contribute to typically those ETFs have a lower management fee as well as additional recurring revenue fees just in general. And so then when we then look at just the longevity market asset, or just in general inflows, you know, those were higher than Q3. You know, I think what we saw there was that it is some of it is just allocating that capital during the quarter. Right? And so you did see that we also had some excess cash there as we were, you know, finishing out the quarter. And so I think that, you know, those will kind of couple themselves together again a little more closely as we get into, you know, Q1, Q2. But, otherwise, you know, it was really successful. We were able to put a large piece of that capital to work, effectively right away. We are meeting certainly the demand that we have with our origination, and you saw a pretty significant uptick in capital deployed as well, which we were, you know, I think one of the highlights of the quarter is when you look at the capital deployed number of over $230 million. Crispin Love: Great. Thank you, Jay. No. That makes a lot of sense on the ETF side. And then you have talked about five-year path to $450 million adjusted EBITDA. I think you had a little over $130 million in 2025. So if I am doing the math right, I think that is compounding adjusted EBITDA about 28% per year. Can you just discuss how you expect to get there? Is that all organic? Are there acquisitions involved? And then is asset management the overwhelming driver of that growth? Jay Jackson: For sure. And I am glad you asked that because, you know, one of the things we highlighted in the call here was that if you look back over the last three years and I sat back with most of our shareholders and said we expect a 3x growth top and bottom line, you probably would not have taken us very seriously. And yet here we are again looking forward three and five years out with similar aspirations. And that is why we put that illustrative target out there, and partly driven by a couple of things. One, let us not forget we do have a massive addressable market with the underlying Life Solutions business. But even beyond that, when you look at some of the key drivers there, absolutely, it is driven by asset management. It is driven by wealth management. And, you know, there is a blend of organic as well as acquisition. And when I think about the acquisition piece, you know, we highlighted a minority investment in just a terrific firm, a fifty-year firm, in Manning & Napier, where, you know, culturally, you know, we see things a lot of the same way. And that is a first entry point for us. And I think when you start to look at the synergies that we are going to, that we have with that firm already and some of the things I believe we are going to be able to do to jointly grow together, things like, you know, increasing assets under management for both parties by having both a distribution agreement and, you know, being able to monetize the lead generation that we are able to generate from our platform through Manning is incredibly exciting. And I think when you look then at the growth of our business and how we are able to achieve these growth numbers, it is what we are doing really well going forward is capitalizing on the life cycle of our clients. And we are generating significant value for them in both policy purchases and policy payouts. And now we are going to monetize that over time. And so, you know, the growth of this asset driven by our data, specifically longevity and lifespan data and how that applies to financial planning, yes, we are very excited about how that growth is going to continue. And now looking forward, I also think that, you know, it is, as I said in prior calls, we saw both ways from a build-it and buy-it. So I think we will see some of that happen internally. And then, in addition to that, you know, finding phenomenal companies that we can invest in such as Manning & Napier and continue that growth. Crispin Love: Great. Thank you, Jay. Appreciate taking my questions. Operator: The next question comes from Andrew Scott Kligerman with TD Cowen. Please go ahead. Andrew Scott Kligerman: So maybe kind of further to the earlier capital question. In terms of equity issuance, would the founding holders have any appetite to do it this year, or do they have more of a sense that they want to wait and see if the price stabilizes? What is the thinking there? And just further elaborating on that question as well. In terms of capital demands, it sounds like you did a really interesting acquisition with Manning. What is the pipeline like there? Is there, you know, any way, Jay, that you could kind of size it to get a sense that, you know, maybe you might need to issue equity to do some of the deals. It sounds like they have all been very impactful. Jay Jackson: Sure. Thank you for that. Good questions. We will start with the initial question related to, you know, we are predominantly insider-owned. So we remain that way. Myself and three other partners and as well as a large shareholder, the five of us own about 58%, almost 60%, of the outstanding shares. I think it is a fair question. You know, just because we have seen a recent performance in the stock price, I would just like to highlight that when you look at the valuation of our business, it is why we are buying back our stock because we still feel it is dramatically undervalued on a comparative basis. I mean, when you look at businesses on an equivalent basis that have put up these types of numbers in 2025, they do not trade at single-digit multiples. Yet here we are. And I think that when you look at this from a perspective of how we feel about the stock, just look at the numbers we put out, some of these targets for 2028. Again, they are illustrative, but, you know, we are talking about effectively 2x over the next three years just in EBITDA while maintaining similar margins. So I think, you know, over time, you know, we have got a business here where some of the founding members have held their shares for 22 years. And I think that as you, you know, at a thoughtful basis, if we were to ever do anything, it would be something that would be to meet excess demand for the stock. And if that were to happen, you know, we would certainly consider that as those folks are thinking about things like retirement and other things. And this happens in all companies. Right? Like, you know, as people kind of age up, you want to be able to do this in an organized way. What I can assure you is that if there were to be a consideration related to some equity being sold by insiders, it would be in a controlled fashion. It would be in an organized fashion. And but to highlight even more so, let us look at the numbers where we are today. There is not a huge incentive for us to do that. Right? Like, you know, we see a lot of runway left here, and we think that we should be taking advantage of that. The second part of your question was what our pipeline looked like. And yeah. You know, you bring up an interesting point as we evaluate, and we have spoken about this for a year, about opportunities that we think would be really good fits both culturally and financially for Abacus Global Management, Inc. where you can find true synergies. Right? Like, let us take a quick look at the Manning & Napier opportunity. This is a strategic alliance where we are going to help generate new private wealth clients through our own client base. Secondly, we are going to source new policies from their current client base. So that feeds the origination machine. Right? And then we are looking at our own asset management portfolios. These are terrific alternative asset management funds that are now going to be available to Manning & Napier clients. Those are the types of successes that we want to point to and why these synergies we think would be very appealing. In addition to that, are there other firms that might meet that type of description? Of course, there are. And,you know, we are engaged in those kinds of conversations, but it has got to be accretive to shareholders. Right? Both financially as well as synergies. And, you know, there are firms out there. We are just very, very patient, very diligent. But I can tell you that there is a pipeline, and we are excited about it. How would we use capital to best fill that pipeline or to work through that pipeline? I think that, you know, we would use the best resources possible to us. If it were equity, I think it would be a blend of equity and really smart debt structuring. But there are a lot of options open to us. Let us keep in mind, we have a very profitable balance sheet. And we can utilize that capital in the most strategic way that we think will drive long-term returns. And that is what we were saying earlier. Right? Like, we want to use the capital in the best way possible, whether that is buybacks, whether that is buying policies, or whether that is acquisitions or investments. And I think that, you know, Q4 and 2025 and what we are putting out for 2026 demonstrates that. Andrew Scott Kligerman: That was helpful, Jay. And then on the KPIs, I mean, the turnover ratio at 2.6, terrific. Number of days the policy held 116, terrific again. I mean, really good changes there. Kind of curious on the days held 269, which upticked a little bit. What is kind of the backdrop to that? Why holding those policies a little bit longer? Jay Jackson: Yeah. And if you compare it to the prior quarter, we had held some policies a little bit longer to maximize revenue. And for us, it is simply about managing the best opportunistic return that we can. And so many times when you see that movement a little bit, whether held slightly longer or not, it is a smaller percentage of the book, but that is an aging part of the book, and you want to maximize returns. I think that you can look in the Q this quarter and even the K, and you will see things like maturations. These are matured contracts where we were able to effectively collect on the entire claim. And in those circumstances, those returns are substantially higher. So, you know, some of those contracts are best seasoning whether that is an additional quarter or not, and some are best to be optimized within that quarter. So, you know, it is a very thoughtful strategy of looking at it going, do I pick up an ROE of, let us say, 20 or do I hold this for maybe something larger another quarter? And in Q3, what you saw was those trade spreads went up pretty high. That was one of the KPIs that you had not mentioned yet, but the KPI was 37% in Q3 and then, you know, 26% in Q4. And I think that, you know, you are going to see some of that, and that is part of just being really good stewards of capital and maximizing returns. Operator: The next question comes from Timothy D'Agostino with B. Riley Securities. Please go ahead. Timothy D'Agostino: Congrats on the year. I guess focusing on Abacus Intel quickly. You had mentioned in your prepared remarks about how governments are using the data. And on Slide 19, you kind of lay out 100-plus governments and union systems. But you also talked about, and I can see in the slide, the market opportunities, whether that be TPA, pension funds, insurance, mortgage lenders. I guess what I am trying to understand is, with this data and advocacy, how do you provide value to those different opportunities and why they would want to partner with you. I guess trying to get an overall kind of high-level understanding of why Abacus Intel can provide value to these opportunities. Jay Jackson: Sure. I mean, at a high level, when you look at pension funds, for example, one of the resources that Abacus Global Management, Inc. provides is called mVerify, or mortality verification. We are able to verify when a mortality occurs in the United States within 48 hours with nearly 100% accuracy, around 97%. And that is incredibly valuable data for a pension fund, so they no longer continue to make those pension fund payments. Therefore, you know, what that really helps is them manage their own balance sheet much stronger because they do not have money going out that is really hard to reclaim. And then you can apply that against different types of agencies, right, to have a better understanding from an insurance company point of view, you know, how their mortality curves might adjust based on real-time mortality information. The reason why that is so valuable is that it is really hard to get that information from other sources. Even the Social Security Administration, you know, that can take months, if not years, to get that data. And most of the time, it is not very accurate. It is, you know, half as accurate. So, you know, that is where those sources of demand are. You know, we have been speaking to even larger institutions, and as we look into 2026, we expect the Abacus Intel business to continue to grow. I would add one piece that is really valuable. We use that data. Right? It helps us build better prediction models around our own investments. So, you know, being able to capitalize and understand how longevity and how that life arc of an individual is managed. Right? One of the things we started saying is that lifespan is not a straight line, it is an arc of possibilities. We have a program coming out called LifeArc, which that LifeArc program helps us better understand what someone’s mortality distribution curve looks like. And we are going to apply that LifeArc to financial services. Right? If the number one fear is running out of money in retirement, should not people have a better understanding of how long they are going to be in retirement, and capitalizing on that longevity and health data? And that is the type of data that I think, in a much larger scale, that Abacus Intel is going to play a major part in. Timothy D'Agostino: Okay. Great. Thank you so much for the color. It is super helpful. Then I guess, a quick second question for me. In the third quarter earnings presentation for the Abacus Asset Group, you have laid out $4 billion-plus in fee-paying AUM by year-end 2026. That number is obviously, or your guide has increased to $5 billion for year-end 2026. Is that primarily due to the capital inflows you saw in Q4 2025, that $275 million, or was there something else? Just trying to understand what gives you confidence in increasing that number between the earnings calls. Thank you. Jay Jackson: Sure. Yeah. Thank you for asking. And yes, it is driven by what we deem to be visible demand. And so when we see the type of demand that we saw in Q4, then we are looking at the demand in 2026 and match that with, you know, a keen understanding that when you have volatile markets, demand increases for this kind of asset, gave us a lot of comfort around increasing that number. And then you tie into not just new funds, products, and the rollout of additional potential securitizations. We feel comfortable around that number. Timothy D'Agostino: Okay. Great. Thank you so much, and congrats on the year again. Jay Jackson: Thank you. Operator: The next question comes from Michael John Grondahl with Northland Securities. Please go ahead. Michael John Grondahl: Hey, guys. Congratulations. And just wanted to circle back to the capital deployed, $230 million. I think you did that securitization late October. Was any of the $230 million for the securitization you have already done, and is any of that can be broken out for a future securitization? Any way to think about that? Jay Jackson: The second part of that question—sorry, Mike. You cut out a little bit on my line. Michael John Grondahl: Any of the $230 million that can be used in a future securitization. Are you able to bifurcate it in that way? Jay Jackson: Yeah. No. The way to look at it is that, yes, in Q4, when we are looking at total capital deployed, that would include the $50 million that we had in the securitization. But in addition to that, it was still a record quarter for us. Yeah. Right? And I think that is part of the power of the securitization. Right? Like, you know, you just kind of have this really consistent model that you can deploy capital with at a very effective and cost-effective structure. As far as bifurcating that capital deployed into additional securitizations, I would just kind of point to our balance sheet at this point, which is, you know, north of $450 million of policies on the balance sheet. And we have excess capacity to do additional securitization. So I think that we are really well positioned as we look forward to additional securitizations. We already have the inventory built up on our balance sheet for that. Michael John Grondahl: Got it. Great. And then just one more. With Manning & Napier, does that sort of replace your ABX Wealth Adviser strategy? There was some thought that you would be hiring some of your own advisers and grow it out that way. How do we think about it now? Jay Jackson: Yeah. I think it certainly complements everything that we thought we were going to do. And I think just one big takeaway here is, you know, we definitely walked before we ran here. Right? You know, we made, I feel like, a very thoughtful, intelligent, conservative investment into a well-established firm to really take a moment and show that, and demonstrate that, the model that we are putting together for our wealth management division is executable. And I think that is just so valuable in the way that we structured this initially. So, you know, this investment makes a ton of sense for us. How we might move forward with our own advisers within that platform, I think it makes sense for us at this point to focus on the investment that we made and prove that that is successful and show some wins and successes, and then we will continue to build the platform from there. But, you know, make no mistake. This is going to be an important platform for us on a go-forward basis because if you think about it, it feeds so many other things. Right? It feeds origination. It feeds asset management. It feeds the Abacus Intel from the longevity data. So, you know, I think it is a really important stage for our growth, and this is just the first step. Michael John Grondahl: Thanks a lot, guys. Good luck in 2026. Operator: This concludes the question and answer session. I would like to turn the conference back over to Jay for any closing remarks. Please go ahead. Jay Jackson: Well, thank you to all of our shareholders. 2025 was a year in which I believe that we solidified our shareholder base, solidified our story and our communication, and solidified our growth. And we are in a position where, looking forward, as great as the last two and three years have been, we are excited about the next three years. And we hope that when you start to see these numbers and see the direction of where this company is headed, and where we can achieve with the foundation of our business, we are excited about what the next three years can bring to us and our shareholders as well. So thank you all. We look forward to answering any additional questions. Please feel free to reach out to our IR department if you have any additional questions. And we look forward to another great quarter. The conference has now concluded. Operator: Thank you for attending today's presentation. You may now disconnect.
Operator: Good afternoon, and welcome to the Mission Produce, Inc. Fiscal First Quarter 2026 Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please also note today's event is being recorded. At this time, I would like to turn the conference over to Jeff Sonnek, Investor Relations at ICR. Please go ahead. Thank you. Today's presentation will be hosted by Steve Barnard, Chief Executive Officer; John Pawlowski, President and Chief Operating Officer; and Bryan Giles, Chief Financial Officer. Jeff Sonnek: The comments during today's call and the accompanying presentation contain forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts are considered forward-looking statements. These statements are based on management's current expectations and beliefs, as well as a number of assumptions concerning future events. Such forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from the results discussed in the forward-looking statements. Some of these risks and uncertainties are identified and discussed in the company's filings with the SEC. We will also refer to certain non-GAAP financial measures today. Please refer to the tables included in the earnings release, which can be found on our Investor Relations website, investors.missionproduce.com, for reconciliations of non-GAAP financial measures to their most directly comparable GAAP measures. I will now turn the call over to Steve Barnard, CEO. Steve Barnard: Thank you, Jeff. Last quarter, we shared the news about our leadership transition, and next month, at our annual meeting, that transition becomes official. John steps into the CEO role, and I move to Executive Chairman. So this is my last earnings call in this seat, and I want to take a moment to say how grateful I am. Forty-plus years building this company alongside an incredible team of people. There is nothing else like it. I am proud of what we have accomplished together. With that said, I am even more excited about what is ahead. Between the momentum we are carrying, the pending Calavo acquisition we announced in January, and the team we have in place, Mission Produce, Inc. has never been positioned better. John has brought a level of strategic rigor and global perspective that has elevated this organization, and I have complete confidence in his abilities and vision. I will still be very much involved as Executive Chairman. This company is in my DNA, and that is not going to change. But the future belongs to John and his team, and I cannot wait to watch it unfold. With that context, I will turn it over to John to walk you through the operational and commercial highlights of the quarter. John? John Pawlowski: Thanks, Steve. And on behalf of the entire Mission Produce, Inc. team, thank you. What you have built over four decades speaks for itself, and it is a privilege to carry it forward. I want to use my time today to walk through our first quarter results and the operational progress we are making across the business. I also want to spend some time talking about the future of Mission Produce, Inc., because we have a lot to be excited about. We are off to a strong start in fiscal 2026, and the first quarter is a good illustration of how we are able to manage this business in a shifting supply and price environment. We are a volume-centric business. Volume and per-unit margins are the metrics we manage to. In a quarter in which industry pricing normalized significantly from the elevated levels we experienced over the past year, our team delivered on both of those fronts, and I want to recognize their collaboration which helped drive our results. We grew avocado volumes 14%. We expanded gross margin, and we grew adjusted EBITDA versus the prior-year period. The headline revenue number reflects pricing dynamics that are outside of our control, but the underlying execution was strong, and that is what drives our results. Our commercial teams drove volume growth, improved per-unit margins, and continued to deepen the customer relationships that underpin our business. That is the combination we are always working towards. As expected, Mexican supply was abundant this quarter, with higher yields in the current harvest season versus last year, and our teams programmed that fruit well across our customer base, expanding our reach, strengthening existing partnerships, and leveraging our category management tools to add value for our retail and foodservice customers—precisely what our platform was built to do. The broader demand environment continues to trend in our favor as well, and the structural tailwinds for avocado consumption are real. Domestic GLP-1 penetration continues to accelerate, and the recent inclusion of avocados in the USDA's updated Dietary Guidelines for Americans was a meaningful development, reinforcing what consumers are already telling us day in and day out with their purchasing behavior—that avocados are simply a staple in America's diet. In fact, we are seeing these dynamics play out in syndicated data as well, which showed that household penetration of avocados reached a high watermark of approximately 72% in the fiscal fourth quarter this year. Per capita consumption has nearly tripled over the past two decades, and with the health and wellness trend continuing to accelerate, we see a long runway for category growth that our platform is uniquely positioned to serve. Our International Farming segment plays an important role in driving year-round consumption here in North America and is also helping accelerate the category in emerging growth markets internationally. We have been working hard to maximize returns from our international asset base. For instance, we are focused on driving improved pack house utilization in Peru by running our own blueberry volume and additional third-party fruit through our facilities to generate better overhead absorption all year round. Recently, we also modified a pack line in that same facility to support mangoes as well. These efforts—filling in the seasonal calendar and maximizing the productivity of our Peruvian assets—have been instrumental in helping us deliver more sustainable positive adjusted EBITDA in our International segment during what was historically a seasonally softer quarter. The Blueberry segment itself continues to grow. Revenue was up 12% in the quarter on higher volumes and modestly higher pricing. Per-acre yields on some of our newer acreage impacted profitability, but that is part of the natural maturation process, and we expect yields to improve as those farms reach full productivity. The volumes are building, and we like where this business model is headed, both as a stand-alone category and for what it contributes to our broader platform. It is this sort of thinking that exemplifies our broader strategy and informs our strategic designs for the future of this company—an area that I am especially excited about. When we announced the Calavo acquisition in January, we described it as a unique opportunity to acquire a strategic and synergistic asset—one that strengthens our core avocado business while adding capabilities in prepared foods through an established brand. Two months after announcing that transaction, I am even more confident in this view. To be direct, we believe scaled assets in our space that contain this level of strategic fit are scarce. Calavo was a unique opportunity, and we believe Mission Produce, Inc. is the best-positioned company to unlock value through this combination. This was an absolutely offensive move—an opportunity to accelerate our growth strategy from a position of strength, backed by two straight years of demonstrated execution, robust cash flow generation, and a very strong balance sheet. Integration planning is underway, and deal progress is moving forward. In fact, we recently filed our preliminary proxy for the transaction, which is now under SEC review, and we are advancing the regulatory approval process in both the United States and Mexico. This is all coming together as planned, and we believe the transaction is on track to close during our fiscal third quarter, subject to satisfaction of the closing conditions. On the strategic merits, we continue to believe the combined company will have greatly enhanced supply reliability for all of our customers. Calavo will also bring tomatoes and papayas into our distribution network, which we believe will further enhance the year-round facility utilization goal that I spoke to earlier, while helping reduce the seasonal troughs that have historically been a feature of the produce industry. But it is the prepared foods opportunity that I am particularly excited about. Calavo's guacamole and ready-to-eat product lines sit within a large and growing market, and it is a natural adjacency to our core avocado business. Having spent 20 years in the branded food industry, I have a deep appreciation for leveraging the power of strong execution and category leadership into adjacent business line expansions, and we have a perfect opportunity with an established consumer brand and the operational scale to support its continued growth. We see significant runway to build up this new capability, and one that is genuinely value additive to what Mission Produce, Inc. does today. On synergies, our conviction has only grown as we have started our integration planning. We continue to see at least $25 million of annualized cost synergies achievable within 18 months of close, and we believe, as we have stated earlier, that there is meaningful upside potential to that number as we bring these two platforms together. Importantly, we also believe that this transaction will help create a clear path to delever back to normalized levels within approximately two years of our close, which is a priority for us as we consider our go-forward capital allocation strategy. Stepping back for a moment, on a stand-alone basis, Mission Produce, Inc. has significant runway in front of us, both domestically and internationally. The demand tailwinds I described earlier are durable, and our platform is built to lead category growth along with our customers. Layer on the Calavo acquisition with the expanded North American footprint, the diversified produce portfolio, entry into prepared foods, and cost synergies, and the combined company has the potential to be something truly differentiated in the fresh produce industry. We are building a platform that we believe can drive meaningful EBITDA growth over the next several years through a combination of organic execution and the value we unlock through this combination. Importantly, as we scale this platform and accelerate free cash flow, returning capital to shareholders is part of the equation that we are envisioning. We are actively developing a long-term capital allocation strategy that balances reinvestment in the business with meaningful returns to our shareholders, and we look forward to laying that out alongside our detailed strategic plan at an Investor Day we are planning to hold following the closure of the Calavo acquisition this fall. But I want to be clear. The ambition here is significant, and I believe the foundation we have, combined with the capabilities Calavo brings, gives us a clear and credible path to get there. I will now turn the call over to Bryan for the financial results. Bryan Giles: Thank you, John, and good afternoon to everyone on the call. Fiscal 2026 first quarter revenue totaled $278.6 million, which was down 17% from the prior year and driven by a 30% decrease in pricing given higher industry supply driven by greater availability from Mexico resulting from higher yields in the current harvest season. However, we are pleased to see strong 14% volume growth in the quarter, which, as John mentioned, is the primary focus of our operating strategy. Despite lower revenue, gross profit was consistent with the prior year at $31.6 million in the first quarter, enabling our gross margin to increase 190 basis points to 11.3% compared to the same period last year. As a reminder, profitability in our Marketing and Distribution segment is managed primarily on a per-unit basis, which can lead to volatility in margin percentage when sales prices fluctuate. The increase in margin percentage was primarily driven by improved performance in our Marketing and Distribution segment, reflecting higher avocado volumes and improved per-unit margins compared to the prior-year period. This performance was partially offset by lower gross profit in our Blueberry segment due to lower per-acre yield resulting in higher per-unit fruit production costs. SG&A expense increased $6.9 million, or 31%, compared to the same period last year. The increase was driven entirely by $7.0 million of transaction advisory costs associated with the pending acquisition of Calavo Growers. Excluding transaction advisory costs, SG&A was essentially flat with the prior-year period. Adjusted net income for the quarter was $7.3 million, or $0.10 per diluted share, consistent with prior-year results. Beyond the operating performance, we continued to benefit from a reduction in interest expense, down $0.5 million, or approximately 23% versus prior year, reflecting our continued focus on maintaining a healthy balance sheet and the lower rates we incur on outstanding borrowings. We also realized a significant increase in equity method income to $1.5 million compared to $0.8 million in the prior-year period, driven by strong performance from our joint venture investment in Henry Avocado Corporation. Adjusted EBITDA increased 5% to $18.5 million compared to $17.7 million last year, driven by higher avocado volumes sold and year-over-year improvement in per-unit margins in our Marketing and Distribution segment, partially offset by higher per-unit fruit production costs in our Blueberry segment. Turning now to the segments, our Marketing and Distribution segment net sales decreased 21% to $234.8 million, driven by the avocado pricing dynamics previously described. As we have mentioned, we manage this business primarily to volume and per-unit margins, and on that basis, the segment performed well. Segment adjusted EBITDA increased 33% to $12.9 million, reflecting higher avocado volume sold and solid per-unit margins. In the first quarter, our International Farming results are typically focused on the provision of packing and processing services for our Blueberry segment and for third-party blueberry producers, though this will evolve over time as our operations develop in other areas such as Guatemala. With this seasonality in mind, our International Farming segment total sales increased 15% to $10.6 million. Segment adjusted EBITDA increased $0.5 million, or 28%, to $2.3 million compared to the prior-year period due to improved pack house utilization versus the prior year. As John discussed in his remarks, we are pleased to see the results of improved operating leverage in what has traditionally been a smaller quarter for that segment. In Blueberries, total sales increased 12% to $40.8 million due to increases in average per-unit sales price and volumes sold of 9% and 3%, respectively. Segment adjusted EBITDA decreased to $3.3 million compared to $6.2 million last year. While our volumes were higher, overall yield per hectare was lower than the prior year, which drove up our per-unit production costs. As we have discussed previously, this is part of the natural maturation process for newer acreage, and we expect yields and per-unit cost to improve over time as these farms mature. Shifting now to our balance sheet and cash flow, cash and cash equivalents were $44.8 million as of 01/30/2026, compared to $64.8 million as of 10/31/2025. Net cash used by operating activities was $3.0 million for the quarter, compared to $1.2 million in the prior-year period. The slight increase in cash usage was driven by higher working capital requirements. As a reminder, the first quarter is typically our weakest period for cash generation given the seasonality of our business, and we expect the customary improvement in operating cash flow as we move toward the latter half of our fiscal year. Capital expenditures were $11.9 million for the quarter, compared to $14.8 million for the same period last year, consistent with the anticipated step down we communicated previously. For full fiscal 2026, we continue to expect total capital expenditures of approximately $40.0 million. This setup positions us for accelerated free cash flow generation going forward. Now let me provide some context on our near-term outlook. For 2026, avocado industry volumes are expected to increase by approximately 10% to 15% versus the prior-year period, driven by a larger Mexican crop in the current harvest season. Pricing is expected to be lower on a year-over-year basis by approximately 30% to 35% compared to the $2 per pound average experienced in 2025. While we expect higher volumes, we anticipate contraction in our per-unit margins for the second quarter due to the lower pricing environment, particularly in a setting where we are sourcing primarily from a single origin. The lower price environment is leading to a delayed start of the California harvest season. It is expected to be about a month behind the prior year as growers wait for improved market conditions. This delay reduces our ability to leverage our sourcing capabilities across regions and lowers asset utilization at our California packing facility in Q2 as we await volumes to ramp up. This is expected to result in lower levels of Q2 profitability in our Marketing and Distribution segment versus the prior year. For Blueberries, harvest timing for the 2025/2026 Peruvian blueberry harvest season is accelerated in relation to the prior year, leaving 10% to 15% of the harvest to be sold through in the fiscal second quarter. We expect to see volume reductions from owned farms resulting from earlier pruning and unfavorable weather conditions in the current year, which should translate to lower revenue despite expectations for higher sales prices, as well as create a headwind for our International Farming segment as a result of lower pack house utilization. Blueberries profitability will continue to be impacted by higher costs resulting from lower yields per hectare as we close out the current harvest season in the second quarter. Taking this all together, we anticipate our consolidated adjusted EBITDA performance to be below the prior-year level. Looking ahead, we remain focused on the fundamentals that drive long-term value creation—supporting consumption growth through building volume, strengthening customer partnerships, and maximizing the productivity of our global asset base. The structural tailwinds supporting avocado consumption are accelerating, and our platform is uniquely positioned to capitalize on this sustained category growth. While we will navigate some near-term supply dynamics in Q2, we have great conviction in the underlying strength of our business model and our team that is driving it forward. Combined with the opportunities afforded by the pending Calavo acquisition, Mission Produce, Inc. is building a differentiated platform with significant runway for EBITDA growth and value creation in the years to come. That concludes our prepared remarks. I will now turn the call back to the operator to take us to Q&A. Operator: We will now open for questions. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 to remove yourself from the queue. For participants using speaker equipment, you may need to pick up your handset before pressing the star key. Your first question comes from Puran Sharma Stephens with Stephens. Please go ahead. Puran Sharma Stephens: Good afternoon, and thanks for the question, and congrats on putting up those results in this lower pricing environment. I did want to start off by asking about the Calavo acquisition. You have said a lot here in the past few months about it, but in your prepared comments, you said you feel more confident as you have had more time to maybe digest information about the deal. Does that mean that there could be even more upside to your previous comment about having further upside to the $25 million? And then just as a follow-on, could you give us a sense as to what buckets you are tackling? What do you see as lower-hanging fruit and higher-hanging fruit in terms of synergy realization? John Pawlowski: Hi, Puran. This is John. Thanks for the question. I hope you are doing well. In regards to the synergy question, I am going to stick with my comments that I have been making over the last couple of months. We feel, as we have been having conversations with the Calavo team and we are working towards consummating the relationship here and all the different elements that have to happen structurally, really good about the estimate assumptions that we made around that $25 million. The estimates around that $25 million were really built around some core cost structure items, and the buckets that we have been always talking about have been around the operating footprint and how synergistic that operating footprint is, around some duplicate costs in the overall structure, and we feel really good about our ability to execute against cost-related synergies in a very expedited, timely manner. As we think about the buckets for the future, there is a lot of opportunity around how we think about growing together, how we think about engaging with our customers in regards to what we can do around the selling cycle and adding value in regards to how we think about the opportunities, particularly in adjacent spaces to where we are at today. I am not going to give any more color in regards to where I think those go, except to stress that I feel really confident in the word “meaningful,” as I have been, quite frankly, pretty consistent in saying around where we go beyond that $25 million. Puran Sharma Stephens: That is great. I appreciate the color there, John, and hope you are doing well as well. Just as my follow-up here, I wanted to ask about, and this is, I guess, more on Bryan's comments around guidance here. I understand that we are going into a lower pricing environment, higher supply environment relative to last year, and that you would expect your per-unit margins to show some compression in this type of environment. But I just wanted to get a sense of the benefit you would get from the increased volumes. Are you able to give us any color, qualitative or quantitative, into how much fixed cost deleveraging you are like, benefit you would get from the increased volumes? Bryan Giles: Hey, Puran. This is Bryan. The vast majority of the costs, particularly this time of year, in our cost structure are variable in nature. When we are buying third-party fruit, that is by far the most significant item in our cost of goods sold, and even at lower price points, it is still the most meaningful item in there. Our goal is we focus on making margin on a per-unit basis so we can be profitable in times when prices are high or when prices are low. There is no doubt, though, when prices are at the lower end, that it does compress that a bit. It makes it a little more challenging to really sell customers on getting them to pay every dollar for the premium service that we provide. So it creates challenges. It does tighten up a bit. I think when we are in a single-source market like we are today with Mexico and there is ample supply, again, it just makes it more difficult to lean into the advantages that we really have. I do think that, in the lower price environment—I made reference to California getting a little bit later start this year—last year we were in a pricing environment that was more than 2x where we are at today. In the moment, it was meaningfully higher-end price to retail. When I look at where we are at, there is fixed cost overhead that is associated with that facility that we are not able to utilize completely when we are not in the California season, so that year-over-year comp is a little bit difficult. I do not think the general per-unit margins that we are going to generate are going to be dramatically lower than the historical ranges that we have seen. I just think that we have gone through a period of time where we were seeing elevated per-unit margins that were above that normal range. I think that what we are seeing in Q2 is a continuation of what we saw in Q1, which is a bit of a reversion back to the historical levels on per-unit margins. Operator: Next question, Mark Smith with Lake Street Capital Markets. Please proceed. Alex Turnicks: Yeah. Hi, guys. You have got Alex Turnicks on the line for Mark Smith today. Thanks for taking my questions. First one for me: on the Blueberry segment, you mentioned the yield pressure is largely tied to newer acreage maturing. Could you talk about the timeline for those farms reaching full productivity and what normalized margin profile for that business could look like once yields stabilize? John Pawlowski: Hi, Alex. Thanks for the question. I will start and maybe Bryan will jump in. From a technical perspective, what we do on those farms is what we call double-density introduction into the harvest. What we are doing is putting plants—which is a very typical part of the process in blueberries and in many other crops—very tightly close together as they are maturing from, say, year one into year one and a half, when those plants are becoming much more productive and mature, and then you are spreading them out as they get into the later stages of maturity. Sometimes when you do that and you spread them out, you have a little bit less productivity for those first couple of months or first year of the time that that plant is executing against what it is trying to do, and we are in a phase where we just did that in a lot of the portions of our farm. Over the course of the next 12 to 18 months, we should really be reverting back to our traditional margins from a cost structure standpoint as those plants become mature. I would love to tell you it is three months, but it is probably more along the lines of 12 to 18 months until we reach the full zone where we would like to be. Bryan Giles: And I would just build off what John said. There are a couple of metrics we look at. We are certainly looking at cost per hectare planted—we do that for our avocados and our blueberry farms. We are also looking at costs on a per-unit basis. The triangle here for profitability is overall cost incurred, production yield, and sales price, and then we work those three together. Certainly, the cost per unit is driven heavily by the overall costs that we incur as well as that yield number. To the point that John made, we do expect those yields to improve as they mature. Blueberries do get into mature production much faster than an avocado tree does. Many of these plantings where we are seeing the reduced yield this year are plants that are one to two years old, and we would expect them to ramp their productivity very quickly, whereas an avocado tree can take four years before you even get to breakeven production. So it is a meaningful difference. It is a faster ramp. We were planting a fair amount of new acreage in blueberries. We are up over 700 hectares in production today, but of that 700, probably 25% of it is new acreage that was impacted by the spread-out. Certainly, as we go forward, we expect those yields to ramp fairly quickly. We did mention other factors that play into this. The timing of pruning in a harvest season—where we let the seasons run a little bit longer the year before and we ended them in a more normalized time this year—had a nominal impact. We are also, in decisions around pruning, often driven by the weather conditions that exist at any given time. The timing of pruning is going to determine when harvest is going to begin the following season. So we are making decisions that are really in the best long-term interest of the business, and sometimes they do not always align with an individual quarter. Alex Turnicks: Okay. That is really helpful. The last one for me: you touched on the prepared remarks about developing that long-term capital allocation strategy and your plans to discuss that at the Investor Day after the acquisition closes. But just at a high level, how should we think about the balance between reinvestment, deleveraging, and returning capital to shareholders as free cash flow ramps? Bryan Giles: I think we want to stop short of committing to specifics at this point, but this is really a continuation of the messaging we have started to deliver over the last 12 to 18 months, which is initial priority: paying down debt. We have spent two years doing that. With this acquisition, that will ramp back up a little bit again, so we will have a process to bring it back down. But these combined entities are going to create meaningfully more operating cash flow than we did individually, so we feel like we can bring that debt back down in short order. We have already had discussions about consistently returning cash to shareholders, and those discussions are going to continue to happen as we move forward. The message that we would want to deliver right now is that we are committed to a program to look at that balance. We do not know what the figures are going to be at, we do not know when it is going to start, but we understand it matters to us, and we feel that it creates value for our external stakeholders as well. John Pawlowski: I would add to that, Alex, that I think in the past, we have been very clear on our priorities of using our capital, and that they were around debt management as well as investing in the growth of the business. At this time, I think we are pivoting a little on that by starting to say that, as we develop this capital allocation strategy, the return-to-shareholder piece is rising on the priority list for us. I would say that, as a combined entity, as we think about the future, the priorities do not necessarily have to be mutually exclusive. We think that there is opportunity to parallel path that over the course of the next 12 to 18 months, and we will not have to wait for that deleveraging to be able to provide some of that shareholder return. Operator: Ladies and gentlemen, at this time, I am showing no further questions. I would like to end the Q&A session and turn the conference call back over to management for any closing remarks. John Pawlowski: Thanks, everybody. This is John. Thanks for joining us today. I hope you can feel the positive energy that we have here with respect to our future. We believe Mission Produce, Inc. is at a very critical juncture in our journey, and the pending acquisition of Calavo will only serve to accelerate our growth ambitions. We appreciate your interest in Mission Produce, Inc. I want to thank Steve for all his contributions and let him know I look forward to the future together, and we collectively look forward to speaking with you again next quarter. Operator: Ladies and gentlemen, that concludes today's conference call. We thank you for attending. You may now disconnect your lines and have a wonderful day.
Operator: Good morning, everyone. Welcome to the BGSF, Inc. Fiscal 2025 Fourth Quarter and Full Year Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press 0 on your telephone keypad. As a reminder, this conference call is being recorded. I will now turn the call over to Sandra Martin with Three Part Advisors. Please go ahead. Sandra Martin: Good morning. Thank you for joining us today for BGSF, Inc.’s 2025 Fourth Quarter and Full Year Earnings Conference Call. On the call with me are Keith R. Schroeder, Co-CEO and CFO, and Kelly Brown, President and Co-CEO. After our prepared remarks, there will be a Q&A session. As noted, today’s call is being webcast live. A replay will be available later today and archived on the company’s relations page at investor.bgf.com. Today’s discussion will include forward-looking statements which are based on certain assumptions made by the company under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by the forward-looking statements because of various risks and uncertainties, including those listed in the company’s filings with the Securities and Exchange Commission. Management’s statements are made as of today, and the company assumes no obligation to update these statements publicly, even if new information becomes available in the future. Management will refer to non-GAAP measures including adjusted EPS and adjusted EBITDA. Reconciliations to the nearest GAAP measures are available at the end of our earnings release. I will now turn the call over to Keith R. Schroeder. Keith R. Schroeder: Thank you, Sandra, and thank you all for joining us in today’s call. Fiscal 2025 was a transformational year for the company. After the sale of the professional division, we retired all outstanding debt, returned a meaningful amount of capital to shareholders via a $2 per share special dividend, and announced a $5,000,000 share buyback. As a result of those actions, today, we are a solely focused property management staffing organization, debt-free with a strong cash position. The fourth quarter was a very busy quarter for our team. As discussed in our third quarter earnings call, there are three major directives where we have been strategically focused. First, we utilized the findings from an independent consulting firm to shape our top-line revenue initiatives as we finalized our budget for 2026 and beyond. Kelly will discuss those in more detail following my remarks. Second, we continued to take aggressive actions to resize our general and administrative expenses to be more in line with our stand-alone property staffing business. We are now estimating ongoing G&A costs to be in the $12,000,000 range, with public company costs estimated at approximately $2,000,000. And third, we are utilizing results of an organizational and incentive compensation study to take further actions to reduce selling and G&A costs, primarily in the selling cost area. Those actions have been identified, and we started taking action in late Q1 with the full effect benefiting us in Q3 of this year. The annualized cost savings are approximately $1,000,000. Additionally, we continue to operate under the TSA agreement following the sale of the professional division. The process is going very well, and we expect to wrap it up by the end of Q1. With that, I will now turn it over to Kelly to cover the strategic initiatives that are underway. Kelly Brown: Thank you, Keith, and good morning, everyone. Before we discuss our fourth quarter sales and 2026 initiatives, I would like to highlight an important change to our go-to-market strategy with clients and candidates. At the completion of our TSA agreement in April, we will transition our website to bgstaffing.com. Our analysis of search trends and AI activity proved that including “staffing” in our name consistently ranks us in the top three results for both clients seeking talent and job seekers exploring opportunities. We believe this change will significantly improve SEO performance, clarify our brand positioning, and enhance the overall effectiveness of our marketing efforts. As Keith mentioned, we are executing on our 2026 top-line strategic initiatives, leveraging insights from the market study completed late last year. A key opportunity identified through that work and reinforced through internal discussions is our expansion into the prop tech support market. In February, we announced our first software partnership with Yardi, an industry-leading property management technology platform. Through the Yardi Independent Consultant Network, we are pairing our industry expertise with technology-enabled talent solutions. PropTech is a sizable adjacent market to our core business and further enhances our differentiated positioning across multifamily and commercial property management staffing. Turning to technology-enabled solutions, we continue to optimize our AI investments to further differentiate our platform and deepen engagement with our clients. Our focus is on elevating the overall client and candidate experience, which positions BGSF, Inc. as an innovative workforce solutions partner. These technology- and AI-driven enhancements have improved front- and back-office efficiency while reinforcing our people-first culture. We believe the right combination of talent and technology suite enables us to deliver quality candidates faster and more efficiently, driving better outcomes for our clients. We continue to advance the operational performance initiatives discussed last quarter, and early insights indicate progress in strengthening our competitive differentiation. These efforts and strategic partnerships are beginning to support incremental top-line revenue growth and improve overall financial performance. Finally, we are excited to participate as an exhibitor at the Apartmentalize Conference hosted by the National Apartment Association, as well as the Building Owners and Managers Association International Conference, both of which are held in June. As two of the premier gatherings in the rental housing and commercial real estate industry, we expect the events to be a strong platform for customer engagement and lead generation. I will now turn the call back to Keith to cover our fourth quarter financial results. Keith R. Schroeder: Thank you, Kelly. Our comments today mostly refer to continuing operations unless otherwise noted. Quarter revenues were $22,000,000, a 9.4% decline compared to the prior year, driven by lower billed hours and weak demand due to overall cost pressures on property management companies and property owners. Gross profit in the fourth quarter was $7,700,000 compared to $8,700,000 in the prior year quarter. Gross profit as a percentage of revenue was 35% and was negatively affected by $147,000 in out-of-period workers’ comp costs. Adjusted for those costs, our gross profit as a percentage of revenue was 35.6% in the quarter, consistent with the prior year’s quarter and the year of 2025 in total. SG&A expenses for the fourth quarter were $9,300,000 compared to $10,500,000 in the prior year’s quarter. SG&A this quarter included strategic review costs of $403,000 compared to $88,000 in the prior year quarter. SG&A expenses in 2025 were negatively affected by approximately $460,000 of out-of-period expenses, mostly related to the medical expenses under our self-insurance plan and the process of finalizing our closing balance sheet for the sale of the professional division. Fourth quarter adjusted EBITDA was a loss of $947,000 inclusive of the medical insurance adjustment mentioned above, compared to an EBITDA loss of $1,600,000 in the prior year. This reduction in EBITDA loss came in spite of $1,000,000 of lower gross profit due to lower sales. Significant cost-cutting measures implemented in selling and in general and administrative expenses during 2025 were the main drivers behind the improved EBITDA loss. We reported fourth quarter GAAP net loss from continuing operations of $0.11 per diluted share, compared to a non-GAAP adjusted EPS loss from continuing operations of $0.09 per share. Consolidated adjusted non-GAAP EPS for the quarter was $0.09 per share. For the full year of 2025, net cash provided by continuing operating activities was $117,000, which included a $5,200,000 escrow receivable from the sale of the professional division. We expect to finalize the settlement of this cash escrow amount during Q2. Our capital expenditures were minimal at $138,000. During 2025, we purchased 351,200 shares of stock totaling approximately $1,500,000. Our purchases to date total 522,000 shares at a total of $2,400,000. Finally, the team remains focused on executing our strategic priorities and our new roadmap while also managing the transitional work related to the sale of the professional division. Kelly and I want to thank everyone across the organization for their continued dedication and hard work over the past year. The execution of the TSA was a particularly heavy lift, and we are deeply grateful to the entire BGSF, Inc. team for their thoughtful planning, strong execution, and sustained commitment. We look forward to updating investors each quarter on our progress and hope today’s discussion has been valuable. We will now open for questions. Operator? Operator: Certainly. At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, that is 1 to ask a question. One moment while we poll for questions. Your first question for today is from William Dezellem with Tieton Capital. William Dezellem: Thank you, and good morning. A couple of questions. Let us just start, if we could, please, with the Yardi relationship, and walk us through that relationship, what you are doing with it, and what the potential implications are for the business longer term. Kelly Brown: Yes. Good morning, Bill. Thank you for the question. I will take that one. The Yardi partnership is an exciting one for our group because Yardi, as a company, has established an independent consultant network, and what that means is that Yardi as a company will obviously sell and implement software to our property management customers that they use for their day-to-day operations. So when and if there are gaps between what Yardi provides as a company and the implementation or training that is needed to actually have the end user fully implemented into the software, they will leverage independent consultants to do that work. And that is exactly where we will come in with our consultant base to be able to fill those requests. So Yardi essentially serves as a base when they know they have needs among their clients so that we can then pick that up, and it is a really basic model of hiring the consultant, placing them, and then billing accordingly. William Dezellem: And, Kelly, what is the potential size of that business? Or is it more important, the relationship enhancement that it leads with your customers? Kelly Brown: Yes. You know, we chose Yardi as our first partnership of this nature because they are the most widely used software in the property management space. So the potential is very large across all of our customer base. They are certainly not the only software used; they are the most widely used. So when you look at potential, you think about all the properties that we bill with across the country; they all have software that they use. So every single one of them would have some type of support that they could need at any given point in time. In addition to that, even at the corporate office level, when you think about their accounting needs and things like that, Yardi is also leveraged for those types of services. So there is potential at both the corporate office level as well as the on-site end user level. William Dezellem: Alright. Great. Thank you. I appreciate that. And then, Keith, would you please walk through your comments about SG&A on an ongoing basis, and I did not catch all the numbers, number one, but maybe related to the $9,300,000 of SG&A that was reported in the fourth quarter? Keith R. Schroeder: Okay. So the G&A cost that we are estimating going forward once we are clear of the TSA and all of that is around $12,000,000. Okay? And then the number obviously continues to unfold as we continue to look for ways to cut costs and software costs and things like that. So that is kind of an ongoing work that we have. There is about $2,500,000 or so of public company costs in that number. Alright? So the Q4 number, which you cited, which was selling and G&A, that number is higher than what we expect in 2026 because we were still supporting the sale, and we were not able to get out of all those software changes that we expect to change. So the Q4 number is not reflective of what we expect in 2026. Does that help? William Dezellem: Yes. That is helpful. And, following up on that, the SG&A that includes—there is the $9,300,000—how much of that is the G&A number? Keith R. Schroeder: Oh, the G&A number for the quarter, it is actually in the press release. It was about $3,500,000, but there is about $460,000 that hit in Q4 that did not relate to Q4, and that was the things that I cited that we, as we broke apart the balance sheet for the sale and we looked at our IBNR in our reserve, we ended up taking $460,000 of expense in Q4. So that is included in those numbers. William Dezellem: Great. That is helpful. And then, one additional question, please. Relative to the overall market environment, how would you characterize it today versus what you were seeing a year ago at this time? Kelly Brown: Yes. You know, what we are seeing today based on customer feedback, there is definitely an interest and a budget to spend on our services. This year is a much more optimistic sentiment than what we were experiencing last year. I think our customers have navigated a lot the last couple of years economically. And this year, the feedback is, absolutely, look, we plan to leverage staffing as well as PropTech support services. And so we are finding from a willingness to spend perspective there certainly is a lot more positive feedback this year than what we were navigating this time a year ago. William Dezellem: And, Kelly, is it your sense that since we have had a couple of years of tight or conservative spending that there is some catch-up and delayed or deferred maintenance that could lead to a higher-than-average level of activity, maybe not in 2026, but as we push further into 2027, and you start to see some catch-up? Kelly Brown: I think it is reasonable to assume that there could be a certain level of that. What we have heard from customers is that as much as possible during times when they have to be conservative on their spending, they will do their best to just leverage the existing employee base that they have, even if that means one employee that may typically work at one property needing to float or visit several properties and try to help. So to an extent, there may be a little bit of that. Nothing like what we saw after COVID or anything like that. But there may be a small amount, but I think as much as possible, they really have tried to make it work with the existing employees that they have. William Dezellem: Great. Thank you both for taking all the questions. Kelly Brown: Absolutely. Thank you. Keith R. Schroeder: Bill, one other thing just to back that up with our top-line sales: through the first two months are slightly ahead of 2025. So it has been off to a solid start for this year. William Dezellem: So just to be clear, what you are saying is if March continues the trend that you saw in January and February, the first quarter revenues would be up, which would be the first time in many quarters that that is the case. Correct? Keith R. Schroeder: Yes. That is correct. William Dezellem: Great. Thank you for that additional perspective. Do you want to share a percentage change that you saw in January and February combined? Keith R. Schroeder: No. But I will say that we do expect full-year sales in 2026 to be over 2025, in the mid-single digits. So if that helps. William Dezellem: That is helpful. And I am going to take the bait and go one step further. Thank you, Bill. So relative to the monthly trends, when you look at the fourth quarter, was November decline less than October, and was December better than November? And then January being better than December, and then was February up more than March? Are we seeing that sort of trend, each and every month improving? Keith R. Schroeder: You are going sequentially. Right? William Dezellem: Yes. Basically, Keith, I am essentially saying let us just take, for example, if October was down 6%, then November being down 4%, December being down 2%, January being up 2%. And I totally just made those numbers up for illustration. Keith R. Schroeder: Yep. So I think the best way to answer that is that as we ended 2025, the seasonality effects that we would expect, we were better than those in the last month of last year. And so we have started out where we are higher in sales than last year for January and February. So it is a positive trend. William Dezellem: That is helpful. Did that positive trend begin late in the fourth quarter in December? Or is it really— Keith R. Schroeder: Yes. William Dezellem: Yes. It did. Keith R. Schroeder: And, of course, we had one really tough week in February because a snowstorm basically shut down the entire country for a few days. But, still, we came out pretty strong. William Dezellem: Yes. That is very helpful. Appreciate that additional color. Anything else you would like to add on that front before I turn it back to the operator? Keith R. Schroeder: No. I think that is it. But thank you. William Dezellem: Thank you again. Operator: Your next question is from George Melas-Kyriazi with MKH Management. George Melas-Kyriazi: Thank you. Good morning. Keith R. Schroeder: Good morning. George Melas-Kyriazi: Trying to clarify the answer that you gave, Kelly, to Bill regarding the PropTech. It seems like it is a very different line of business. Right? It is not your regular consultants or staffing that is more focused on maintenance and leasing. So is that a new segment of the business, could we say? And how many consultants do you have and what kind of revenue are you expecting in 2026 from PropTech? Kelly Brown: Yes. Well, good morning, George. Thank you for the question. Yes. It is different from the type of staffing that we have delivered in the past. You are correct. And the reason why we selected PropTech as an adjacent market that we were interested in is because it is a need that the people that we place and our existing customers have on all of their properties. They are leveraging technology, as all of us are, in their day to day. So we saw an opportunity to explore the support of that technology, and it really does two things. It helps solve customer problems that exist today, but it also helps lift up our candidate base as we know they are going to be, when they are out to work, leveraging the same technology. And so, learning about how Yardi structures their independent consultant network really became of interest to us because we are building that consultant base. To answer your question, we are going to start with a pool of 8 to 12 consultants and get them out working, and it will just grow organically over the year. So, early projections for 2026, we expect to be able to organically grow the revenue and ramp up through the year. First-year top line may be $1,000,000 to $2,000,000, but we really are just launching it organically this quarter. So we are going to look at the next couple of quarters very carefully as sales accelerate, and we will be able to give much more accurate forecasting after that point. George Melas-Kyriazi: Okay. That is exciting. And how many people do you have on staff now? How many consultants do you have, and do you train them in the Yardi tech, or are they pretty much already trained and ready to go? Kelly Brown: Yes. They tend to come in with existing Yardi experience. If we are going to hire them, they have existing Yardi knowledge. We are not hiring folks to come in and then train them. Now I will add that Yardi does provide really impressive resources to make sure their consultant base has access to training and to knowledge and continuing education. Yardi does a really great job making sure that their consultant network is very well equipped to stay knowledgeable on their technology. So that is another reason why we selected Yardi as a partner: those resources that they have, the knowledge base that they offer. Therefore, that is not really a lift that we have to take on internally, that type of training. We will hire consultants that have existing knowledge, then leverage Yardi’s resources to make sure that they stay fresh on that knowledge. George Melas-Kyriazi: Great. And maybe I am digging too much into the weeds, but I am really curious. Are you starting in Texas, for example? Are you starting in one market? How do you see the ramp of that business segment unfolding? Kelly Brown: Fortunately, this service is not necessarily geographically driven because a lot of the work that these consultants can deliver is remote. So we will not be a geographically based expansion. It will really be more of a customer-by-customer-based expansion. And so we will grow that way between both our own sales initiatives and Yardi’s referral base. It will not necessarily have a geographic component. George Melas-Kyriazi: Okay. Great. That sounds like an exciting initiative. It is nice to see having these growth initiatives. Maybe just also trying to clarify a little bit what you said at the end regarding a solid start to the year. The fourth quarter, year over year, was down 9.4%, right, I think the top line. Keith R. Schroeder: Yes. That is correct. George Melas-Kyriazi: If part of December was a positive comp, it sort of means that, actually, maybe October and November were down double digits. And then so that seems like a very dramatic change from down double digit in a few months to going up comp. And how do you explain this change, and to what extent is this change market-driven, and to what extent is it your own execution and what you are doing internally that is driving that, in your opinion? Keith R. Schroeder: Yes. I think there is some market improvement in there, but really from our perspective, it is more driven by execution. The things that we learned from one of these studies are the speed to fill, giving them the right candidate in the right spot quickly. Those things all make a big difference, and we have changed some things up, and we are laser-focused on that stuff. George Melas-Kyriazi: And let us see if we can try to extrapolate that to the year. So you expect mid-single-digit growth. Does that mean that you expect growth pretty much in every—year-over-year growth, I mean—in every quarter of 2026? Keith R. Schroeder: Yes. That is correct. George Melas-Kyriazi: Okay. Great. That is really good to know. And to what extent is that driven by—I think, Kelly, you mentioned that you feel like customers have a slightly greater propensity to purchase and to spend. So you have that on the one hand. On the other hand, you have that execution on your side. Is that the way one would look at it? Kelly Brown: Yes. It is definitely a mixture of both of those factors that would lead to the year-over-year performance being more favorable. George Melas-Kyriazi: Okay. Great. Good. And then on the cost side, thank you very much for what you have as the property management segment. It is super helpful, and it really helps us understand the business much better. So if we look at the G&A, it is $3.9. But if we take out the medical and the cost of the review, it comes down to pretty much $3.1. So let us say $3.0 to $3.1, and if we annualize that, it is roughly $12. Which I think is what you said, Keith, as kind of the ongoing expenses of G&A. Does that mean that if we take out those two one-time things, we are pretty much at the steady-state level for G&A? Keith R. Schroeder: Yes. But just to make clear that we are looking at ways ongoing to bring down those costs. So it is not a done deal. That is where we are now, but we are constantly looking at ways to bring down those costs. George Melas-Kyriazi: Okay. And with, of course, seasonality, your second and third quarter are your best quarters from a revenue perspective. That impacts somewhat selling expenses. But would that have an impact on G&A, or is G&A basically flattish from quarter to quarter? Keith R. Schroeder: G&A is pretty flat. So selling would go up some. You have more sales; you have more bonus dollars, commission dollars, things like that. But with the G&A, it is basically pretty fixed across all four quarters. George Melas-Kyriazi: Okay. Great. Thank you very much for taking my questions. Operator: Thank you, George. We have reached the end of the question-and-answer session, and I will now turn the call over to Kelly for closing remarks. Kelly Brown: Thank you for your time today. We appreciate your continued support and look forward to providing an update on our first quarter in a couple of months. Have a great day. Operator: This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Good morning, everyone, and welcome to the Stoneridge, Inc. fourth quarter and full year 2025 earnings conference call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one on your touch-tone telephones. To withdraw your questions, you may press star and then two. Please also note today's event is being recorded. At this time, I would like to turn the floor over to Kelly K. Harvey, Director of Investor Relations. Please go ahead. Kelly K. Harvey: Good morning, everyone, and thank you for joining us to discuss our fourth quarter and full year 2025 results. The release and accompanying presentation were filed with the SEC and are posted on our website at stoneridge.com in the Investors section under Presentations and Events. Joining me on today's call are James Zizelman, our President and Chief Executive Officer, and Matthew R. Horvath, our Chief Financial Officer. Also on today's call are Natalia Noble, our President of Stoneridge Electronics and incoming Chief Executive Officer, and Bob Hartman, our Chief Accounting Officer who will be stepping into the role of interim Chief Financial Officer on April 1. During today's call, we will be referring to certain non-GAAP financial measures. Please see Slide 2 of the presentation for a more detailed description of these non-GAAP measures, and the appendix for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures. In addition, certain statements today may be forward-looking statements. Forward-looking statements include statements that are not historical in nature, and include information concerning our future results or plans. Although we believe that such statements are based upon reasonable assumptions, you should understand that these statements are subject to risks and uncertainties and actual results may differ materially. Additional information about such factors and uncertainties that could cause actual results to differ may be found on page 3 of the presentation and in our most recently filed Form 8-K and the 2025 Form 10-Ks which will be filed in the next few business days with the Securities and Exchange Commission under the heading Forward-Looking Statements. After our speakers have finished their formal remarks, we will then open up the call to questions. I will now turn the call over to James Zizelman. James Zizelman: Thank you, Kelly, and good morning, everyone. Let me begin on page 4. In 2025, our focused growth strategy, continuous improvements on material and quality-related costs, and rigorous structural cost control enabled us to successfully navigate another year marked by very challenging macroeconomic conditions. We are proud of our ability to continuously outperform our end markets even in a significantly challenged production environment while also limiting the impact on our bottom line. Our outperformance was primarily driven by continued momentum with MirrorEye resulting in sales of over $110,000,000, or approximately 70% growth compared to the prior year. In addition to strong performance this year, our strategy to grow the MirrorEye platform continues to pay off with additional business awards and expansion across many of our global OEMs. Our focus on long-term growth, enabled by our advanced technology offerings, drove significant new business awards in 2025. New business awards announced this year for Electronics and Stoneridge Brazil total approximately $830,000,000 in estimated life revenue. This included the largest business award in Stoneridge, Inc. history for a global OEM MirrorEye program extension, and the largest OEM program award in Stoneridge Brazil's history, as well as several other significant programs for secondary displays, the SmartTube Tachograph, and other electronic control products. In 2025, we limited the impact of significant end market headwinds by reducing material costs by 80 basis points, reducing quality-related costs by $6,600,000, and driving continued inventory reductions to support positive cash flow performance. Our focus on cash performance and inventory management resulted in positive free cash flow of approximately $19,000,000, driven by a significant improvement in inventory balances of $18,700,000. Earlier this year, we announced that we completed the sale of our Control Devices segment for a base purchase price of $59,000,000, reflecting an important milestone for the company's long-term strategy. As a result of this sale, Stoneridge, Inc. will now focus its resources on our highest growth, highest return businesses and reduce overall organizational complexity leading to a clear, focused strategy for the company. Additionally, this transaction strengthens our balance sheet, as proceeds from the sale will be used to pay down debt and reduce interest expense burden. As part of this next chapter for Stoneridge, Inc., we are thrilled to announce that Natalia Noble, our current President of Stoneridge Electronics, has been promoted to President and Chief Executive Officer effective April 1. Natalia will continue focusing on the strategic vision of the company by advancing the rigor and discipline we have built into our daily execution over the last several years to drive long-term sustainable performance. Later on the call, I will more formally introduce Natalia, and she will provide her perspective on the deeply embedded strategy for Stoneridge, Inc. and our unshakable commitment to long-term value creation for our stakeholders. We are proud of our accomplishments in 2025. Yet again, we successfully navigated a year of macroeconomic pressures and maintained operational discipline and focus. With the expected favorable market tailwinds ahead, a revitalized company following the divestiture of Control Devices, sustained momentum from our growth products driving continued outperformance, and keen monitoring of potential headwinds such as geopolitical volatility, we are quite optimistic about the years to come. Page 5 covers our fourth quarter financial performance and summarizes our key financial metrics for the full year 2025 compared to the prior year. While we continue to make significant progress across our key priorities in 2025, fourth quarter results did underperform our prior expectations. The Control Devices segment, which was subsequently divested in January 2026, underperformed by approximately $2,000,000, driven primarily by the unfavorable impact of foreign exchange and incremental tariffs. Similarly, tariffs impacted the remaining business by an incremental $1,200,000 in the quarter relative to our prior expectations. While we expect to recover a significant portion, if not all, of these incremental costs, there are timing differences between when the tariffs are incurred and when the recovery is realized. We have shown historically strong performance in recouping these tariff-related costs and expect to continue to do so with those incurred at the end of the year. Finally, during the fourth quarter, we incurred incremental quality-related costs of approximately $3,300,000 relative to our prior expectations. As evidenced by our full year quality cost reduction of $6,600,000, our relentless focus on continuous improvement has been effective. As stated, we have continued to face challenges with certain legacy warranty issues culminating with settlements with key customers to bring them to conclusion. While this drove incremental cost in the quarter, it also allows us to move on from these historical issues and focus on building stronger relationships with these customers to drive growth in the future. This is why it is imperative that we remain committed to improved quality processes early in the product development cycle to prevent quality issues with long tails as the ones we dealt with this quarter. Now shifting to our full year performance. There is no question 2025 presented some challenges for the broader transportation industry as production volume declined significantly compared to the prior year and fell well below our initial expectations. Even with significantly reduced production volumes, we outperformed our weighted average OEM end markets by 150 basis points in 2025. This market outperformance was driven primarily by the substantial growth in MirrorEye sales as our OEM programs continue to mature, take rates continue to increase in Europe, and new programs launched with Daimler and Volvo in North America. This resulted in MirrorEye OEM revenue growth of 84% compared to the prior year. We continue to be encouraged by the overwhelmingly positive response to our MirrorEye technology from our customers, and their customers alike. Later on the call, we will discuss how this strong market acceptance is expected to continue to drive substantial growth over the long term. Adjusted operating margin was significantly impacted by the decline in sales and the underlying macroeconomic pressures, including tariff-related headwinds and significantly reduced production at certain customers. However, our actions to improve material costs, manufacturing performance, and quality-related costs partially mitigated this impact. Our focused efforts to reduce material-related costs resulted in an 80 basis point improvement relative to the prior year. In addition, and as indicated earlier, quality-related costs improved by $6,600,000, contributing an additional 50 basis points to operating performance, as we continue to focus on built-in quality, responsiveness, and a proactive process to address any historical quality issues. Excluding other non-operating expense of $3,600,000 primarily related to adverse foreign currency impacts, full year adjusted EBITDA was $28,600,000, or 3.3% of sales. This resulted in a 60 basis point decline compared to the prior year and reflects our success in limiting the impact of the significantly reduced volumes faced during the year. We achieved this by our strict focus on improved operational performance, which drove a decremental contribution margin of just 14.2% versus our historical average of 25% to 30%. Finally, as I mentioned previously, our focus on cash and inventory management drove positive adjusted free cash flow of approximately $19,000,000. Lower contribution margin was offset by the significant improvement in our inventory balances, which declined by $18,700,000 this year. Overall, despite continued and significant challenges in our end markets, we were able to outperform our weighted average end markets, significantly improve our operational performance, and drive cash performance in 2025. Turning to page 6. Just a few weeks ago, I announced that I will be retiring effective May 20. As part of Stoneridge, Inc.'s long-term, thoughtful succession planning strategy, the Board has prioritized leadership continuity and a smooth transition to support the company's next phase of growth. That said, I was pleased to announce that Natalia Noble, our current President of Electronics, has been appointed as incoming President and CEO and member of the Board of Directors. I will remain as President and Chief Executive Officer through March 31. On April 1, Natalia will assume the role of President and Chief Executive Officer, and I will remain on the Board of Directors and transition into a Strategic Adviser role to support the transition and key stakeholder relationships through May 20. I will also be a Board nominee for election at our next annual meeting to provide continuity and support for the company. Natalia is the right leader for this company. For nearly two years, Natalia has led the Electronics segment with focus and discipline, making this a natural and well-prepared transition. Natalia is a highly experienced global leader with deep roots in the commercial vehicle industry. She consistently delivers on our commitments and operational excellence while strengthening meaningful relationships with our customers. During her tenure, Natalia led the segment in securing several significant new business awards, including the largest program in company history. Her customer connections and commitment to excellence in execution demonstrate her ability to drive growth, strengthen competitive positioning, and deliver measurable results. Over the course of her career, she has held various senior leadership roles within global transportation technology companies including ZF and Wabco, where she led complex multi-regional businesses with full profit and loss responsibility. Her broad cross-functional leadership experience and proven ability to drive performance make her a natural choice to lead Stoneridge, Inc. through its well-planned evolution. Natalia's appointment marks an exciting new chapter for the company. Over the next few months, we will continue to work very closely together to ensure a seamless, well-organized transfer of responsibilities. I am confident that under her leadership, Stoneridge, Inc. will continue to accelerate its drive forward. Before I conclude, I would like to take a moment to say thank you. Serving as the CEO of this company has truly been an honor. I am incredibly proud of what we have built together—our focus, our rigor, and our discipline to drive operational excellence and the establishment of a strong performance culture. To our employees, our customers, our shareholders, and other partners, thank you for your trust and your commitment. I am confident the improvements we have made are built into the company DNA, positioning it for sustainable long-term growth well beyond my tenure. I will now turn the call over to Natalia to walk us through Stoneridge, Inc.'s refined company strategy and position. Natalia, the floor is yours. Natalia Noble: Good morning, everyone, and thank you, Jim. I am fortunate enough to have already spent nearly two years with Stoneridge, Inc. as President of the Electronics division and as a member of the executive staff where I have contributed to shaping the company's next phase of disciplined, sustainable growth. I look forward to working closely with the Board of Directors, our senior leadership team, and our talented, dedicated global teams as we continue to execute on a strong long-term strategy focused on sustainable, profitable growth. Now turning to page 7. Stoneridge, Inc.'s strength is rooted in our global footprint, with strong operations in Europe, North America, and Brazil, each positioned for significant growth over the long term. Earlier this year, Stoneridge, Inc. took a significant step in its long-term strategic vision by completing the sale of the Control Devices division. As Jim just mentioned, this transaction allows us to focus resources on our highest growth, highest return businesses, and reduce overall organizational complexity leading to a clear, focused strategy for the company. We will continue to utilize our global footprint to serve our customers. Our strong global presence enables us to remain a preferred global supplier of industry-leading technologies to the world's leading commercial and off-highway vehicle manufacturers. Furthermore, we will continue to leverage our global engineering footprint and technology expertise. Our global engineering capabilities remain focused and robust, aligning our technologies with key industry trends, including safety and vehicle efficiency. Brazil remains a critical engineering center that augments our global teams located in Europe and North America, and our dedicated engineering partners in India strengthen our capabilities to meet the evolving needs of our global customers. We will continue investing in and scaling our cost-advantaged engineering presence to deepen customer partnerships. Overall, Stoneridge, Inc. will continue to drive global growth and invest in the resources required to advance our capabilities within a more cost-efficient structure. Turning to page 8. Our portfolio is focused on advanced technologies and electronic solutions primarily serving the global commercial vehicle and off-highway end markets. Over the past several years, the commercial vehicle industry has been undergoing a fundamental transformation with more automation and connected vehicle technologies focused on advanced safety and vehicle efficiency. Our product portfolio related to vision and safety, connectivity, vehicle intelligence, and electronic controls is directly aligned with this transformation and represents significant growth opportunities. Beginning with our vision and safety systems, we are a global leader in camera monitor and vision systems in the truck, bus, and off-highway end markets. Our award-winning, industry-changing MirrorEye technology replaces traditional rear and side-view mirrors with external digital cameras and digital displays inside the cab of the vehicle. The best-in-class technology offers innovative features and functionality that enable fleets to reduce operational costs while enhancing safety for everyone on the road. Our technology sets us apart from the competitors. Next to the fact that it is a significant growth driver, MirrorEye provides us with the opportunity to not only expand on our current product, but also enables a pathway to new technologies and capabilities. This includes connected trailer and 360-degree surround view suite of technologies. With focused resource deployment, we expect to further accelerate these opportunities. Our vehicle intelligence and electronic control products include digital driver information systems and secondary displays primarily for the commercial vehicle end market. These fully configurable displays allow customer differentiation and flexibility. They are the main source of data for a driver in the vehicle and will enable increased in-vehicle connectivity and customized solutions for future technology packages including Schrader connectivity and 360-degree surround view technologies I just mentioned. This category also includes our electronic control units that range from basic controls to highly engineered system-based products. Electronic control units will be at the center of the consolidation of existing products into complex electronic systems. Stoneridge, Inc. is well positioned to take advantage of this consolidation. Furthermore, we recently announced Stoneridge Brazil's largest program in its history for an OEM infotainment controller. Through our continued delivery of high-quality products and focus on customer support, we continue to win in this market. Finally, our connectivity portfolio includes our Telematics and Tachograph products, as well as our digital services. We also offer end-to-end tracking solutions for logistics, cargo security, and fleet management in Brazil. Our connectivity products provide streamlined solutions to efficiently monitor individual drivers and fleets, providing readily accessible data on their vehicles, allowing them to ensure compliance with legal requirements. Decades of design and manufacturing coupled with our insight and experience allow us to remain a leading supplier of connectivity products. Our products occupy a significant amount of real estate inside the cockpit of the vehicle. As such, we plan to further integrate these complex electronic systems into a large system offering. This will bring advanced technology to our customers to help differentiate their vehicles, improve vehicle safety and efficiency, and provide opportunities for long-term profitable growth for the company. Our customers are choosing to work with us for our technology and our proximity and flexibility. We are not just delivering product, systems, and services. We are improving safety on the roads, reducing emissions, improving overall efficiency of the vehicles, and enabling better driver comfort. Our strong product portfolio has built a meaningful and growing backlog of awarded programs, and we expect to continue this momentum in the coming years. Turning to Slide 9. As President and CEO, I will continue the strong focus on excellence in execution, to sharpen our strategy and drive financial performance. As the President of our Electronics division, I played an integral role in establishing our focus on sustainable long-term value creation. Therefore, our key drivers for sustainable performance remain the same: drive market outperformance, margin expansion, and cash flow conversion to create long-term value for shareholders, customers, and employees. To accomplish this, we must continue to deliver a strong customer value proposition and differentiation. First, we will continue to deliver advanced technology solutions that solve critical challenges and help our customers achieve their long-term goals, whether it is improving efficiency, enhancing safety, or increasing driver comfort. Supported by our strong backlog of awarded business and deep customer integration, our robust technology roadmap will continue to create opportunities with both existing and new products to the market. As such, we expect to continue to drive market outperformance of two to three times over the long term. Later in the call, I will provide further perspective on top line growth expectations through discussion of our long-term target. Second, we are focused on excellence in execution in everything we do. This starts with consistent delivery of our promised outcomes. Whether it is to our customers, our employees, or other stakeholders, we must drive disciplined execution to meet the expectations. In turn, this allows us to build trust and confidence of our customers and other stakeholders. We will continue to embed rigor and discipline in all our processes to drive operational efficiency and continuous improvement. By investing in quality-related processes and resources, we not only improve product reliability and performance for our customers, but also reduce internal quality costs. At the same time, our robust pipeline of material and manufacturing cost reduction initiatives, through smarter engineering and more efficient supply chains, enhances cost efficiency. Together, these efforts lower quality, manufacturing, and material-related costs, drive margin expansion, and support sustainable growth. As part of this overarching driver, the executive team and I are committed to organizational cost efficiencies by streamlining corporate costs to better support our company in this structure. Finally, when passion, process, and priorities are aligned, a strong performance culture emerges—one that consistently drives long-term value. By fostering a culture of accountability, creativity, collaboration, and continuous improvement, we drive outcomes that matter most to our customers and business. With empowering leadership, our talent aligned with core technology strategy, and a global footprint providing flexibility and proximity, we can bring faster innovation and problem-solving strategies to better support our customers. By combining our operational levers, we will convert our strategy into measurable outcomes. We want our customers to see tangible results, our teams to feel motivated and aligned, and our stakeholders to benefit from sustainable long-term value. Later on the call, we will provide further detail on how we will drive long-term shareholder value through market outperformance, margin expansion, and cash flow conversion, both in the current year and over the long term. I am excited about this next stage of our strategy and am committed to executing on the long-term plan that Stoneridge, Inc. has in place. I will now turn the call over to Matt. Matthew R. Horvath: Thank you, Natalia, and again, congratulations on your new role. Page 11 summarizes our key financial metrics specific to Electronics and Stoneridge Brazil. For Electronics, full year sales of $551,000,000 outperformed our weighted average OEM end markets by approximately 430 basis points. This market outperformance was driven by MirrorEye sales which totaled $111,000,000 in 2025, resulting in growth of $45,000,000, or 69%, compared to the prior year. This includes increasing take rates in Europe and the ramp-up of new programs for Daimler and Volvo in North America. Additionally, MirrorEye bus revenue grew by approximately 34% as our latest generation camera systems have received extremely positive market feedback. We expect continued expansion of MirrorEye as our end markets improve and our recently launched programs continue to mature. Electronics adjusted operating income declined by 140 basis points, primarily driven by lower contribution from sales. While we were able to offset a portion of our tariff-related expenses, our adjusted operating income was also impacted by incremental tariff-related expenses of approximately $2,000,000. This was partially offset by material cost improvement of approximately 120 basis points and lower quality-related costs of $3,700,000 compared to 2024 for the Electronics segment. Stoneridge Brazil full year sales growth of $15,000,000, or approximately 30%, was primarily driven by incremental OEM sales as our Brazilian OEM business continues to accelerate. OEM sales in Brazil set a record at $26,700,000, which approximately doubled compared to the prior year. We expect OEM sales in Brazil to continue to expand as new programs launch and we continue to win local OEM business. Full year adjusted operating income improved by $4,600,000, or 660 basis points compared to the prior year, primarily driven by increased contribution from incremental sales. As we have previously announced, this will be my final earnings call as I have accepted a role outside the company. It has been a privilege to serve in this role, and I am proud of what we have accomplished. With that, I would like to turn the call over to Bob Hartman, our Chief Accounting Officer, who will serve as the interim Chief Financial Officer upon my resignation from the company effective March 31. Bob Hartman: Thank you, Matt. I am looking forward to stepping into the role of interim CFO and I am confident that this team will continue to drive long-term value for our stakeholders as we transition to a more focused, leaner global company. Turning to Slide 12. As mentioned earlier on the call, the commercial vehicle end market created significant headwinds during 2025. This is highlighted by an almost 7% decline in our weighted average OEM end markets in 2025 compared to our initial expectations of approximately flat end market conditions. That said, in 2026, our end markets are expected to begin to recover. More specifically, the European commercial vehicle market is expected to show stabilization with potential for moderate growth after subdued demand over the last two years. Similarly, in North America, we expect that soft freight demand and continued capital spending discipline will persist, resulting in relatively flat first half revenues. However, we are beginning to see increasing order strength from our customers and third-party production forecasts have improved for the second half of the year. Additionally, with EPA 2027 regulations becoming clearer, we expect a pre-buy effect as the year progresses in our North American commercial vehicle market. As a result, North American OEM production is forecast to improve by 9.8% this year while European production is forecast to improve by 6.6%, resulting in expected full year 2026 weighted average end market growth of 7.1%. For 2027, current third-party production forecasts suggest 6.6% growth for our weighted average OEM end markets. We are seeing moderate improvement in production levels in 2026. More importantly, we are also receiving increasingly positive indications from customers that would align with third-party forecasts, particularly in the second half of the year. That said, turning to Slide 13, we are taking a relatively conservative approach to our revenue expectations for the year as we are assuming OEM end markets will remain flat. While third-party forecasts have indicated potential upside to this expectation, we believe continued geopolitical volatility warrants some level of conservatism. We are expecting yet another year of strong growth for our MirrorEye products. In total, we expect MirrorEye to grow by approximately $50,000,000 to at least $160,000,000, which translates to approximately 45% growth compared to 2025. Of the $160,000,000 in sales forecasted for MirrorEye, we expect approximately $140,000,000 in OEM sales, or approximately 45% growth relative to 2025. We expect continued strong improvement in take rates this year as recently launched programs continue to mature and strong customer feedback drives further adoption in both Europe and North America. Our MirrorEye OEM programs continue to gain positive momentum from our customers’ committed marketing campaigns that highlight the substantial benefits of our system, including improved safety, fuel economy, and driver comfort. We are also expecting significant growth in our MirrorEye bus programs due to strong market feedback on our latest camera system. After two years of strong SmartTube Tachograph aftermarket sales, driven by incremental regulatory requirements, we are expecting a sales decline of approximately $12,000,000 in 2026 relative to the prior year. Overall, SmartTube will still contribute significantly to sales in 2026, with OEM programs expected to be flat year over year. As highlighted by a recent award announced in the second quarter, our SMART II Tachograph continues to win new business in Europe. We will work with our current customers, as well as prospective customers, to drive continued OEM growth in this segment. Finally, we expect that customer price reductions and continued pressures in our aftermarket and other end markets will substantially offset foreign currency tailwinds, tariff-related reimbursements, and continued growth in our off-highway end markets. However, similar to our OEM end markets, recovery in off-highway vehicle production could drive upside to our guidance. In summary, based on our midpoint guidance, we are expecting revenue growth of approximately 4.2% in 2026, primarily driven by continued MirrorEye growth as our weighted average OEM end markets are expected to be flat. Slide 14 outlines our expectations for 2026 EBITDA in detail. We expect that the revenue growth of $26,000,000 will contribute approximately $6,500,000 of EBITDA growth based on the low end of our historical contribution margin of 25% to 30%, as the SMART II Tachograph business generally drove a higher margin and we are expecting lower sales from that product this year. As Natalia discussed earlier on the call, we are committed to driving organizational efficiency by streamlining our corporate costs to more effectively support our company's current structure. This year, we expect the benefit of at least $5,000,000 from these structural cost reductions. In 2027, we expect to realize additional savings as we complete our obligations under the transition services agreements from the sale of Control Devices. As our markets recover and overall company performance continues to improve, we expect that our incentive compensation programs will return to target levels in 2026. This increase, in addition to merit-based wage increases, is expected to drive a $6,700,000 headwind year over year. As Natalia and Jim also mentioned earlier in the call, we remain focused on improving operating and manufacturing performance, including reducing quality-related and material costs to drive gross margin improvement. We have incorporated some incremental warranty costs in our guidance for this year as we address the few remaining legacy issues that Jim mentioned earlier in the call. Overall, we expect that our continued focus on quality during the product development process will drive fundamental improvement in the long-term quality of our product portfolio. In summary, we are expecting revenue growth, continuous improvement in our operating performance, and structural cost reductions to drive EBITDA improvement in 2026 to our midpoint EBITDA guidance of $22,500,000. As it relates to the cadence of our guidance, we are expecting a relatively muted first quarter as production volumes remain lower to start the year, resulting in approximately breakeven EBITDA in the first quarter. This assumes first quarter revenue to be slightly below 2025. Following the first quarter, we are expecting improving volumes and structural cost benefits to drive improved EBITDA in the second quarter and beyond. We are expecting EBITDA to continue to improve in the second half of the year aligned with continued revenue growth and the ramp-up of benefits from structural cost improvement. This expected cadence would result in significant EBITDA improvement in the second half of the year compared to the first half. Turning to page 15. As Matt mentioned earlier on the call, we continue to manage cash efficiently even as production volumes remained significantly lower than originally expected in 2025, driven primarily by inventory reductions and capital expenditure management. In 2026, we will continue to prioritize efficient cash generation as we remain focused on optimizing inventory levels to reduce working capital levels. Additionally, we will maintain disciplined oversight of our capital expenditures. Last week, we completed an amendment of our current credit facility to extend the maturity date to 07/01/2027 to allow ample time to refinance our existing credit facility and align our long-term capital structure with the structure of the company after the sale of Control Devices. Based on our current EBITDA guidance and our amended covenant ratios, we expect to remain in compliance with all of our covenant ratios and have sufficient liquidity to navigate continuing volatility. Based on our 2026 guidance, we expect a compliance ratio between 3.0x and 3.5x by the end of the year. With that, I will turn it back over to Natalia for detail regarding our medium- to long-term targets. Natalia Noble: Thank you both. Slide 17 lays out the drivers of our medium and long-term financial targets. First, as a reminder, our weighted average end markets are expected to improve by 6.6% from 2026 to 2027, which would drive approximately $42,000,000 of incremental revenue in 2027. In addition to a strong market, we are expecting continued expansion of our MirrorEye programs driven primarily by the continued ramp-up of our OEM programs and improved customer take rates in both North America and Europe. Based on the third-party market forecast and our expectations for MirrorEye by 2027, we currently estimate revenue of at least $715,000,000 in 2027, which would represent approximately 12% growth versus our midpoint expectation for 2026. We continue to focus on market outperformance and believe that incremental opportunities in both our Brazilian OEM business as well as our off-highway business could drive upside to these expectations. Looking beyond 2027, we are expecting continued strong growth in our key product categories. In addition to market growth, we expect continued expansion in our MirrorEye programs as they mature. Similarly, we are expecting our other products to outpace market growth, including the continued adoption of camera-based safety systems in the off-highway market, as well as the expansion of our connected trailer and 360-degree surround view technologies as we continue to build on our existing systems and capabilities. In turn, we expect these growth drivers to result in revenue of $850,000,000 to $1,000,000,000 by 2030, representing a five-year compound annual growth rate of 6.8% to 10.3%. We expect that revenue growth will drive significant earnings expansion as well. Based on our historical and expected contribution margin, we expect that our growth will improve EBITDA to at least $44,000,000 in 2027, based only on market growth and continued momentum with our MirrorEye programs. We will have the ability to outperform this contribution-based target as we will continue to execute on our pipeline of material cost improvement activities, quality improvement initiatives, and structural cost reductions. Similarly, based on our long-term revenue targets, we expect EBITDA growth aligned with the midpoint of our historical contribution margins of 25% to 30%. Based only on contribution from incremental revenue, we are targeting EBITDA of approximately $80,000,000 to $120,000,000 in 2030. Again, we will rely on our robust pipeline of material cost improvement activities and the continued focus on long-term excellence in overall execution to drive to and beyond these targets. Stoneridge, Inc. is well positioned to significantly outpace our underlying end markets even as they are forecasted to recover over the next several years and provide a tailwind to overall growth. Our industry-leading product portfolio, focused on our vision and safety, connectivity, and vehicle intelligence and controls products, is expected to drive significant growth forward as we build on recent momentum, particularly with our MirrorEye platform. We expect that this growth will drive meaningful earnings expansion that will be amplified by excellence in execution as we continue to build on the recent success of reducing material costs, improving our quality processes, and utilizing a lean, global structure to optimize performance. Turning to page 18. In summary, with favorable market tailwinds ahead, a revitalized company following the divestiture of Control Devices, and sustained momentum from our growth products driving continued market outperformance, while monitoring potential headwinds such as geopolitical volatility, we are quite optimistic about the years to come. Under Jim's leadership, we built a strong foundation. Now, with our simplified company structure and focused strategy, we will continue to drive strong performance going forward. We will continue to focus on excellence in execution to drive significant earnings expansion and, as a result, strong shareholder returns both in the short and long term. Stoneridge, Inc. remains well positioned to outpace our weighted average end markets, significantly expand our earnings, and drive long-term shareholder value. We will now open for questions. Operator: Ladies and gentlemen, at this time, we will begin the question-and-answer session. To ask a question, you may press star and then one on your touch-tone phones. If you are using a speakerphone, we ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality. To withdraw your questions, you may press star and then two. Again, that is star and then one to join the question queue. Our first question today comes from Gary Prestopino from Barrington Research. Please go ahead with your question. Gary Prestopino: Yeah. Good morning, Walt. Several questions here. First of all, I think I heard you say that there are going to be legacy warranty costs related to the Control Devices business this year and possibly, I do not know how for how long really, but that would assume that when you sold the business, those warranty costs were not part of the sale and transferred to the new owners of the business. Is that correct? Matthew R. Horvath: Gary, actually, no. When we referred to legacy warranty questions, those were legacy warranty questions for issues within our Electronics products themselves. Any warranty that related to Control Devices was passed with the business to the new buyer. Gary Prestopino: Okay. Alright. I guess some other questions here. I just want to refer back to one of the slides where you broke out your sales footprint. Your three markets, I think you talked about here. I am referring to Slide 8, at least on my computer. You have got connectivity, vision and safety, and intelligence and electronic controls. Can you give us an idea of what percentage of the revenues between Electronics and Brazil make up those three markets? Matthew R. Horvath: Yes. Hey, Gary. It is Matt. How are you doing? Generally, you will see two different breakouts. One on Slide 7 there where you see revenue by region and end market. We do not break out specifically by product category. As we talked about, the Brazilian OEM business is growing pretty significantly, so you are seeing some pretty strong growth across a couple of those product categories. In Brazil, for example, the connectivity devices that we call out on Slide 8 has the track-and-trace business and digital services. A large portion of that is Brazil. Of course. So I would say we do not break it out specifically. But the connectivity business is certainly more global than the other businesses. But we are seeing some things—as we talked about, OEM sales doubling in Brazil—we are seeing some increased penetration of some of those other product categories in Brazil. And we would also say that the Europe versus North America, these are global customers. So we really do consider them as a singular customer across the globe. Their purchasing teams are operating that way. So the only real split we would say is Brazil currently about 15% of the business. Electronics business globally is 85%. That is the best way. That is the way we deal with our customers on it as well. Gary Prestopino: Okay. So if we look at the numbers for this past year, your MirrorEye sales were up dramatically, so there had to be a dramatic downturn in the Electronics business in some of these other areas. Is that really a correct assumption? I mean, I have to go through and work through the numbers, but it seems like if your MirrorEye sales were up $111,000,000 but your other sales were down, where are you seeing the most impact across these three areas? Natalia Noble: I agree. It is Natalia. So, yes, the MirrorEye platform was representing a big increase in the sales. Overall, when you look at the vehicle production, especially in North America, but not only, in other products that are really linked with the vehicle production, this is where the biggest downside is coming from. Matthew R. Horvath: Yes. So looking at commercial vehicle volumes, there were some months in 2025 that set all-time record lows for actual orders placed in the commercial vehicle space. That is how weak that sector got during the course of the year. Fortunately, toward the end of the year, we saw a nice uptick there in December. And we expect a lot more of that coming forward. And so do the third-party prognosticators—ACT and S&P Global—they are starting to show a recovery, especially in North America on the commercial vehicle side. Gary Prestopino: Right. I have seen the first two months of the year that that has been pretty strong. And I guess that was a lead into the next question. How has your sales force in the market when trying to sell MirrorEye—what have they been experiencing here for the first two months of the year, given that truck production looks like it is starting to move up? At least, I saw the North America numbers. I did not see European. Natalia Noble: Right. Indeed, we see first very positive signals from the third-party companies that are showing the orders of the trucks, Class 8 in North America, but also looking at Europe. We are also seeing first slight increases in the orders from our customers, primarily in the second half of the year. We are also very cautious of the overall geopolitical situation and monitoring that very closely. But indeed, the first positive signals are out there. Gary Prestopino: Okay. And then just one quick question, and I will jump off. Let me understand something here with your business, especially on the telematics. With everything that you are doing, you are basically selling product that allows for this telematics to happen. Are you also the backbone on the connected service side through a network? Or are the products that you have agnostic and able to work with any network? Natalia Noble: Thank you for that. Indeed, especially in Brazil, but not only, with our track-and-trace business, we are quite successful in digital services. This is direct recurring revenue and a business that is completely different from the hardware or hardware with embedded software. We do also have a certain portfolio of digital services linked with our Tachograph products as well as MirrorEye products. That is an area that we are also growing. The strongest market here for us is Brazil at this point. Gary Prestopino: Okay. Thank you very much. Operator: Thank you, Gary. It is showing no additional questions at this time. I would like to turn the floor back over to Natalia Noble for closing remarks. Natalia Noble: Thank you, everyone, for joining us for the call. I know your time is very important, and as always, we truly appreciate your willingness to engage with us today. We have built a strong foundation that will allow us to drive significant earnings expansion as we grow. We will continue to deliver on our commitments by focusing on our advanced technology and excellence in execution delivered by our talented and passionate team. We expect that our performance, along with our unique mix of industry-changing product platforms, will continue to drive strong shareholder value. Thank you. Operator: And with that, ladies and gentlemen, we will conclude today's conference call and presentation. We thank you for joining. You may now disconnect your lines.
Operator: Good day, and thank you for standing by. Welcome to the Rapid Micro Biosystems Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] Please advise that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Mike Beaulieu of Investor Relations. Please go ahead. Michael Beaulieu: Good morning, and thank you for joining the Rapid Micro Biosystems Fourth Quarter and Full Year 2025 Earnings Call. Joining me on the call are Rob Spignesi, President and Chief Executive Officer; and Sean Wirtjes, Chief Financial Officer. Earlier today, we issued a press release announcing our fourth quarter and full year 2025 financial results. A copy of the release is available on the company's website at rapidmicrobio.com under Investors in the News & Events section. Before we begin, I'd like to remind you that many statements made during this call may be considered forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results or performance are forward-looking statements, including, but not limited to, statements relating to Rapid Micro's financial condition, assumptions regarding future financial performance, anticipated future cash usage, statements relating to the company's term loan facility, guidance for 2026, including revenue, expenses, gross margins, system placements and validation activities expectations for and planned activities related to Rapid Micro's business development and growth, including the expected benefits from our distribution and collaboration agreement with MilliporeSigma. Customer interest and adoption of the Growth Direct system and the impact of the Growth Direct system on their businesses and operations and statements regarding the potential impact of general macroeconomic conditions on our business and that of our customers. Actual results may differ materially from those expressed or implied in the forward-looking statements due to a variety of factors, including our ability to meet publicly announced guidance the impact of our existing and any future indebtedness on our ability to operate our business, our ability to access any future tranches under our debt facility and to comply with all of its obligations thereunder. Our ability to deliver products to customers and recognize revenue and market and macroeconomic conditions. For a more detailed list and description of the risks and uncertainties associated with Rapid Micro's business, please refer to the Risk Factors section of our most recent quarterly report on Form 10-Q filed with the Securities and Exchange Commission as updated from time to time in our subsequent filings with the SEC. We urge you to consider these factors and you should be aware that these statements should be considered estimates only and are not a guarantee of future performance. Please note that today's remarks include certain non-GAAP financial measures. These non-GAAP measures should not be considered in isolation or as a substitute for or superior to financial information presented in accordance with GAAP. They have provided a supplemental information to enhance investors' understanding of our operating performance and may differ from similarly titled measures used by other companies. Reconciliations between these non-GAAP measures and the most directly comparable GAAP measures are available in our earnings release issued this morning. We encourage you to review these affiliations carefully. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, March 12, 2026. The Rapid Micro disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events or otherwise. And with that, I'll turn the call over to Rob. Robert Spignesi: Thank you, Mike. Good morning, everyone. I will begin with a brief overview of our fourth quarter performance and recent commercial wins as well as an update on our key priorities. I'll then share a few comments on our 2026 outlook before turning the call over to Sean for a detailed review of our Q4 financial results and 2026 expectations. Before reviewing our fourth quarter results, I'd like to highlight the first press release we issued this morning announcing that Samsung Biologics is expanding its deployment of the Growth Direct platform through a new multisystem order received in the first quarter of 2026. This follow-on order builds on our existing strong partnership and we are proud to support Samsung's next-generation manufacturing strategy. This expansion yet again highlights the impact that Growth Direct delivers to the world's leading pharmaceutical manufacturers as they seek to automate and modernize their critical quality and manufacturing workflows. Now turning to our performance. This morning, we reported total fourth quarter revenue of $11.3 million, representing 37% year-over-year growth and a quarterly record. These results exceeded the increased guidance we provided in November and marked our 13th consecutive quarter of meeting or exceeding expectations. We placed 16 growth direct systems in the quarter, and ended the year with 190 systems placed globally, of which 155 are fully validated. A highlight of the quarter was a record multisystem order from Amgen reflecting our continued investment in the growth -- in the global rollout of the Growth Direct platform. Amgen is deploying systems across multiple sites in North America, Europe and Asia and fully leveraging all applications to include environmental monitoring, bioburden and water testing. Additionally, Amgen will sponsor our first-ever North American Growth Direct Day in the second quarter. Product revenue increased 78% in the fourth quarter with outperformance driven by strong system placements. For the full year, consumable revenue increased 17% reflecting continued strong utilization across our installed base. Consumable growth remains one of the clearest indicators that customers are actively using their systems and realizing meaningful ROI. Importantly, consumable strength underpins recurring revenue, which increased 15% for the full year and accounted for 53% of total revenue, highlighting the durability and visibility of our business model. Turning to gross margin. Fourth quarter gross margin was impacted by inventory-related charges that Sean will discuss shortly. This does not diminish the significant progress we made throughout 2025 in reducing product costs improving manufacturing efficiencies and increasing service productivity. As I look back at our performance over the last 3 years, total gross margin has improved by over 50 percentage points trajectory, we are confident we can sustain. Now turning to the MilliporeSigma collaboration. Our partnership is entering its second year, and we are pleased with the progress to date. In support of their commercial growth strategy, we have completed specialist training and MilliporeSigma has established customer demo labs across Europe and Asia. These labs will serve as an important part of the sales process to give customers hands-on experience with the Growth Direct system. As a reminder, Rapid Micro operates demo labs in North America, Europe and Asia as well. We continue to work with the MilliporeSigma team as they expand their funnel and drive sales, which we expect will meaningfully contribute to our 2026 system placements. Turning to our supply chain. We are advancing opportunities to reduce product costs and leverage MilliporeSigma's broader logistics network and other capabilities. Combined with our internal efforts, we have already secured meaningful consumable cost reduction benefits that will positively impact product margins starting in the first half and accelerating in the second half of 2026. Now I'd like to briefly review our priorities and 2026 outlook. We are off to a strong start of the year and our priorities remain consistent: accelerating system placements, expanding gross margins continue to innovate new products and prudently managing our cash, all while maintaining disciplined and consistent execution. On the commercial front, we remain focused on expanding and converting our sales funnel. The multi-system global rollout at Amgen and today's announcement that Samsung Biologics is meaningfully expanding its deployment of the Growth Direct platform underscore the substantial opportunity we see across the global pharmaceutical market. In addition, our partnership with MilliporeSigma continues to complement our direct sales efforts by broadening our global reach in our core pharmaceutical segments and providing access to attractive adjacent customer segments. As we work to expand the sales funnel, our annual Growth Direct Day remains one of the most effective customer-focused forums. This year, we are expanding the impact by adding events in North America and Asia. In addition to our premier recurring event in Europe. As a reminder, these sessions bring current and prospective customers together to showcase our automation and improved data management delivered by the Growth Direct can drive meaningful operational improvements and compliance within manufacturing and quality control. We are especially pleased Amgen will sponsor the North American event in Q2, reflecting their confidence in and commitment to the Growth Direct platform. Looking at the broader market landscape, there are strong tailwinds augmenting our consistent commercial execution. These include increased adoption of full automation, a greater focus on data integrity by industry and regulators, advanced manufacturing modalities driving the need to modernize and growing investment in the onshoring of pharmaceutical manufacturing in the U.S. We believe these tailwinds will remain strong and durable, which will contribute to position us well for sustained long-term growth. In addition to staying highly focused on our priorities of accelerating growth direct placements and expanding gross margins, we continue to innovate to provide new value-add solutions to our customers. To this end, we expect to release our next-generation cloud-native software platform in the second half of 2026, which will redefine the growth direct experience for our customers. Our AI engineers have spent 15 years developing and refining the industry-leading algorithm for microbial growth detection. And this new platform will leverage that experience to deliver significant additional value through AI-driven analytics and insights across our customers' global data. As a Growth Direct installed fleet expands globally and generates increasing volumes of digital data, this new software and data platform will provide meaningful value to our customers by enabling deeper insights and faster decision-making power for global quality and manufacturing operations. Against this backdrop, we are initiating full year 2026 revenue guidance of $37 million to $41 million, including 30 to 38 system placements. We expect meaningful gross margin expansion and expect to achieve approximately 20% gross margin for the full year, with performance accelerating in the second half. We believe this guidance is both prudent and achievable and reflects our track record of consistent execution. Sean will provide some additional details around the assumptions included in our outlook as well as potential upside opportunities and we look forward to updating you as the year progresses. And with that, I'll turn the call over to Sean to discuss our fourth quarter performance and 2026 outlook in more detail. Sean? Sean Wirtjes: Thanks, Rob, and good morning, everyone. I'll begin my comments this morning with a review of our fourth quarter 2025 results and then discuss our first quarter and full year outlook for 2026. We'll then open the call up for questions. Fourth quarter revenue increased 37% to a record $11.3 million compared to $8.2 million in Q4 2024. During the fourth quarter, we placed 16 Growth Direct systems, which was also a record compared to 6 systems in the fourth quarter last year. We also completed 3 validations in the quarter compared to 4 in Q4 last year. Product revenue, which is comprised of systems and consumable revenue, increased 78% to $9.3 million in the fourth quarter compared to $5.2 million in Q4 2024. This was primarily driven by the increase in system placements. Consumable revenue grew 11% in the fourth quarter compared to Q4 last year. Service revenue was $2 million in the fourth quarter, which was in line with the guidance we provided in November, compared to $3 million in Q4 2024. As a reminder, the timing of validations tends to be the largest driver of quarter-to-quarter variability in service revenue and the validation revenue we generated in Q4 2024 and remains a company record. Fourth quarter recurring revenue, which consists of consumables and service contracts increased 10% to $4.6 million compared to $4.2 million in Q4 2024. Nonrecurring revenue, which is comprised mainly of systems and validation revenue increased 65% to $6.7 million. Turning to margin. Product margin was negative 8% in Q4, this includes a $1.1 million or 12 percentage point impact related to the write-off of unusable consumable inventory in the period. Our manufacturing team has addressed the underlying situation, and we do not expect any further charges related to this in 2026. Excluding the impact of this write-off, Q4 product margin was positive 4%, which was consistent with our guidance. Service margins were 22% in the fourth quarter compared to a record 47% in Q4 last year. The lower service margins in Q4 this year were due to the lower service revenue in the period, which more than offset the positive impact of service productivity improvements and cost reductions made during 2025. On a combined basis, fourth quarter gross margin was negative $0.3 million or negative 3% compared to positive $1 million or 12% in Q4 last year. Excluding the impact of the inventory-related charges we recorded in the period, total Q4 gross margin was positive 7%. This was in line with our guidance and slightly lower than the Q4 last year due to the impact of lower service revenue on service margins. Moving down the P&L. Total operating expenses were $11.9 million in the fourth quarter compared to $11.2 million in Q4 2024. Within OpEx, R&D expenses were $3.2 million, sales and marketing expenses were $3.3 million and G&A expenses were $5.3 million. For the full year, total operating expenses decreased by 3%, while revenue increased by 20%. Interest income was $0.5 million and interest expense was $0.8 million in the fourth quarter. Q4 net loss was $12.5 million. This compares to a net loss of $9.7 million in Q4 last year. The larger net loss in Q4 this year was primarily attributable to the inventory charges we recorded as well as the lower service margin and higher interest expense in the period. Net loss per share was $0.28 in Q4 compared to net loss per share of $0.22 in the prior year quarter. With respect to noncash expenses and capital expenditures, depreciation and amortization expenses were $0.8 million, stock compensation expense was $0.6 million and capital expenditures were $0.1 million in the fourth quarter. We ended the year with $39 million in cash and investments, which was in line with our guidance as well as $25 million of unused capacity under our debt facility with Trinity Capital. Our net cash burn was $3 million in Q4. As a reminder, Q4 is typically our lowest burn quarter, while Q1 is typically our highest burn quarter each year. Now I'll turn to our 2026 outlook. For the full year 2026, we expect total revenue to be in a range of $37 million to $41 million, which assumes we place between 30 and 38 systems. This system placement range reflects a few key variables. First, our guidance continues to account for some ongoing uncertainty around the timing and scale of customer purchase decisions, particularly with respect to larger multisystem opportunities which often involve more complex purchasing considerations. Second, the low end of our guidance range assumes we do not place any new large multisystem orders in 2026 other than the Samsung order announced this morning. And third, we continue to expect MilliporeSigma to contribute meaningfully to system placements in 2026. However, the low end of our guidance range does not assume they satisfy their full year 2 system commitment since some of those systems may be placed in Q1 2027. For Q1, we expect revenue of at least $7.5 million, including at least 5 system placements. Consistent with historical trends, we expect at least 30% of our system placements to be made in the first half of the year with the remainder in the second half. We also expect revenue and placements to peak in Q4, in line with typical seasonality. Turning to consumables. We expect revenue in Q1 and Q2 2026 to be slightly higher than Q4 2025 and then increased gradually over the remaining quarters with variability driven by the timing of customer orders and shipments. Looking at service, we expect revenue between $2.3 million and $2.6 million in Q1. We then expect service revenue to step down slightly in Q2, followed by meaningful increases in Q3 and again in Q4 based on our current expectations with respect to the timing of installation and validation activities. We expect to complete at least 25 validations in 2026 and with at least 3 in the first quarter. Turning to margins. We expect our Q1 gross margin as a percentage of revenue to be in the mid-single digits with product margin of negative single digits and service margin above 30%. Thereafter, we expect to reach and maintain positive product gross margin in each of the remaining quarters of 2026, led by improving consumable gross margin, which we expect to turn positive in the second half of the year as we fully realize the benefit of meaningful material cost reductions we recently locked in as well as benefits from other cost reduction and manufacturing and efficiency initiatives. For the full year, we expect total gross margin of approximately 20% with a Q4 exit rate in the mid-20% range or better, product margin in the high single digits to low teens and service margin above 40%. Consistent with prior years, we expect quarter-to-quarter variability in gross margin to be driven by progress on our product cost reduction and service productivity initiatives, overall revenue volumes and the revenue mix between systems, consumables and service in each period. We expect operating expenses to be between $47 million and $51 million for the full year. We expect $10 million in noncash expenses, including depreciation and amortization expense of $3 million and stock compensation expense of $7 million. We also expect CapEx of $2 million, interest income of $1 million and interest expense of $2 million. Looking further ahead, our strategic priorities of accelerating system placements, improving gross margin, innovating new products and prudently managing our cash remain unchanged. We continue to build momentum in our business, including our partnership with MilliporeSigma, which we expect will further accelerate progress on these strategic priorities over the coming years, including the meaningful contribution to system placements we've incorporated into our guidance for this year. That concludes my comments. So at this point, we'll open the call up for questions. Operator? Operator: [Operator Instructions] And our first question comes from the line of Tom Flaten of Lake Street Capital Markets. Thomas Flaten: I appreciate all the detail on the guide. The gap between placed and validated systems has widened since 2023. What are you guys doing to or are you doing anything to shrink that gap over time? Is that just more engineers to complete the validation? Can you help us think about that a little bit? Sean Wirtjes: Yes, Thomas. I'll take a shot at that. I think part of that -- a lot of that has to do with timing actually in terms of there can be variation between when we deliver a system and when that validation process gets started, depending on the customers' plans and resourcing that goes along with that. So I think we'd expect to see that come down. I think we talked about Amgen this time. I think as we look at that, some of the color we gave in the call -- prepared remarks, it really ties into how we expect that to roll out, which think the majority of that work is right now, our plan working with them would be that a lot of that would happen at the end of this year. So I think if you look at a deal like that, the expectation would be if you'll see that placed in Q4 last year, we'll get most, if not all that work done with them by the end of this year. So that gives you some indication of how these things can typically go. So there is a natural lag in there. I think you'll see that variance come back in a bit as we work through that and a few other customer situations. So I don't -- it's nothing we're concerned about. It is something we keep our eyes on, and it's something that we will continue to work to keep tight as much as we can. So I don't know, Rob, if you have any comment on this. Robert Spignesi: Yes. It's clearly a robust validation year as well. You can see that backlog being worked and some of this is to Sean's point, driven by order timing, size and timing of orders and just the sequencing of our team and our customers' teams and working through the validations. Thomas Flaten: That's great. I appreciate that color. And then just with the Samsung announcement this morning, could you just comment on the percentage of your place systems that are within CDMOs and how you see that space evolving over time relative to the manufacturer -- or to the drug originators themselves? Robert Spignesi: Yes. So it's interesting. I don't know the exact percentage. So I don't want to put that out. But it's sizable. We've previously announced Lonza as a customer. Samsung, obviously, in other CDMOs as well. We have a very strong value proposition for CDMOs as well as probably call principal manufacturers. We're growing clearly, today is a good example of both Amgen and Samsung. So you've got both a principal manufacturer and a CDMO. But CDMos in particular, or benefit from our ability to turn their lines faster or lease product faster. And also, to a certain extent, in some cases, market the use of advanced technologies and their quality control and manufacturing operations. So yes, quite strong in CDMOs and we plan to stay that way and grow with the CDMO space. We also have talk about it significantly on these calls. We also have small mid CDOs globally as well. So generally, it's a very strong segment for us as well as the principal manufacturers. I can't say it's one stronger than the other. They're both strong right now, and we tend to be in both segments, as we've said, generally more in the advanced modalities, primarily biologics and also in the cell and gene categories within CDMOs and also principal manufacturers. Operator: Our next question comes from the line of Dan Arias of Stifel. Daniel Arias: Sean, on gross margins, where is the confidence in the 20% number for 2026 kind of felt like a good 4Q number would be the jumping off point for what you're going to do this year. I understand it was due to the inventory charge, but the number is sort of the number. So what are the key moving pieces and risks when it comes to your own process? And then as we think about product gross margins being back to negative in 2Q, how do we get comfortable with the idea that as we start to feel better about placement momentum, which has been good, we can also feel good about gross margins that there doesn't have to be an offset there. Sean Wirtjes: Yes. Yes. I'll take that one, Dan. I thinking about it, there's a couple of key drivers to focus on from my perspective. One is -- we talked -- or I talked to my comments about the fact that we have recently locked in some meaningful product cost reductions with some vendors that will benefit us beginning in Q2 with that accelerate in Q3 and Q4. So that is a substantial reduction from what we're paying for some of the key materials in our product, and that's consumables, specifically. So that's number one. Number two, I'd say is I talked a minute ago about how we expect the year to roll out from a validation and service revenue standpoint, you kind of see in recent quarters, what lower service revenues can do from a leverage standpoint in our service margins. We expect to see that go back the other way as we work our way through this year. So to get to 20%, I think the two of the largest drivers, if not the largest drivers are that those cost reductions kind of kicking in full bore in the second half and us getting our service revenues back up to levels where they can generate meaningful margins beyond where we've been over the past quarter or two. Volume is also a big part of it. So as we progress through the year, we're manufacturing more. We expect to sell more. I talked about peaking and placements in those things also contribute. So I think it's important to note the comment that we expect Q4 exit to be mid-20s or above. So that trend should be growing as we work our way through the year overall for total margins. And those are the key factors that give us confidence in being able to achieve those kinds of numbers for the year and exiting the year. Robert Spignesi: And Dan, just to put maybe an estimation point on one thing Sean said on the product cost, in particular. With regard to execution risk, we have contractual agreements in place with the supply base, which is meaningful with regard to how we get comfortable and confident in that cost out in addition to the other elements that Sean mentioned. Daniel Arias: No. Okay. Okay. That's helpful. All right. And then maybe on the systems to Samsung and Amgen, how do you see utilization ramping there? And then just on overall utilization, can you maybe just talk about consumables pull-through per system consumables growth has been pretty good here. We all presumably have this placement and pull-through driven model. So Sean, we've talked a little bit about this. Can you just maybe set a baseline for where 2025 pull-through came in? And then to what extent that number might be higher in 2026. Sean Wirtjes: Yes. So I guess on the first question, Dan, I think -- in terms of what will happen with Amgen and Samsung in terms of pull-through, I think I talked about Amgen a little bit ago, latter part of the year, likely when we get those fully validated. Samsung, I don't know that we have a fixed timetable for that yet, but I'm sure it kind of follows that similar time line would be my best guess. So in terms of where we get with them, I think validations are definitely in play for 2026, our expectation, frankly, in terms of when they start to contribute to recurring revenue, I'd expect that to be more a 2027 factor. In terms of pull-through, I think we continue recently, I'd say, to be kind of in that single-digit year-over-year improvement range that we've talked about historically. So I'd expect that, that will be similar. I think with big orders that kind of a bolus of validations like we're talking about with these larger orders, I think there is an opportunity for us to see more meaningful step-ups in that as we bring those systems online kind of in short periods of time. So for now, I'd say, think about it as single digits in 2026. I think as we look at '27 that we would potentially have opportunity to see a bigger step-up than that in '27. Operator: Our next question. Our next question comes from the line of Anna Snopkowski of KeyBanc. Anna Snopkowski: Congrats on the quarter and the exciting announcement with Samsung. Maybe to start do you think you could share more insight on the Samsung multisystem order? Maybe would you say it's fair that this is in the double-digit range and should we expect this to roll out over the course of 2026 or just Q1? And then just also on this more on the strategy. Is this one site? Is this part of the global rollout or maybe a therapeutic area? And then I have one follow-up. Robert Spignesi: Yes. Generally, Samsung. We won't get into the specific quantum of it, but it's the next phase of rollout. I think many of you may remember, we had the initial launch with Samsung a couple of years ago. This is a second way, which is actually a larger order size. And it's focused primarily on their principal area in South Korea, although some of you may know that Samsung is also acquiring around the world. So also in scope. And as I mentioned a couple of years ago, we expect to grow at Samsung in the quarters and years ahead. And I'll say it again, we expect to grow a Samsung in the quarters and years ahead. Interestingly, which we didn't talk about in the prepared remarks, but also discussing other collaboration opportunities with Samsung, which we're quite excited about. So more to follow on that. And part b, Anna? Anna Snopkowski: Okay. Perfect. And then my second question, just more in general on repeat orders versus new customers. Do you expect these customers, repeat customers like Samsung to move through your pipeline quicker? And then just in terms of validation, is that usually a quarter lag? Or what should we expect both from Samsung and just repeat customers in general? Robert Spignesi: Yes. So a general rule of thumb is repeat customers go faster, generally, both in the sales process and the validation process. It's a general takeaway. Now certain things like some of these large orders Amgen as an example, and other large customers. We haven't specifically mentioned by name across several sites around the world. The sites have projects going on at a given time. So the timing could be throttled by a site-based activity. But generally, it's quite faster, generally, we have what's called a modular validation, which basically leverages the knowledge and work we've done on the initial validation usually at a starter site, and we can roll that out in an expedited fashion to accelerate the process. And as you may imagine, our land-expand strategy is focused on that. But also to your point, we're also -- the team is also out there. acquiring new customers as well, which can be a bit longer, both in the sales process and the initial validation. Operator: And our last question comes from the line of Brendan Smith of TD Cowen. Brendan Smith: I wanted to actually first ask about the kind of next-gen cloud-native software platform you referenced in the prepared remarks. Can you maybe just give us a bit more color on how this gets integrated into devices moving forward? Is this something that all new orders will automatically include some of these analytics capabilities? Is that software update push you can monetize into existing installed base? Just kind of wondering how we should think about that contributing to growth. Robert Spignesi: Yes. So thanks for the question, Brendan. It's a -- think of it as a a bit of a phased approach. So out of the box, first of all, it's a complete rewrite of our application software for the Growth Direct. So it's a completely different architecture. So day 1, the customers benefit from a modern UI, much easier integration into some of their IT infrastructure. And by cloud native, it's been built around a cloud infrastructure. We envision the customers' cloud will run it. But from a future revenue standpoint, we could also provide cloud services. Right now, the system is in a prelaunch phase with a major customer operating in their cloud, running the Growth Direct and the feedback has been exceptional. So we're quite excited about that. So out of the box, a couple of benefits. First, a complete rewrite, so customers benefit from easier navigation, easier integration, a more modern UI, the ability to access data from the cloud, from any device versus through their IT infrastructure attached to their limbs. Over time, we see the ability to provide services against that cloud data. So imagine a fleet of Growth Direct generating. And the idea came from we had these Growth Direct around the world is generating all this data. How can we help customers benefit from that. So the Growth Direct would be effectively an appliance other technologies can also plug into this technology and feeds into a cloud infrastructure. And then against that, we could provide services against that, predictive analytics, other types of insights on seasonality, quality failures, potentially speciation and ID services. And that's really part of the vision. We're not going to get into too much detail on what those are and how we plan to monetize it. But think of this as step one to a couple step multiyear process to really advance from the automation side into the, I'll call it, the AI sort of higher-powered analytics and cloud-enabled side of our business, which will -- the goal is to continue to drive to recurring -- high-margin recurring revenue over time. And -- what we've seen is that customers are -- especially in pharma, which can be a little conservative, are open to discussing how AI and cloud, in particular, can enable their environment. So we're not really pushing against the closed door. It's really -- it feels like we're pushing against an open door. And in some cases, customers are asking us for services in this general category. Brendan Smith: Got it. Super helpful. And then maybe just one last one on some of the consumable cost reduction benefits. I think you guys spoke to starting to see now. Can you maybe just expand a bit on what some of the moves you guys have made on your side, even within the Millipore network, I know you referenced maybe what else you're planning there this year to kind of drive that added production in the second half. Sean Wirtjes: Brendan, it's Sean. Yes, so we are still working with MilliporeSigma on several different opportunities. I think some could benefit this year. Some are more longer-term focused in terms of things we could do in very -- as we've talked about in the past, it's quite a broad pallet of things that we're looking at in terms of things that could benefit our margins, not just material cost reduction. I'd say that the locked-in savings that we have at this point that are going to benefit consumables in 2026 are not with Merck Millipore directly, but they are things that are direct inputs with other vendors that we have in place that our procurement team has done a really good job with and leveraging our growth, leveraging other relationships to be able to get us. What I would say is kind of a step change reduction in cost for a couple of different key inputs into the material that will benefit us this year. So we're excited about that. As I said earlier, it's going to be a key driver of our gross consumable margin expansion by association overall gross margin expansion. And we think it's something that we can use as a template to drive future reductions in others in the future and continue to drive those consumable margins up. Robert Spignesi: Thanks, Brendan. Well, thanks, everyone, for your time and attention. We'll wrap the call up at this point. Thanks again, and look forward to speaking with many of you shortly. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Operator: Good morning, ladies and gentlemen, and welcome to BK Technologies Corporation Conference Call for 2025. This call is being recorded. All participants have been placed on a listen-only mode, and following management's remarks, the call will be opened for questions. There is a slide presentation that accompanies today's remarks, which can be accessed via the webcast. At this time, it is my pleasure to turn the floor over to your host for today, Brett Maas of Hayden Investor Relations. Brett, please go ahead. Brett Maas: Thank you, operator. Good morning, and welcome to our conference call to discuss BK Technologies Corporation results for the fourth quarter and full year 2025. On the call today are John M. Suzuki, Chief Executive Officer, and Scott A. Malmanger, Chief Financial Officer. Please take a moment to read the safe harbor statements. Statements made during this conference call and presented in the presentation that are not based on historical facts are forward-looking statements. Such statements include, but are not limited to, projections or statements of future goals and targets regarding the company's revenue and profits. These statements are subject to known and unknown risks and factors. The company's actual results, performance, or achievements may differ materially from those expressed or implied by these forward-looking statements, and some of the factors and risks that could contribute to such material differences have been described in this morning's press release and in BK Technologies Corporation filings with the U.S. Securities and Exchange Commission. These statements are based on information and understandings that are believed to be accurate as of today, and we do not undertake any duty to update such forward-looking statements. With that out of the way, I will now turn the call over to John M. Suzuki, CEO of BK Technologies Corporation. Go ahead, John. John M. Suzuki: Thank you, Brett. Good morning, everyone, and thank you for joining us on our fourth quarter and fiscal year 2025 conference call. I will start by reviewing our operational and financial performance and then turn it over to our Chief Financial Officer, Scott A. Malmanger, for a deeper dive into our financial results for the fourth quarter and fiscal year 2025. Following the discussion of our financial results, I will provide an outlook for our fiscal year 2026 and introduce the core objectives of Vision 2030. We will conclude by opening the call for a brief Q&A. The fourth quarter capped off an excellent year for the business, marked by substantial achievements and the successful execution of our Vision 2025 objectives. We delivered results ahead of annual guidance by all measures, including revenue growth, margin expansion, and increased profitability. Our results underscore the strength of our product portfolio and accelerated customer adoption of our solutions in the public safety communications market. Our business performed strongly in 2025, with revenue of $21,500,000, increasing 20% year over year, which is the second consecutive quarter of 20%+ top line growth. Revenue growth was driven primarily by robust state and local agency order volumes, including increased purchase volumes of our BKR Series radios by agencies within our core Tier 2 and Tier 3 target markets. As a reflection of favorable product mix and continued wider-scale adoption of our BKR 9,000, gross margin increased by over 900 basis points in 2025, a material expansion to 50.4% compared to 41.2% in the year-ago quarter. This powerful combination of revenue growth, gross margin expansion, and diligent cost management resulted in a 78% year-over-year increase in adjusted EBITDA, reaching $4,700,000 in 2025. For the third consecutive quarter, we delivered adjusted EBITDA margin north of 20%, expanding to 22% in 2025 from 14.9% in the year-ago period. Profitability continued to advance in 2025, with non-GAAP fully diluted adjusted EPS reaching $1.17, up from $0.61 in 2024. As a result of the strong performance, we closed 2025 with a record cash position of $22,800,000, a significant increase from $7,100,000 at year-end 2024. Our financial strength gives us the flexibility to invest strategically in innovation and commercial expansion, supporting opportunities to capture market share and unlock long-term value creation. Currently, our disciplined capital allocation strategy and inherent operating leverage are driving improving returns, with return on invested capital of over 20% for the second consecutive year. We delivered sustained gross margin improvements during the 2025 period and successfully navigated substantial industry-wide headwinds, starting with the supply chain disruptions in 2022. At that point, we implemented meticulous cost management initiatives, followed by securing a strategic partnership with East West for outsourced manufacturing, which significantly improved supply chain resilience while reducing manufacturing complexity. Stepping into 2025, gross margins steadily expanded throughout the year, supported by firm customer adoption of our high-margin BKR 9,000 multiband radio and resulting favorable product mix. For the full year 2025, gross margin expanded by over 1,000 basis points to 48.8%, comfortably above our 47% target. Gross margins improved from 19.3% in 2022 to 48.8% in four years, a trajectory that is the result of growing customer adoption, disciplined cost management, optimized supply chain, and the successful repositioning of our manufacturing and sourcing footprint. These structural advantages provide us with the ability to invest in long-term growth. To expand on the positive impact from the BKR 9,000, our multiband radios continued to attract agencies for their unmatched combination of performance, interoperability, affordability, and ergonomics. BKR Series radios fueled solid revenue growth into 2025, leading to full-year revenue growth of 12.5%, exceeding our guidance range of high single digits. While fourth quarter revenue declined sequentially from the third quarter due to normal ordering patterns among public safety agencies, it still represented our strongest fourth quarter on record. As I discussed in our third quarter conference call, we shipped 2.5 times the number of BKR 9,000 multiband radios in 2025 than we did in 2024. This continued sales ramp was driven by expanded agency deployments and recurring replacement cycles. This higher-margin mix, in tandem with operating leverage, resulted in a 91% year-over-year increase in operating income for 2025, which outpaced revenue growth. This momentum, coupled with the upcoming launch of the BKR 9,500 radio, positions us with a strong growth lever as we commence our Vision 2030 road map. As we close Vision 2025 and enter Vision 2030, our competitive positioning has never been stronger. Our results validate the strength of our product portfolio, the accelerating adoption of our solutions across public safety communications, and the team's successful execution of our strategic priorities. With that, I will now turn it over to Scott A. Malmanger, our CFO, to give a more detailed overview of our fourth quarter and full year 2025 financial performance. Go ahead, Scott. Thank you. Scott A. Malmanger: Thank you, John. Sales for the fourth quarter totaled $21,500,000, an increase of 20% compared with $17,900,000 in 2024. For full year 2025, sales expanded by 12.5% to $86,100,000, growing ahead of the high single-digit guidance. Gross margin in the fourth quarter was 50.4% compared with 41.2% in 2024, reflecting favorable product mix and continued robust adoption of the higher-margin BKR 9,000. For the year, gross margin expanded by 1,086 basis points from 37.9% to 48.8%, exceeding our guidance of more than 47%. Selling, general, and administrative expenses for the fourth quarter increased to $6,600,000 compared to $5,200,000 in the same quarter last year. SG&A expense for the quarter includes non-cash stock-based compensation expense of approximately $500,000. For the full year 2025, SG&A increased 23% to $26,000,000, primarily driven by marketing and promotion costs for the BKR 9,000 and non-cash RSU compensation expenses within our software engineering team, both of which align with our previously communicated investment strategy to drive sustainable growth. Operating income was $4,200,000 in the fourth quarter 2025, with operating margin expansion from 12.3% in the year-ago quarter to 19.7%. For the full year, operating income more than doubled to $16,000,000 from $7,800,000, with operating margin expanding by over 830 basis points from 10.2% in 2024 to 18.6% for full year 2025. For 2025, the company delivered GAAP net income of $4,200,000, or GAAP EPS of $1.12 per basic and $1.05 per diluted share, compared with net income of $3,700,000, or $1.03 per basic and $0.93 per diluted share, in the prior-year period. For the full year 2025, GAAP net income reached $13,500,000, or $3.69 per basic and $3.44 per diluted share, comfortably above the $3.15 per diluted share guidance. This compares to $8,400,000, or $2.35 per basic and $2.25 per diluted share, in 2024. Net income of $13,500,000 for the full year 2025 includes the impact of tax credits for the remediation of the uncertain tax position recorded in the 2024 financial results. The company's effective tax rate for 2025 was percent compared to an estimated rate of 25% as we look forward to 2026. The higher tax rate reflects the normalization of our tax profile and profitability increases. The impact of our higher tax rate on 2026 fully diluted EPS is estimated to be approximately $0.55 per share. Non-GAAP adjusted earnings, which add back net realized and unrealized loss on investments, non-cash stock-based compensation expenses, non-cash income tax provision expense, and severance expenses, were $4,700,000, or $1.24 per basic share and $1.17 per diluted share, in 2025. This compares to adjusted earnings of $2,400,000, or $0.67 per basic and $0.61 per diluted share, in 2024. For the full year, non-GAAP adjusted earnings reached $17,000,000, or $4.63 per basic and $4.32 per diluted share, exceeding our guidance of $3.80. This compares to full year 2024 non-GAAP adjusted earnings of $6,800,000, or $1.92 per basic and $1.84 per diluted share. We reported non-GAAP adjusted EBITDA of $4,700,000 with adjusted EBITDA margin of 22% in 2025, representing a material increase compared to $2,700,000 and 14.9% in 2024. This marks our third consecutive quarter of adjusted EBITDA margin above 20%. For full year 2025, adjusted EBITDA reached $17,600,000 with adjusted EBITDA margin of 20.5%, a significant expansion from $9,600,000 and 12.5% in 2024. Turning to Slide 7, we have delivered noticeable improvement in our profit trajectory dating back to 2024. Although we have achieved continuous profitability increases overall, we did recognize a slight decrease in non-GAAP adjusted earnings on a sequential basis from the third quarter to 2025, which was related to a non-cash provision for income taxes of approximately $932,000 in 2025. This is associated with a year-to-date R&D tax credit adjustment stemming from the “Big Beautiful Bill” signed in July. Our profitability trend has been strong, and we anticipate this trajectory will continue as product mix shifts and we increase BKR 9,000 sales. Turning to the balance sheet, we ended 2025 with a record cash balance and debt-free balance sheet, underscoring the strong cash-generating capability of the business. At 12/31/2025, we had $22,800,000 in cash on the balance sheet, a significant improvement over the $7,100,000 as of 12/31/2024, as well as no debt. The company, as part of its capital allocation plan, established a Rule 10b5-1 nondiscretionary stock repurchase program in September. During the quarter, the company repurchased approximately 19,000 shares of its common stock as per the conditions of the plan. Working capital improved to $37,300,000 at 12/31/2025, compared with $23,000,000 at 12/31/2024. Shareholders' equity increased to $44,700,000 compared with $29,800,000 at 12/31/2024. To conclude, the strength of our business model and disciplined execution by our team enabled us to deliver on our Vision 2025 objectives and successfully navigate industry-wide challenges. We remain confident that our positioning will enable us to accomplish our Vision 2030 objectives, with our guiding principles being to surpass customer expectations and create and advance value for our shareholders. I will now turn the call back over to John, who will provide our 2026 outlook and Vision 2030 goals. Thanks, Scott. John M. Suzuki: We closed Vision 2025 in a strong financial position and are poised to carry forward the momentum into 2026 and beyond. Accordingly, we are introducing the following full-year 2026 guidance: revenue of at least $90,000,000; full-year gross margin of 50% or greater; full-year GAAP EPS of $3.15; and full-year non-GAAP adjusted EPS of $3.55. These targets reflect our current expectations for continued revenue growth, further margin expansion, and operating leverage, particularly on the SG&A line. However, the above guidance also includes the impact of the estimated income taxes described earlier that we believe we will encounter in 2026. We believe there is upside, and we will adjust guidance as we execute our growth plan. In addition, we continue to make meaningful progress on the development of our soon-to-be-launched 9,500 multiband mobile radio, a companion radio to the 9,000, which is on track now for shipping in 2027. Initial customer validation has been strong, with agencies preferring to buy both handheld and in-vehicle devices from the same manufacturer for seamless interoperability. The 9,500 represents a significant opportunity to deepen existing agency relationships and expand our customer base. As we reviewed the remaining development work for the BKR 9,500 multiband radio, we made the decision to expense future development costs rather than capitalize them. While this reduces reported EPS by approximately $0.50 in 2026, we believe this more conservative accounting treatment better reflects the economics of our R&D investments and strengthens the transparency of our financial reporting. Turning to Vision 2025 and Vision 2030, Vision 2025 was drafted shortly after I arrived in July 2021. Our base year was 2020, and we set a goal to more than double our revenues, increase our gross margins, and dramatically improve our EBITDA to 20% from 3.5%. We did not know within six months we would be at the start of a global supply chain crisis that dropped our gross margins down to 14%. What was perhaps worse, our new flagship BKR 9,000 multiband handheld radio would take another 18 months to be released. Despite these challenges, the team battled back and ended 2025 with results just shy of doubling our revenue while achieving the 50% gross margin target in the fourth quarter. This resulted in a full-year adjusted EBITDA margin of 20.5%, exceeding our 2025 Vision target of 20%. As we look forward to 2030, we have set new targets. Our goals for Vision 2030 include the following: increase our market share and double our revenue to $170,000,000; deliver continued gross margin expansion to 60%; achieve adjusted EBITDA margin of 35%; triple our earnings per share to $13; and flow through to free cash flow generation of over $55,000,000. Year one of Vision 2030 is 2026. We have reiterated our strategic focus on extending our reach beyond wildland fire into structured fire, law enforcement, and everyday mission-critical communications, as we expand our addressable market meaningfully. Our Vision 2030 targets are driven by three primary levers: expanding our installed base of BKR 9,000 radios; the introduction of the BKR 9,500 mobile platform; and continued margin leverage as our manufacturing model scales. Next month at our Investor Day, we will provide a comprehensive deep dive into our Vision 2030 initiatives, including a roadmap for our product innovation, channel expansion, and capital allocation, among other playbook objectives. The event will be held virtually on April 2. Registration details will become available shortly, and we hope you can attend. Before we begin the Q&A, I would also like to mention that Scott and I will be attending the 38th Annual Roth Conference on March at the Ritz-Carlton in Dana Point, California. We encourage you to contact your Roth representative to register. With that, we will now open for questions. Jenny? Thank you very much. Operator: At this time, we will begin polling for questions. If you would like to ask a question, please press star 1 on your phone keypad now. A confirmation tone will indicate that your line is in the queue. You may press star 2 if you would like to remove your question from the queue. For anyone using speaker equipment, it may be necessary to pick up your handset before you press the keys. Please wait a moment while we poll for questions. Our first question is coming from Jason Schmidt of Lake Street Capital. Jason, your line is live. Jason Schmidt: Hey, thanks for taking my questions. John, I know you do not want to give specific details on the 9,000 for competitive reasons, which is understandable. But just curious if you could provide some color on what you are seeing from sort of sales cycle length, if you are seeing any sort of significant pushback from customers. And I guess, relatedly, with the traction you saw in 2025, was most of that coming from initial orders or expanding orders at existing customers? John M. Suzuki: Jason, thanks for joining us this morning, and thank you for the question. The expansion on the 9,000 is definitely coming from new orders. A lot of our customers are coming from the fire side, with some in the law enforcement side. The anecdotal feedback that we receive from our customers who test the radios and have made purchases is that it is a quality radio that performs well. They really like the ergonomics. And the ones that have received their radios, the feedback has been very positive. So no pushback to date. Jason Schmidt: Okay. That is great to hear. And on the 2030 Vision, I want to dig in a little bit to some of those metrics. Obviously, a significant ramp is expected on the top line. Not looking for a specific breakout, but at a high level, how much should we think about sort of that 9,500 being a driver? Or can you get there with just continued penetration of the 9,000? John M. Suzuki: So I think in general, the expectation is that for every two handheld radios that are sold in the marketplace, one in-vehicle mobile radio would be sold. That is just kind of a general rule of thumb in our industry. So we expect the same ratio between the BKR 9,000 and the BKR 9,500. We do believe that come 2030, a substantial amount of that revenue will come from the 9,500, but even more, again, from the 9,000. Jason Schmidt: Okay. That makes sense. And then just the last one from me, and I will jump back into the queue. Sticking with some of these 2030 Vision metrics, free cash flow generation is expected to be significant. How should investors think about sort of capital plans going forward? John M. Suzuki: I think the first and foremost priority is investing in ourselves and in our portfolio. We do believe that we are just starting to penetrate this market on a wider scale, and that there is a huge runway for our solutions. So the funding will always be prioritized towards our core portfolio and building on that portfolio, especially as we look towards the solution side, which should drive further adoption of our BKR Series radios. After that, we are looking at different acquisitions. Those acquisitions would be tailored around, again, our core solution offering. Anything that could drive further adoption of our radios would be top of mind for an acquisition. And then lastly, in terms of priorities, it would be returning the money to the shareholders if we at that time could not find better alternatives, or in the case we did in the fourth quarter, where we felt that our share price was undervalued, we purchased shares back. So that would be the priority. We will talk about that more on our 2030 Vision call coming up, and I will expand on our capital allocation priorities at that time. Jason Schmidt: Sounds good. Thanks a lot, guys. John M. Suzuki: Thank you, Jason. Operator: Thank you very much. Just a reminder, if anyone has any questions, you can still join the queue by pressing star 1 on your phone keypad now. The next question is coming from Robert Van Voorhis of Vanatoc Capital Management. Robert, your line is live. Robert Van Voorhis: Hey, good morning, guys. Great quarter and good execution from the team. I just have a couple quick questions. My first is on the R&D development expense for the 9,500, and I understand it is somewhere around $2,000,000. Does that expense essentially go away once the 9,500 is released, or is it sort of run-rated at a higher rate to sustain the 9,500? Scott A. Malmanger: Yeah. Our expectation is that we are going to continue to invest in our core products, so we do not expect our engineering expense to go down over time. That being said, less of that investment is going to be in the sustainment of the 9,500 versus the development. But we are planning to continue the roadmap and continue our investment in engineering. Robert Van Voorhis: Okay. That makes sense. And then my second question, and maybe this is more suited for the call you guys have coming up, but, John, just long term, in terms of pricing strategy, I understand this industry has quite a lot of pricing power. There is a lot of brand loyalty. What is the pricing strategy long term here? Is it low single-digit increases over time? How do you guys think about that? John M. Suzuki: That is an excellent question, Robert. In the context of where we are today, we have 3%–3.5% market share, so I would say very modest at best. We also think that we can at least get to a 10% market share with our current plan and our marketing strategy. My goal right now is to garner as much market share as I can, and at the point at which we feel that the incremental increase in market share is less than what we could achieve through a price increase, at that point we would start raising prices. That being said, we did have some price increases last year that were related to the administration's tariffs. If we have a disruption in our cost structure, then, of course, we are going to pass that on to our customers, just like all our competitors did in our industry. If I look at the trade-off between the opportunity for us to gain market share, once you gain these customers, the stickiness is there. I think the priority really is to get as much market share as we can, and then at some point, we will be shifting to continued improved profitability through sustained price increases over time. Robert Van Voorhis: Okay. That makes total sense. Very rational. My last quick question, if I could just get one more, is maybe more suited for Scott. On Slide 10, the target 2026 diluted GAAP EPS number is $3.50 versus, I think, the diluted GAAP EPS number that you guys gave in the outlook was $3.15 for this year. How should we look at the difference between those two? What really is the difference? Scott A. Malmanger: It should be $3.15. John M. Suzuki: Apologies, Robert, we did catch that, but, obviously, version control caught us on that. We will get that updated. Scott A. Malmanger: Yeah, GAAP diluted EPS is $3.15. The non-GAAP diluted is $3.55. Robert Van Voorhis: Okay. Thank you. That is it for me. Appreciate it. Operator: Thank you very much. We appear to have reached the end of our question and answer session. John and Scott, would you like to make any closing remarks? John M. Suzuki: Thank you, Jenny. Thank you all for participating in today's call. We are confident the foundation we have built, anchored by continuous revenue and profit growth, a strong debt-free balance sheet, and an increasing free cash flow trajectory, positions us to deliver long-term value creation for both our customers and shareholders. We look forward to speaking to you again at our upcoming Investor Day next month. All the best to all of you, and have a great day. Operator: This concludes today's call. You may now disconnect.
Operator: Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Vivid Seats Fourth Quarter 2025 Earnings Webcast and Conference Call. [Operator Instructions]. I would now like to introduce your host for today's presentation, [ Mr. Austin Arnett ]. Sir, please begin. Unknown Executive: Good morning, and welcome to the Vivid Seat's Fourth Quarter 2025 Earnings Call. I'm Austin Arnett, Vivid Seat's General Counsel. I'm joined today by Larry Fey, Chief Executive Officer; and Joe Thomas, Chief Financial Officer. By now, everyone should have access to the earnings press release we issued earlier this morning. The release as well as supplemental earnings slides are available on our Investor Relations website at investors.vividseats.com. Today's call will include forward-looking statements within the meaning of federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially, including those discussed in our earnings release, our annual report on Form 10-K and our other filings with the SEC. Today's call will also include references to adjusted EBITDA and net debt, which are non-GAAP financial measures that provide useful information to investors. To the extent reasonably available, A reconciliation of these non-GAAP financial measures to their most directly comparable GAAP measures can be found in our earnings release and supplemental earnings slides. And now I'll turn the call over to Larry. Lawrence Fey: Good morning, everyone, and thank you for joining us today. I'm excited to share what we are working on as we chart a refreshed course for Vivid Seats in 2026 and beyond. We believe we have the right team and the right strategy to drive innovation, thought leadership and profitable growth in the coming quarters and years. I'd like to begin with an update on our leadership team. Austin Arnett who provided opening remarks for this call was named General Counsel in December. Austin previously led our corporate legal team after prior roles at Latham & Watkins and McDonald's. Austin steps into the GC role with extensive legal expertise and substantial familiarity with our business. I'd also like to introduce Joe Thomas, our new Chief Financial Officer. Joe, who joined us in January is an accomplished executive with a strong track record of driving financial discipline through data-driven decisions while supporting long-term growth initiatives. I'm excited to join forces with both of them as we embark on this new chapter for Vivid Seats. I'd also like to thank Ted Pikes, who served as our interim CFO during this transition. Ted's deep institutional knowledge and steady hand were critical during a pivotal period for the company. I'm grateful for his continued partnership as our Chief Accounting Officer. With our new team in place, we have refined our long-term strategy and have quickly begun executing against it. Our strategy builds and expands upon visits foundational strength, our leading technology our unique data, a relentless focus on efficiency and an increasingly compelling and differentiated value proposition to customers. I will spend a few minutes touching on our efforts across each of these foundational elements. Starting with our technology and product, we are redoubling our focus on product innovation and efficiency and expect this to benefit our results as we move through 2026. Across both our web and app properties, we are bringing a renewed focus on our core customer funnel to ensure a seamless user experience. Beyond this foundational focus, we are continuing to innovate in an increasingly AI world. In 2023, Vivid Seats became the first company in the live events industry to launch a live events plug-in for open AI's ChatGPT. That early partnership underscored our commitment to innovating at the intersection of technology and live entertainment. Building on that foundation, we recently introduced a dedicated Vivid Seats app within ChatGPT, further advancing our AI-driven shopping capabilities. This new app is designed to capture real-time consumer intent and transform event discovery by making it more personalized, intuitive and efficient while reinforcing our position as a leader, shaping the future of how fans discover and access live events. This launch is an example of our continuous efforts to evolve our platform in a highly dynamic environment. Our path forward will combine innovation with a disciplined focus on efficiency. As previously announced, we significantly expanded our cost reduction program increasing our initial fixed cost savings target from $25 million to $60 million. We have now achieved our increased target of $60 million of annualized savings with reductions in spanning marketing, G&A and stock-based compensation. These savings position us to reinvest selectively in growth initiatives such as our enhanced app value proposition while improving our operating leverage as we return to growth. We also executed our corporate simplification early in the fourth quarter, which included the termination of our tax receivable agreement and the collapse of our dual-class share structure. This meaningfully reduces complexity, improves transparency and generates both immediate and long-term financial benefits. Taken together, our cost reduction program and corporate simplification are creating a more efficient, agile organization that can invest strategically for growth, while maintaining financial discipline. Moving to the compelling and differentiated value proposition we present to customers. Vivid Seats is the most rewarding ticket company. We are centering the Vivid Seats message and experience around that simple but powerful fact. No one rewards fans more than we do. We're sharpening our messaging to highlight how Vivid Seats delivers more value at every step of the journey from rewarding prices to a seamless, stress-free shopping experience to tangible rewards that deepen loyalty over time. By delivering the most rewarding experience in ticketing, we seek to build long-term relationships with our customers and our app ecosystem. App users return more frequently, convert at higher rates and rely less on paid performance marketing channels. We believe the combination of our rewards program and our lowest price guarantee represents the most compelling value proposition in ticketing. We are seeing encouraging trends as we pursue this strategy. App GOV is up over 20% year-over-year through the first 2 months of 2026. Since launching our enhanced app value proposition during Q3 of last year, we have seen app share of GOV increase by more than 500 basis points. We also remain confident that information transparency will only increase as AI continues to reshape how consumers discover and evaluate offerings across the Internet. We believe we are well positioned to benefit as AI-guided consumers increasingly gravitate towards platforms that are delivering the most value to consumers. While we are early in our execution journey, the trends we are seeing thus far in Q1 indicate we are making substantial progress and that our strategy is gaining traction. Accordingly, we are reaffirming our 2026 outlook. We continue to expect marketplace GOV in the range of $2.2 billion to $2.6 billion and adjusted EBITDA in the range of $30 million to $40 million. In addition, we are providing Q1 2026 guidance of $570 million to $620 million of GOV, $8 million to $10 million of adjusted EBITDA and a cash balance of $125 million to $135 million. Turning to the fourth quarter. While our results were challenging, they were largely in line with what we anticipated as we work through a transitional period for the business. As we shared last quarter, a softer Q4 industry backdrop, private label declines and ongoing execution of our strategic realignment were expected to pressure results. While these pressures played out as expected, we were encouraged by emerging momentum across our own properties. In particular, our app performance remained a bright spot, reflecting the impact of our ongoing product investments and enhanced value proposition. The trends we are seeing thus far in the first quarter confirm the actions taken by this new team are translating to tangible progress. These indicators reinforce our belief that the path forward we have put in place is the right one. and that the investments we are making will enable us to return to growth in the second half of 2026 and deliver sustainable, profitable growth for many years to come. With that, I'll turn it over to Joe to walk through our fourth quarter financial results and outlook in more detail. Joseph Thomas: Thank you, Larry, and good morning, everyone. I'm excited to join Vivid Seats and help shape the company's next phase of growth. The business is a strong foundation and significant opportunity. I look forward to working closely with Larry and the leadership team to deliver long-term value. Turning to the results. In Q4 2025, we generated $581 million of marketplace GOV compared with $994 million in the prior year period. Q4 2025 total marketplace orders were down 32% year-over-year with average order size down to $329 from $380 in Q4 2024. According to our SkyBox data, industry volumes were down double digits in Q4, primarily due to less content on sales and a difficult world series comparison, which pressured results when combined with the loss of a large private label customer that occurred in early Q3 2025. Q4 2025 revenues were $127 million, compared to prior year revenues of $200 million. Our Q4 2025 marketplace take rate was 16.8%, up slightly from 16.6% in Q4 2024. We expect our near-term take rates to stay in the 16% range. Adjusted EBITDA for the quarter was $1 million, reflecting the impact of lower volume and negative operating leverage. Importantly, we achieved our annualized cost reduction target of $60 million during the quarter. While we saw a partial benefit from these efforts in Q4 2025, we anticipate full benefit starting in Q1 2026 and with a more agile cost structure, allowing for improved operating leverage moving forward. We ended the fourth quarter with $103 million of cash and $390 million of debt resulting in net debt of $287 million. As a reminder, the fourth quarter brings seasonally lower working capital flow with that flood reduction accounting for a majority of our cash outflows in the quarter. Q1 2026 is seasonally stronger in terms of cash inflow, which supports our guidance for a cash balance range of $125 million to $135 million by the end of Q1 2026. We expect Q1 2026 marketplace GOV in the range of $570 million to $620 million. This GOV level is consistent with Q4 2025 and despite the fourth quarter traditionally being the strongest volume quarter of the year, which reflects sequential improvement in share. We expect Q1 2026 adjusted EBITDA in the range of $8 million to $10 million. This represents a substantial improvement relative to Q4 2025 EBITDA and reflects consistent volumes, improved unit economics and the full impact of our cost reduction efforts. For fiscal year 2026, we continue to expect marketplace GOB in the range of $2.2 billion to $2.6 billion and adjusted EBITDA in the range of $30 million to $40 million. This outlook reflects an expectation of modest industry growth and continued competitive pressures, but also benefits from our cost reduction program and strategic investments and an enhanced customer value proposition. Back to you, Larry. Lawrence Fey: In closing, the positive trends we are seeing in the first quarter support our belief that we are now on the right path. We are seeing encouraging progress across numerous leading indicators. Pointing to a return to volumetric growth across the business outside of private label. We are particularly excited about the app trajectory and believe the combination of a return to growth, a streamlined cost structure and more efficient tax profile positions us to deliver growing profitability and cash flow as we execute our strategy. We are confident that visits foundational advantages our leading technology, unique data, best-in-class efficiency and the differentiated customer value proposition remains. And with disciplined execution, will support our return to profitable growth. With that, operator, please open the call for questions. Operator: [Operator Instructions]. Our first question or comment comes from the line of Ryan Sigdahl from Craig-Hallum Capital Group. Ryan Sigdahl: Welcome, Joe. Larry, I want to start, you've dealt with unfavorable competitive dynamics for the better part of 2 years now. We've heard from that may appear that they plan to focus more on customer acquisition efficiency in 2026, nice change, a fairly big change, I guess, in statement versus the user acquisition Blitz Creek, that they've been going under. I guess curious if you've seen any of that and then how you think about the competitive dynamics heading into 2026 or as we start and how you plan to balance your customer acquisition efficiency versus the value proposition, the app, direct traffic, et cetera, et cetera? Lawrence Fey: Yes. Thanks, Ryan. In terms of competitive landscape and competitive intensity, I think we have seen a degree of moderation, particularly as it relates to some of the peak intensity from StubHub in particular. I think others in the space continue to be pretty aggressive, and I think there continues to be a meaningful priority placed on GOV and volume across a number of our competitors relative to fundamental unit economics and profitability. But I think we continue to see that over time economics play out, financial realities ultimately win. And so I think we will stay the course that we've been on for the last couple of years where -- there is certainly inherent tension between volume and profitability, but we're going to stay true to our unit economics. And in particular, the focus on the app ecosystem, the focus on the app value proposition is trying to enhance our lifetime value which enables you -- if you know you are keeping people in your ecosystem longer with a longer relationship with more repeat rates, you can still solve your unit economic question while being more aggressive on the customer acquisition front. So we think we can try to accomplish both, right, stay true to our unit economic frameworks and enable ourselves to drive better volumetric performance as we continue to execute against that. Ryan Sigdahl: Very good. Then just you mentioned ChatGPT plug-in in '23. Your main competitor press released, I guess, a relationship and partnership with ChatGPT a few months ago. So I guess curious kind of how you fit with your competitive set within there. I think you also have perplexity that you didn't mention, but just talk broadly speaking about LLM if you're willing to quantify kind of the percentage of whether it's customers or GMV or anything there, that would be helpful. Lawrence Fey: Yes. AI, as you can imagine, top of mind an incredibly dynamic space. We haven't yet seen consumer behavior in our space reflects the height, right? It's still a pretty small percentage, very small percentage, probably 1% is the best estimate I would put out there for what we're seeing in terms of direct traffic through the AI channel today. That said, I think we are fundamentally of the belief that this is a one-way street where AI will have more, not less impact and that there are fundamental unlocks that AI can bring for the benefit of consumers in our space, the benefit of consumers across e-commerce with better information transparency. And so we've been in a space where, for many years, being at the top of a search was critical to driving customer awareness and you could charge in many instances, premium pricing to facilitate that. So it hasn't changed yet, but we are making the bet that there will be evolution there where customers will be better able to surface differentiated value propositions over time, better able to research and compare. We do think there's still a place in ticketing where the seat you're in, the angle of your view, the size of the stadium there's a lot of deeply personal preferences. So the desire to do detailed shopping, detailed comparisons in an app, we think will be a longer-term home for a lot of customers, but AI at the top of the funnel when people are researching their options, understanding the choices out there we think will be meaningfully disruptive over the coming quarters. Operator: Our next question comment comes from the line of Cameron Mansson-Perrone from Morgan Stanley. Cameron Mansson-Perrone: One follow-up on the industry trends. Just curious, there's a competitive dynamic, but then there's also been some potentially favorable dynamics happening as well. Wondering if you've seen any benefit or seen anything in the marketplace in conjunction with the changes that Ticketmaster has made around its resale platform and activity. And then as we look forward to 2026, wondering what -- how you guys are framing your thinking about the World Cup and any expectations around participating in that resale activity this summer. Lawrence Fey: Yes. Thanks, Cameron. On the industry front, Q4, not a great quarter. We saw it down double digits I think we mentioned tough MLP comp, but in particular, concert on sales were down dramatically year-over-year. Those on sales picked back up in Q1, whether that was just normal variation in timing or something reflective of some other planning or considerations on the Ticketmaster side, not clear to us. We haven't seen any meaningful impact beyond that in terms of Ticketmaster's overall posture level of aggressiveness in the space. So I'd say those kind of rumored changes or adjustments not to a degree that we could say we've seen, felt or can measure, but we'll continue to keep an eye on it. for broader industry overall, the last time when we gave guidance, we had pointed to expectations of flat over the year. I think with the Q1 on sales, we continue to feel equally as good, if not a little bit better with World Cup volumes equally as good, if not a little bit better. So I think stable to slight growth in the industry is our new estimate. And as we look at the World Cup, I think if you think of the benchmarks or the goalpost -- goalpost as a typical A-List tour would be 1% of GOV for the year. Taylor Swift be the other side of that, that's ever mid- to high single digits as a percentage of I think World Cup is an event will end up somewhere in between. Where in between will be, I think, dictated by do you have great matchups, does the U.S. play Mexico and the semifinals. So that would be a dream. But we think it will be substantial, a couple of hundred basis points of GOVs our best guess. Operator: Our next question comment comes from the line of Dan Kurnos from Benchmark. Daniel Kurnos: Great. Thanks. Good morning. Welcome, Joe. For -- I guess, Larry, just as we think about your customer acquisition strategy around app, I know we've talked about it a little bit, but I don't know if you want to take a second to kind of maybe flesh out obviously, without giving away any trade secrets, how you're thinking about driving incremental traffic beyond just pointing to the value prop? Like are you thinking about different marketing channels, you thinking about better more efficient ways to kind of get people to understand the message there? And then I have a follow-up for you. Lawrence Fey: Yes. I think the last thing you said, having people clearly understand the value prop is a critical threshold element where if we don't do that successfully, we have no reason to believe people will come back more often. We'll build a lifetime relationship. So we're mid-flight on it, but you should see continued improvements in the journey as an app customer. So your onboarding experience. How do we build that initial report if you make it feel like a win-win where you're providing us your information, and we're providing you something of value and return to kick off on the right foot. Well-situated messaging to drive home not only the everyday pricing, but this idea of ongoing rewards, ongoing benefits for loyalty and repeat purchasers, such that if you are a customer who has intentions of going to multiple live events per year for presumably decades to come, you can get peace of mind that you've completed your research, right? You'll do the research and depth, you'll compare the pricing, you'll validate the claims and once that validation is complete, you can with peace of mind buy from us. I think the second dimension beyond making sure that once you arrive at the app, it's very clear what we're doing and why we are making claims about our value proposition. We have a very large database of people who have purchased from us over the years. And so really thoughtfully targeting and messaging that database of folks continuing to use growing AI capabilities to have personalized messages that could resonate right message at the right time. I think that's the second major dimension. And then over time, I think we'll continue to explore complementary marketing channels that are outside of that core paid search funnel, right, whether it's social or other adjacencies. There continues to be an opportunity there, but it has been a relatively long-term play to build that awareness. And so that will be a steady as she goes element. Daniel Kurnos: Got it. That's super helpful. And then I'll just ask if you care to opine on -- I know we've already had sort of the competitive question, but clearly, while you guys aren't in primary, we've had movement from DOJ and live now, and there's always knock-on effects to the competitors that are maybe hybrid or trying to get in there. Into that space, you guys have tested the waters in primary and small doses in the past. Just curious if how you think about regulatory either from that perspective or the bulk seller stuff might just impact overall industry dynamics, consolidation, just anything that you would like to opine on how you think kind of the broader group adjusts to some of the regulatory stuff. Lawrence Fey: Yes. I mean, we've certainly been through the term sheet. I think devil in the details is probably the operative phrase here. So we'll wait for more to come out and probably premature for us to comment in too much depth given the lack of detail on some pretty important provisions in the term sheet. From everything we've seen, I can't see anything that would be deemed or even considered potentially adverse to our position in the marketplace. And at least from our position, I don't see a lot that will change anything meaningfully. But put the [indiscernible] for devil in the details, and we'll see if there's more to it. Operator: Our next question comment comes from the line of Maria Ripps from Canaccord. Maria Ripps: Welcome, Joe. First, I just wanted to follow up on your within. Can you maybe just talk about sort of the type of consumer that you're attracting within ChatGPT and sort of conversion rate? And then do you maintain sort of the customer profile or customer data after that initial engagement? Lawrence Fey: Yes. Thanks, Maria. I think the ChatGPT app is a good example of you need to play in traffic while this world situates itself. As it sits today, finding apps in the LOM journey requires someone who's looking for the app or you need to come in with a targeted search and seek out, whether it's ours or a competitor's app and that open up a different use case, but I don't think it's gone mainstream. I don't think most people have unlocked how to access apps within the LLM journey. And so as a result, what you do see is folks who come through LLM and folks who come through that app convert at structurally higher rates. What is probably too early to tell. Is that because you have a selection bias or the folks who are doing that are the most intent thoughtful tech savvy users and thus you're just revealing that their intent versus tool is fundamentally changing their behavior journey. So we're looking at all the data with eager anticipation. But I don't think we have clear answers yet on that. separately to the broader question on customer personalization, the more interactions you have with someone, right, where you can see if they're logging in, in Chicago, and they're searching cubs tickets. And then 6 months later, they search their tickets, you can start to create a profile of a Chicago-based sports fan and make sure that they see content aligned with those sports preferences and you perhaps deemphasize comedy shows, if they've never shown any interest and over time, figuring out ways to round out that profile, right? There's numerous sources that I think we're increasingly focused on capturing more customer information to create a more bespoke experience. And one of the exciting elements over the intermediate term that we think AI offers aside from the top of the funnel, as you ingest more of this customer information, how do you create a fundamentally better experience for your users. And at the core of that, I think is thoughtful personalization built around a growing dataset. Maria Ripps: Got it. That's very helpful. And then can you maybe give us a little bit more color on what you're seeing on the supply side in concert sort of this year? And to what extent that's a factor for sort of improving trends and returning to growth in the second half of the year? Lawrence Fey: Yes. Yes. Pretty nice lineup of on sales that has come out in Q1. BTS was -- is probably the highest profile of those, but steady stream of meaningful artists coming out in January and February, Harry Styles, Noah Khan, et cetera, which was welcome because the Q4 lineup was underwhelming. When you sum up Q4 and Q1, and we've seen this before where timing moves a little bit between the quarters. It was a solid concert lineup. And so I think maybe consistent with what we've heard Auto Live Nation, where they continue to point to steady growth perhaps double digits for them across their global footprint, but still continued growth in North America on the lower end of that range. I think everything we've seen from the supply side continues to support that perspective. And we had a little bit of hesitation based on how Q4 industry trends were shaping up, and it's been refreshing to see Q1 strengthen from there. Operator: Our next question comment comes from the line of Thomas Forte from Maxim Group. Thomas Forte: So I also want to welcome Joe to the call. One question, one follow-up. Can you talk about your ability to capitalize record recurring sporting events that are not always held on an annual basis, including World Cup, Olympics and World Baseball Classic, in particular, when this type of event is in 1 of your geographies, how confident are you in your ability to get a similar share of GOV as in other sports, baseball, football, et cetera? Lawrence Fey: Yes. Thanks, Tom. Those intermittent sporting events. They're really interesting hybrid because as a general statement, if you were to look at sports versus our concert and theater customer journey, sports. If you're a Cubs fan, you're a Cub's fan, right? You're going to a Cub's game this year, you're probably going to Cub's next year, you'll probably go in the year after that. Same with baseball, football, pick your sport a preference. And so the proclivity for repeat is just higher on sports, whereas concerts are more episodic. Even if you're a lifelong die hard Taylor Swift fan. She's in town once every 5 years, right? And maybe you're going to take it one time and you're not a town the next time so you see our once in a lifetime, right, once every 10 years. And the interest in Taylor Swift may or may not map to Sabrina Carpenter or Pop Star X. And so it's a different relationship, right? It's a bit more intermittent on all things concert comedy theater relative to that more continuous sports relationship. And these intermittent events kind of straddle those. It's pretty hard to say like what on any individual customer basis, their soccer preferences or their World Cup preferences in particular, would be. And whatever we learn about them, it's probably not going to be that valuable going forward as what is going to be 30 years before we get the World Cup here again. But we can leverage folks who are MLSs are soccer fans and target those folks in a thoughtful way. But we actually see the nits of World Cup folks who it ends up being more new customers than you would see in a typical sports league because there is that intermittent element. But less so than concerts because you do have that stable base of sports fans who knows where they want to come and buy a ticket from. Thomas Forte: And then for a follow-up, can you give your thoughts on cash conversion and free cash flow generation for full year '26? Lawrence Fey: Yes. I appreciate that question. So our major cash obligations or CapEx, interest expense and taxes. The sum of those, we think, will fall between $35 million and $40 million. And so a majority of that amount would be our net interest expense. Our CapEx and cap software we think will be in the $15-ish million range. And then post tax simplification, taxes will be quite a bit lower to low single-digit millions. And thus, we need $35 million to $40 million of EBITDA before considering working capital to be cash flow neutral to generative. And then I think as we've demonstrated in spades this past few quarters, if you are growing GOV, working capital can be a source of cash, the inverse is also true. So as we project a return to growth, which we're feeling quite good about as we approach the second half of the year on a year-over-year basis and equally good earlier in the year on a sequential basis. Within working capital shift to being a source of cash and thus, we expect to be modestly but cash generative in 2026. Thank you. Operator: Our next question comes from the line of Andrew Marok from Raymond James. Andrew Marok: One on the comps. I know you called out a difficult world series. This year as a headwind. I guess as we're looking forward into the 2026 trajectory, how are the 2025 championships and maybe special events and sports playing out from a comp perspective as we look into the model? Lawrence Fey: Yes. Great question, Andrew. I think if we were to just go through the calendar, we've already seen some benefit when you had the, call it, up down up in the Super Bowl. So 2024 sort of peak experience with Vegas 2025 with the kind of repeat participants in New Orleans was been underwhelming, much stronger performance, Super Bowl in 2026. As we look at the rest of the year, I'd say there's nothing daunting. I'd say, it ranges from, call it, slightly below -- slightly above average matchups. NCAA tournament was relatively strong last year. We'll see how that goes in the next few weeks. Nothing I would say of note in terms of NDA or NHL I love that Oklahoma City has 47 traffics over the next couple of years, except for the fact that Oklahoma City is not the most dynamic market from a secondary standpoint. So we'll see if anyone topples them on the MBA side. And MLB was off of the peak Yankees Dodgers levels, but Yankee Blueray wasn't bad. So I'd say that was still above average last year. So the MLB comp is probably the most daunting of the remaining major championships coming through the rest of the year. Operator: Our next question comment comes from the line of Benjamin Black from Deutsche Bank. Unknown Analyst: This is Jeff on for Ben. Can you just talk a little bit about the puts and takes to getting to the high and the low end of your guidance, particularly in GLD, would you need to see the competitive dynamics kind of continue to soften from here? Or could you get to the high end with just better performance from events in the industry? Lawrence Fey: Yes, it's a great question. Our presumption is that we can get to the high end of our GOV and EBITDA range. through our own execution. So steady performance from industry volumes consistent with current competitive intensity and continued delivery of a pipeline of product enhancements that we're really excited about that we think will start coming out over the next couple of months and have a meaningful portion of the year to benefit in terms of the back half contribution. And if we deliver in those enhancements flow through as expected. That's the path to the top end of the range. cure if there's better industry volume and/or a further shift in competitive landscape that would make it easier and/or create a path to outperforming. Unknown Analyst: Understood. Got it. And then maybe just one quick follow-up on sort of the app share growth in the gains. You talked about the increase in the FPD. Is that more driven by bringing new customers to the app? Or is it sort of just increasing the velocity or the repeat purchases of existing customers already using the app. Lawrence Fey: I'm happy to say yes to that. So it is across both dimensions, we are seeing app sessions increasing year-over-year. We are seeing app repeat rates increased double digits when we're looking at our cohort subsequent to these changes. And one of the things we talk about a lot over here that when you're playing a longer game with trying to build lifetime relationships to drive long-term repeat, the toughest day of that journey is the first day because you feel all the pain on the enhanced value proposition. We haven't given folks an opportunity to come back and repeat. So we feel like we started the snowball down the hill, and now as we move through subsequent quarters and years, that benefit will compound. And we're seeing all the underlying -- we talk about leading indicators that are flash and positive. That's a perfect example. These repeat rates, the growing size of the cohort and the growing proclivity to repeat within them. are the types of leading indicators that if you could stack over time, become a really powerful trend. Operator: Next question or comment comes from the line of Ralph Schackart from William Blair. Ralph Schackart: Larry, you talked about sort of entering Q2 with a refined strategy. Maybe talk about, I guess, maybe your top 1 or 2 key priorities or adjustments to that strategy? I know you talked about the APRA new focus, I'm not sure if that's [indiscernible] two of them. But just maybe if you could sort of highlight or underscore what those are in progress to date and kind of how that progresses through 2026. That would be great. Lawrence Fey: Yes. Thanks, Ralph. I think as you noted, parts of the strategy were starting to be rolled out back half of last year, executed throughout Q4 and will continue. And so the efficiency, the cost reduction program was the starting point of that, reinvesting some of those savings into the structurally enhanced at value proposition was a part of that. I think when you look at what incrementally we're pursuing, I think there's a refreshed focus on the core customer journey, where you need -- when someone has decided that they want to attend an event, a relentless focus on making that journey as quick, efficient and pleasurable as possible for the customer. Don't distract them with superfluous information, but make sure all of the relevant information is in front of them, make sure every step of the journey works efficiently, you aren't introducing undue friction. And that's been an area where I think we were pursuing a lot of different paths and distracting a little bit. So ultimately, that will manifest in, I think, an enhanced conversion profile, particularly on our web journey. We're very excited about that. I won't go into too much detail on this. I think there's some enhancements to our private label philosophy and approach that we're working on that get that business line returning to growth as we lap the tough comps starting in Q3. They're a little more operational in nature. But if I were to say it in a word, getting back to being operationally elite, it's the core focus in addition to the cost efficiency and the app value proposition, each which has their own sub elements where we'll continue to build on the early gains and wins. Operator: I'm showing no additional questions in the queue at this time. Ladies and gentlemen, this concludes today's program. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.
Operator: Welcome to Sleep Number's Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded today, Thursday, March 12, 2026. This conference call will be available on the company's website, ir.sleepnember.com. Please refer to today's news release to access the replay. On today's call, we have Linda Findley, President and CEO; and Amy O'Keefe, Chief Financial Officer of Sleep Number. Before handing the call over to the company, we will review the safe harbor statement. The primary purpose of this call is to discuss the results of the fiscal period ending on January 3, 2026. Commentary and responses to questions may include certain forward-looking statements. These forward-looking statements are subject to a number of risks and uncertainties outlined in the company's earnings news release and discussed in some detail in the annual report on Form 10-K and other periodic filings with the SEC. The company's actual future results may vary materially. In addition, any forward-looking statements represent the company's views only as of today and should not be relied upon as representing its views as any subsequent date. The company specifically disclaims any obligation to update these statements. Please also refer to the company's news release and SEC filings for a reconciliation of certain non-GAAP financial measures and supplemental financial information included in the news release or that may be discussed on this call. I will now turn the call over to Linda Finley, Sleep Number's CEO. Linda Findley: Thank you, Rob, and good morning, everyone. Before I begin, I want to welcome Amy O'Keefe, our new CFO. After an extensive search, she joined us in December and brings with her decades of experience leading operational and financial transformations across public and private companies. Her focus has been on streamlining our business operations and strengthening our capital structure to support our turnaround strategy. You'll hear more from her shortly. In today's call, I will cover 3 things. First, how we're executing on our strategy, both for growth and cost cutting; second, why we believe that our new marketing and product strategies are working; and third, what we're doing to manage liquidity and the capital structure. First, on delivering our strategy. 2025 was a pivotal year for Sleep Number as our ReShape team drove big turnaround changes at every level of the company. from retail and corporate operations to marketing strategy and the rapid development of our new product line. Importantly, we delivered on the guidance we provided in our last call. Full year net sales were $1.41 billion, in line with our guidance despite reduced marketing spend and lower traffic throughout the year. Adjusted EBITDA was $78 million, exceeding our guidance of $70 million. Our use of cash for 2025 was $18 million compared to the $50 million guidance. For the full year pro forma adjusted EBITDA margin was approximately 9%, and Amy will discuss how we plan to improve margins further in 2026. The long-term benefit to adjusted EBITDA margin comes from 2 places. First, the renewed growth from our product line redesign; and second, the significant cost savings we have already done and will continue to do this year. We radically reset the business by lowering our fixed cost structure and built a leaner, more nimble organization. We removed more than $185 million of annualized costs and have identified another $50 million of annualized fixed costs that we are executing on now. We are still in full turnaround mode, and our progress in 2025 doesn't change the fact that we still have hurdles to clear in 2026. We saw the same pressures as the rest of the industry in January and early February from severe weather and macroeconomic impacts. We had 236 stores that were closed for at least 1 day in the month of January, and therefore, sales at the start of the year were significantly down. We adjusted our marketing spend and strategy to lean in when things improved, and we have seen sequential improvement into February and March, driven mostly by our product launch. That brings us to our next point about why we believe our product and marketing strategies are working and will carry us through the next phase of the turnaround. We launched our first new bed and a new adjustable base in January and the response from customers has been fantastic. The Comfort mode mattress priced under $1,600 gives us access to a new group of customers while maintaining personalized comfort as the core of the experience. As of the end of February, sales are 3.5x what we expected and nearly twice all the sales of all 3 C Series beds that this bed replaces. In addition, we are seeing very strong attach rates for adjustable bases and bedding. The success of the first Comfort bed is an important indicator for the rest of the portfolio we announced this morning as it's built off the same principles and the same value proposition. We listened to both current and prospective customers and built a product line that addresses their most critical needs of comfort, durability and value. We also refer to the core of what only Sleep Number can offer, personalized comfort, adjustability, smart technology and temperature benefits, the only bed in the industry that bed owners can fully control whenever they want. It's comfort that shift with you night after night. With 4 new beds available in-store and online starting March 23, Sleep Number beds will now reach a broader set of consumers in the premium category. We are leveraging years of innovation and experience servicing luxury materials, features, comfort, temperature management and adjustability at better price points than ever before. This enabled us to build more value per dollar in each bed, protecting our margins while also achieving a lower price point for today's premium customer. In addition to these innovative new beds, we are also making it easier to find the right bed for you by simplifying the buying experience in store and online. With this launch, we are reducing our core lineup from 12 mattresses to 7 organized into 3 clear collections. First, Comfort mode is our new entry point to the brand. It delivers personalized comfort and temperature management controlled without an app, all at an accessible price. In January, we launched the 10-inch comfort mode bed, and now we're adding an 11-inch model called Comfort mode Luxe with 3-zone comfort layer and advanced temperature materials starting at just $2,099 for. Second, the Comfort next line, starting at $2,999 for a queen is our biggest innovation in the launch with 3 all-new beds, including 2 that feature our new Tribrid design. We are the first company to combine foam, advanced temperature materials and microcoils on top of air adjustability to deliver improved comfort, pressure release and durability with personalized comfort we are known for. These exceptionally luxurious beds will be the start of our smart technology in our portfolio and we'll track and improve your fleet at incredibly competitive price points. Third, we have our climate collection starting at $5,499 for Queen and it includes our existing Climate Cool and Climate 360 beds that differentiate with true active temperature management. This category represents the ultimate and luxurious comfort. When combined with the base, it remains the only line of mattresses on the market that offers personalized firmness, smart technology, adjustability and active temperature control, all in one bed. In fact, our temperature programs on Climate 360 result in up to 52 more minutes of restful sleep per night. But the new product alone isn't what gives us confidence. The marketing changes we have made are substantial. As I've said before, we can do more with the dollars we spend, and that is happening. First, we rebuilt our marketing foundation and modernized how we identify and attract customers. As a result, we saw meaningful improvements throughout 2025 in our funnel metrics. Our marketing into Q4 maintained this improvement, and we're seeing accelerated year-over-year improvement in cost per acquisition so far in 2026. Second, we also started refreshing our creative and messaging last year in social and digital channels. We also recently launched our first new commercial in more than 2 years with a dedicated comfort mode spot where recent performance has now surpassed our prior campaign and current competitive benchmarks. The combination of this work is showing up in our annual brand tracker that we completed in January just before we announced our partnership with Travis Kelce. Despite overall pressure in the industry, we saw significant increases in every aspect of Sleep Number's brand. Brand consideration among premium shoppers grew 10% and achieved the highest consideration in the premium category. We also saw the highest levels in 6 years of critical consideration drivers, including value, quality, aspirational fit, comfort and individualized comfort. Now it's up to us to build on that success and turn that brand strength into sales growth. The marketing changes are still underway, and you will continue to see new creative, new strategies and our partnership with Travis Kelce comes to life. Finally, let's talk about liquidity and capital structure. It isn't news to anyone that we need to fix our capital structure. I knew that when I joined the business less than a year ago, and it remains our top priority. Three things hit us particularly hard in the end of 2025 and beginning of 2026. The industry-wide softness we already spoke about, our work to clear out inventory as we roll out the new product line and our continued careful management of marketing spend as we lap a very high inefficient spend of Q1 last year. This puts pressure on our liquidity, and we are implementing a plan to address this. As part of that plan, we hired Guggenheim Securities to evaluate the inbound interest we have received and advise on other opportunities to refinance our credit facility as we shape Sleep Number back into a profitable growing company. Amy will talk about this in more detail. Before I turn the call over, I want to thank our team members. Delivering a product reset of this scale in just 10 months, work that typically takes more than 2 years, reflects a new level of speed, collaboration and execution across the company. Our work is focused on delivering better value for our customers, shareholders and team members and on bringing Sleep Number back to profitable growth. With that, I'll turn it over to Amy. Amy O'Keefe: Thank you, Linda, and good morning. I joined Sleep Number in mid-December because I view it as a company whose intrinsic value far exceeds its market capitalization. While Sleep Number is in the midst of a turnaround, the value of its underlying assets is undeniable, leading brand recognition, differentiated product and the tens of billions of hours of sleep data that validate the benefit our beds have on the quality of your sleep. We have a lot of work ahead of us, but fortunately for me, Linda and the team have already done a significant amount of the hard work to put the company on a path to profitable growth. One, rightsizing the cost structure to a lower revenue base by executing on $185 million of annualized cost reductions with line of sight to an incremental $50 million to be executed in 2026. Two, executing in record speed for Sleep Number on a completely new line of products that Linda described, which we are launching on March 23; and three, modernizing our marketing engine with new leadership, new creative, new channel-specific media strategies and a new partnership with Travis Kelce to strengthen the brand and drive top line growth. This is a pivotal time for the company, and I'm excited to partner with Linda and add my deep turnaround experience to unlock value for our shareholders. I want to thank the team for their very warm welcome and efforts to get me up to speed quickly. Now let's get into Q4 results, which were better than expected. Net sales were $347 million in Q4 or 8% below the same period in the prior year. As a reminder, fiscal year '25 benefited from a 53rd week, which favorably impacted year-over-year results by approximately 660 basis points. Notably, the performance trend across the year improved sequentially, while the number of stores decreased by 40, exiting the year with 600 stores. And as Linda noted, the impact of our improved marketing offense continues to drive efficiencies. Gross profit margin was 55.6% in the quarter, a 430 basis point decline versus the prior year, primarily driven by a $9.6 million nonrecurring inventory obsolescence charge associated with our new product launch and the impact of unit deleverage and higher tariffs. Excluding the impact of the inventory charge, adjusted gross profit margin was 58.4%. Operating expenses in the quarter were $197 million, down 9% year-over-year, excluding restructuring and other nonrecurring costs. The reduction was driven by ongoing cost savings initiatives to rightsize the fixed cost base and lower variable selling expenses. Media investments were comparable to the fourth quarter of the prior year despite a 53rd fiscal week. Adjusted EBITDA was $19 million, down $7 million versus the same period last year. For the full year, net sales were $1.41 billion, consistent with our expectations, but down 16% versus the prior year. Full year gross margin was 59%, and down 60 basis points year-over-year and aligned with the guidance of 60% that we shared last quarter when excluding the impact of the fourth quarter inventory charge. Operating expenses for the full year were $824 million, a $136 million reduction from the prior year, excluding restructuring and other nonrecurring costs. On an annualized basis, we've executed approximately $185 million of cost savings initiatives, which gives us an estimated $50 million tailwind as we head into 2026. As Linda mentioned, 2025 adjusted EBITDA was $78 million, exceeding our most recent outlook of $70 million. Importantly, for the full year, pro forma adjusted EBITDA margin was approximately 9%, a 200 basis point improvement versus the prior year. Turning to the balance sheet and cash flow. We ended the year in full compliance with our credit agreement and debt covenants. Total liquidity, including cash and revolver capacity, was $58 million at year-end, well above the amended $30 million covenant floor. Full year free cash flow was a use of $18 million. which was just over $30 million favorable to expectations. However, it was unfavorable by $21 million compared to the prior year, primarily due to top line pressure and nonrecurring cash restructuring costs. Capital expenditures of $14 million were down $9 million compared to the prior year. Looking ahead to 2026, as Linda mentioned, January demand was soft versus last year and our internal expectations. As we planned, the media investment in January was down significantly year-over-year and reallocated to after the launch of our new products when the return on investment is likely to be much higher. Moving into February, we saw a sequential improvement in performance during the President's Day event as we launched Comfort mode. Not only were we pleased with Comfort mode sales performance, but gross margin is well above our legacy opening price point beds. This provides another proof point that we can regain competitive positioning in the premium opening price point as we planned. We're excited to launch the rest of our product line in late March. Given the magnitude of the change that we are executing in 2026 as part of our turnaround plan, we will not be providing guidance today. However, I will provide some indications of our performance expectations for the balance of the year. I will also note that we are planning cautiously to ensure that our cost base and our liquidity planning are set appropriately as revenue ramps sequentially over the balance of the year. While we expect Q1 net sales to decline in the high teens because of the softness we saw at the beginning of the year with the full impact of the new product launch in the second quarter, along with an increase in year-over-year media spend, we expect a significant improvement in year-over-year revenue performance in Q2. We further expect double-digit sales growth in the second half with the full benefit of, one, new products, two, new creative assets, and three, marketing reach with our new strategic partner, Travis Kelce. As a result of cost savings initiatives and the expected ARU improvement from new products, adjusted EBITDA for the full year is expected to increase in the high teens to mid-20s percent range year-over-year, and we expect free cash flow to be positive. Lastly, but importantly, and as Linda mentioned, while we are seeing improvement in the business, the softness from the start of the year and the clearance of our existing products have put pressure on our liquidity and covenants. We are actively implementing a plan to address this as further detailed in our Form 10-K and have engaged an advisory bank, Guggenheim Securities, to help us. We will continue to monitor our liquidity position and covenant compliance and we'll work with our advisers to address our credit facility and evaluate inbound interest and other opportunities to improve the company's liquidity, balance sheet and financial flexibility. With that, I will turn it to the operator for Q&A. Operator: [Operator Instructions] Your first question today comes from the line of Dan Silverstein from UBS. Daniel Silverstein: Congrats on the announcement of the product launch. First question is just on that. So with the new product launches, what were the main pain points you were trying to address? And then the Comfort mode product replaced its predecessor at a higher margin. How will this new announcement today, how will these new beds reset the impact on ASPs, cost per bed and margins going forward? Linda Findley: Sure. Yes. So I'll start on both of those, and then I'll have Amy jump in as well. So first of all, thanks very much for the congratulations and the questions. So pain points, first of all, was going back to exactly what we talked about before, customers right now, when you think about the people who are most interested in the premium category, we really wanted to expand our audience to be able to serve our existing customer base and then broaden into younger demographics and additional demographics that would want access to the benefits of a Sleep Number bed. So we focused on comfort, value and durability in everything that we built. But one of the advantages that we have is all of the investments that Sleep Number has made in innovation over the years really came to pay off in this particular product line where we were able to take incredibly luxurious materials, temperature management materials and other new innovations around comfort, including foam and our new micro coils that we're putting into 2 of our new beds, to really say we're going to take luxury materials and bring them to a much more accessible premium price point. So what this allows us to do is both more directly addressed comfort and improve sleep from our past innovation history in a better price point for our customers. And there's a much clearer step-up strategy too now. So there's the beds that don't require an app that allow people to experience the brand for the first time. And then you can move into some of our smart technology and our other beds that we're rolling out today or introducing today. In that concept, we built these beds for manufacturability. And one of the challenges you've heard us say in the past is that in order to really maintain our margin, we were kind of selling up the line. We have some incredible beds, and we still have our climate series beds that we mentioned today. they are doing extremely well. But we wanted to make every bed in the line the same margin and a strong margin profile in order to make sure that our sales team could really sell the best bed for whoever the customer is and not have to worry about the impact to the margin profile. So our comfort mode bed is as margin accretive as our climate 360 beds and that allows us to serve the customer more clearly, more directly and also protect our margins at the same time. So sort of 2 -- double answers there to your questions, but we are really excited about this launch, not only for what it means for customers, but what it does mean for our margin profile. Any thing you want to add, Amy? Amy O'Keefe: And I'll just jump in on gross margin. We are expecting, as I mentioned, a sequential increase in ARU as these products transition out and the legacy products are discontinued. The exciting part for a finance person is that gross margin, if I just look at the comfort mode bed compared -- and this is just the one SKU that we've already launched, which is performing, as Linda mentioned, well above our expectations, 3.5x the plan. The best part of that for me is the gross margin. If I just look at that compared to the 2 beds in the C Series that it's replacing, it's a 10 percentage point gross margin improvement compared to the prior year. So it's really exciting not only for early indications of the performance but also the margin profile of the business. Daniel Silverstein: Very, very helpful. And just one quick follow-up. Could you just touch on the major sources of the $50 million of additional savings you think you can drive this year? And will there be any further clearance activity as we nudge up to March 23? Amy O'Keefe: Sure. And so last year, the Linda and the team, as we mentioned, took a significant amount of cost out of the business. annualized basis, it was $185 million. And I think those were, forgive the term, but sort of blunt force, right, the team needed to move fast in order to protect our liquidity position. I think over the last several months, a quarter or more, we have been looking, I think, more surgically at where opportunity remains to take costs out of the business. And at a super high level on the incremental annualized $50 million, there's a lot of logistics, delivery, last mile labor model resets, and we're still taking a look at our corporate overhead structure. And so I think those things -- those are the big activities in the $50 million. Linda Findley: And importantly, just to add to that, all of the $50 million has already been identified, we're already executing on it, and it is all fixed costs. Amy O'Keefe: Yes, all fixed costs. Operator: Your next question comes from the line of Bobby Griffin from Raymond James. Robert Griffin: Congrats on the first product launch there. I guess, first for me, I think the release or maybe the prepared remarks called out March 23 as the date, but like what's the phasing as we look at getting these 6 new beds now that you talked about on the floors and kind of across the portfolio, how is that phasing work throughout the year? And if you can, just give us a date that you feel the floors will be largely set, the stores will look as you want them to be? . Linda Findley: So I'll jump in on that. First of all, the all 4 -- so we launched 1 bed earlier this year. That was the comfort mode, the first bed that we launched. There are 4 new beds plus the base -- sorry, we launched the first new bed and base in January. There are 4 new beds and a new base that are all going to be available for purchase starting on March 23. Those are the ones that we announced today. And that completes the product reset, plus, of course, the existing climate series that we have Climate 360, Climate Cool that are already obviously on floor. So all the beds will be available for purchase starting on March 23, and we will start setting floors on March 23. So we will start with our first highest volume stores and most of the stores will be set by mid-April. Then we'll have a few more stores that might roll out into May. But for the most part, the key stores will be -- will all be set by mid-April. Robert Griffin: Okay. So basically, Floor will be in good shape for the Memorial Day holiday. That's what I was getting at. Linda Findley: Absolutely. That is exactly what we're planning for. Yes. Robert Griffin: Okay. That's very encouraging. And I guess, just on -- I understand the dynamics around not wanting to give the guide. But just one clarification, Amy, and then maybe a little help. But the EBITDA number that -- the growth that you're referencing, that's versus the reported number in '25, not the pro forma number. Amy O'Keefe: That's correct. That's correct. Of the $78 million adjusted EBITDA base mid-20s percent range improvement. Robert Griffin: Yes. Okay. Perfect. And then if that comes to fruition and you guys are able to deliver that, would that translate into positive free cash flow for the year, I understand this business typically has really good cash flow metrics, but it would? . Amy O'Keefe: Absolutely. Operator: Your next question comes from the line of Peter Keith from Piper Sandler. Unknown Analyst: This is Sarah on for Peter. First, just on marketing spend, given the meaningful reductions in 2025, how are you guys thinking about investment in '26? Should we expect those marketing dollars to start trending back up particularly as the new product lineup rolls out? Or is current on kind of sufficient to drive demand? Linda Findley: Right. So as we spoke about before, what we're actually doing in 2026 compared to 2025 is you'll see marketing held flat as total spend in 2026 over 2025. But what that means in reality because 2025 had very high spend in Q1, much lower spend in Q2 and Q3 and then moderated sort of relatively flat spend in Q4. That was the shape of the curve in 2025, someone compared it to a square root at one point. So when you look at 2026, what we're actually doing is evening that spend out across the entire year. So you don't have any peaks and valleys of spend that can create inefficiencies and so what that means in reality is Q1 is actually down because, again, Q1 spend last year was extremely high before I joined the business. So Q1 spend is slightly down. Q2, 3 and 4 will be up year-over-year relative to last year because of the fact that we're evening out the spend. So you are going to see increased spending, as Amy mentioned, in line with our full rollout of the products. Amy O'Keefe: And the only thing I'd add is that Q2 is up higher than -- the back half by quarter is roughly flat, but the flip flop is really between Q1 and Q2. Unknown Analyst: Yes. Okay. Very helpful. And then just a quick follow-up on the clearance of existing products. Was that primarily greater markdown than expected? And then did you say that was expected to be a headwind once with those newer products and on the reduction? Amy O'Keefe: Sorry, are you finished with your question? Unknown Analyst: Yes. Amy O'Keefe: Got you. We are going to see unquestionably some margin pressure in Q1. So this new product rollout is monumental compared to other product launches in the company's history. I mean, I think we say we haven't seen such significant change in a decade and so with a hard stop, and we definitely didn't want to do a rolling change of these products because we wanted to get the revenue ramp and the margin benefits as early as we possibly could. So we're definitely going to be taking some discounting and hits to margin in Q1 because of the hard stop and the softness that we talked about in January and February, we had a little bit more inventory hangover than we would have liked, and we're working through that in the month of March. Linda Findley: Yes. The only thing I would add to that is it was -- you were asking if it was expected, and we did expect to do some clearance work. So I think that's fairly standard in a launch of this magnitude. One of the things that we are excited about with what we've seen from the launch of Comfort mode is this -- it outsold 3.5x our plan, but it's also out selling all 3 of the beds it replaces by 2x. So you get leverage with volume as well. And that's a big part of what we're thinking about long term is, of course, the volume play and how we can increase leverage that way, too. So there's trade-offs in everything that we're looking at that this was expected. Operator: And as we have no further questions, ladies and gentlemen, this will conclude today's question-and-answer session. I'd now like to turn the conference back over to Linda for any closing remarks. Linda Findley: Thank you very much for your time today. We're excited for our customers to experience our new product lineup later this month, and we remain very focused on the key elements of our turnaround strategies as we actively address our capital structure. . I look forward to updating you on our continued progress in the coming months. As always, if you have any questions, please contact us directly. Operator: This concludes today's conference call. Thank you all for joining. You may now disconnect.
Operator: Good morning, ladies and gentlemen. Welcome to Village Farms International's Fourth Quarter and Year-End 2025 Financial Results Conference Call. This morning, Village Farms issued a news release reporting its financial results for the fourth quarter and year ended December 31, 2025. That news release, along with the company's financial statements are available on the company's website at villagefarms.com under the Investors heading. Please note that today's call is being broadcast live over the Internet and will be archived for replay both by telephone and via the Internet, beginning approximately 1 hour following completion of the call. Details of how to access the replays are available in today's news release. Before we begin, let me remind you that forward-looking statements may be made today during or after the formal part of this conference call. Certain material assumptions were applied in providing these statements, many of which are beyond our control. These statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those expressed or implied in forward-looking statements. A summary of these underlying assumptions, risks and uncertainties is contained in the company's various securities filings with the SEC and Canadian regulators, including its Form 10-K, MD&A for the year ended December 31, 2025, and which will be available on EDGAR and SEDAR+. These forward-looking statements are made as of today's date and except as required by applicable securities law, we undertake no obligation to publicly update or revise any such statements. I would now like to turn the call over to Michael DeGiglio, Chief Executive Officer of Village Farms International. Please go ahead, Mr. DeGiglio. Mike DeGiglio: Thank you, Liz. Good morning, everyone, and thank you for joining us. With me today are Steve Ruffini, our Chief Financial Officer; and Gilan Lefever, our Chief Operating Officer; and Sam Gibbons, our Senior Vice President of Corporate Affairs. So I'm very excited to report our 2025 results, and I'll begin with a review of highlights for the full year and the fourth quarter. Then I'll turn the call over to Steve for a review of the financials before some last closing remarks. Our fourth quarter results again delivered strong profitability, gross margin and cash flow from operations, which contributed to record levels of performance for each of these metrics in fiscal year 2025. It was also a year that reflected the accumulation of many years of hard work and long-term strategic planning that has prepared us to capitalize on many of the catalysts that are now unlocking value for our stakeholders. Not only did we deliver record profitability and cash flow generation in 2025, but we did so with step function growth across several key metrics compared to 2024. We grew our global cannabis sales by 17% year-over-year with just a partial year of contributions from outstanding Netherlands business and international export sales increased more than sixfold as we continue to benefit from our leadership position as 1 of the world's largest EU GMP-certified cannabis operators. This resulted in consolidated and record consolidated performance, including net income from continuing operations of $21 million or $0.19 per share. a $49 million improvement compared to the prior year. Adjusted EBITDA from continuing operations of $50 million, another improvement of $48 million. and cash flow from continuing operations of $58 million, an improvement of $44 million compared to 2024. Our full year performance is a result of solid execution against our long-term plan and a strategy focused on improving margin performance, profitability and cash generation to enable additional growth investments across our platform. Those of you who follow us the longest know that we started with a crawl-walk-run approach to scaling out of cannabis business. And that's always been our view that we don't need to be first-mover advantage to build durable, defensible business models in our plant-based consumer goods. But what we do need is vision, patience, discipline and excellence in asset development operations and commercial activities, coupled with world-class people capable of leading us forward. We believe we demonstrated all of these qualities since we expanded the cannabis in 2018 and particularly in 2025. Since 2018, we've taken a methodical approach to scaling our capacity and capabilities in Canada, including early recognition of the potential power of EU GMP certification which we began pursuing nearly 6 years ago. We've now been EU GMP certified for over 4 years and international customers are increasingly seeking our products as more stringent regulations abroad -- have been restricting routes to market of other operators who can't meet our production and quality standards. The recent financial contribution from our Netherlands business are also making -- we're also making years in the making. We acquired our Netherlands license 5 years ago and have been very patient and prudent with respect to commercializing our operations and aligning our commencement of sales with the launch of the pilot program last April. We've modeled our business in an events to ensure return our investment in under a 4-year time line and our performance in 2025 clearly demonstrates Village Farms strong stewardship of capital on behalf of our shareholders, with positive net income for the year after only 3 quarters of revenue performance. And finally, our transaction this past May to privatize our legacy produce business also reflected many years of hard work and preparation, to achieve confidence that our cannabis business was ready to stand on its own and to structure transactions that enabled us to retain the attractive long-term optionality that we see for our portfolio of advanced greenhouse assets in Canada and Texas. All of these improvement important developments began unlocking value for our stakeholders in 2025 and provide more evidence of the success of our initial crawl, walk, run approach to scaling our operations. And now we believe we're ready to run as 1 of the world's largest and most respected scaled cannabis operators. Before I continue discussion on the fourth quarter, I'd like to, again, take an opportunity to acknowledge all our folks who are enabling our success. At [indiscernible] does take a village, and our people raised the bar considerably last year. Congratulations to all our team members around the world on a tremendous year. Now turning to the fourth quarter, which demonstrates our third consecutive quarter of positive consolidated net income from continuing operations, adjusted EBITDA and cash flow from operations. Operator: Please standby. Mike DeGiglio: Okay. Apologies, we lost connection. I'm not quite sure where we lost it. So I will back up a couple -- 30 seconds or so. And I apologize if I'm repeating certain things that were transmitted Talking about the Netherlands, our recent financial contribution to the Netherlands business are also many -- were many years in the making. We acquired the Netherlands license 5 years ago and have been very patient and prudent with respect to commercializing our operations and aligning our commencement of sales with the launch of our pilot program last April. We've modeled our business in Netherlands to ensure a return on our investment under a 4-year time line. and our performance in 2025 clearly demonstrates Village Farm's strong stewardship of the capital on behalf of our shareholders, with positive net income for the year after only 3 quarters. And finally, our transition this past May to privatize our legacy Produce business also reflected many years of hard work and preparation to achieve confidence that our cannabis business was ready to stand on its own and to secure a transaction that enabled us to retain the attractive long-term optionality that we see for our portfolio of advanced greenhouse assets in Canada and Texas. All of these important developments began unlocking value for our stakeholders in 2025 and provide more evidence of the success of our initial crawl walk run approach to scaling our operations. And now we believe we're ready to run as 1 of the world's largest and most respected scaled cannabis operators. Before I continue to discuss the fourth quarter, I'd like to again take an opportunity to acknowledge all our folks who are who are enabling our success. It truly does take a village and our people raised the bar considerably last year. Congratulations to all our team members around the world on a tremendous year. Now turning to the fourth quarter, which demonstrated our third consecutive quarter of positive consolidated net income from continuing operations, adjusted EBITDA and cash flow from operations and further evidence of our progress to become consistently and sustainably profitable for the long term. We saw year-over-year growth in net sales of 9%, just shy of $50 million. Net income from operations of $2.3 million, adjusted EBITDA of $8.6 million and operating cash flow of $11.4 million. Our Canadian cannabis sales once again led the way where we continue to maintain a top 5 overall market share position and as of the end of last month, continue to hold the #1 position in dry flower. Q4 sales grew 10% year-over-year, driven by a nearly 400% increase in international export sales. Retail branded sales were flat compared to Q4 last year, but with improved gross margins year-over-year, reflecting our success in shifting the business in Canada towards high-margin products throughout the course of the year. Gross margin performance in Canada, 43% was once again above our 30% to 40% target range for the fourth consecutive quarter and up meaningfully from Q4 last year. All of this translated to significant year-over-year improvements in profitability resulting in CAD 7.5 million in net income and adjusted EBITDA of CAD 14.3 million which is roughly 27% of sales and cash flow from operations increased to $21.5 million. Before I move on to discuss progress of our ongoing capacity expansion projects, I'd like to take some time to address some of the sequential variances in our fourth quarter results as compared to a record third quarter. We're thrilled to deliver record results every quarter, and frankly, we had demand from our customers to do so once again in Q4. However, near-term supply constraints are temporary holding us back -- and as some of you may be aware, the flow of cannabis in the province of British Columbia was impacted by a labor strike in Q4, which we estimate reduced our Q4 sales by approximately $2.5 million. As we noted in this morning's earnings release, our demand levels continue to meaningfully outpace our current supply capabilities. As some of you may recall, from our Q4 call last year, we entered 2025 with the leanest inventory position in more than 5 years. And for those of you who may be newer to our story, our Canadian cannabis business does experience seasonality due to variances in our growing climate throughout the course of the year. We typically experienced sequential declines in production and revenue during the fourth quarter, unless we've had new capacity come online, which tends to result in higher costs sequentially as compared to our third quarter. We also ended the fourth quarter after back-to-back quarters of record performance in which we continue to sell all the cannabis we produce. In addition to the nuances of inventory levels, seasonality and our temporary supply constraints, the nature of our international export sales has introduce an extra layer of potential variability and quarterly performance due to the timing of shipments and both the size of order flows and profitabilities of these sales. and we did have some international oils from Germany that we expected to ship in late Q4, and that got delayed to Q1. While we're operating with temporary supply constraints as we balance the increasing complex needs of our diverse customer base, importantly, -- the underlying fundamentals of our business remain very strong with continued strength of demand domestically in Canada and in our other international markets which will enable us to continue to drive profitable growth in 2026 and beyond. As we noted in this morning's earnings call, we are expecting to return to sequential growth in international exports in Q1 and continue to expect that we'll begin shipping to multiple new jurisdictions over the course of the next several months. Biomass constraints are a proverbial good problem to have in our circumstances, and it's 1 we're well down the road of addressing with ongoing capacity expansion projects. I'll now turn to some updates on these initiatives in Canada and the Netherlands. I'm pleased to report that our previously announced expansion of our Delta 2 facility remains on track and on budget. We actually began planting the first half of this expansion on March 2 and expect to start seeing early contributions of this additional capacity in late Q2. We expect to harvest an incremental 15 metric tons of production from this expansion during the remainder of this year, while we continue optional providing optimizing the second half of the expansion. Once we're operating at full capacity by mid '27, the D2 expansion will provide an incremental 40 metric tons of annual production compared to fiscal year 2025, which represents an increase of approximately 33%. In the Netherlands, our Phase 1 facility in [ Drafton ] continues to operate at full capacity with healthy growing margins even at limited scale, and we are also continuing to sell everything we produce. We are leveraging our experience in Canada to lead new product innovations and recently launched 10 new product offerings across multiple formats that are unique to this market. We are continuing to see strong pricing with participating coffee shops and believe we're well positioned to capture market share in premium product categories as our new Phase II capacity comes online. I will note that Q4 profitability in the Netherlands was impacted by increased operating expenses as we've recently been adding head count to prepare for the launch of our Phase 2 facility in Groningen which I'm pleased to report is nearing completion and also remains on time and on budget. We anticipate our first Groningen Phase II facility will be painted towards the end of this month with full capacity completion expected in Q2 as we put the finishing touches on some post-harvest and processing capabilities. The Groningen facility will ramp up to full capacity throughout the remainder of this year, at which point our total annual production capacity in the Netherlands will be approximately 10 metric tons. For comparative purposes, we had harvested just under 2 tons from Groningen fiscal year '25. Our capacity expansion products coming online in Canada and Netherlands will allow us to continue scaling profitably and increasing demand with -- and we believe the strength of our balance sheet will enable us to be opportunistic with respect to additional accretive organic and acquisitive growth investments in the future. We funded the majority of our ongoing Canadian and Netherlands expansions from cash on hand but we did recently amend and extend our Canadian credit facility with an incremental $15 million delayed draw term loan at an interest rate of just over 5%. We intend to utilize this incremental debt financing to make additional enhancements to our existing operations beginning with an incremental $3 million investment to expand our EU GMP capabilities throughout the remainder of this year. We ended the year with approximately $86 million in cash after completing a $3 million share repurchase during the fourth quarter, and we remain in an excellent position to continue creating value for shareholders and driving profitable growth in 2026 and beyond. So I'll close the call with some final thoughts on priorities for '26, but now I'll turn the call over to Steve for his review of Q4 financials. Steve? Steve Ruffini: Thanks, Mike. As a reminder, as of May 30, the majority of our legacy produce assets were privatized and are now classified as discontinued operations. Reported financial results for comparative prior periods have been adjusted accordingly. I'll start with a review of our consolidated Q4 results and a reminder that comparable performance to the fourth quarter of last year reflects the impacts of a $10.5 million noncash impairment charge during Q4 of 2024, and related to nonflower inventory purchased primarily from third parties that we determined did not meet our quality standards. Consolidated net sales increased 9% to $49.6 million, driven by growth in our Canadian cannabis segment as well as the third full quarter of contributions of recreational cannabis sales from our Phase 1 facility in the Netherlands. Net income from continuing operations improved to $2.3 million or $0.02 per share compared with a net loss of $5.7 million or $0.04 per share in Q4 of last year. Consolidated adjusted EBITDA from continuing operations was $8.6 million compared to negative $2.9 million in Q4 of last year. resulting in an adjusted EBITDA margin of 17.3% in the quarter compared with a negative 6.4% in Q4 of last year, which was driven by the noncash inventory impairment I just referenced. Our cash flow from operations improved to $11.4 million compared to $10.9 million in Q4 of last year. Turning now to our segmented results. I will start with Canadian cannabis, which I will discuss in Canadian dollars. Total net sales were $52.7 million for a 10% increase versus Q4 of last year. The year-on-year improvement was driven by the strong performance in our international medicinal exports, which increased 384% over Q4 of last year. For the year, Canadian Cannabis net sales were up 12% to a record $228 million. Canadian retail branded sales for the fourth quarter were $55.6 million, essentially flat with the fourth quarter of last year and reflects both the realignment of our product portfolio to higher-margin SKUs as well as biomass constraints. As Mike noted, our retail branded sales in Q4 were impacted by a labor strike in B.C. which we estimate negatively impacted the revenues by $2.5 million. Canadian cannabis gross margin was 43%, up from 3% in Q4 of last year, which was impacted by the inventory impairment. -- reflecting a higher proportion of higher-margin international export sales as well as our focus on higher-margin SKUs in the retail branded channel in Canada. This drove a full year gross margin of 44% and with both the fourth quarter and full year 2025 above the high end of our target range of 30% to 40%. SG&A as a percentage of sales was 22% and down from 28% last year as we continued to drive efficiencies throughout our Canadian cannabis operations. Q4 adjusted EBITDA from continuing operations for Canadian cannabis improved to $14.3 million from negative $9.1 million in Q4 of last year. resulting in an adjusted EBITDA margin of 27%. For the full year, adjusted EBITDA increased nearly $58 million to $67 million for an adjusted EBITDA margin of 29%. Q4 cash flow from operations increased $24.8 million to $21.5 million. For the full year, cash flow from operations increased $61.4 million to $77.5 million. Finally, as we do each quarter, I will point out that in Q4, we paid Canadian excise taxes on a retail branded sales of $21.5 million nearly 40% of retail branded sales and almost double our SG&A costs. I'd also like to discuss our Canadian income tax situation, which will impact our cash flow from operations in 2026. In 2025, we accrued Canadian income taxes of $16 million, which was paid as required in February 28 of this year. In prior years, we did not pay income tax due to carryover tax losses, all of which have now been utilized. I'll note that we are the only major Canadian cannabis LP positions, which is a testament to the strength of our operating capabilities and strong stewardship of capital on behalf of our shareholders and a sign of a sustainable, long-term, profitable business platform. Turning now to our recreational cannabis business in the Netherlands. Q4 saw our third full quarter of sales from our Netherlands operations. Sales were $3.3 million with adjusted EBITDA of $700,000 and which, as Mike noted, includes a sequential increase in operating expenses compared to Q3 as we began to ramp up staffing to support the launch of our Phase II facility. We continue to expect our Phase II facilities to drive a substantial increase in revenue and EBITDA performance in the Netherlands during the second half of this year. Turning now to our U.S. cannabis business. Q4 sales of $3.4 million continues to reflect the impact of various state actions and the ongoing proliferation of unregulated hemp products. Gross margin was down slightly year-over-year at 60%, resulting in a small negative adjusted EBITDA for the quarter. In our continuing produce operations, sales of $4.9 million were 21% lower than Q4 last year. reflecting the impacts of softer year-on-year pricing as well as the sales commission paid to our newly privatized produce business. In previous years, we were the exclusive sales agent for our produce as well as for others. Net loss from continuing gross operations was $1.6 million with adjusted EBITDA of negative $462,000. As a reminder, our produce operations moving forward will reflect contributions from our Delta One greenhouse as well as operating cost of our [ Monahans ] facility in Texas, which remains idle at this time. Our last tomato crop from the Delta 2 greenhouse was pulled in November to begin the conversion to cannabis. Turning to consolidated cash flows and the balance sheet. Total cash flow from operations to $11.4 million for the fourth quarter, bringing the total for the year to $58.1 million. We ended Q4 with cash of approximately $86 million which includes restricted cash of $5 million, putting us in a strong net cash position of $53 million. Our total debt at the end of Q4 was $34 million, and we remain very comfortable with our debt levels, inclusive of the incremental CAD 15 million delayed draw term loan that Mike mentioned earlier, of which we've drawn $5 million. Finally, we have been active with our share repurchase program that our Board approved at the end of September. As a reminder, the program provides the purchase of up to just under 5 million common shares or 5% of our issued and outstanding shares as of the date of the announcement. During Q4, we purchased just under 813,000 shares at an aggregate cost of $3 million. And we have continued the program activity into Q1 of 2026 with the repurchase of roughly 1.1 million shares at an aggregate cost of $3.7 million. Our management team and Board continue to believe this reflects a prudent and balanced approach to capital allocation to drive returns to our shareholders, and we expect to remain active in this regard in the near term. I will now turn the call back to Mike for some closing comments. Mike DeGiglio: Thanks, Steve. So in closing, 2025 was a watershed year for Village Farms as we steadily and successfully executed on our strategy to scale our global cannabis platform, generating not just record results but a step function transformation and profitability and cash generation. Our performance in 2025 for a new baseline as we realize the benefits of our investments in capacity to continue transition demand growth into long-term sustainable growth in earnings and cash flow, and we are continuing to benefit from multiple catalysts and unlocking value for our stakeholders. Our focus remains on execution. -- but we are looking to the remainder of this year with a growth-oriented mindset. We are investing behind our proven teams with enhancement to our operating facilities and we expect to maintain a balanced approach to capital allocation to deliver value for our shareholders. We are continuing to capitalize on the opportunity to enhance shareholder value through our ongoing share repurchase program. We're also given prudent consideration to incremental -- incremental growth, accretive organic and acquisition growth investments. Our expanding global platform, combined with our strong balance sheet, industry-leading cost of capital, an incredibly talented global team, we believe we're well positioned for continued success in 2026 and beyond. With that, Liz, we're now ready to open the call for questions. Operator: [Operator Instructions] Our first question comes from Frederico Gomes with ATB Capital Markets. Frederico Yokota Gomes: My first question is regarding your share repurchases. I guess, from a capital allocation standpoint, -- what does that tell investors in regards to how you view your current valuation and the trajectory of the business as well as the opportunities you see for maybe additional investments in the business and M&A. . Mike DeGiglio: Well, the business always comes first, but we were very confident in the cash generation that we just reported and going forward -- so we felt it's not going to -- in the amount of share repurchase that was approved by more of $10 million. It's not going to meaningfully impact running the business or any opportunities we see for both internal investment or growth. So we've taken a balanced approach. We are always concerned with shareholder value. And at the time and currently, we thought it was prudent. So we have no necessary plans at this point for more once it goes, but we'll reevaluate it as we execute going forward. Frederico Yokota Gomes: Mike. I appreciate that. And then my second question is on Germany. So we saw, I guess, a sequential decline in import volumes in Q4 for that market according to the data from there. So I think that was impacted by some issues in Portugal and maybe the quota permits. But in terms of the growth and the demand coming from that market? I mean is there -- should investors be worried about growth there? Or are you continuing to see that increasing and the important volumes there increasing for that market? Sam Gibbons: Fred, it's Sam. Thanks for the question. So you're right, the official stats are that German imports fell 4%, and Canadian imports were down 11%. And you're right that there was regulatory uncertainty, and we think that, that caused pharmacies, distributors and importers to lower their inventories. But we are seeing that those concerns have since abated and we expect to return to growth in Q1. Also notably, we had, and as Mike noted, we had some orders in that got delayed to Q1. And just to give you context, if those hadn't been pushed, our performance in Q4 in Germany would have outperformed the market performance. So just a caution that the nature of the export market means that there's going to be variability, but we are continuing to experience increasing demand as regulators in Germany have now started to apply more stringent restrictions on the quality and routes to market. And frankly, that's where our model shines. Operator: Our next question comes from Aaron Grey with Alliance Global Partners. . Aaron Grey: Very much for the questions here, and thanks for the commentary and in terms of quantifying some of the shipment order delays. I wanted to kind of carry on from that in terms of some of the capacity constraints that you touch on in some of the near-term variability we understand the appeal of prioritizing international markets for the incremental capacity that we expect to come online with the Delta 2 ramping up. But I just want to get some further contents of how you look to utilize that capacity for international versus Canada? Is it still fair to say that predominantly, most of that will be for international. And could you talk about the lens of how you're looking to maybe see Canadian market share aspirations as you might be utilizing more the incremental capacity for international? . Mike DeGiglio: Aaron, first, let me just clarify. I mean, Canada's first and foremost, that's our additional market where we're balancing all the time the demand we have from international and meeting our commitments in Canada. And I think we're doing a very good job at that, but it could have some variability month to month, but that's why we're making tremendous investments in additional capacity. And keep in mind that there's no stopping capacity in our footprint in Canada with current assets. So that's what we are measuring a lot of time. But I would not say international's priority over Canada, a bit equal. Sam Gibbons: Aaron, just a couple of things to add. We did regain our #1 flower share position in January. And we expect that to be something you'll continue to see in 2026. We had several significant restock during Q4 and new launches in Q4, which are starting to show up in Q1. And then with respect to our 3 primary brands, Pure Sunfarms brand, [indiscernible] dried flower for 12 consecutive months in 2025, and that was a sequential growth. It also -- our Fraser Valley brand grew share of dry flower consecutively between January and September, that short-term supply constraints did kick in for that brand in October, but it recovered by December. And then finally, our -- in our convenience category, we've had a very successful launch of Super Toast, Liquid diamonds, 510 Bates in Q4. and the team is constantly posting updates on the success of that basis point by basis point in market share. . Mike DeGiglio: Yes. And 1 final point is for Canada and international with current assets, we have the capability of more than doubling our 2027 forecast where I mentioned the 40 additional metric tons in 2027. Aaron Grey: Okay. And that's really helpful color in terms of how you're going to prioritize both markets there. Second question for me is kind of going back to some of the Village Farms grassroot talking about cultivation costs. I know you stopped disclosing cost per gram a while back, but it'd be great to get some color in terms of initiatives that you have to further lower the cost of production potentially leveraging innovation that exists in the broader produce segments, like I know you've spoken to in the past and then also potentially touching on expected savings from leveraging costs with the second half of Delta 2 facility coming online. . Mike DeGiglio: Well, we're not going to get into the specifics, obviously, but we continue to improve our costs. Let's just say that, and we're very pleased with continuing reduction in costs. So when I touched on my comment, you have to look at the cost really over a full year. There is some seasonality low light, higher light, so on and so forth. But on an annual basis, we continue to drive those costs lower, just like Steve mentioned, on SG&A as well. So -- in fact, I would say it's exceeding the target of cost improvement in the company today. Operator: That concludes today's question-and-answer session. I'd like to turn the call back to Mr. DeGiglio for closing remarks. . Mike DeGiglio: Okay. I want to thank everyone for joining us today. It was a great year in 2025 and we look forward that would just be a short amount of time before we be reporting our first quarter and look forward to that day in early May. Thank you, operator. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Thank you for standing by. At this time, I would like to welcome everyone to the MariMed Fiscal Year and Fourth Quarter 2025 Earnings Call. [Operator Instructions] I would now like to turn the conference over to Andrew Pacheco, General Manager for MariMed in Massachusetts. Sir, the floor is yours. Unknown Executive: Hello, and good morning, everyone. I'm [ Andrew Pacheco ], General Manager for Massachusetts at MariMed. I'm honored to kick off today's 2025 fiscal year and fourth quarter earnings call. My team at our New Bedford cultivation and processing facility is responsible for the manufacturing of our great brands that is distributed throughout the state. I'm privileged to see firsthand the expertise collaboration and dedication our employees contribute on a daily basis. They take the company's mission to improve lives every day very seriously. You're going to hear during this call about our performance in Massachusetts in 2025 relative to the rest of the market. And I think it's our team's commitment to our success, that's a huge part of what differentiates us and our performance in Massachusetts. Joining the call today are Jon Levine, our Chief Executive Officer; Ryan Crandall, our Chief Commercial Officer; and Mario Pinho, our Chief Financial Officer. This call will be archived on our Investor Relations website and contains forward-looking statements. Actual events or results may differ materially from these forward-looking statements and are subject to various risks and uncertainties. These risks are discussed in the Risk Factors section of our 10-K and 10-Qs available on our website. Any forward-looking statements reflect management's expectations as of today and we assume no obligation to update them unless required by law. Additionally, we will refer to certain non-GAAP financial measures, which are reconciled in our earnings release. I will now turn the call over to Jon for his overview. Jon Levine: Thank you, Andy. Good morning, everyone, and thank you for joining us. Last night, we reported full year revenue of $160 million for 2025, a 1% increase over 2024. 2025 also marked the sixth consecutive year we generated positive adjusted EBITDA. The cannabis industry continues to evolve rapidly. As we have consistently said, we believe an enduring advantage in this environment will come from only the strongest and most accessible brands. That conviction continues to guide our expand the brand road map, which is built around 3 strategic pillars. First, capturing meaningful market share in our existing markets; second, investing thoughtfully to bring our best-performing brands into new markets; and third, a further strengthening our balance sheet to support long-term growth initiatives. We made progress across all 3 pillars in 2025. And have continued advancing them into early 2026. With respect to the first pillar, owning a meaningful share in each of our existing markets, our proven wholesale capabilities delivered another strong year as wholesale revenue grew in each of our core markets. Our integrated expertise across cultivation, manufacturing, distribution and marketing. In addition to the quality of our products, has enabled several of our brands to secure leading market positions, notably for the fourth quarter, Betty's Eddies was the #1 selling edible across the markets where it's available. In the beverage category, which includes hundreds of ready-to-drink options, our Vibations power to drink mix ranked fourth. Turning to the second pillar, expanding into new markets, in 2025, we laid the groundwork to bring our brands to Pennsylvania and New York and launched Betty's Eddies in Maine through a new licensing agreement, expanding through licensing is a clear validation of our brand strength. We're very confident about the revenue potential for our brands in Pennsylvania, especially with adult sales likely to come in the next year or 2. We've watched our product thrives in the neighboring states of Maryland and Delaware. They're already learning a lot about the Pennsylvania market through the managed services partnership we entered into in 2025. In fact, we helped significantly grow our partners' revenue during the short period in which we've managed their business in Pennsylvania. We've established licensing agreements with the same partner last year and they've submitted our products in packaging for state approval. Turning to New York. Construction is underway on the processing kitchen we're building with our partner. That project is on schedule. In Maine, our new licensing partner began distributing Betty's Eddies during the fourth quarter of 2025, and we're tracking with our expectations, achieving positive results with exceptional sell-through at the accounts opened to date. Collectively, Adding these 3 states provide a strategic foothold for MariMed across the Northeast and Mid-Atlantic. Licensing allows us to pursue growth and expand brand distribution in a capital-efficient manner, and we'll continue to pursue other agreements as part of extend our brand strategy. This brings me to our third pillar, continuing to strengthen our balance sheet. We have always maintained a strong balance sheet, and we intend to continue fortifying it to support our future growth initiatives. Last week, we successfully completed the restructuring of the convertible stock held by our Series D shareholder. The agreement extended the maturity of the preferred shares further enhancing our financial flexibility to support our growth initiatives. We are pleased to execute the agreement with favorable market terms for the company, along with reductions in operating expense that Mario will discuss our objectives to provide the stability and flexibility required to execute our growth plan. We recognize that implementing all the initiatives I've outlined only get us part of the way to our goal of value creation we seek and our investors deserve. To help us achieve that goal accretive M&A remains an active and imperative avenue for the company. Our Thrive retail stores also play an integral role in our growth plan. First, they serve as premium showcases for our brands. Second, they enable us to cultivate direct-to-consumer relationships through our Thrive loyalty program. Third, and perhaps the most important, retail will continue to generate the majority of our revenue and operating cash flow. In Ohio, we intend to leverage our second retail license with a new Thrive store to be located in the Columbus area. We anticipate it opening this year. In summary, in 2025, we maintained or strengthened our bend leadership across core markets and expanded our geographic reach. We intend to build on our momentum in 2026 while continuing to reinforce our financial foundation. Our primary growth driver this year will include continued wholesale penetration and full year contributions from Delaware's expanding adult-use market in our main licensing partnership, and anticipated revenue generated by our new Ohio dispensary. At the same time, we will do everything in our control to move up the time line for distribution of our brands in Pennsylvania and New York. While we remain optimistic about the potential for federal reform and Schedule 3 finally getting over the finish line, our growth strategies do not depend on it. It depends on disciplined capital allocation and the execution capabilities of the strongest team in cannabis and we are fortunate to have both. I want to thank our employees for their dedication, hard work and unwavering commitment. Their contributions are the foundation of our success. I'll now turn the call over to Ryan to provide details around our fourth quarter performance. Ryan Crandall: Thanks, Jon, and good morning, everyone. Let me walk you through our performance at a high level and then across each of our core markets. Our sales, marketing and operations teams delivered another strong year with aggregate wholesale revenue increasing 11% in 2025. Wholesale represents 44% of MariMed's total revenue, up from 40% in 2024. Our diversified portfolio across flower, vapes, edibles and concentrates continues to resonate with consumers, delivering compelling value and performance across multiple price tiers and in every market we serve. Overall, we increased our penetration into dispensaries in 2025 by 200 basis points, selling our brands into 85% of retail stores in the markets in which we operate. Turning to retail. We finished the year with momentum, achieving sequential growth of 4% during the fourth quarter compared to a decline of 5% during the same period in 2024. We also increased transactions in our stores by 4% sequentially and 8% year-over-year. Adding Delaware adult-use sales in August was certainly part of our growth story but several initiatives we implemented during the year really started gaining traction toward the end of 2025, helping offset price pressures across our core markets. Those initiatives included centralizing our retail buying, which delivered cross market intelligence and buying power for the company. Second, we improved our assortments and decreased our days on-hand inventories. Working together, these steps elevated our customer experience while also supporting margin expansion. Third, we unified the Thrive brand across all of our stores, and at the same time, launched a new, more user-friendly website to make online purchasing easier. Fourth, we made it easier to shop inside our stores by expanding our store hours as well as our payment options. And fifth, we focused on generating more revenue through our loyalty program, whose members shop more often and with larger basket sizes than nonmembers. We accomplished that by reactivating dormant membership and by implementing strategies to increase membership. Membership in the program increased 7% sequentially during the fourth quarter and 31% year-over-year. The results of those initiatives give us confidence as we look ahead to this year, especially when combined with new initiatives we're executing in 2026, which include the following: continuing to focus on accelerating the growth of our loyalty program membership by personalizing its offerings based on member demographics, geographics and buying behaviors. Next, we launched a Thrive retail app, which will enable us to increase and personalize our communications with Thrive customers at greatly reduced cost. You can download the app thrive dispensaries from the Apple and Android stores today. Third, we're putting a heavier emphasis on increasing the internalization of MariMed-produced brands in our stores, helping expand the company's margins. Turning to individual market performance. In Massachusetts, wholesale revenue was flat year-over-year and for the year, mapping the state's performance according to state sales figures. We ended the year with our products in 83% of the dispensaries in the state, a 4% increase since 2024. In an environment defined by price pressure, the strength and consumer appeal of our brands enabled us to expand our presence across more dispensaries statewide. Betty's Eddies and Bubby's Baked continued to shine, ranking #1 in their respective edible categories. By basins, Nature's Heritage pre-rolls and InHouse gummies all owned significant share as well with each ranking among the top 10 in their categories. Retail revenue in Massachusetts was flat sequentially and year-over-year. We view that outcome positively given we were able to increase transactions by 5% during the year versus 2024. It's a recurring theme that sustained pricing pressure in Massachusetts resulted in declines of our AOV. In Maryland, wholesale sales grew 3% in 2025, which was in line with the market's performance year-over-year. We also maintained nearly 100% penetration across open dispensaries with our products available in 108 of 109 dispensaries. There's no resting on our laurels for our Maryland team. Their goal in 2026 is hyper focused on expanding our shelf space in those open accounts. Our brands sustain strong leadership positions in the state with Betty's Eddies, Bubby's Baked by basins and InHouse companies all ranked within the top 5 in their respective categories by market share. During the fourth quarter of 2025, retail revenue in Maryland increased 14% sequentially and 18% for the full year compared to 2024, with particular credit due to our Upper Marlboro team for delivering outstanding games. Overall, we increased transactions across our 2 Maryland dispensaries by 35% in 2025 versus 2024. Turning to Illinois, where we began distributing our brands just 2 years ago, wholesale revenue increased 39% in 2025 versus 2024 as we continue building scale. That compares favorably to the state's overall cannabis sales, which declined 5% according to [indiscernible]. We expanded distribution into 27 additional dispensaries in Illinois during the year, finishing the year with 82% penetration and reinforcing the competitiveness of our brands in a crowded marketplace. Retail sales in Illinois were flat sequentially and decreased 26% for the full year versus 2024, primarily attributable to the price pressure in that market. In Delaware, we have been very pleased with wholesale performance following the commencement of adult-use sales in August 2025. Wholesale revenue increased 37% sequentially, supported by the expansion of our Milford cultivation facility, which positioned us to meet rising demand. Our products are available in every Delaware dispensary and according to [indiscernible], our portfolio achieved the #1 overall market share in 2025. Betty's Eddies, Bubby's Baked, Vibations and InHouse gummies each ranked #1 in their respective categories. And total sales for both Nature's Heritage and FSC brands placed us #1 in the flower category. At retail, revenue tracked in line with our expectations following the adult-use transition with sales across our 2 Delaware stores increasing 1.25x following the AU launch. In summary, our business remained resilient in 2025 despite a challenging operating backdrop. We entered 2026 with momentum on our side and well positioned to further strengthen our brand leadership and build on the foundation we have established. Before turning the call over to Mario, I want to thank all our wholesale and retail employees. They demonstrated the creativity, expertise and commitment necessary to deliver strong results in the challenging environment. I will now turn the call over to Mario to provide the financial update. Mario Pinho: Thank you, Ryan, and good morning, everyone. For the fourth quarter, total revenue was $41.7 million, bringing full year 2025 revenue to $159.8 million, representing 1.3% sequential growth in the quarter and 7% growth for the full year. Against a broadly flat industry environment, we delivered growth, maintain margin discipline and strengthen liquidity, reflecting continued operational focus across the business. From a mix perspective, fourth quarter retail revenue was $23.4 million, up 3.6% sequentially. Beyond top line growth, retail continues to generate the majority of our operating cash flow and remains the driver of our cash generation profile. During the quarter, we saw a stabilization in store level contribution margins and improved inventory efficiency, reflecting the operational initiatives Ryan outlined earlier. Wholesale revenue for the quarter was $17.6 million compared to $18 million in the prior quarter. while sequential pricing pressure persisted in certain mature markets, we continue to manage production planning yield optimization and brand positioning to protect contribution margins. Importantly, performance in newer markets with healthier supply-demand dynamics such as Delaware continues to validate our strategy with stronger demand dynamics supporting healthier unit economics. Non-GAAP cost of revenue for the quarter was $25 million, resulting in gross profit of $16.5 million. Non-GAAP gross margin declined modestly to 40%. Operational efficiencies across cultivation and manufacturing helped offset pressure in certain mature markets, allowing us to maintain margin stability. Turning to operating expenses. Total operating expenses were $56.9 million for the year, representing only a 0.7% increase compared to 2024. This reflects continued discipline across SG&A even as we invested selectively in brand expansion and new market infrastructure. This expense discipline demonstrated the scalability of our operating model and our ability to generate operating leverage as revenue grows. Operating income for the quarter was $2.4 million, down $667,000 sequentially. For the full year, operating income was $8.8 million compared to $11.4 million in 2024. The decline primarily reflects lower gross profit in certain mature markets as well as a negative contribution from our Missouri operations prior to our exit in October. Excluding Missouri, the year-over-year decline would have been meaningfully smaller, reflecting disciplined cost control across the organization. On an adjusted basis, operating margin declined less than 1 percentage point year-over-year, demonstrating the effectiveness of our cost discipline. From a full year cash earnings perspective, non-GAAP EBITDA for the 2025 was $16.9 million, representing a margin of 10.5%. This margin reflects a disciplined balance between protecting profitability in a pricing compressed environment and continuing to invest in long-term value drivers such as brand expansion and market positioning. For the full year, non-GAAP EBITDA declined 12.8% year-over-year, primarily reflecting lower gross profit and the impact of Missouri operations prior to our exit in October. These factors were partially offset by disciplined cost control and operational efficiencies across the business. Turning to capital discipline and liquidity. Cash flow from operations remained positive during the quarter and for the year, supported by disciplined working capital management -- we exited noncore operations with Missouri maintain measured capital expenditures and prioritize liquidity preservation in a constrained capital environment. We ended the year with $8.9 million in cash and cash equivalents, up from $7.3 million at the end of 2024. In addition, as Jon mentioned, we recently completed the restructuring of our Series B preferred shares, extending maturities and enhancing financial flexibility. Importantly, we have no material debt maturities in the near term, positioning us to execute our growth strategy without near-term capital pressure. Looking ahead, our financial focus remains centered on 3 objectives: driving margin expansion through mix optimization and cost management, prioritizing capital deployment into the highest return opportunities and finally, strengthening liquidity and financial flexibility. We believe our disciplined approach to liquidity will position us to create long-term shareholder value while navigating near-term sector volatility. With that, I'll turn the call over to Jon. Jon Levine: Thank you, Mario. In summary, I'm proud of what MariMed accomplished in 2025, and I'm excited about our prospects for 2026 and beyond. Our company performed well in a challenging environment. Looking ahead, we have a strong leadership team, strong business fundamentals, outstanding brand and no material debt maturing for the next several years. Together with the strategic initiatives we have underway, we are confident in MariMed's tremendous upside over the long term. Operator, you can now open the line for questions. Operator: [Operator Instructions] Your first question comes from Pablo Zuanic with Zuanic & Associates. Pablo Zuanic: Look, special thanks to Ryan for all the color that he gave at the state level. I just want to follow up on a couple of points there. I think you said Illinois retail revenue flat sequentially, but down 26% for the year. My question is more about we've seen the rise in the number of stores in Illinois. I think we're already getting close to the gap. So the effect from the new stores should begin to subside. I mean, correct me if I'm wrong on that because, I mean, the fact that you -- after a big growth for the year, that Illinois store revenues are stabilizing, that's a good sign? Or do you still expect deflation in 2026 and still expect more revenue per store erosion in 2026? I'm speaking specifically about Illinois. Unknown Executive: Thank you for the question. I think we still see some price compression happening in Illinois. But I do tend to agree with you overall that we do believe the market seems to be stabilizing, at least our stores seem to be stabilizing. But price compression is still real in that market, and it is forecasted to compress more in '26. Pablo Zuanic: All right. And if you don't mind, I think you gave the detail for revenues for Illinois in terms of retail, but can you say in total, what happened with Illinois in the fourth quarter, accounting retail and wholesale and then Massachusetts also retail and wholesale? And again, I don't know if you provided that or not in the prepared remarks, I'm not sure. Mario Pinho: Pablo, it's Mario. Specific to Illinois? Pablo Zuanic: Yes. I'm just trying -- I know as you said for the year, Retail, Illinois was down 26%, but wholesale was up, right? So I'm just trying to -- and again, we can follow up offline. But just trying to understand the total revenue for Illinois will happen in the fourth quarter and the full year and the same thing for Massachusetts. Obviously, Massachusetts more stable in total compared to Illinois, but just trying to gauge that. Mario Pinho: Yes, we can definitely follow up in detail offline, but sequentially in Illinois, we were down. and primarily driven by the retail side of our product revenue. Aaron Grey: Right. Okay. And then just moving on to Delaware. Can you comment on your expectations for how fast the number of stores can grow in Delaware, I mean, obviously, that will create great opportunities on the wholesale side but may lead to some revenue erosion at the store level. But what's the outlook there on timing in -- from what you know for the market in Delaware? Unknown Executive: Yes. Pablo, thank you. We are closely working with new stores prior to opening. I think it has been good. We have seen some new stores getting close to coming online. But at this point, it has been a relatively slow rollout of new stores. We are increasing our sell-in to stores across the state and as I mentioned, our brands are leading positions across the state in almost every category, and we have a plan to get there in every category. So very bullish as the new stores come online that we're going to be able to supply those stores and be partners with them out of the gate and make our brands really kind of first movers in every store in that market. Pablo Zuanic: Right. And then just a follow-up here. These are more modeling questions, but in Ohio, Columbus store, when do you expect exactly that to open roughly. And then in the case of the Upper Marlboro store, trade growth sequentially, is that base -- again, is that sustainable that growth pace or was that one-off related to the fourth quarter? Jon Levine: Pablo, this is Jon to speak to you again today. First of all, [indiscernible] it, but we do know that it will be in this year, and we're going to expect as we can to get the building up and running. [indiscernible]. That's a big positive that we are seeing is that [indiscernible] is very willing to work quickly. As far as the [indiscernible], that business has been very strong there for a very small store. It is just a pleasure to watch that continue to grow. And I do believe that it will continue to see additional growth and can handle it. I just think part of it is that the -- that it is so hard to find real estate in Upper Marlboro county that we're getting an advantage even though we're a small store, not easily seen, but we're seeing positives that people are hearing about it and coming in droves. Pablo Zuanic: And the last one, maybe bigger picture. I know that you are following an asset-light expansion model. I guess, in my opinion, those are my words, of course, with the licensing deals in New York and Maine. But what about acquisitions in terms of entering other states and buying hard assets? Is that part of the strategy or not for now, just protect the balance sheet and keep it asset light? Jon Levine: No, Pablo, as I said, the big growth opportunities is to still be active in the M&A and we're out there talking to quite a few different groups. There's a lot of fire sales going on, but they have to be for the right price. We don't want to do something that will be not beneficial for the company or make our balance sheet worse. So we are constantly negotiating but they also have to have some upside. We don't want people that are not capable of running a place that we could go in and turn it around, but we would also want to make sure that we're not buying something that's being the price compression and competition take away from their ability to survive in that market. Massachusetts where there's the biggest over slot of licenses is you're seeing a lot of people going out of business. And there's the opportunity coming up with the expansion in Massachusetts that we hear that they are going to increase the number of licenses. So we are actively looking at trying to gain some more market share. Pablo Zuanic: I had one more, if I may, my apologies, if there's anyone else in the queue here. In the case of the licensing agreement in New York and the MSA in Pennsylvania, is there a path to take control of those assets someday or nothing on paper right now? Jon Levine: There is presently nothing on paper. We're also -- I mean, going into these markets on the licensing ability to learn the markets and to see how those markets react not just to our brands, but just to see what there is in the market in terms of growth potential. And we will look at negotiating with our partners if there is the opportunity to either buy them or join them in some other way than just the licensing agreement. Operator: Your next question comes from Joe Gomes with NOBLE Capital. Joseph Gomes: I wanted to follow up on the Pennsylvania and New York. Jon, doesn't -- from your comments as to what you were looking ahead for '26 to fuel growth doesn't sound like either one of those will be big contributors in '26. I just wanted to make sure I am reading that properly. Jon Levine: You're reading it properly in the way that we've made the statements. We are presently in construction in New York. We're hopeful that we can get that operation up and running before the end of the year. and build the inventory to start revenue either late the year or early in '27. And Pennsylvania is just basically, we have to get the approval of our brands and everything by the state, and then we can go into the manufacturing and building up the inventory in that state also, but it's more of the timing that is out of our control. So we are just not sitting here saying that we're going to have that done. So we're going to be a little bit conservative on that approach. But we're very excited about the opportunity in Pennsylvania. And we're still building up our brands in the state of Maine with our licensing up there also. So the licensing is working positive up there. Joseph Gomes: Okay. And then given the fact that your penetration already is at about 85% in the core market, how much more is available, do you think, from that to help drive growth in '26 and getting additional penetration? Jon Levine: Yes, Joe, thank you for the question. We talk about that often. And it's a tremendous opportunity for us having that type of penetration in these core markets. And so from a product and brand standpoint the ability to go wider and deeper with these customers as we're already a trusted vendor of theirs. I think that's our opportunity. We do believe that, that's a tremendous opportunity on the wholesale side. And I think as you see the trajectory of going from 40% of our revenue to 44% and still increasing the revenue year-over-year, that increased penetration can only help us if we have more products to bear for buyers. Joseph Gomes: Okay. And just one more for me, and I'll get back in queue. So great job on the refi. Just what will that increase in interest cost or interest expense for on an annual basis? Jon Levine: That number is approximately $800,000. Operator: This concludes the question-and-answer portion of the call and today's call. Thank you so much for attending. You may now disconnect, and have a wonderful rest of your day.
Operator: Hello, and welcome to the TIC Solutions Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the call over to your host, Andrew Shen, Director of Investor Relations. Thank you. You may begin. Andrew Shen: Thank you, operator. Good morning, everyone, and thank you for joining the call. Joining me this morning is Tal Pizzey, our Chief Executive Officer; Ben Heraud, our President and Chief Operating Officer; Kristin Schultes, our Chief Financial Officer; and Robbie Franklin, Executive Chairman. As disclosed in our earnings release, we would like to acknowledge the planned leadership transition we announced this morning. Ben Heraud has been appointed Chief Executive Officer effective March 31, 2026, succeeding Tal Pizzey. Tal will continue to serve on our Board of Directors and act as an adviser to Ben through and following the transition to ensure continuity. We will provide additional context during our prepared remarks. I would now like to remind you that certain statements in the company's earnings press release and on this call are forward-looking statements that are based on expectations, intentions and projections regarding the company's future performance, anticipated events or trends and other measures that are not historical facts. These statements are not a guarantee of future performance and are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. In our press release and filings with the SEC, we detail material risks that may cause our future results to differ from our expectations. Our statements are as of today, March 12, 2026, and we undertake no obligation to update any forward-looking statements we may make except as required by law. As a reminder, we have posted a presentation detailing our fourth quarter financial performance on the Investor Relations page of our website @ticsolutions.com. Our comments today will also include non-GAAP financial measures and other key operating metrics. The required reconciliations of non-GAAP financial metrics can be found in our press release and in our presentation. For the purpose of this call, we refer to our segments as Inspection and Mitigation, or I&M, Consulting Engineering or CE, and Geospatial or GEO. Any reference to combined results reflects a non-GAAP combined view of legacy Acuren and legacy NV5 for comparability. More details on the calculations of the combined results are included in the presentation. Let me outline the flow of today's prepared remarks. Tal will provide opening comments. Ben will review our operating priorities and segment performance. Kristin will cover our financial results, integration progress and our 2026 outlook. Robbie will conclude with strategic priorities and capital allocation. It's now my pleasure to turn the call over to Tal. Talman Pizzey: Thank you, Andrew. Good morning, everyone. This morning, we announced the planned leadership transition that has been contemplated as part of our broader succession planning process. After nearly 4 decades with the business, including serving as Chief Executive Officer, I will be transitioning from the CEO role as I prepare for retirement. I will continue to serve on the Board and act as an adviser to Ben and his team to ensure a seamless transition. Since joining Acuren in 1987, it has been a privilege to help build this organization. We entered the public markets and completed the combination with NV5 create TIC Solutions a $2 billion revenue company. Ben has been deeply involved in shaping the combined operating model since the NV5 combination closed in August. He understands the platform, the culture and the priorities ahead. I have full confidence in his leadership as the company moves into this next chapter. With that, I will turn the call over to Ben. Benjamin Heraud: Thank you, Tal. I'm excited to step into the CEO role on March 31 and to build on the strong foundation we have established across both legacy organizations. Since joining TIC Solutions in August, my priority has been sharpening our commercial execution across the platform. That starts with aligning leadership around clear growth priorities, strengthening account management processes and accelerating cross-segment collaboration. We are driving greater consistency and pricing and utilization. Before joining TIC Solutions, I served as CEO of NV5 and previously as COO. I joined NV5 through the acquisition of Energenz, a business I co-founded and spent more than a decade building and scaling engineering and commissioning operations across global markets. That experience in building commercial teams, improving operating rigor and driving prudent capital allocation informs how I approach this next chapter. 2025 marked an important step change for TIC Solutions. We completed the combination, rebranded and established a scale TIC, Engineering and Geospatial platform positioned for the next phase of growth. On a combined basis, in 2025, we grew revenue approximately 4% to $2.1 billion, representing our highest combined full year revenue. We delivered approximately $312 million of adjusted EBITDA and 14.8% adjusted EBITDA margin for the full year. We now operate at meaningful scale with a diversified end market mix and a recurring revenue base anchored in compliance and essential services that positions us well for durable growth. We have an incredible opportunity ahead to expand margins and compound earnings through focused execution of our strategy. And as we move into 2026, our priorities are clear. First, we will accelerate organic growth across the platform with a particular focus on cross-selling and deeper client engagement across our segments. We see a meaningful opportunity to expand share of wallet with key infrastructure, industrial, utilities, data center and government clients by leveraging our combined capabilities. Second, we are focused on strengthening organizational alignment and cultural cohesion across TIC, so we retain our great talent and deploy our resources and capital to the highest return opportunities. Finally, we'll drive margin expansion through prudent cost management, service mix improvement and utilization improvements as we scale. We're beginning to see tangible cross-selling traction across the platform. For example, we're in late-stage negotiations on a multiyear bridge infrastructure engagement. The scope brings together drone-based LiDAR mapping and modeling, engineering oversight and design review, both access and inspection capabilities, allowing the client to execute a long-term inspection and maintenance solution. This is a good example of how we can serve as a multidisciplined provider across the asset life cycle, which we believe is a differentiator in the market. In this example, we expect opportunities to expand and scope over time, including additional inspection work and analytics services. This project is emblematic of the sizable market opportunity ahead for this integrated offering. Our revenue base remains anchored in recurring and repeat compliance-driven inspection, Engineering and Geospatial activity. We believe the diversified nature of our portfolio provides enhanced stability and performance greater flexibility and capital allocation. Diving into segment performance, CE continued to perform well. Activity in data centers, infrastructure, engineering, building planning and design and specialty services such as the development of digital twins remains healthy. Results were supported by ongoing infrastructure investment and grid hardening and modernization programs. These programs are typically embedded within multiyear capital plans rather than short cycle activity. Data center revenue increased meaningfully year-over-year, reaching nearly $70 million in 2025, more than doubling versus the prior year. We continue to see strong momentum with line of sight to nearly $100 million of data center revenue supported by contracted backlog and programmatic client engagements. Within data centers, our work expands building systems design commissioning and power-related scopes, including mechanical, electrical, bioprotection, substation, peer review and digital modeling services. Our mix reflects a broader life cycle position. We support hyperscale and colocation clients from early stage engineering and design through commissioning and operational optimization, increasing scope density per site and supporting repeat deployment across multiphase campus relationships. We also recently secured a U.S.-based I&M engagement within the data center vertical, extending our inspection capabilities into the mission-critical space. The scope involves radiographic testing of critical mechanical systems. The engagement demonstrates the applicability of our advanced NDT capabilities within the data center ecosystem. We continue to deepen relationships with global hyperscale clients and as we expand service rep within existing accounts, we expect to continue gaining market share. GEO delivered steady growth and strong margins, supported by utility demand, healthy fleet utilization and increasing contribution from analytics and software services. During the quarter, the federal funding lapse slowed certain procurement and approval processes, which affected timing of work in select programs. The impact was limited to award and approval pacing, and there were no material cancellations. We expect execution timing and visibility to improve as we progress through the year. In February, we announced GEO Agent, our proprietary AI-enabled geospatial platform, and we expect to begin rolling it out to clients in the coming weeks. GEO Agent is designed to integrate with clients' existing systems record and over time, it should improve processing efficiency, automate key workflows and enable higher-value analytics. We expect it to support faster delivery times and incremental analytics services over time while operating within client environments and established workflows. Year-end backlog within CE and GEO was $1.07 billion, up about 10% from approximately $970 million last year. In I&M, Lower volumes were concentrated in the Gulf Coast, primarily due to LNG construction timing and slower chemical activity, along with a few site losses amid elevated competition. Competitive intensity in the region remained elevated during 2025, and we stayed disciplined on pricing while tightening account coverage and improving staffing and resource deployment. LNG-related demand has increased globally and we believe the impact in our second half results reflect timing between major construction phases rather than demand deterioration. We have strengthened regional leadership in the Gulf Coast and made targeted leadership additions with an inspection of litigation to drive operating consistency, commercial focus and improved resource deployment. We remain focused on margin quality, and we continue to pursue work that meets our margin thresholds. We maintain pricing integrity even when competitors were more aggressive, and we will not trade long-term economics for short-term volume. Our embedded run and maintain programs and call-out activity grew in the year. This recurring and repeat revenue base provides meaningful visibility and resiliency across cycles. This growth was offset by declines in the timing and scale of outages and capital projects. To strengthen execution we refined the I&M operating model during the quarter by reorganizing the segment into economically meaningful operating regions with clear P&L ownership. We also streamlined support function and improved indirect cost management to reduce duplication and improve coordination. We are tightening utilization management, asset deployment and cost oversight. On the commercial side, we are reinforcing structured account and pipeline management discipline across our largest customers with compensation frameworks aligned to growth and renewal performance. Collectively, these actions are intended to improve execution consistency and support margin progression in 2026. We plan to host an Investor Day in May to outline our longer-term growth strategy, margin trajectory and capital allocation framework, including additional detail on our updated I&M operating framework. Across TIC Solutions, this quarter's performance reinforces the benefits of scale and diversification in our business. We believe that this positions the company for continued growth and margin progression. And with that, I'll turn the call over to Kristin to review the financial details for the full year and fourth quarter 2025, provide an update on integration and offer context for our 2026 outlook. Kristin Schultes: Thank you, Ben, and congratulations. Good morning, everyone. On a combined basis, full year revenue grew 4.4% on a constant currency basis or 3.6% as reported to $2.1 billion after FX headwinds in the year. Full year combined adjusted gross profit was $794 million, with adjusted gross margin of 37.6%, up 14 basis points. In I&M, revenue was approximately $1.1 billion for 2025, roughly flat for the year with growth in industrial, midstream, wind and automotive, offset by localized softness in the Gulf Coast. I&M full year adjusted gross margin was 27.8% compared to 28.5% in the prior year. On a combined basis, CE revenue was $714 million, up roughly 8% against 2024, lifted by infrastructure and data center tailwinds. CE's full year adjusted gross margin was 47.0% and up 150 basis points against 45.5% in the prior year driven by data center growth and real estate transaction work. On a combined basis, Geospatial revenue was $298 million, up roughly 6% against 2024, driven by strong commercial demand as well as broadening analytics and software sales. Geospatial's full year adjusted gross margin was 51.5% compared to 53.6% in the prior year, driven by mix and utilization. Now shifting to our fourth quarter results. Total revenue was $508 million, reflecting a full quarter of NV5 contribution. On a combined basis, this was roughly flat year-over-year, with growth in CE and GEO offset by I&M. Adjusted gross profit for the quarter was $197 million, up 8% from the combined $183 million. Adjusted gross margin was 38.8%, up 277 basis points from the combined margin of 36.0% in the prior year period. This performance represented margin expansion on a dollar and percentage basis across all 3 segments. In I&M, revenue was $258 million in the fourth quarter, down 2% driven by lower outage and capital project spending. Adjusted gross margin was 28.2% for the quarter compared to 26.1% in the prior year period. The over 200 basis point margin improvement reflects favorable mix, including higher call-out activity as well as improved execution. On a combined basis, CE contributed fourth quarter revenue of $181 million, up 2%. CE's adjusted gross margin was 46.9% in the quarter up 150 basis points against 45.4% in the prior year period, driven by infrastructure and data center tailwinds. On a combined basis, GEO contributed fourth quarter revenue of $70 million, up 2%, with growth impacted due to the federal funding lapse. GEO's adjusted gross margin of 57.2% in the quarter improved against 50.0% in the prior year period, reflecting favorable project mix and strong operational execution. The margin improvement in each of our 3 segments in the quarter demonstrates real momentum as we start 2026. Adjusted SG&A for the quarter was $124 million or 24.4% of revenue reflecting the inclusion of NV5 operations, which carry a higher SG&A ratio. In the near term, we are attacking the elevated SG&A levels through the announced integration program as well as our commercial excellence initiatives. Adjusted EBITDA for the fourth quarter was $76.4 million, representing an adjusted EBITDA margin of 15.0% compared to $40.7 million in the prior year period. The full year combined adjusted EBITDA was $312 million, representing an adjusted EBITDA margin of 14.8%. We improved cash conversion during the year, supported by lower DSO and tire working capital management. Operating cash flow as reported for the year was $95 million, reflecting only a partial year contribution from NV5. Capital expenditures for the full year totaled $34 million or 2.2% of revenue. On a combined basis, CapEx was $56 million or 2.7% of revenue reflecting our low capital intensity and asset-light business. Moving now to an overview of our balance sheet and capital resources. As of year-end, we had total liquidity of $551 million, including approximately $440 million of cash and cash equivalents and $111 million of available capacity under our revolving credit facility. Total term loan debt was approximately $1.6 billion. Our balance sheet is in a solid position, and we remain focused on generating free cash flow to achieve our long-term net leverage ratio target of below 3x. In October, we completed a $250 million private placement of 20.8 million shares of common stock and prefunded warrants to an existing shareholder. The transaction strengthened our balance sheet and provided additional flexibility to fund growth opportunities and to deleverage. Turning to integration. We transitioned to the execution phase of the integration program toward the end of the fourth quarter. We remain on track to execute on the $25 million of cost synergies that we've committed to delivering. We anticipate roughly half of the annualized cost savings to be realized during 2026. And we expect to reach full synergy run rate by mid-2027. To ensure disciplined execution, our integration management office has clear ownership across key functional work streams with defined milestones to track delivery and cost capture while ensuring operational stability. We are also focused on communication, incentive alignment and cultural integration as we bring the organizations together. Now turning to our outlook. For the full year 2026, we expect revenue in the range of $2.15 billion to $2.25 billion and adjusted EBITDA in the range of $330 million to $355 million. At the midpoint, this implies approximately 4% revenue growth over our 2025 combined baseline of $2.1 billion. Meaningful year-over-year growth in adjusted EBITDA is expected to be driven by commercial focus and partial realization of our cost synergies, along with the operating model refinements and I&M that Ben discussed earlier. By segment, on a combined basis, we expect growth in CE and GEO to outpace growth in I&M for the full year. Please note that our 2026 adjusted EBITDA guidance reflects an $8 million investment related to compensation alignment actions at NV5. Specifically, we made a decision to reclassify the short-term incentive program at NV5 from stock-based compensation to cash compensation, which all else equal, reduces adjusted EBITDA beginning in 2026, thus impacting our guidance framework. This important change reflects an integrated market-based compensation structure at TIC. We are excited to announce this to our team, and we believe this will help retain and attract top talent as we continue to grow. We expect typical seasonality in 2026, consistent with the combined profile of our business. First quarter adjusted EBITDA typically represents roughly 15% to 18% of full year EBITDA. In line with historical patterns. The first quarter is generally the lightest quarter of the year, and we expect activity levels and margins to improve with performance weighted towards the second and third quarters. As you think about the first quarter, based on what we see today and our internal planning assumptions, we imply revenue in the range of $470 million to $485 million and adjusted EBITDA of $55 million to $60 million. From a cash flow perspective, we expect healthy free cash flow conversion from adjusted EBITDA. In 2026, we expect net interest expense of $95 million to $105 million, cash taxes in the range of $20 million to $30 million and capital expenditures between $60 million to $70 million. We also expect working capital to be a modest use of cash as we see growth this year. Taken together, these items frame our expected free cash flow generation for 2026. We are excited to be filing our first 10-K as a combined company. I want to thank our teams across the organization for the care, commitment and TIC first mindset that they've demonstrated through this period of change. Many leaders within our businesses have taken on additional responsibilities to move this forward and the integration momentum and progress we've made reflects the pride and ownership our teams bring to the table every day. With that, I'll turn the call over to Robbie to discuss our long-term strategy and capital allocation priorities. Robert Franklin: Good morning, and thank you, Kristin. I also want to thank our investors for your continued engagement and support. Before I outline our strategic priorities, I want to reiterate the Board's confidence in Ben's leadership and thank Tal for his decades of service. With integration underway, TIC Solutions is a unified platform with meaningful scale across inspection, engineering and geospatial analytics. Our revenue base is anchored in nondiscretionary maintenance, regulatory compliance, utility programs and long-cycle investment across critical industries. We support our clients from planning and design through commissioning, maintenance, compliance and asset optimization. Our team combined field data collection with design, analysis and digital capabilities that enhance reliability and reduce operational risk. Our capital allocation framework is disciplined. We will prioritize deleveraging towards our long-term target, reinvest organically in the highest return areas of our business and pursue selective tuck-ins and larger acquisitions that enhance capability, geography or technical depth at attractive returns. This week, our Board authorized a $200 million share repurchase program, which we may use opportunistically based on market conditions. With scale, diverse end markets and resilient revenue characteristics, we believe TIC Solutions is positioned to compound earnings and cash flow over time. 2026 is a critical year for TIC Solutions. We are laser-focused on execution and delivering on the targets we have shared with the investor community. We are encouraged by our early results to start the year and have confidence in our team's ability to drive top and bottom line growth. And with that, I'll turn the call back to Ben for -- to close our prepared remarks. Benjamin Heraud: Thank you, Robbie. As we close, I want to frame where we are going. 2025 was a pivotal year for TIC Solutions. We successfully brought together 2 scaled organizations, strengthened the balance sheet and advanced integration while continuing to deliver for our clients without disruption. The structural tailwinds in our markets remain intact, including infrastructure reinvestment, grid modernization, increasing technical and regulatory complexity and the continued expansion of mission-critical facilities. As we move into 2026, we are focused on accelerating growth by increasing share of wallet, expanding cross-selling across our segments and scaling our account coverage, while strengthening how we work together and reinforcing a common culture. That focus supports continued margin progression and cash generation while maintaining balance sheet strength, which will ultimately drive shareholder returns. I want to take a moment to recognize our teammates across TIC Solutions, they've handled a period of significant change with discipline and focus while staying committed to delivering for our clients every day. Thank you. With that, operator, we're ready to open the line for questions. Operator: [Operator Instructions] Our first questions come from the line of Chris Moore with CJS Securities. Unknown Analyst: This is Will on for Chris. Can you talk a little bit more about the integration process in a little more detail? Are there specific milestones you're looking to reach in 2026? Kristin Schultes: Yes. Thank you for the question. I will tell you that we are -- I am extremely proud of the team and the momentum that we have so far, a high degree of confidence in our ability to execute on this. Right now, I would tell you that some of our focus areas have been around communications and culture, which is incredibly important, especially during leadership transitions. We're working through compensation studies and alignment and choosing system implementation partners. So if you think about our commitment of $25 million of savings and capturing half of that this year, think about that as roughly 60% headcount and the rest non-headcount. And the team is meeting weekly on individual milestones and on track, we're ahead of schedule. Unknown Analyst: That's super helpful. And then on the top line, can you talk more about the biggest potential synergies and go-to-market strategies? And what are you hearing from customers? Is there any cross-selling opportunities that you're seeing that you weren't thinking about initially? Benjamin Heraud: Yes. Thanks, we touched on it on the call, but we have some really exciting developments and opportunities that are coming through the cross-selling program. Been really pleased with how the segments have been coming together and exploring ideas with their clients. We have a lot of white space between the businesses that create opportunity. But just pointing to that recent win and inspection mitigation within the data center space, that's really exciting, that's completely new to inspection of mitigation. So to be able to get that exposure to that market where we're seeing a lot of tailwinds is exciting. And then on the infrastructure side of things, we're able to really service the full life cycle of any kind of asset now with our capabilities from planning and design, consulting and engineering through I&M, it's driving opportunity for us to service our clients in new ways. So we're seeing a lot of upside. It does take time to get these wins in play. We're going to put these ideas in front of our clients and give it to a contract, but very pleased with the progress that we're seeing so far. Operator: Our next questions come from the line of Brian Biros with Thompson Research Group. Unknown Analyst: This is Chris calling in for Brian. A couple of questions on end markets. It seems fair to say that some of the smaller exposure categories are the fastest-growing. In your release and prepared comments, you called out significant organic growth in data centers, and we know that aerospace is another fast-growing end market. Both of these, of course, are higher-margin businesses. Where do you think these businesses could be in the next 12 to 24 months? And could they represent a double-digit percentage of sales? Benjamin Heraud: Yes. I mean in terms of organic growth, we sort of we've doubled the data center business over the last 12 months, and we're continuing to see -- be on track for continued significant growth. Related to that is power delivery and the the demand that data centers are putting on the grid. We're very, very well positioned to exploit that also with our technical capabilities in that space, along with infrastructure and general and the demand that we're seeing there. So some good end markets. Data centers will continue to grow and outpace certain parts of the business, especially as we layer in new services and increase our revenue per megawatt. Kristin Schultes: Chris, I would just add that we're really excited about with the combination of the businesses is the more diversified platform. And really, we see all of our end markets is having tailwinds. So yes, there are pockets of outsized or outpaced growth. But in general, we're really optimistic about all of our end markets. Benjamin Heraud: Yes, probably a good indicator of that. The backlog being up 10% year-on-year. Unknown Analyst: Yes. Fantastic. And then can you talk a little bit about your expectations on the inspection side for the energy and oil end markets? I know they can be somewhat lumpy quarter-to-quarter with the chemical market pressure and how oil and gas is performing, but how should we think about that end market into 2026. Benjamin Heraud: Yes. I mean we have good visibility on the business. A very large percentage of it is planned outages and run and maintain year-on-year as we look at the number of sites that we're working on, that's similar. And in a lot of cases, the contracts have a longer time line. So we have good visibility there. Operator: Our next questions come from the line of Tomo Sano with JPMorgan. Tomohiko Sano: Could you talk about the EBITDA margins in the latest 2026 guidance. IC is lower than what was indicated in your prior outlook given the considerations of the stock comp to cash comp, I get that, but what other reasons for this more vicious margin outlook compared to what you guided 3 months ago, please? Kristin Schultes: Yes. Thank you. So you're spot on the previous range was 15.5% to 16.5% and have been adjusted by the stock compensation investment that we've decided to make. We think this is best for the business in the long term and really drive the integration of the team and provides market-based compensation for our team. So we feel that that's the right decision from there. And from there, we've given a nice framework for our 2026 guidance, both on revenue and adjusted EBITDA on a consolidated basis. Demonstrating dementing growth on the top line as well as margin expansion coming from improved execution across all 3 segments as well as the planned cost synergy realization. Tomohiko Sano: And follow up on CEO transitions. Could you elaborate on the timing and the rationale for this transition? And should we expect any changes in strategies or execution, please? Robert Franklin: It's Robbie. The transition sort of contemplated from the onset, when we bought Acuren helping the business for a very long time, and we wanted to create an environment where he could execute and really have its fingerprints on what the combined TIC Solutions entity would look like. And we also -- we had Ben who was already CEO of NV5, new the business, but we wanted to give him sort of the period to learn about Acuren and sort of the inspection side of the business. So in terms of timing, we feel like this is sort of the right transition time as we build. As we build sort of this unified culture. So pretty consistent with sort of our original thinking. And the Board and the entire team is very supportive of sort of this path. Operator: Our next questions come from the line of Alex Rago with Texas Capital. Unknown Analyst: Thank you very much. More broadly, can you address the current situation in the Middle East and the rise in oil prices and how that could impact your business or some of your customers' decisions? Benjamin Heraud: Yes. So the Middle East is a relatively small piece of our business, around 1%. So it's relatively immaterial, like now the impacts that we're seeing are minimal on the business there. As far as the price of oil and the impact on the business, we could see some additional work around pipelines. It's good for our oil sands business. And the refinery side of the business is relatively stable. So I mentioned earlier the good line of sight that we have with the run and maintain business. And right now, the outlook looks good. Unknown Analyst: Very helpful. And then as it relates to revenue guidance, which just kind of 2% to 7% growth rate, can you talk about the primary variables that could cause this to be either kind of closer to the high end or the low end? Kristin Schultes: Yes. So from a 2026 perspective on the top line, I would tell you we have a high degree of confidence in this and it was a very thoughtful approach that we did to the budgeting process this year down to the division level and a bottoms-up approach. And given the tailwinds we have in our business, we feel very confident in our ability to deliver against that. Operator: Our next questions come from the line of Harold Antor with Jefferies. Harold Antor: This is Harold Antor on for Stephanie Moore. So a quick question. Just on the pricing front, could you remind us what pricing rack historically, how it trended in the quarter? Just give me we're more disciplined and what, as you focus on the margin profile we want to walk away from some businesses. And then I guess, do you see that you guys are better positioned to be more aggressive on pricing, just given you provide the full suite of products and services today versus mostly competitors we can't compete on our phone. Benjamin Heraud: Yes. So we mentioned some of the work that we've done around the organization of our inspection and mitigation business in the U.S. that has offered us an opportunity to be more competitive on our pricing and go after more of the work in that space. A lot of the work that we price is more on a value proposition, fixed fee kind of work and we continue to see good momentum there. I would also just point back to the backlog being up 10% and the sales being very positive through the first part of this year already. And yes, just -- I mean, you mentioned the mix of work. And if we think of this opportunity to work through the life cycle of an asset, we are very sticky with our clients -- we have very strong relationships and our ability to work through the entire life cycle of an asset keeps us very sticky with those assets and clients. Kristin Schultes: And Harold, on the pricing, I think also I would just remind you to point back to our Q4 results, gross margin dollars and percentages were up across all 3 of our segments. We feel really good about that heading into 2026. And if you combine that with some of the operational initiatives under Ben's leadership, high confidence. Harold Antor: Yes. And then just to piggyback on an earlier question, Ben, I think you highlighted that you see a line of sight of $100 million in data center revenue. Just wanted to get a sense, is that a '27 event? Is that a '28 event? Or is that just -- is that a longer-term event? Just wanted to get a sense of the timing on that. Benjamin Heraud: It's '26 line of sight. So we have a very strong backlog, particularly to that, and we have multiyear programs, some extremely resource constrained area of the business where we have very strong relationships with the hyperscalers. So we see over the next 12 months line of sight to those numbers. Harold Antor: And then I could squeeze in 1 more just on capital allocation that you guys focused did the buyback. So should we be thinking more of the capital being deployed and buy backs? Or do you expect to do a little bit more on tuck-in side, any organic growth implementation investments that you could provide a little bit more color, that would be great. And that's all for me. Benjamin Heraud: So on capital allocation, we have a robust tuck-in line that we're going to continue to execute on. But we thought, as a Board, it was prudent have the flexibility to have a buyback program in place given where market conditions are. And frankly, there's no better acquisition than your own stock at the right levels. So we have a very opportunistic view on how we approach ,but there is no question we're continuing with in pipeline because it creates a more robust a more robust operating profile and allows us to new geographies and new service lines, which are critical to sort of our investment thesis. Kristin Schultes: Harold, I would just add that on our -- on the tuck-in side that Robbie mentioned, I'm really proud of the team's ability to continue maintaining focus on the broader integration with the merger, but also remain focused on the importance of the small tuck-in strategy that we have that's been largely successful for us. So we completed 3 small tuck-ins during the quarter and the combined business together at 12% for the full year, and that's across all 3 segments. So we're excited to continue that into the New Year. Operator: [Operator Instructions] We have reached the end of our question-and-answer session. I would now like to hand the call back over to Ben Heraud for any closing comments. Benjamin Heraud: Thank you all for your questions. I just wanted to reemphasize our strategic priorities to drive shareholder value. One, we need to accelerate our organic growth, and we will. Two, we're going to strengthen our organizational alignment and cultural cohesion. And three, drive margin expansion. Finally, I want to thank our investors for their continued support and partnership. We look forward to updating you on our next quarter. Thank you all, and have a good day. Operator: Thank you, ladies and gentlemen. This does now conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.
Operator: Greetings, and welcome to the Vera Bradley Fourth Quarter Fiscal 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mark Dely, Chief Administrative Officer [ for very ]. Thank you. You may begin. Mark Dely: Good morning, and welcome, everyone. We'd like to thank you for joining us for today's call. Some of the statements made during our prepared remarks and in response to your questions may constitute forward-looking statements made pursuant to and within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 as amended. Such forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from those that we expect. Please refer to today's press release and the company's most recent Form 10-K filed with the SEC for a discussion of known risks and uncertainties. Investors should not assume that the statements made during the call will remain operative at a later time. We undertake no obligation to update any information discussed on today's call. I'll now turn the call over to Vera Bradley's Chairman and Chief Executive Officer Ian Bickley. Ian? Ian Bickley: Good morning, everyone, and thank you for joining us for Vera Bradley's Fourth Quarter and Full Year 2026 Earnings Call. Before I begin discussing our quarterly results and continued transformation progress, I want to share some important leadership news that reflects the Board's confidence in our strategic direction and the momentum we are building. I am pleased to announce that the Board of Directors has named me as Vera Bradley's permanent Chief Executive Officer in addition to my current role as Chairman of the Board, transitioning from my role as Executive Chairman. Additionally, our Chief Financial Officer, Martin Layding, will be expanding the scope of his responsibilities as Chief Operating and Financial Officer. I want to express my sincere gratitude to our Board of Directors for their support, confidence and this tremendous opportunity to lead Vera Bradley into its next chapter of growth. This leadership transition reinforces the Board's belief in our existing strategies under Project Sunshine and validates that we are on the right path forward. I remain confident that with the right focus, effort and execution we have a tremendous opportunity to increase market share and return the business to growth by reengaging our loyal customer base while also expanding our reach and relevance to new customer segments. In addition to my appointment to the permanent CEO seat and Martin's added role as COO. Over the past few months, we have added new leadership talent across all key customer-facing functions including merchandising, marketing, digital commerce, wholesale and stores. This was achieved through a combination of new external leadership appointments as well as internal promotions of top talent, demonstrating our commitment to the path of continued progress in reinvigorating and reimagining the iconic Vera Bradley brand. I'm also pleased to report that the fourth quarter marks our first quarter of profitability in over a year. We are stabilizing our business gaining better visibility to the underlying growth and efficiency opportunities and beginning to make meaningful progress on our transformation journey. Looking to FY '27, we are planning our sales to be between $255 million and $270 million. The Board's decision to formalize our leadership structure at this pivotal moment underscores the collective confidence in our transformation plans and ability to deliver long-term sustainable results. Over the past quarter, we have remained focused on delivering Project Sunshine which anchors on reclaiming Vera Bradley's joyful optimism and acts as our North Star, bringing creative energy to how we work within functions and across the Vera Bradley team. It is leading us to new ideas for products, marketing and channels, transforming how we work with each other and encouraging us to think differently about our operations. At the same time, we have been addressing past missteps with urgency and implementing comprehensive changes across the business and organization, demonstrating the focus and agility of our team. To remind you, the 5 strategic pillars under Project Sunshine are: first, sharpening our brand focus through product relevance and storytelling. Second, resetting our go-to-market approach with data-led insights. Third, rewiring our digital ecosystem across all touch points. Fourth, implementing [ outlet 2.0 ] for a more brand-enhancing retail experience. And fifth, reimagining how we work with new capabilities and organizational alignment. Before updating you on our progress across these 5 pillars, I would like to provide a few fourth quarter highlights that clearly demonstrate continued sequential improvement and measurable progress towards our goal of achieving long-term sustainable growth and profitability. For the fourth quarter, we achieved strong sequential improvement in our Direct channel registering a revenue decline of 2.6% compared to the prior year, 270 basis points of progress from Q3 and nearly 1,400 basis points from Q2. The Q4 Direct channel top line results represent our third consecutive quarter of sequential improvement. And I'm pleased to report that our fiscal '27 Q1 Direct channel revenue is tracking positive marking a significant milestone in the stabilization of our business. While we have work to do, this performance is building confidence in our teams and reinforces that the direction we are taking is beginning to resonate with our consumers. Overall sales for the fourth quarter were down 1.7% versus Q4 of the prior year. benefiting from positive year-over-year indirect channel revenue growth of just under 5%. Our indirect channel growth was driven by a large wholesale order from an upcoming spring collaboration which we're very excited about and will be able to announce shortly. During the quarter, we also successfully and intentionally leveraged holiday traffic to clear through the discontinued product from last year's Project Restoration while rebuilding our assortment of hero products, including the original 100 bag, iconic heritage prints and select IP including Snoopy and Lilo and Stitch. We continue to see strong consumer acceptance to the strategic reinvestment in our cotton-based assortment and in our brand channels, we experienced a second consecutive quarter of strong double-digit positive comp growth, further validating that we're moving the overall product assortment in the right direction. In our outlet channel, a more impactful and better executed end of season sale in January drove clearance and successful sell-through of discontinued and aged products. At the same time, customers responded positively to the return of classics and handbags, including the triple zip, glenna and [ Vera ] franchise as well as the giftability of our Cody collection. We are also encouraged by the positive response we are seeing to the first deliveries of new spring/summer product that flowed into our stores at the end of January. For the quarter, comparable sales declined by less than 1% and when we account for the negative impact of winter storm firm during the last week of January, our comparable sales were essentially flat. As I mentioned, this marks our first quarter of achieving profitability in over a year with net income of $2.5 million and an EPS of $0.09, a positive year-over-year swing of $0.28. Our bottom line disciplined cost management, while our overall results demonstrate that we are stabilizing the business gaining better visibility and beginning to make meaningful progress on our transformation journey. Martin will provide greater detail, but through an improvement in product acceptance, continued inventory management efforts and disciplined pricing and promotional strategies while delivering smart value to our customers, we generated year-over-year gross margin expansion of approximately 100 basis points. We also managed our SG&A spend prudently with total costs down more than $10 million to the prior year or a favorable decline of 22%. From a cash flow perspective, we generated $17 million in operating cash flow in Q4. This strong cash flow generation allowed us to pay off our ABL facility, further strengthening our balance sheet and providing additional financial flexibility as we continue executing Project Sunshine. While we recognize there's still significant work ahead, these early wins give us confidence that our focused approach to product innovation brand storytelling and operational excellence is moving Vera Bradley in the right direction. The sequential improvement we've achieved across multiple quarters, combined with our return to profitability this quarter, validates that Project Sunshine is gaining traction and positioning us for long-term sustainable growth, profitability and cash flow generation. I want to personally thank our entire team for their disciplined execution, agility and commitment to operational excellence during the all-important holiday season, which allowed us to achieve these results. Now for an update on our Project Sunshine strategic initiatives. First up, sharpening our brand focus. As I've discussed on prior calls, we lost track of what made Vera Bradley special and unique and what customers love about us. We became indistinguishable from other brands and over reliant on promotions, sharpening our brand focus has been all about bringing our unique and distinctive brand positioning to life through our products, marketing and storytelling and where consumers can find our products. Since I joined in my executive chair role, roughly 8 months ago, our #1 focus has been on improving the product. This is an effort that doesn't happen overnight but our Q4 results are testament to the early success we're experiencing. We are seeing strong initial indicators of our product strategies effectiveness and our continued momentum in Q4 was fueled in part by the return of discontinued styles that our customers had been asking for. This 20% of the assortment that we were able to influence this quarter delivered encouraging results, validating our merchandising approach. The great news is that through a combination of reintroduced styles and high demand coupled with newly designed products, the team has successfully influenced approximately 80% of the spring assortment and is generating positive customer response and early sales momentum. The assortment changes we have made remain anchored in the brand attributes, which are core to our DNA. Vera Bradley is feminine, creative, cheerful, whimsical, joyful, fun, colorful, approachable, high-quality and smart value. To support the significant progress we have made on the product assortment during the past 8 months, we are now putting increased focus on storytelling through an enhanced social-first marketing strategy to engage both our existing customers and new audiences. From a creative standpoint, under new marketing leadership and leveraging our core brand attributes, we have shot a new spring campaign that reflects our return to joyful optimism and authentic Vera Bradley roots. This refresh creative is being deployed across our website and e-mail marketing with a major social media push that just began last week. Our marketing strategy has been focused on 3 key priorities: channel optimization, refined messaging and enhanced media efficiency. Despite reducing overall marketing spend year-over-year, we achieved strong performance across multiple metrics, return on ad spend improved meaningfully, e-mail open rates increased, and we successfully scaled our paid social programs while maintaining consistent returns. In addition to product and marketing, we have also been focused on our channels of distribution in order to sharpen our brand focus and amplify our messaging. Let me first spend a moment on our wholesale strategy and partnerships. As I've stated before, while the overall landscape of wholesale partners has evolved, we believe that rebuilding the wholesale channel with the right partners will be a key component of our success in regaining brand relevance and market share. Under new wholesale leadership that has recently joined, we are building a tiered strategy with focus on key retailers, strategic collaborations and specialty accounts. In the meantime, we are thrilled about a large wholesale order that shipped late in Q4 for a very exciting upcoming collaboration, which we will be able to announce soon. We are also seeing recognition of the brand momentum by some leading retail accounts. For Back to School, we will launch a focused Vera Bradley capsule collection in [ 89 ] Nordstrom doors and on nordstrom.com. Let me also spend a moment discussing our IP partnerships, which remain an important driver of brand heat and commercial success. And as we engage both new customers and repeat purchasers looking to collect items. Our strategy is to focus on fewer, more impactful and qualitatively executed IP launches going forward. The success of this strategy was evidenced by our Peanuts, Lilo and Stitch and recent Winnie the Pooh collaborations, which achieved excellent social media engagement and strong product sell-through, some of the best results we have ever had. Second, resetting our go-to-market approach. As previously shared, we have been fundamentally updating our go-to-market approach to deliver what our customers truly need and value working across 6 critical areas. More focused investments into bigger product ideas and [ hero ] styles, alignment of our channel assortment strategy, integrated social-first marketing to support our big ideas in moments like Back to School, better planning and inventory management capabilities to improve terms, stronger pricing and promotion governance to protect margins and enhanced analytics and business intelligence capabilities to inform data-driven decisions. Our goal has been to rebuild the engine that turns our creativity into commercial results and to work in a more integrated and agile manner. In Q4, we saw several examples of this newly new approach positively impacting our business performance. The team began the process of coming together cross-functionally and scrutinizing how we work from product development to buying, to marketing and executing strategies in our channels, ensuring the right products to reach our customers through their preferred shopping channels. We have now integrated consumer insights into this process with the implementation of various customer ethnographies, segmentation focus groups and quantitative analyses that are informing product development to address our customers' needs and wants more effectively going forward. Operationally, we were much more agile, reacting to our data to adjust promotions, marketing and digital communications to meet real-time customer needs, improving gross margin year-to-year and enabling reductions in overall inventory. For Q1, we have developed a streamlined promotional plan that is more focused and less complex to execute that we believe will lead to further gross margin improvements. We also began to impact the business upstream with a new creative team quickly conceiving and executing this spring's campaign with an on-location shoot at dramatically lower cost than historic levels. and producing recognizable and relatable campaign imagery to which our customers have positively responded. We are excited about these early achievements and optimistic about the impact that our integrated approach will continue to have on the business in the year ahead. Moving to our third pillar, rewiring our digital ecosystem. As previous -- as mentioned previously, our digital commerce business across owned sites and third-party marketplaces is already a very important business for Vera Bradley, both in terms of the business size and overall profitability. However, our various digital platforms, there has not been a cohesive customer journey for Vera Bradley customers. During Q4, we took the important step of consolidating the P&L of all our digital platforms, including DTC e-commerce and third-party marketplace operations, and we are currently recruiting a new Head of Digital Commerce to lead this integrated function. At the same time, while taking these important strategic steps, we made significant enhancements to our e-commerce platform with improved site navigation and a better overall customer experience. Our data-driven approach to pricing and promotions has enabled us to operate with lower promotional intensity while maintaining strong customer engagement. Additionally, we deployed enhanced digital capabilities that are driving customer engagement, early results also show strong adoption of our streamlined checkout process, which is contributing to improved conversion rates. Fourth, Outlet 2.0. As a reminder, our Outlet 2.0 initiative represents a fundamental shift in how we approach our outlet channel. Outlet 2.0 is designed to elevate customer experience while maintaining our smart value proposition and reaching customers where we currently do not have brand stores. The enhancements included a curated more focused assortment with an initial 35% SKU reduction, strategically adding new brand products from our heritage and select IP collections. We have introduced elevated visual merchandising elements, including mannequins, light boxes and brand fixtures that hero our signature color, pattern and lifestyle stories. Our enhanced selling experience incorporates updated training, improved in-store tools for selling and personalization. This transformation moves us from a discount-focused model to a smart value curated experience that reinforces brand equity while driving conversion and profitability. Building on the pilot that we launched during the holiday season, we have been taking a disciplined test and learn approach. So far, in addition to the positive qualitative feedback from our customers and employees, we have seen measurable improvements in retail KPIs, including overall sales, conversion rate, average spend and gross profit per visitor versus a control group of stores. This tells us that the Outlet 2.0 experience is engaging consumers in a more meaningful way with the brand. We are continuing to monitor and track these results while also refining the Outlet 2.0 pilot with a view to rolling out additional stores in the near future. And last but not least, reimagining how we work, streamlining our organization while building and investing in new capabilities. rebuilding Vera Bradley for long-term sustainable growth and profitability has required us to make tough decisions to reduce personnel costs. At the same time, reimagining how we work is not only about cutting costs. but also about redesigning our organization to be future fit, building new capabilities and making significant investments in our talent. To date, this has been most pronounced across our customer-facing product, marketing and commercial functions, which are vital to reinvigorating the relevance of our brand and driving brand heat. In addition to the appointment of a new Chief Brand Officer in October, we have now also appointed new leaders across merchandising, marketing, stores wholesale and a soon to be appointed new head of Digital Commerce. We have strategically strengthened our team through a combination of internal promotions and strategic external hires with particular focus on roles that directly impact the customer experience across all touch points. To sum up, we remain confident that the 5 strategic pillars we are pursuing under Project Sunshine are the right initiatives to revitalize the Vera Bradley brand, expand market share and return the business to long-term sustainable growth, profitability and cash flow. To execute these plans, we have been building a best-in-class team with relevant experience that will allow us to move quickly to win in the marketplace. We are reimagining how we work, building a culture of performance, agility, accountability and strong cross-functional collaboration, leveraging data-driven insights to make smart decisions. We are still in the very early stages of our transformation, but remain encouraged by the results we achieved in Q4, the stabilization of our business, the greater visibility we have to the underlying opportunities and the strong belief in alignment, our entire team and Board of Directors has behind our transformation plans. As the newly appointed CEO, Vera Bradley, I am extremely excited about the opportunity to lead us into the future and write the next chapter of this iconic and storied brand. With that, I will turn the call over to Marty for a detailed financial review, and then we'll be happy to take your questions. Martin Layding: Thanks, Ian. Good morning, everyone, and thank you for joining us. I have a few brief comments to make about our performance for the quarter. Before I begin, I want to thank the Board for their unwavering support and confidence in entrusting me with expanded operational responsibilities. Our focus remains on transforming our operational processes to deliver enhanced business performance and greater efficiency across the organization. For the sake of clarity, all of the numbers I am discussing today are non-GAAP and exclude the charges outlined in today's press release, the complete detail of items are excluded from the non-GAAP numbers as well as a reconciliation of GAAP to non-GAAP can be found in that release. For the fourth quarter of fiscal 2026, our consolidated revenues totaled $84.9 million compared to $86.4 million in the prior year fourth quarter. Net income from continuing operations for the fourth quarter totaled $2.5 million or $0.09 per diluted share compared to a net loss from continuing operations of negative $5.4 million last year or negative $0.19 per diluted share. In terms of segment performance, Vera Bradley Direct segment revenues for the current year fourth quarter totaled $74.5 million a 2.6% decrease from $76.5 million in the prior year fourth quarter. Comparable sales declined 0.7%, which represents a sequential comparable sales improvement in each quarter of the current fiscal year, our original 100 handbag heritage prints, along with leveraging holiday promotional activity resulted in positive brand comps and overall positive growth versus last year. Total revenues year-over-year were also impacted by 2 store openings -- new store openings, 13 store closures since the prior year fourth quarter and negatively impacted by approximately $0.4 million due to the temporary store closures associated with [ winter storm firm ] in week 52. Vera Bradley Indirect segment revenues for the fourth quarter totaled $10.4 million, a 4.9% increase from $9.9 million in the prior year fourth quarter. The increase was driven by a large wholesale spring collaboration to be announced in the future date. Fourth quarter gross margin totaled $40.5 million or 47.8% of net revenues compared to $40.4 million or 46.8% of net revenues in the prior year. The increase in year-over-year margin rate resulted from lower promotional activity in outlet channels, A favorable adjustment to the Q3 inventory reserve and freight cost savings, partially offset by sell-through of project restoration inventory as part of clearance and incremental duty costs. SG&A expense totaled $37.3 million or 43.9% of net revenues compared to $47.9 million or 55.4% of net revenues for the prior year fourth quarter. The $10.6 million decrease in expenses was primarily due to continued cost reduction initiatives, reduction in phasing of marketing expenses during the year and reduced lease costs. Fourth quarter operating income from continuing operations totaled $3.6 million or 4.2% of net revenue compared to an operating loss from continuing operations negative $7.3 million or negative 8.5% of net revenues in the prior year. We continue to be pleased with our operational performance, demonstrating increased levels of agility as we react to changes in the marketplace, enabling us to take advantage of opportunities, thus improving our sell-through of age inventory through more focused strategies and tactics. Now turning to the balance sheet. Cash and cash equivalents at the end of the quarter totaled $18.5 million. Cash flow for the year while negative $11.9 million has significantly improved from FY '25 to negative $46.9 million. We had no borrowings on our ABL facility at year-end. Fourth quarter inventory decreased year-over-year by nearly 17% to $76 million compared to $91.4 million at the end of fourth quarter last year. Tariffs increased year-end inventory value by approximately $4.2 million. Excluding tariff impact, inventory dollars would have decreased over approximately 22% versus last year. Our inventory turns were 1.6%, improved from 1.5% from fiscal year '25. We recognize that this is a key measure we need to improve on while also reducing our overall level of inventory in FY '27. In FY '27, we will begin experimenting with new strategies to improve our responsiveness to our consumers when sell-through is ahead of expectations while looking for opportunities to continue ourselves down a project restoration inventory thus improving our net working capital position and inventory productivity overall. As Ian mentioned, we are providing some guidance for fiscal year 2027. For fiscal year '27, we plan for sales to be in the range of $255 million to $270 million as we continue to focus on stabilizing the direct business and rebuilding our wholesale business under new leadership while at the same time, placing less emphasis on liquidation channels. It is important to note that we will not be holding our annual outlook sale in the first quarter as we focus on the inventory for our stores and look to elevate the overall customer and brand experience for this event, which we hope to bring back and better in the future. Further, due to our continued operational focus in fiscal 2027, we expect to see year-over-year rate improvement in both gross profit and SG&A, enabling operating loss improvement of 40% or better compared to an adjusted operating loss of $21.7 million in fiscal 2026. In closing, I want to reiterate that we are encouraged by the progress we have made throughout fiscal 2026, we have significantly improved our operational efficiency, reduced our cost structure and strengthened our balance sheet. While we still have work ahead of us, we are confident in our strategic direction and our ability to drive sustainable, profitable growth over time. Now I'll open the call to your questions. Operator? Operator: [Operator Instructions] Our first question comes from the line of Eric Beder with SCC Research. Eric Beder: Congratulations on the appointments and the strong Q4 results. When we look at it, I know you continue to make progress, when should we feel that the product flows and kind of the product mix is where you want it to be? I know you've worked through kind of prior -- some of the [ prior manages ] pieces. How should we be judging what we're seeing as we go to the stores and beyond through this year? Ian Bickley: I'll begin. Thanks, Eric, first of all, and appreciate the comments. Obviously, this is a really exciting opportunity. And delighted to have a chance to step into this role. I think pretty consistent with what we have said before. We -- our impact on product has gradually improved over time, right, in terms of what we could impact. As I mentioned in the call, about 80% of what is in there for spring/summer, we've been able to impact. I think to fall winter we basically have a blank sheet of paper and everything that is there, we will have been able to impact. And additionally, we are continuing to learn from the product that has flowed in already in terms of the decisions that we've made. With that said, as you are well aware, we are still managing through and balancing some overhang of inventory from Project Restoration, a lot of the discontinued and aged products. So I think this is going to continue to be a path that we're going to have to navigate through over the next 6 to 12 months. And I think overall, I really do think that we need to look at fiscal '27 still as a year of both stabilization of the business, but also a year where we are continuing to build the strong foundation that we believe are going to lead the business to growth in FY '28 and beyond. Eric Beder: Great. And when you think about the future, some of the shifts going on in terms of stores, other pieces. Where should we be thinking about the [ death and where ] the focuses are going to be on this force versus the digital versus the other pieces? And how the store flows can kind of look going forward? Ian Bickley: Yes. No, I think it's a great question. Obviously, let's not downplay the digital business because it is a very important part of our business today. It is an important source of profitability. And it is an important way in which we can reach consumers, especially new consumers when our retail and outlet fleet may not be optimized in the way that we would like it to be. But with respect to the brick-and-mortar, I think first of all, we're going to continue to leverage the fleet that we have and optimize the productivity of that business. That's a big reason for Outlet 2.0 because the majority of our fleet today is outlet stores, which is sort of a -- which is a legacy that we have inherited. But these stores are, as you know, very productive. They get incredibly high foot traffic and the majority of them are located in centers where there are also luxury brands and other premium accessible luxury brands. And so there's a very high-quality footfall and eyeballs that we get. So our -- it is important for us to be the best that we can be in those outlet centers because that's where we're getting the majority of the retail footfall visibility today. In terms of the brand stores, this for us is an opportunity. And as we get more confident about the performance of the product. And as you know, we're now really going to step into a much higher here with the marketing now that we're feeling good about the product pipeline, this is going to be something we're going to be looking at very carefully in terms of where we could selectively open new brand stores in pockets which would make sense for [ us and where we don't ] have coverage. And I would say the last piece of this is going to be the wholesale channel, which for us is going to be a very important channel that we need to focus on and rebuild because one of the things we hear from many of our consumers when we do research is they don't know where to find us. And in many of these sort of more affluent areas, we don't have brand stores. And so I think we also have an opportunity with our wholesale accounts to develop the business there. So focusing on key retailers specialty accounts, in particular, this is a way to -- for us to broaden awareness and reach and fill in some of the gaps that we don't have with our own fleet. And so I think all boats will rise. Eric Beder: Great. We -- so your [ 7 ] Outlet 2.0, do you think you'll open any more of them in 2026? Or should we be thinking about it as another year of kind of increasing the experimentation with the group? Ian Bickley: I can't say that definitively. I think you meant when we opened anything in FY '27, right, this fiscal year? Eric Beder: Yes. FY '26. Ian Bickley: Yes, yes. No worries. But look, I think if I had to place a bet, I would say we are inclined to do a few more Outlet 2.0 stores this fiscal year. I think there are just some opportunities to refine what we do in Outlet 2.0 and also to think about where are going to be the best places for us to do it. Eric Beder: Again, congratulations and look forward to '26. Operator: And this -- we have reached the end of the question-and-answer session. And this also concludes today's conference call. You may disconnect your lines at this time, and we do thank you for your participation. Have a great day.