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Randall Giveans: As we conduct today's presentation, we will be making various forward-looking statements. These statements include, but are not limited to, the future expectations, plans, and prospects from both a financial and operational perspective, and are based on management assumptions, forecasts, and expectations as of today's date, March 12, 2026, and are as such subject to material risks and uncertainties. Actual results may differ significantly from our forward-looking information and financial forecast, and additional information about these factors are included in our annual and quarterly reports filed with the Securities and Exchange Commission. With that, I now pass the floor to our CEO, Mads Peter Zacho. Please go ahead, Mads. Mads Peter Zacho: Good morning and good afternoon. Thanks a lot for joining the Navigator Holdings Ltd. earnings call for Q4 2025. Just to get us started on the right foot, I would like to clarify that Navigator Holdings Ltd. currently has no vessels inside the Hormuz Strait. We will later touch more on the war in the Middle East and what it means for Navigator Holdings Ltd.. We will explain why the impact is limited. As usual, I will review the key data from our Q4 2025 performance and then go over the outlook for the coming quarter. After that, Gary, Øyvind, and Randy will discuss our results in more detail, and then there will be Q&A afterwards. Please turn to page 4. As you can see, in summary, we decided to call Q4 2025 a steady finish to a dynamic year, 2026 looking better. Mads Peter Zacho: In Q4, we generated revenues of $153 million, same as previous quarter and up 6% compared to same period previous year. The main driver of the increase in revenue over same period last year was 8% higher charter time charter equivalent rates and partially offset by lower utilization. Adjusted EBITDA was $73 million, down from $77 million in Q3 and similar to the same period previous year. The balance sheet is strong, with total liquidity position less restricted cash of $246 million at quarter-end, significantly higher than same date the year before. In November, we increased our capital return to 30% of net income from previously 25%, and we increased the fixed dividend from $0.05 per share to $0.07 per share. Mads Peter Zacho: This reflects our strong balance sheet and equally important also our commitment to increasing the return of capital to shareholders. We achieved very attractive financing for two of our six new buildings at margins of 150 basis points, equal to the lowest ever for Navigator Holdings Ltd.. You should watch this space because more will come. On the commercial side, we achieved average TC rates of $30,647 per day during Q4. This is about $300 less than the ten-year high achieved in Q3 and is 8% above same period previous year. We utilized our vessels as guided at 90%, almost the same as last quarter, but below the 92% year prior. Mads Peter Zacho: Throughput at our joint venture ethylene export terminal was about 192,000 tons for the quarter below Q3, but it was 20% higher than same period previous year. It continues to be European demand driving U.S. ethylene exports, and we expect continued strong demand from Europe, but we also now see signs that Asian demand is emerging. Two ethylene offtake contracts have been signed for our terminal, and we will see renewed interest from customers to sign more. We continued the sale of older tonnage with Navigator Saturn and the Happy Falcon that were sold in January. I would like to make two comments on this. First, over the past few years, we have consistently sold older vessels with attractive book gains and on average, well above market value estimates. Mads Peter Zacho: I consider this a recurring income stream and an integral part of our business model. Secondly, the older vessels are typically unencumbered and release significant cash. This cash has been and can be expected to be used for capital return. Looking ahead, it is obvious that the war in the Middle East creates uncertainty but also commercial opportunities for Navigator Holdings Ltd.. Overall, we expect both TC rates and utilization to remain or exceed those achieved in the fourth quarter of 2025. We also expect exports out of Morgan's Point to strengthen towards or above the record export volumes that we saw in Q3 of 2025. Only 3% of global Handysize volumes are loaded in the Gulf. Oil and gas export from the Gulf have stopped, and that opens for alternative trading routes and substitute products. Producing ethylene from U.S. ethane is a substitute to Middle Eastern naphtha-based ethylene production. Mads Peter Zacho: Ammonia also now sees longer ton-mile transportation. On top of this, we see LPG volumes from Venezuela starting to be exported on the regular fleet, and that means not the shadow fleet. Lastly, I want to point out to the aging handysize fleet with almost twice as many vessels being older than 20 years, which compares well to the newbuilding book. This can lead to negative fleet growth in the near to midterm. With that, I will just pass it on to you, Gary, so you can give a little bit more detail on our financial result. Randall Giveans: Thank you very much. Mads Peter Zacho: Before I do so, sorry, maybe I should just not forget to just have a quick look at the slide here. We are quite proud to show the overview here of the Webber's ranking of stock exchange listed shipping companies and how they ranked on governance. You can see Navigator Holdings Ltd. was ranked number 16 back in 2021, and we gradually improved to number 11, 7, 3, and to number 1 in the most recent ranking here. I think it is important for us as a company that the corporate governance work that we are doing is being recognized by Webber Research & Advisory. Mads Peter Zacho: We will of course do everything we can to stay in the top ranking here and continue to deliver very strong results, not only financially but also governance-wise. Not to be forgotten and on to you, Gary. Gary Chapman: Yeah, that is great. Thank you, Mads. Hello everyone. During the final quarter of 2025, we continued wrestling, as Mads has said, with headwinds from geopolitics. Perhaps looking at events in 2026 so far, it perhaps makes the fourth quarter feel quite calm. However, so far, as Mads alluded to, Navigator Holdings Ltd. has not been materially affected financially or operationally, and Øyvind will talk some more about this. Turning back to the fourth quarter last year, we were able to report a very solid set of results. As always, helped by our cargo type diversification, our geographical trading flexibility, our market position, and our strong financial foundations. Gary Chapman: Our fourth quarter 2025 results have even contributed to some annual data points that are record-breaking for Navigator Holdings Ltd., where we have been able to push and keep charter rates up and also maintain utilization, supported by our flexibility, efficiency, and cost management. On slide 7, we report strong fourth quarter TCE of $30,647 per day, leading to total quarterly operating revenue of $152.8 million and quarterly EBITDA of $70.9 million. The positive TCE result this quarter reflected a good performance across all our vessel segments and led to an annual TCE of $30,110 per day, which is the highest level since the previous cycle peak in 2015. Gary Chapman: Utilization was 90% in the fourth quarter, right on our benchmark, which is slightly up by 0.7% compared to the third quarter of 2025, but down 2.2% compared to the fourth quarter of 2024. Fourth quarter adjusted EBITDA was $73.4 million, which is the same level we posted in the fourth quarter of last year. Following the record revenue generated across 2025, we are reporting a record annual EBITDA for Navigator Holdings Ltd. in 2025 of $302.8 million. Vessel operating expenses were up compared to the fourth quarter of 2024 at $47.6 million, with the increase primarily driven by the net increase in our fleet size following the purchase of the three secondhand vessels in the first quarter of 2025, as well as simply the timing of maintenance costs incurred. Gary Chapman: We have closed the year close to budget for our OpEx costs, adjusting for the extra vessels, and there is more guidance for 2026 on slide 10. Depreciation is very slightly down compared to previous quarters, despite our now increased fleet, mainly due to two older vessels, the Navigator Pluto and Navigator Saturn, reaching the end of their 25-year accounting life during the fourth quarter, and hence they are no longer depreciated. Whilst it does not yet impact our income statement, we wanted to mention that we received around NOK 9.7 million in November 2025, being the first tranche of the Norwegian government grant from their agency, Enova, towards construction of our two new ammonia-fueled ammonia gas carrier vessels. This represents just over half of the total grant, which the remainder will be paid based on construction progress. Gary Chapman: Our income tax line reflects movements in current tax and mainly deferred tax in relation to our equity investment in the ethylene export terminal, and also in relation to the natural ending of our Indonesian joint venture business, which happened in 2025, and which is not considered a recurring item and effectively represents the cost of our exiting the joint venture and repatriating our assets and profits. Randy will discuss our ethylene terminal shortly, but throughput volumes in the fourth quarter of 2025, as Mads mentioned, were 191,700 tonnes, down from 270,000 tonnes in the previous quarter, but up compared to the same quarter last year of 159,000 tonnes, resulting in us recording a profit this quarter of $0.9 million. Gary Chapman: Overall, for the fourth quarter of 2025, net income attributable to stockholders was $18.5 million, with basic earnings per share of $0.28 and adjusted basic earnings per share of $0.32. This performance in the quarter contributed to Navigator Holdings Ltd. delivering record annual net income of $100.2 million and our highest annual earnings per share of $1.49 since the previous cycle peak in 2015. Our balance sheet, shown on slide 8, continues to build and be strong. Our cash equivalents, and restricted cash balance was $204.9 million at December 31, 2025, which, if you include our available but undrawn revolving credit facilities, gives total liquidity of $296 million at the same date. Gary Chapman: Taking out restricted cash gives total available liquidity of $246 million. This strong liquidity position is despite paying out $34 million for scheduled loan repayments, $10 million under our return of capital policy in respect of the third quarter of 2025, $10 million as payments for our vessels under construction in the quarter, and paying cash consideration of $16.8 million to increase our ownership interest in our Navigator Greater Bay joint venture by 15.1%. Our Morgan's Point ethylene export terminal investment on our balance sheet sits at an equity value of $245 million but is fully unencumbered now, with the final $4 million of remaining debt having been repaid in December 2025. Gary Chapman: Alongside this, we have paid from our own cash a total of $110 million as at December 31, 2025 towards the six vessels we have under construction. The difference of this figure to our balance sheet figure represents capitalized interest under U.S. GAAP. The unencumbered terminal, a number of unencumbered vessels, and the construction payments made from our cash on hand that we will partially recoup as we fix financings for our newbuild vessels, together with the still growing operational cash flow, are reflective of the financial stability and strength that Navigator Holdings Ltd. is able to demonstrate. Gary Chapman: To bring you up to date, including our available but undrawn facilities, we had around $300 million of available liquidity at the close of business on March 11, 2026. On slide 9, we show a summary of the main capital events across the quarter where, with a very supportive banking group and a strong underlying business, we were able to return capital to shareholders, raise funds for the construction of our new builds, reward our shareholders, and continue working on managing our financing needs. We had a particularly active 2025 from a financing perspective, in which the company successfully entered into a new secured term loan to buy three vessels, refinanced existing loan facilities, issued a $40 million tap of our senior unsecured bonds, and executed several new interest rate swaps to reduce our interest rate risk. Gary Chapman: We continued that activity into the first quarter of 2026, such that on March 2, we signed a 5-year post-delivery secured term loan facility of up to $133.8 million, which will be used to finance up to 65% of the delivery and also pre-delivery installments and the construction of 2 of our new Ethylene Panda new build vessels. This transaction was executed at a very low margin cost of 150 basis points plus SOFR. We would like to thank our banking group for supporting Navigator Holdings Ltd., and we really believe the deal and the very keen pricing not only reflects the banking market today, but also the strong and stable credit story of Navigator Holdings Ltd.. Gary Chapman: In addition to our scheduled repayments, we now have only two relatively small debt balloons due in the next 24 months, with payments due in 2026 of $54 million in total that you can see on the bottom left. We continued to make substantial scheduled loan repayments with $34 million in the fourth quarter, and we have an average of $126 million of annual scheduled pro forma debt amortization per year across 2025 through 2028, with our net debt to 2025 adjusted EBITDA sitting at 2.5x at December 31, 2025. In addition, our net debt to our on-water fleet value results in a loan to value or LTV of 32%, which falls below 30% if you attribute any reasonable value against our Morgan's Point terminal. Gary Chapman: We try to use our balance sheet efficiently to allow us to reward our equity holders while also ensuring we maintain a sensible position for the business and our bond and credit investors. This balance is something we are continually evaluating, especially in today's environment. Our next priority is to close financing in relation to our remaining four new-build vessels, and this work is already started with transactions well progressed. We are currently targeting to complete the finance for the remaining two Ethylene Panda vessels in March or latest April 2026 and our two ammonia vessels within the second quarter of 2026. We look forward to being able to report on a successful outcome when this work is complete. Gary Chapman: Finally, at December 31, 2025, 58% of the company's debt was either hedged or was on a fixed interest rate basis, with 42% open to interest rate variability. This is another key metric that we keep under close review. On slide 10, we show our estimated all-in cash breakeven for the full year 2026, which at $20,970 per day per vessel remains significantly below our average TCE revenue for 2025 of $30,110 per day. The graph bottom left shows how this headroom has developed over the last few years, and you will see in there the consistency of our business, particularly in the last four years, but even going back further. Gary Chapman: You can see on the top left that the all-in breakeven rate includes forecast scheduled debt repayments and our scheduled dry dock commitments. The latest figure here is materially unchanged from the estimate we provided on our last earnings call in November 2025. On the right is our updated OpEx guidance for 2026 across our differing vessel segments, ranging from $7,900 per day for our smaller vessels to $11,400 per day for our larger, more complex Ethylene vessels. This guidance also remains materially unchanged from our last quarterly call in November 2025. Below that is further next quarter and full year guidance across vessel OpEx, general and admin cost, depreciation and net interest expense in total dollar terms. Gary Chapman: The full year guidance for vessel OpEx towards the bottom is now lower in total than previous guidance given in November, given we have reduced our fleet size somewhat through vessel sales. Net interest expense is also a little lower than previous guidance given at the same time. However, both are materially unchanged. Slide 11 outlines our historic quarterly adjusted EBITDA, adding this fourth quarter's result. We now have 12 quarters in a row since 1Q 2023 of reporting at least $60 million of quarterly adjusted EBITDA at an average of $71 million over that period. This comes back to our diversification of cargo types and geography that protects the business. On the right side, we show our adjusted EBITDA for 2025 and our fourth quarter 2025 annualized adjusted EBITDA. Gary Chapman: In addition, the bars then to the right provide some sensitivity and illustrate an increase in adjusted EBITDA of approximately $18 million, all other things being equal, for each $1,000 incremental increase in average TCE rates per day. As in previous quarters, an update on our vessel dry dock schedule, projected costs and time taken can be found in the appendix, slide 28, should that detail be of interest. With that, I will hand you over to Øyvind to provide an update on the commercial picture. Øyvind? Øyvind Lindeman: Thank you, Gary, and good morning, everyone. We will go straight to the topic everyone is focused on, namely the war involving Iran. This morning, oil is trading above $100 per barrel, second time since it started. Natural gas in Europe is up by 70% since the bombs started falling. The Strait of Hormuz remains closed. Roughly 1,000 vessels are currently trapped inside the Gulf, and an estimated 3,000 more are stalled across the broader region. A significant number of oil tankers, gas carriers, and bulkers are caught up in the disruption. 3 handysize vessels are trapped inside, none from Navigator Holdings Ltd.. A major portion of Middle East exports of oil products, LNG and LPG, representing roughly 20%-30% of global supply in some categories is effectively shut in. That leaves producers, consumers, and shipowners in a very difficult position. Øyvind Lindeman: India, for example, relies heavily on Middle Eastern LPG for heating and cooking. Asia, more broadly, it depends on Middle East for energy, and refineries depend on crude oil to produce derivatives such as naphtha, which in turn is a critical feedstock for petrochemicals, including ethylene. Naturally, this has triggered an immediate scramble to source alternative supply. How does this affect our Handysize business? Let us turn to page 13. The map shown here was taken from our operating system this morning. It shows the entire Navigator Holdings Ltd. fleet. It has a very important story, though. First, to repeat, we have zero vessels inside the Middle East Gulf. Second, we have zero vessels positioned nearby in ballast, waiting for the Strait to reopen. Øyvind Lindeman: Third, the vast majority of our fleet is deployed elsewhere, trading from the U.S. to Europe, trading from U.S. to Asia, trading from Europe to Asia via the Cape of Good Hope, and in regional trades within Europe, within the Mediterranean, and within Southeast Asia. Out of our 55 vessels, only 4 had been engaged in Iraq LPG exports. Importantly, those vessels are on time charter. That means whether they are actively sailing or temporarily idle, hire continues to be paid, much like a leased car where payment is due whether the vehicle is being driven or not. Even so, those vessels have already demonstrated the flexibility of the handysize segment by securing alternative supply position, loading LPG from places such as South China and Australia. We are frequently asked a version of the following question. Øyvind Lindeman: If 30% of LPG supply is effectively shut off from the Middle East Gulf, and now that the VLGC Baltic Index has stalled due to the lack of concluded trades, and most VLGCs are ballasting toward the only major alternative export region, U.S. and Canada, is the situation the same for Navigator Holdings Ltd.? The answer often surprises people. Mads mentioned it, but across the entire global handysize segment, only 3% of total transported volume originates from inside the Arabian Gulf, and that again is 3% only. It is a very small number, and it means that there has been far less knee-jerk repositioning, speculative ballasting, or dislocation in the handysize segment than what is apparent in larger vessel classes. In fact, many operators in larger segments would welcome the degree of geographic and cargo diversification that we have. Øyvind Lindeman: I have said it many times before, and it is worth repeating again, we are not a one-trick pony reliant on one loading region for one cargo. That diversification, both geographic and by cargo type, is working to our advantage in the current environment, which is shown on page 14. Demand for C2 cargoes such as ethylene and ethane is firm. Demand for easy petrochemicals such as butadiene is firm. Demand for ammonia is increasing. LPG demand remains steady. We do not yet have final March figures, but utilization, as you see on top left graph, improved over the first couple of months of the first quarter. At this moment in time, we do not expect any material change to our quarterly outlook. If we go a level deeper in the diversification story on page 15, the picture becomes even clearer. Øyvind Lindeman: As mentioned, the Arabian Gulf accounts for only 3% of total global Handysize volumes over the last few years. That is modest, especially compared with crude tankers and larger gas carriers, as we mentioned. By contrast, for Navigator Holdings Ltd. specifically, approximately 60% of our earning days are generated from North America, and those earning days are in turn diversified across three categories, 67% petrochemicals, 21% LPGs, and 12% ammonia. We also see incremental opportunities emerging elsewhere. Venezuela is beginning to come back into the market. Two LPG cargoes have been exported so far this year, one discharged in the U.S., believe it or not, and one in the Dominican Republic. We fully expect to be contracting Handysize vessels for Venezuela LPG exports in the near term. That would represent incremental demand for our fleet. Butadiene continues to be an important source of ton-mile demand. Øyvind Lindeman: To put that into perspective, a single Handysize cargo of 13,000 metric tons shipped from Europe to Asia via the Cape of Good Hope can generate roughly three months of vessel employment, and that is pretty meaningful to us. On ammonia, we are beginning to see some of the same dynamics that we saw 4 years ago following the outbreak of the war in Ukraine. As natural gas prices rise, ammonia production economics become more challenged in certain regions, especially in Europe, with consumers looking for more cost-effective alternatives. Instead of producing, they can import. We are actively engaging on a number of customer inquiries in this particular area. A similar pattern is developing in the U.S. ethane and ethylene exports, as shown on page 16. Ethane prices remain stable. Just as a reminder, ethane is the most efficient feedstock for ethylene production. Øyvind Lindeman: In a world where ethylene producers are paying extremely high prices for naphtha, or in some cases are struggling to source naphtha at all, those producers with access to ethane-based cracking enjoy a significant competitive advantage. Ethane exports should therefore remain resilient, and we have ethane-capable vessels currently employed in this trade and others positioned to serve exactly this demand. U.S. ethylene prices have risen in response to stronger international pull. However, import prices internationally have risen even more, which means the arbitrage has widened. Today, Europe is the highest price destination, and unsurprisingly, that is where the product is moving. From our perspective, we are happy with that dynamic as long as fleet utilization remains high and day rates remain robust, which they are. At our Morgan's Point ethylene export terminal, March is on track to be an all-time record month for volumes. Øyvind Lindeman: In fact, we are receiving indications that throughput may exceed even what you see here, being the Kpler forecast in the graph. This is definitely a space to watch closely. More broadly, we continue to see structurally increasing flow of hydrocarbons from the United States of America to Europe. Europe needs American hydrocarbons, and our Atlantic trade is becoming increasingly structural in nature. By contrast, the Trans-Pacific trade to Asia remains more ad hoc and opportunistic. Turning to fleet supply on page 17, the outlook remains supportive, as Mads mentioned, in his opening remarks. Fleet supply has been unchanged for more than a year. The order book stands at only around 10% of the existing fleet, while 17% of current vessels are already more than 20 years of age. Øyvind Lindeman: That creates a healthy supply-demand balance over the medium term, and importantly, if a new vessel were to be ordered today, they would not be delivered before 2029. Finally, on earnings and chartering condition on page 18, our all-in cash break-even has already been discussed earlier on the call. Current charter rates remain well above that level of $20,970 per day. Time charter discussions are taking place at levels above what you are looking at here, which represents the assessed 12-month charter rates from independent brokers. Certain spot trades, due to all the volatility and the attractiveness of American NGLs that we are involved in, are achieving materially high returns due to this volatility. When we step back and look at the overall picture, what we see is this. Øyvind Lindeman: While the geopolitical situation is clearly severe and highly disruptive for global energy markets, our fleet positioning, cargo flexibility, and geographical diversification leave us comparatively well-placed. In periods like this, resilience matters, and our Handysize platform is demonstrating exactly that. Over to you, Randy. Randall Giveans: Thank you, Øyvind. Now, following up on several announcements we made in recent months, we want to provide some additional details and updates on those developments. On slide 20, as a reminder, our recently improved return of capital policy includes a fixed quarterly cash dividend of $0.07 per share as part of our quarterly payout percentage of 30% of net income. As a result, during the fourth quarter, we paid a $0.07 quarterly cash dividend totaling $4.6 million, and we repurchased over 300,000 common shares of NVGS in the open market, totaling $5.4 million for an average price of $17.68 per share. Now looking ahead, in line with that new return of capital policy, we are returning 30% of net income or a total of more than $5.5 million to shareholders this quarter. Randall Giveans: The board has declared a cash dividend of $0.07 per share payable on March 31, 2026, to all shareholders of record as of March 23, 2026, equating to a quarterly cash dividend payment of $4.6 million. Additionally, with Navigator Holdings Ltd. shares trading well below our estimated NAV of north of $29 a share, we will use the variable portion for the return of capital policy for share buybacks. As such, we expect to repurchase $1 million of our shares between now and quarter end, such that the dividend and share repurchases together equal 30% of net income. As Mads alluded to, we continue to repurchase shares and believe there is upside from here. Randall Giveans: Turning to our ethylene export terminal on slide 21. As guided, ethylene throughput volumes fell slightly to almost 192,000 tons during the fourth quarter as European ethylene demand softened and end users reduced inventories and vessel availability remained relatively tight. Now despite those lower volumes, it was encouraging to see some new customers step in to take cargoes, spot cargoes to both Europe and Asia during the quarter. Now to the really good news. As you will see in the bottom left chart, we expect volumes in March to reach a record high of close to, if not more than, 120,000 tons, which could result in a quarterly high in the first quarter of 2026. Randall Giveans: Now looking at the bottom right chart, despite the near term increase in U.S. ethylene prices, the arb remains wide open as multiple European crackers are undergoing turnarounds and Asian demand for U.S. ethylene is also increasing due to that recent surge in oil-based naphtha prices, as Øyvind was mentioning. Longer term, the forward curve remains stable around $0.21 per pound or $460 per ton. Now as for contracting the expansion volumes, we have been saying that new offtake contracts would be coming soon, and we are pleased to announce that 2 new offtake contracts have been signed in recent months. Now we continue to expect additional offtake contracts will be signed throughout this year as customers continue to request updated terms for both the terminal and for shipping. In the meantime, we will continue to sell volumes on a spot basis. Randall Giveans: Now turning to our fleet on slide 22. Our fleet renewal program continues to progress, most recently through the sale of two of our oldest vessels. On the same day in January, we sold the Navigator Saturn, a 2000 built, 22,000 cubic meter ethylene-capable handysize gas carrier to a third party for almost $16 million, netting a gain of over $10 million. We also sold the Happy Falcon, a 2002 built, 3,700 cubic meter semi-refrigerated small gas carrier to a third party for $4 million, netting a gain of almost $2 million. That roughly $12 million profit will be booked in our first quarter 2026 results. We now have 8 vessels over 15 years of age, all of which are debt-free, and we continue to engage buyers who are showing interest in acquiring these older vessels. Randall Giveans: Now on the other side of the equation, we will continue to pursue accretive second-hand vessel acquisitions as well, and we will also acquire more of our own vessels through share buybacks. Now as a result of our recent sales, our current fleet now consists of 55 vessels with an average age of 12.6 years and an average size of over 21,000 cubic meters. To note, we continue to upgrade our vessels with various energy savings technologies. More details on slide 28. We recently started rolling out new artificial intelligence or AI programs to make our fleet even more efficient. With that, I will now turn it back over to Mads for some closing remarks before we get to Q&A. Mads Peter Zacho: Good. Thanks a lot, Randy. As you can all see, Q4 was a steady quarter with financial and operational performance that was much in line with the previous quarters. Our financial standing remains strong with ample financial reserves, few upcoming maturities and a well-managed interest rate risk. Looking into this first quarter, we already delivered the first 2 new building financings at record low margins, and we are well on track to secure the remaining 4 within the first half of 2026. Cash reserves are expected to be further strengthened through the sale of older tonnage at attractive prices. The war in the Middle East brings uncertainty, but also opportunities for Navigator Holdings Ltd., as just described. We experience increased demand from customers due to new trading patterns emerging, especially for U.S. exports. Venezuela is another emerging opportunity in front of us. Mads Peter Zacho: This all comes on top of what we consider a fundamentally sound demand and supply outlook, where growth in the U.S.-based NGL production is very likely to exceed the global vessel supply growth. Thanks a lot for listening, and back to you, Randy. Randall Giveans: Thank you, Mads. Operator, we will now open the lines for some Q&A. To raise your hand, press star nine, and then you will have to unmute yourself by pressing star six. Or if using Zoom, just use that Raise Hand function. First question, your line should be open. Chris Robertson: Hey, good morning, everybody. This is Chris Robertson at Deutsche Bank. Thank you for taking my questions. Just to recap on the Middle East situation, what might be the impact from the larger segments here? I know that you guys do not necessarily compete in the same trades as VLGCs, but any risk here that the VLECs or ACs can cannibalize some of the trade if they ballast to the U.S.? Can you talk about the potential on that? I guess it depends on the duration of the current situation, of course, but any downside risk from that? Thanks, Øyvind. Just looking at March here in terms of ethylene, a lot going on on price inputs and all these types of things. There is also some unplanned and planned disruptions and turnarounds in the U.S. Gulf Coast. I think 6% of North American ethylene capacity is going to be offline this month by some of your competitors. Can you talk about maybe the landscape here? You mentioned it earlier. Inquiries on both a contract and in spot basis, are you seeing an impact of course from the Middle East situation? Are you seeing an impact from this outage situation making your volumes more competitive here? Øyvind Lindeman: I think how to look at it. VLGCs, they do LPG. Clearly, if I was a VLGC owner and Strait of Hormuz is shut, that delivers up to 30% of my exports, then I would ballast to the U.S. and see if I can get a cargo slot or berth availability, which is scarce because they have been running quite full anyways. That is a VLGC conundrum at the moment. How does it impact Navigator Holdings Ltd.? You need to understand that we, Navigator Holdings Ltd., we do not do LPG from U.S. to Asia. We do ethane and ethylene, and VLGCs cannot do that physically. The impact from that dimension limited. You know, our Atlantic trade for Handysize remains LPG, ammonia. VLGCs never do ammonia and also ethane and ethylene. Yeah, limited impact on the downside should it be a pile up of VLGCs in the U.S. Gulf. Different businesses. March looking very strong as we showed. Sentiment continues the same into April. I think while there might be reduction in production in the U.S. domestically, I think the international demand outweighs that. That is why you see U.S. prices increasing. However, international markets needs it, and therefore bidding even higher than that, encouraging exports. I think what is the direct impact of Middle East taking the driver's seat in this one. Randall Giveans: Thank you, Chris. Next caller, your line should be open as well. Spiro Dounis: Hey, guys, Spiro Dounis from Citi. Glad to hear your crews are staying out of harm's way. Hope that continues. And maybe starting kind of on that topic, just kind of trying to think about your chartering strategy as you think about the rest of the year in the context of some of this Middle East volatility. Sounds like you are constructive on prices and rates moving up from here. At the same time, you probably want to preserve some of that upside optionality. Øyvind, how are you thinking about locking in vessels for term here, maybe leaning into some of the stronger market to do that, once things have settled down a bit? Understood. Second question, maybe going to the fleet renewal. You called out in the slides about 8 more vessels older than 15 years old that could be sales candidates here, I think all of which are unencumbered. Based on my math, I think those are worth collectively over $200 million. I am curious, is that consistent with your view on the valuation there? As you think about reallocating that capital, what would be optimal and best use today if you were able to sell those in the near term here? Øyvind Lindeman: It is very dynamic. We have never been in a position where we want to go 100% term, and conversely, never been, it is not part of our strategy to be a 100% spot either. Generally, we have been operating the last 10 years between 30%-50% cover. If there is an opportunity to lock in an attractive rate historically, then yes, we definitely pursue that. But it is more, you know, with 55 ships, then I think we are pretty well covered today. We are looking at some extensions and so forth at the decent rates, which we will probably do, but no huge change from what we have been doing over the last few years. Mads Peter Zacho: Yeah, I think doing it in the very near term would be difficult. I mean, these vessels are not sold in a very liquid market. As you have seen also over the past 2, 3 years, what we have done is we have sold 2, 3, 4 per year. We might be able to do that a little bit faster, but I think you should assume that this is going to take at least a year or 2. I think that the valuation is quite attractive as you suggest here, and it would free up a lot of additional capital. As Gary was just talking about and me also, we have a robust balance sheet at this point in time. It would constitute, you could say, excess capital that would open up for further capital repatriation. We would not go and plow it into a new building market or buy vessels at high prices for the time being. We would be selective as we always have been. Last year, we bought three vessels that were in a distressed situation, and we bought them at very attractive prices. We always are on the lookout for that. Other than that, the consolidation opportunities are few and far between. I think we would be in a situation where we would probably have more cash coming in than good uses for it in the new building or second-hand market. Capital return would be a big proportion of that. Spiro Dounis: Great. I will leave it there for today. Thank you, gentlemen. Mads Peter Zacho: Thank you. Randall Giveans: Thanks, Spiro. Next caller, your line should be open. Omar Nokta: Thank you. Hey, guys, it is Omar Nokta from Clarksons Securities. Thanks for the update. Obviously, a lot going on. Wanted to maybe just touch base back to the Middle East situation, you know. Just on our ethylene exports from the U.S., you highlighted that in the fourth quarter, about maybe 84% of U.S. exports went to Europe and really just 11% to Asia. How do you see that mix evolving here? You mentioned it a bit in your comments, and you can see from the terminal that you have had a nice move up and throughput for March. I guess, how do you think of that mix shaping up here for, say, the month of March? What would that impact be on freight rates? Øyvind Lindeman: Thank you, Omar. Perhaps, Randy, you can add some additional color. In one of the graphs on, in the presentation, we included up to February. Up to February, January, February, 100% to Europe. Now, Iran happened on the 28th of February, I believe. What is going to happen in March? We are just on the 12th of March, and you would expect that some of that ethylene exported in March will head to Asia because naphtha and these other things we talked about, the dynamics there are completely turned upside down. We expect that to happen. Now, on the ton-mile demand, that obviously is a positive. A voyage to Asia from U.S. Gulf is longer than a voyage to Europe, we welcome those changes. Should the ethylene go continue to 100% go to Europe. I think in a situation today where utilization is quite high and rates are quite good, then we will be happy with that too. Obviously, the more that goes to Asia, the better it is. Omar Nokta: Cool. Thank you, Øyvind. Then just a follow-up. Saw the five-year charter, or perhaps it is an extension, on the Navigator Aurora, taking that vessel's employment up to 2031. Any details you are able to give us on, you know, the terms of the charter? I know obviously you do not necessarily give specifics on rates, but, you know, what it is going to be doing, what it is going to be carrying, for the duration of the charter. Then, you know, given that you have those four ethylene MGCs now fully contracted, how confident are you with the four that you have under construction, about getting long-term contracts as well? Øyvind Lindeman: At least the first part of the question, the Navigator Aurora, since delivery, has been trading with the Borealis, a petrochemical producer, bridging or taking ethane from U.S. East Coast, primarily from Marcus Hook, to Stenungssund cracker that they converted to be able to use ethane, and therefore bring the U.S. advantage to Sweden ethylene production. She will continue to do that. Over the next five years, she will maintain that virtual pipeline between the U.S. East Coast and Sweden. Omar Nokta: Thank you. Just in terms of, you know, expectations on the new buildings, do you have conviction that you will be able to secure them on long-term charter, as well? Øyvind Lindeman: We are- Omar Nokta: Is that increased or? Øyvind Lindeman: We are very- Omar Nokta: Yeah, you probably want to share. Øyvind Lindeman: We are very confident when we ordered it, and today, with everything that happened in Middle East, we are even more confident. Why? Because if you are running a ethylene production plant in, say, Asia, and you are facing these immense disruptions, you think twice about continuing how you have been doing it, and rather, contract ethane from U.S. In any case, we are confident. Omar Nokta: Very good. Thank you, Øyvind. Thanks, guys. I will pass it back. Randall Giveans: Thanks, Omar. Good to have you back. Next caller, your line should be open. Clement? Climent Molins: Hey, guys. This is Clement Mullins. I am from Value Investor's Edge. Thank you for taking my questions. This is kind of a follow-up to Øyvind's latest commentary, and although it may be too early to ask, have you seen increased interest or urgency, let us say, from potential customers for the ethylene export terminal since the war in Iran started? And secondly, have you sold spot cargos in recent weeks from the terminal? To what extent should we expect a contribution from this in Q1? Øyvind Lindeman: The answer is. The first part of the question is yes. We have seen increased interest for U.S. ethylene. You can see that in one of the pricing graphs. While U.S. domestic price, ethylene prices have gone up. Why have they gone up? Because there is obviously demand, international demand, pulling prices up, and then, the commentary also was that international prices are gone up even more than the U.S. increase, therefore encouraging trade. Ethylene are being sold both on contract and spot in March. March is looking very healthy on the terminal side, as Randy and I mentioned. That was also before what happened, because nominations for the terminal happens, sort of in the middle of the month for the previous month. The terminal was pretty full even before this thing happened. Yeah, we remain quite optimistic. Randall Giveans: Yeah. A lot of the flurry of incremental spot cargos, they are asking, "Can you get it as soon as possible?" Right? In March, we are pretty much sold out. A lot of that will bleed into April, so that bodes well for the start of the second quarter as well. Climent Molins: Okay. That is very helpful. Thank you, guys. I will turn it over. Randall Giveans: We have a few other questions. This one for Gary, that was included here. In terms of the new build financing, congrats on that. Do we have any updates for the remaining four new build vessels in terms of financing and the potential timing of those? Should we expect similar terms for those? Gary Chapman: Yeah. Thanks, Randy. As I mentioned in the first half of the call, we have got two more vessels under a financing package that we are hoping to close either this month or the very latest next month. That is for the other two Panda financings. The ammonia vessels, we are hoping and expecting to get that done within the second quarter, certainly by the end of June. I think that is very comfortable. In terms of terms, as I also mentioned, I think Navigator's credit at the moment is very good, and the banking market is also very good. We have got two things there working very much in our favor. We are very much expecting strong terms on all six vessels by the time we close. Obviously, there are some external factors here, but so far we have not really seen any impact on financing or banking activity and behaviors so far. I think that probably will hold because I think this hopefully is a short-term situation compared to, say, a 5 or plus year financing arrangement. Randall Giveans: Thank you. Øyvind, for you, can you please discuss the force majeure clauses in your time charters? Øyvind Lindeman: Time charters are generally like you lease a car, and if that road is blocked, you take a different road. Same for shipping. You lease a ship, you charter a ship, and it is up to you to decide where you are going to sail her. Even if Hormuz Straits are closed, it does not constitute cancellation for those ships. Randall Giveans: Perfect. Question here on the magnitude of the ethylene offtake agreements. Are Asian buyers looking at spot cargos or longer term commitments, and will the export terminal performance be more consistent in 2026 than 2025? I will start there. We, you know, we have not disclosed the terms in terms of the duration or the magnitude of the offtake agreements, but clearly you have seen that already coming through the system, both more offtake in terms of term as well as spot cargos pushing up volumes in the first quarter and beyond. We are still actively negotiating some of the volumes, so we do not want to go into too many details there. In terms of the Asian buyers, it is a combination of spot cargos coming to the market immediately and also longer term commitments. Again, a lot of that is based on the higher naphtha prices. The third part here, will the export terminal performance be more consistent in 2026 than 2025? We certainly hope so. But yes, I think if you saw on the first quarter of 2025, it was a loss, right? We had 85,000 tons for the entire quarter. First quarter of 2026 will certainly be a gain and at least triple that. The first quarter certainly at a much stronger start than the first quarter of 2025. As I mentioned, a lot of that strength is already bleeding into April and beyond, more offtake commitments, all of those things. I think we can confidently say that from today, 2026 should be much better than 2025 from the terminal perspective. I think that completes our Q&A. Mads, any final comments before we end the call? Mads Peter Zacho: I just want to say, thanks a lot for listening here and for the great questions that you brought. You know where to catch us if you have more questions. Other than that, we look forward to reporting next time in early May on the Q1, a quarter that has started with business as usual, but surely brought March, which brought an entirely new dynamics here. As we have discussed in the call so far, that there are a lot of opportunities that are coming our way, and we will of course take advantage of those. Thanks a lot.
Operator: Good afternoon, everyone, and welcome to Limoneira Company’s First Quarter Fiscal Year 2026 Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. It is now my pleasure to introduce your host, John Mills with ICR. Thank you. You may begin. Great. Thank you. Good afternoon, everyone, and thank you for joining us for Limoneira Company’s First Quarter Fiscal Year 2026 Conference Call. John Mills: On the call today are Harold Edwards, President and Chief Executive Officer, and Greg Hamm, Chief Financial Officer. By now, everyone should have access to the First Quarter Fiscal Year 2026 earnings release, which went out today after the market close. If you have not had a chance to view the release, it is available on the Investor Relations portion of the company’s website at limoneira.com. This call is being webcast, and a replay will be available on Limoneira Company’s website as well. Before we begin, we would like to remind everyone that prepared remarks contain forward-looking statements, and management may make additional forward-looking statements in response to your questions. Such statements involve a number of known and unknown risks and uncertainties, many of which are outside the company’s control, and could cause its future results, performance, or achievements to differ significantly from the results, performance, or achievements expressed or implied by such forward-looking statements. Important factors that could cause or contribute to such differences include risks detailed in the company’s Forms 10-Q and 10-K filed with the SEC and those mentioned in the earnings release. Except as required by law, we undertake no obligation to update any forward-looking or other statements herein, whether as a result of new information, future events, or otherwise. Please note that during today’s call, we will be discussing non-GAAP financial measures, including results on an adjusted basis. We believe these adjusted financial measures can facilitate a more complete analysis and greater understanding of Limoneira Company’s ongoing results of operations, particularly when comparing underlying results from period to period. We have provided as much detail as possible on any items that are discussed on an adjusted basis. Also within the company’s earnings release and in today’s prepared remarks, we include adjusted EBITDA and adjusted diluted EPS, which are non-GAAP financial measures. A reconciliation of adjusted EBITDA and adjusted diluted earnings per share to the most directly comparable GAAP financial measures is included in the company’s press release, which has been posted to its website. I will now turn the call over to the company’s President and CEO, Harold Edwards. Harold Edwards: Thanks, John, and good afternoon, everyone. Our first quarter results reflect the strategic transformation we have been executing to position Limoneira Company for sustainable long-term value creation. While the cadence of lemon sales will shift due to our return to Sunkist, with the first and second quarters expected to have lower sales and the third and fourth quarters higher, we are pleased that fresh utilization improved in the first quarter. Even though we incurred some specific costs, which we believe are nonrecurring during this transition quarter, the strategic foundation we have built is now delivering measurable results, and we remain firmly on track to achieve our Fiscal 2026 objectives, including our annual volume guidance for lemons and avocados. I would like to add a little more color on the costs reflected in our first quarter results. We experienced $2.5 million in specific expenses, which consisted of $1.0 million in packing house repairs that we recovered from insurance proceeds in the second quarter, $0.5 million in costs related to the closing of our Chilean farming operations, and $1.0 million in foreign exchange fluctuation on the receivables from the sale of the Chilean farming assets. Adjusted net loss was a $0.48 loss per diluted share and includes approximately $0.06 per share of loss related to the packing house repairs and closing the Chilean farming operations. Additionally, we are expecting another $1.4 million of insurance proceeds in the second quarter. Looking beyond these items, our underlying business performance demonstrates the strength of our strategic repositioning. Our Sunkist partnership is functioning as planned, our avocado operations continue to expand, and our asset monetization initiatives are progressing on schedule. The strategic initiatives we began implementing were driven by a clear assessment of market realities. We took decisive action to reduce our exposure to volatile lemon pricing while building sustainable competitive advantages. In 2025, we accelerated this work by reducing future costs to position us for stronger Fiscal 2026 results. In Fiscal 2026, we expect the enhancements we are making to our cost structure will generate $10 million in selling, general, and administrative savings compared to Fiscal 2025. Importantly, Sunkist provides enhanced customer access to premium accounts and major U.S. retailers through a full-category citrus offering. This positions us to deliver comprehensive solutions for retail buyers while removing pricing pressure from the marketplace and strengthening both our packing margins and grower partner relationships. Another key initiative involved expanding our avocado production. Today, we have 1,600 acres planted, with only 800 acres currently bearing fruit. The additional 800 acres will begin bearing fruit over the next two to four years, representing a near 100% increase in our avocado production capacity. California avocados command premium pricing due to superior quality. Our strategic location provides logistical advantages to the highest per capita consumption markets in the Western United States. Our strategic initiatives extend well beyond agriculture. We have our planned 50/50 organic recycling joint venture with Agerman that we expect to process 300,000 tons of organic waste annually and contribute to EBITDA when the facility becomes operational in Fiscal 2027. We also have our real estate development project, Harvest at Limoneira. We continue to expect future proceeds from Harvest, Limoneira Lewis Community Builders 2, and East Area 2 to total $155 million over the next five fiscal years. Phase 3 of the project consists of approximately 550 home lots and 300 apartments, plus we have 35 acres of East Area 2 Medical Pavilion development that we believe could begin to be monetized in Fiscal 2026. Additionally, we have Lincodelmar, our 221-acre agricultural infill property in the City of Ventura, California, which represents a strategic asset with potential for residential development and significant long-term value creation. We are also unlocking value by divesting nonstrategic assets and monetizing our water rights to fuel this transformation and strengthen our balance sheet. We are now advancing the monetization of our Windfall Farms vineyard in Paso Robles and our Argentina agricultural assets, with Windfall Farms completion targeted by the end of Fiscal 2026. Our water monetization strategy is also progressing well. Following last year’s $1.7 million realization from Santa Paula Basin water rights sales, we are actively working to realize meaningful value from our Class 3 Colorado River water rights and Santa Paula Basin conserved pumping rights. These water assets represent high-value nonoperational resources that we can convert to cash while maintaining our agricultural operations. The proof points are clear. Our cost structure is dramatically improved, customer access enhanced, our product mix is optimized, and our asset base is being monetized. These are strategic initiatives that we believe will drive financial results throughout Fiscal 2026. In summary, our First Quarter Fiscal 2026 results reflect the company in transition, absorbing specific costs while building the foundation for sustained profitability. The strategic initiatives we have implemented are now delivering tangible financial benefits. We anticipate you will see these improvements on a sequential basis this year, as we expect our second quarter to show improvement compared to the first quarter and our third and fourth quarters being the strongest periods of the year. We have transformed our cost structure, focused our revenue streams, optimized our asset base, and positioned ourselves for sustainable EBITDA growth. The Limoneira Company of today is a fundamentally stronger company, more focused and better positioned for long-term value creation. We look forward to demonstrating continued progress throughout Fiscal 2026. Now I would like to officially introduce Greg Hamm as our new Chief Financial Officer. I have had the privilege to work with Greg for over 22 years at Limoneira Company since he was hired in 2004. He previously served as our Vice President and Corporate Controller since 2008. Greg succeeds Mark Palamountain, who served as our Chief Financial Officer since 2018 and was instrumental in our strategic transformation. As part of our commitment to succession planning, we identified Greg as a candidate for Chief Financial Officer, and we have worked closely with him over the years to prepare him for this role. I will now turn the call over to Greg for the financial results. Greg Hamm: Thank you, Harold. Greg Hamm: And good afternoon, everyone. I am pleased to be speaking with you today as Limoneira Company’s Chief Financial Officer. I have had the privilege of working alongside this talented team for a number of years. This marks my first earnings call in this role, and I am pleased to share our financial results with you. As Harold mentioned, we are executing a significant transformation that we believe positions Limoneira Company for sustainable long-term value creation. Let me walk you through the financial details of our first quarter performance and explain how our strategic initiatives are ready to deliver measurable results. Before diving into specifics, I want to remind everyone that our business is best viewed on an annual basis due to its seasonal nature. With our transition to Sunkist, our quarterly rhythm has fundamentally shifted. Under our partnership with Sunkist, the first and second quarters are now our seasonally softer periods, while the third and fourth quarters will be stronger. As we move through Fiscal 2026, you will see this new cadence taking shape. Let me walk you through our revenue performance for the first quarter. Total net revenues were $18.2 million compared to $34.3 million in 2025. Agribusiness revenues totaled $16.8 million compared to $32.9 million in the prior-year first quarter. The year-over-year decrease in total net revenue reflects the strategic transition to Sunkist for lemon sales and marketing and the resulting shift in quarterly sales cadence, as well as exiting our brokerage business in the first quarter of Fiscal 2026 and farm management business during Fiscal 2025, which further contributed to the year-over-year revenue decrease. Other operations revenue was $1.4 million and essentially flat compared to the prior-year quarter. Fresh packed lemon sales were $11.9 million compared to $21.2 million in the same period last year. We sold approximately 681,000 cartons of U.S.-packed fresh lemons at an average price of $17.41 per carton, compared to 1,147 cartons at $18.44 per carton in the prior-year first quarter. The decrease in volume was entirely related to the change in cadence under the Sunkist agreement. It is important to note that per-carton prices for Fiscal 2026 are now net of the Sunkist marketing fee. Brokered lemons and other lemon sales were $1.0 million compared to $2.2 million in 2025, reflecting the transition of brokerage operations to Sunkist. There was no avocado revenue in 2026, compared to $162,000 in the prior-year period due to harvest timing. Orange revenue was $10,000 compared to $1.6 million in the same period last year, reflecting the sale of our Chilean agricultural properties and the transition of brokerage operations to Sunkist. Specialty citrus, wine grape, and other revenues were $700,000 in 2026 compared to $500,000 in 2025. There was no farm management revenue in 2026, compared to $1.2 million in the prior-year period due to the termination of our farm management agreement effective 03/31/2025. Total costs and expenses in the first quarter were $28.8 million, down 27% from $39.7 million in 2025. The decrease was primarily driven by reduced agribusiness volumes and the elimination of citrus sales and marketing costs following the transition to Sunkist, which resulted in lower agribusiness costs and a meaningful decrease in selling, general, and administrative expenses. Operating loss for 2026 was $10.6 million compared to an operating loss of $5.3 million in the prior-year period. The increase in operating loss was primarily due to decreased agribusiness revenues, as well as $1.0 million in packing house repairs, $500,000 of costs related to closing Chilean farming operations, and $1.5 million of gain on sales of water rights in Fiscal 2025. Additionally, total other expenses for Fiscal 2026 include $1.0 million in foreign exchange fluctuations on the receivables from the sale of our Chilean farming assets. Excluding these items, our underlying operational performance reflects the cost improvements we have been implementing. Net loss applicable to common stock after preferred dividends was $9.6 million, or $0.53 per diluted share, for 2026, compared to a net loss of $3.2 million, or $0.18 per diluted share, in 2025. On an adjusted basis, adjusted net loss for diluted EPS in 2026 was $8.5 million, or $0.48 per diluted share, compared to an adjusted net loss of $2.5 million, or $0.14 per diluted share, in the prior-year period. A full reconciliation is provided in our earnings release. Non-GAAP adjusted EBITDA was a loss of $7.7 million in 2026 compared to a loss of $2.3 million in the same period last year. A reconciliation of net loss attributable to Limoneira Company to adjusted EBITDA is also provided in our earnings release. Again, I want to emphasize that these first quarter results reflect the new seasonal cadence under our Sunkist partnership. The specific expenses mentioned, and the strategic investments we are making, position the company for improved performance throughout the remainder of Fiscal 2026. Operator: Turning to our balance sheet, we remain— Greg Hamm: —in a solid position to execute on our strategic initiatives. Long-term debt as of 01/31/2026 was $89.9 million compared to $72.5 million at the end of Fiscal 2025. Our net debt position was $88.0 million at quarter end after accounting for $1.3 million of cash on hand. Let me provide more detail on the financial impact of our strategic initiatives, particularly our Sunkist partnership. We expect to realize approximately $10.0 million in total annual selling, general, and administrative savings for Fiscal 2026. These are real, tangible cost reductions that will flow through our P&L this fiscal year and position us for improved profitability as our revenue cadence normalizes in the second half of the year. In summary, while our first quarter results reflect the new seasonal cadence and specific expenses, the underlying operational improvements are substantial. The 27% reduction in costs year over year demonstrates our disciplined execution. We have clear visibility into $10.0 million of selling, general, and administrative savings benefiting Fiscal 2026 through the Sunkist partnership, which fundamentally improves our cost structure. I will now turn the call back to Harold to discuss our Fiscal 2026 outlook and longer-term growth pipeline. Operator: —and longer term growth pipeline. Harold Edwards: Thank you, Greg. Looking at the remainder of Fiscal 2026, we expect this period to be when our strategic transformation begins delivering measurable financial results. We anticipate you will see these improvements on a sequential basis this year, as we expect our second quarter to show improvement compared to the first quarter and our third and fourth quarters being the strongest periods of the year. We ended this year with approximately $10.0 million in cost-saving initiatives based primarily on the benefits of our Sunkist partnership, which will be visible in our Fiscal 2026 results through improved cost structure and enhanced customer relationships. Our avocado expansion continues on schedule with significant production increases expected in Fiscal 2027 as our nonbearing acreage matures. For full-year Fiscal 2026, we are reiterating the following guidance: fresh lemon volumes of 4.0 to 4.5 million cartons and avocado volumes of 5.0 to 6.0 million pounds. Beyond our core operations, we have several additional value-creation opportunities progressing. Our real estate pipeline remains strong, with $155 million in expected total proceeds over the next five fiscal years. The Limco Del Mar entitlement process represents another significant real estate development opportunity, and our planned organic recycling joint venture is expected to contribute meaningful EBITDA when the facility becomes operational in Fiscal 2027. We have built a more resilient business model that is less dependent on commodity lemon pricing while creating multiple engines for profitable growth. We will now open for questions. Operator: Thank you. 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. Our first question comes from Puran Sharma with Stephens. Your line is now live. Puran Sharma: Good afternoon, and thanks for the question. This is Adam Shepherd on for Puran. On the $10 million in expected SG&A savings this year, I think you mentioned $10 million was to be realized this year. I was going to ask about how much would be visible in the first half versus the back half, and if that ramp kind of implies there might be a higher-than-$10 million run rate exiting the year. And then if there are any offsets to keep in mind as the Sunkist transition fully ramps, that would be great. Thanks. Harold Edwards: Those are great questions, Adam. Thank you. I think that you will see we had some lingering or dragging costs from Fiscal 2025 that entered into 2026. So while we were pleased with our cost reduction, we think our run rate was slightly behind in Q1 versus what you will see in Q2, Q3, and Q4. The actual reduction is not going to be linear, so you will see it move around, and we have also tried to be conservative in our estimates. I think at the end of the year, though, you will see a total reduction of $10 million from the SG&A overhead line item. As it relates to whether you will see a faster or higher run rate at the end of the fiscal year, I would not expect it. I think you will get to the end of the year and then see much more of a fixed overhead as we enter 2027. Greg Hamm: I agree. It is not tied to volume. It is more of a steady savings throughout the year. Puran Sharma: Okay. Great. Thank you. And then switching over to avocados for my follow-up, are you able to just give us an update on weather conditions, how the trees are looking—just color around that would be great too. Harold Edwards: Sure. It has been pretty much an idyllic winter in California. It really never got cold, which is fantastic, and the winds, which can oftentimes be a real problem for holding fruit on the trees, have been moderate. The young trees look fantastic. We are actually entering a week here—it is March 12 today—of potentially record heat levels, which will not harm the trees. It will actually accelerate fruit growth, but also the bloom and the flower on the trees for next year’s crop setting. We have had really good rain conditions this year. You know, a normal year of rain in this part of the world is about 17 inches a year. To date, we have received almost 25 inches in nice, steady, warm rains, and that has allowed us to realize good fruit growth. So there is good, big fruit hanging on the trees for this year, and it looks like the flowering and the blooming set for next year with the avocados looks as good as it can right now. So we feel like it has been almost idyllic weather conditions to set us up for a strong 2027 with avocados. Puran Sharma: Okay. Great. Thank you very much. Thank you. Thank you. Operator: Our next question comes from Mark Smith with Lake Street Capital. Your line is now live. Harold Edwards: Hey guys. Similar to the last question, just wanted to talk around pricing around lemons, weather impact—anything that you are seeing there. I will start with avocados, Mark. Thanks for the question. So Mexico has an extraordinarily large crop this year, and through the last three months of weekly shipments, we have seen some of the highest weekly shipments coming into the United States from Mexico. Conventional wisdom was always that the U.S. consumed about 60 million pounds a week. The last week saw 75 million pounds of fruit from Mexico come into the U.S. The good news is that fruit is all being consumed, but the issue is that with that much fruit coming in, it is putting downward pricing pressure on avocados right now. Size 48s are going for about $1.00 a pound right now, and 60s are going for about $1.05 to $1.10. So, ironically, the smaller sizing fruit is more valuable right now. As you see Mexico’s crop tapering off, I would expect pricing to buoy a little bit here in California—maybe $1.10 to $1.20—but right now, you are seeing pricing on the low end because of how much fruit is in the marketplace. Again, it is great news that the fruit is being consumed. You are seeing per capita consumption growing when you see pricing this low as it works its way through the supply chain and consumers are able to access fruit more readily and less expensively. So that should set us up for a pretty strong environment in 2027. As it relates to lemons, we started out Q1 with pricing that was similar to 2025 in Q1, and then the market became supplied and full, and we have seen lower pricing for lemons. Greg, do you want to maybe comment on lemon pricing? Greg Hamm: We ended up at $17.42 for this quarter versus $18.44, and Sunkist charges $0.60 a carton, so you take that into account, and then coming into February, it softened up to around $16. Harold Edwards: Which is not as low as it was last year, but I predict this is probably the trough for pricing, and it will start picking back up again as we head towards May. And, Mark, the other comment I would make on that pricing is that a lemon is not a lemon is not a lemon, because buried into that average pricing is a product mix factor—how much of your valuable fancy fruit, how much of your middle-range choice fruit, and how much of your standards actually got sold fresh. The comment that we made earlier about a much higher percentage of fresh utilization in the first quarter meant that a lot of the standards, which before—like last year—went to juice, actually made it to the fresh market. So the total impact is it drags your average price down, but your units are much higher, and throughout the course of the full season, that should work itself out in a very positive way for us, if that makes sense. So while it seems like it is very, very low pricing on half the fruit, we sold a significantly higher amount of volume fresh in the first quarter than we saw last year, and that bodes very well for the rest of the year for us. Mark Smith: Perfect. Harold Edwards: Last question for me was just as we look at certain markets in the West with drought conditions and low snowpack, does this create opportunities for monetization of some of these water assets? Any update you can give us on how that process is going would be great. Thanks, Mark. That is a great question. I am glad we get to talk about it just a little bit. The two most opportunistic situations we have with our water assets are related to our conserved water in the Santa Paula Water Basin, and not much to report there other than that there remains demand for that water. As you probably remember, we sold water last year at $30,000 an acre-foot and did that as a placeholder to show the potential value that could be created as more and more of that conserved water is made available into the marketplace in Santa Paula. The real opportunity right now—and I am sure this is what most people are focused on; we certainly are—is what is going on on the Colorado River. For background, as you may recall, we have Class 3 Colorado River water rights. There are seven states now that are negotiating who gets what in terms of a new water accord that is put on the Colorado River. The Department of the Interior and the Bureau of Reclamation have mandated that one-third of the consumptive use of the Colorado River be cut, and so now each of the seven states who derive benefit off the river today are negotiating who gets what and what kind of cuts need to be made. The reality is that the actual agreements for future water use have not been reached. There continues to be quite a bit of turmoil between the states, and there has been an inability, at least to this point, to come up with an agreement for each of the seven states that is satisfactory. With that being said, the amount of cuts that need to come off the river put Limoneira Company’s water rights off the Colorado River into a position of being very valuable. How they monetize at this point is still a little bit unclear, although we do believe that there will be long-term fallowing programs that we will be positioned to our advantage. We do expect to announce programs in the near term that we will be able to take advantage of, that will bring value and allow that water from the Colorado River to be monetized in the near term. Nothing specific to report at this time; however, I would say that I would hope that by the next time we talk, at the conclusion of the second quarter, we will have specifics that we can address and speak to about the monetization of our Colorado River water rights. Operator: Excellent. We have reached the end of the question-and-answer session. I would now like to turn the call back over to Harold Edwards for closing comments. Harold Edwards: Great. Thank you very much for all of your questions and your interest in Limoneira Company. Operator: Have a great day. Thank you. Harold Edwards: This concludes today’s conference. You may disconnect your lines— Operator: —at this time, and we thank you for your participation. Greetings, and welcome to Limoneira Company’s First Quarter 2026 Financial Results Conference Call. At this time, participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. It is now my pleasure to introduce your host, John Mills with ICR. Thank you. You may begin. John Mills: Great. Thank you. Good afternoon, everyone, and thank you for joining us for Limoneira Company’s First Quarter Fiscal Year 2026 Conference Call. On the call today are Harold Edwards, President and Chief Executive Officer, and Greg Hamm, Chief Financial Officer. By now, everyone should have access to the First Quarter Fiscal Year 2026 earnings release, which went out today after the market closed. If you have not had a chance to view the release, it is available on the Investor Relations portion of the company’s website at limoneira.com. This call is being webcast, and a replay will be available on Limoneira Company’s website as well. Before we begin, we would like to remind everyone that prepared remarks contain forward-looking statements, and management may make additional forward-looking statements in response to your questions. Such statements involve a number of known and unknown risks and uncertainties, many of which are outside the company’s control, and could cause its future results, performance, or achievements to differ significantly from the results, performance, or achievements expressed or implied by such forward-looking statements. Important factors that could cause or contribute to such differences include risks detailed in the company’s Forms 10-Q and 10-K filed with the SEC and those mentioned in the earnings release. Except as required by law, we undertake no obligation to update any forward-looking or other statements herein, whether a result of new information, future events, or otherwise. Please note that during today’s call, we will be discussing non-GAAP financial measures, including results on an adjusted basis. We believe these adjusted financial measures can facilitate a more complete analysis and greater understanding of Limoneira Company’s ongoing results of operations, particularly when comparing underlying results from period to period. We have provided as much detail as possible on any items that are discussed on an adjusted basis. Also within the company’s earnings release and in today’s prepared remarks, we include adjusted EBITDA and adjusted diluted EPS, which are non-GAAP financial measures. A reconciliation of adjusted EBITDA and adjusted diluted earnings per share to the most directly comparable GAAP financial measures is included in the company’s press release, which has been posted to its website. I will now turn the call over to the company’s President and CEO, Harold Edwards. Harold Edwards: Thanks, John, and good afternoon, everyone. Our first quarter results reflect the strategic transformation we have been executing to position Limoneira Company for sustainable long-term value creation. While the cadence of lemon sales will shift due to our return to Sunkist, with the first and second quarters expected to have lower sales and the third and fourth quarters higher, we are pleased that fresh utilization improved in the first quarter. Even though we incurred some specific costs, which we believe are nonrecurring during this transition quarter, the strategic foundation we have built is now delivering measurable results, and we remain firmly on track to achieve our Fiscal 2026 objectives, including our annual volume guidance for lemons and avocados. I would like to add a little more color on the specific costs reflected in our first quarter results. We experienced $2.5 million in specific expenses, which consisted of $1.0 million in packing house repairs that we recovered from insurance proceeds in the second quarter, $0.5 million in costs related to the closing of our Chilean farming operations, and $1.0 million in foreign exchange fluctuations on the receivables from the sale of the Chilean farming assets. Adjusted net loss was a $0.48 loss per diluted share and includes approximately $0.06 per share of loss related to the packing house repairs and closing the Chilean farming operations. Additionally, we are expecting another $1.4 million of insurance proceeds in the second quarter. Looking beyond these items, our underlying business performance demonstrates the strength of our strategic repositioning. Our Sunkist partnership is functioning as planned, our avocado operations continue to expand, and our asset monetization initiatives are progressing on schedule. The strategic initiatives we began implementing were driven by a clear assessment of market realities. We took decisive action to reduce our exposure to volatile lemon pricing while building sustainable competitive advantages. In 2025, we accelerated this work by reducing future costs to position us for stronger Fiscal 2026 results. In Fiscal 2026, we expect the enhancements we are making to our cost structure will generate $10 million in selling, general, and administrative savings compared to Fiscal 2025. Importantly, Sunkist provides enhanced customer access to premium accounts and major U.S. retailers through a full-category citrus offering. This positions us to deliver comprehensive solutions for retail buyers while removing pricing pressure from the marketplace and strengthening both our packing margins and grower partner relationships. Another key initiative involved expanding our avocado production. Today, we have 1,600 acres planted, with only 800 acres currently bearing fruit. The additional 800 acres will begin bearing fruit over the next two to four years, representing a near 100% increase in our avocado production capacity. California avocados command premium pricing due to superior quality, and our strategic location provides logistical advantages to the highest per capita consumption markets in the Western United States. Our strategic initiatives extend well beyond agriculture. We have our planned 50/50 organic recycling joint venture with Agerman that we expect to process 300,000 tons of organic waste annually and contribute to EBITDA when the facility becomes operational in Fiscal 2027. We also have our real estate development project, Harvest at Limoneira. We continue to expect future proceeds from Harvest, Limoneira Lewis Community Builders 2, and East Area 2 to total $155 million over the next five fiscal years. Phase 3 of the project consists of approximately 550 home lots and 300 apartments. Plus, we have 35 acres of East Area 2 Medical Pavilion development that we believe could begin to be monetized in Fiscal 2026. Additionally, we have Lincodelmar, our 221-acre agricultural infill property in the City of Ventura, California, which represents a strategic asset with potential for residential development and significant long-term value creation. We are also unlocking value by divesting nonstrategic assets and monetizing our water rights to fuel this transformation and strengthen our balance sheet. We are now advancing the monetization of our Windfall Farms vineyard in Paso Robles and our Argentina agricultural assets, with Windfall Farms completion targeted by the end of Fiscal 2026. Our water monetization strategy is also progressing well. Following last year’s $1.7 million realization from Santa Paula Basin water rights sales, we are actively working to realize meaningful value from our Class 3 Colorado River water rights and Santa Paula Basin conserved pumping rights. These water assets represent high-value nonoperational resources that we can convert to cash while maintaining our agricultural operations. The proof points are clear. Our cost structure is dramatically improved, our customer access enhanced, our product mix is optimized, and our asset base is being monetized. These are strategic initiatives that we believe will drive financial results throughout Fiscal 2026. In summary, our First Quarter Fiscal 2026 results reflect the company in transition, absorbing specific costs while building the foundation for sustained profitability. The strategic initiatives we have implemented are now delivering tangible financial benefits. We anticipate you will see these improvements on a sequential basis this year, as we expect our second quarter to show improvement compared to the first quarter and our third and fourth quarters being the strongest periods of the year. We have transformed our cost structure, focused our revenue streams, optimized our asset base, and positioned ourselves for sustainable EBITDA growth. The Limoneira Company of today is a fundamentally stronger company, more focused and better positioned for long-term value creation. We look forward to demonstrating continued progress throughout Fiscal 2026. Now I would like to officially introduce Greg Hamm as our new Chief Financial Officer. I have had the privilege to work with Greg for over 22 years at Limoneira Company since he was hired in 2004. He previously served as our Vice President and Corporate Controller since 2008. Greg succeeds Mark Palamountain, who served as our Chief Financial Officer since 2018 and was instrumental in our strategic transformation. As part of our commitment to succession planning, we identified Greg as a candidate for Chief Financial Officer, and we have worked closely with him over the years to prepare him for this role. Now let me turn it over to Greg for the financial details, and then we will take your questions. Greg Hamm: Thank you, Harold. Greg Hamm: And good afternoon, everyone. I am pleased to be speaking with you today as Limoneira Company’s Chief Financial Officer. I have had the privilege of working alongside this talented team for a number of years. This marks my first earnings call in this role. I am pleased to share our financial results with you. As Harold mentioned, we are executing a significant transformation that we believe positions Limoneira Company for sustainable long-term value creation. Let me walk you through the financial details of our first quarter performance and explain how our strategic initiatives are ready to deliver measurable results. Before diving into specifics, I want to remind everyone that our business is best viewed on an annual basis due to its seasonal nature. With our transition to Sunkist, our quarterly rhythm has fundamentally shifted. Under our partnership with Sunkist, the first and second quarters are now our seasonally softer periods, while the third and fourth quarters will be stronger. As we move through Fiscal 2026, you will see this new cadence taking shape. Let me walk you through our revenue performance for the first quarter. Total net revenues were $18.2 million, compared to $34.3 million in 2025. Agribusiness revenues totaled $16.8 million compared to $32.9 million in the prior-year first quarter. The year-over-year decrease in total net revenue reflects the strategic transition to Sunkist for lemon sales and marketing and the resulting shift in quarterly sales cadence, as well as exiting our brokerage business in 2026 and farm management business during Fiscal 2025, which further contributed to the year-over-year revenue decrease. Other operations revenue was $1.4 million and essentially flat compared to the prior-year quarter. Fresh packed lemon sales were $11.9 million compared to $21.2 million in the same period last year. We sold approximately 681,000 cartons of U.S.-packed fresh lemons at an average price of $17.41 per carton, compared to 1,147 cartons at $18.44 per carton in the prior-year first quarter. The decrease in volume was entirely related to the change in cadence under the Sunkist agreement. It is important to note that per-carton prices for Fiscal 2026 are now net of the Sunkist marketing fee. Brokered lemons and other lemon sales were $1.0 million compared to $2.2 million in 2025, reflecting the transition of brokerage operations to Sunkist. There was no avocado revenue in 2026 compared to $162,000 in the prior-year period due to harvest timing. Orange revenue was $10,000 compared to $1.6 million in the same period last year, reflecting the sale of our Chilean agricultural properties and the transition of brokerage operations to Sunkist. Specialty citrus, wine grape, and other revenues were $700,000 in 2026 compared to $500,000 in 2025. There was no farm management revenue in 2026 compared to $1.2 million in the prior-year period due to the termination of our farm management agreement effective 03/31/2025. Total costs and expenses in the first quarter were $28.8 million, down 27% from $39.7 million in the first quarter of Fiscal 2025. The decrease was primarily driven by reduced agribusiness volumes and the elimination of citrus sales and marketing costs— Operator: —following the transition to Sunkist, which resulted in lower agribusiness costs— Greg Hamm: —and a meaningful decrease in selling, general, and administrative expenses. Operating loss for 2026 was $10.6 million compared to an operating loss of $5.3 million in the prior-year period. The increase in operating loss was primarily due to decreased agribusiness revenues, as well as $1.0 million in packing house repairs, $500,000 of costs related to closing the Chilean farming operation— John Mills: —and $1.5 million of gain on sales of water rights— Greg Hamm: —in Fiscal 2025. Additionally, total other expenses for Fiscal 2026 includes $1.0 million in foreign exchange fluctuations on the receivables from the sale of our Chilean farming assets. Excluding these items, our underlying operational performance reflects the cost improvements we have been implementing. Net loss applicable to common stock after preferred dividends was $9.6 million, or $0.53 per diluted share, for 2026, compared to a net loss of $3.2 million, or $0.18 per diluted share, in 2025. On an adjusted basis, adjusted net loss for diluted EPS in 2026 was $8.5 million, or $0.48 per diluted share, compared to an adjusted net loss of $2.5 million, or $0.14 per diluted share, in the prior-year period. A full reconciliation is provided in our earnings release. Non-GAAP adjusted EBITDA was a loss of $7.7 million in 2026 compared to a loss of $2.3 million in the same period last year. A reconciliation of net loss attributable to Limoneira Company to adjusted EBITDA is also provided in our earnings release. Again, I want to emphasize that these first quarter results reflect the new seasonal cadence under our Sunkist partnership. The specific expenses mentioned, and the strategic investments we are making, position the company for improved performance throughout the remainder of Fiscal 2026. Turning to our balance sheet, we remain in a solid position to execute on our strategic initiatives. Long-term debt as of 01/31/2026 was $89.9 million compared to $72.5 million at the end of Fiscal 2025. Our net debt position was $88.0 million at quarter end after accounting for $1.3 million of cash on hand. Let me provide more detail on the financial impact of our strategic initiatives, particularly our Sunkist partnership. We expect to realize approximately $10.0 million in total annual selling, general, and administrative savings for Fiscal 2026. These are real, tangible cost reductions that will flow through our P&L this fiscal year and position us for improved profitability as our revenue cadence normalizes in the second half of the year. John Mills: In summary— Greg Hamm: —while our first quarter results reflect the new seasonal cadence and specific expenses, the underlying operational improvements are substantial. The 27% reduction in costs year over year demonstrates our disciplined execution. We have clear visibility into $10.0 million of selling, general, and administrative savings benefiting Fiscal 2026 through the Sunkist partnership, which fundamentally improves our cost structure. Now I would like to turn the call back to Harold to discuss our Fiscal 2026 outlook and longer-term growth pipeline. Thank you, Greg. Looking at the remainder of Fiscal 2026, we expect this period to be when our strategic transformation begins delivering measurable financial results. We anticipate you will see these improvements on a sequential basis this year, as we expect our second quarter to show improvement compared to the first quarter and our third and fourth quarters being the strongest periods of the year. We ended this year with approximately $10.0 million in cost-saving initiatives based primarily on the benefits of our Sunkist partnership, which will be visible in our Fiscal 2026 results through improved cost structure and enhanced customer relationships. Our avocado expansion continues on schedule with significant production increases expected in Fiscal 2027 as our nonbearing acreage matures. For full-year Fiscal 2026, we are reiterating the following guidance: fresh lemon volumes of 4.0 to 4.5 million cartons and avocado volumes of 5.0 to 6.0 million pounds. Beyond our core operations, we have several additional value-creation opportunities progressing. Our real estate pipeline remains strong, with $155 million in expected total proceeds over the next five fiscal years. The Limco Del Mar entitlement process represents another significant real estate development opportunity, and our planned organic recycling joint venture is expected to contribute meaningful EBITDA when the facility becomes operational in Fiscal 2027. We have built a more resilient business model that is less dependent on commodity lemon pricing while creating multiple engines for profitable growth. Operator, we will now open for questions. Thank you. At this time, we will be conducting a question-and-answer session. Operator: 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. One moment please while we poll for questions. Our first question comes from Puran Sharma with Stephens. Your line is now live. Puran Sharma: Good afternoon, and thanks for the question. This is Adam Shepherd on for Puran. On the $10 million in expected SG&A savings this year, I think you mentioned $10 million was to be realized this year. I was going to ask about how much would be visible in the first half versus the back half, and if that ramp kind of implies there might be a higher-than-$10 million run rate exiting the year. And then if there are any offsets to keep in mind as the Sunkist transition fully ramps, that would be great. Thanks. Harold Edwards: Those are great questions, Adam. Thank you. I think that you will see we had some lingering or dragging costs from Fiscal 2025 that entered into 2026. So while we were pleased with our cost reduction, we think our run rate was slightly behind in Q1. The actual reduction is not going to be linear versus what you will see in Q2, Q3, Q4, so you will see it move around, and we have also tried to be conservative in our estimates. I think at the end of the year, though, you will see a total reduction of $10 million from the SG&A overhead line item. As it relates to whether you will see a faster or higher run rate at the end of the fiscal year, I would not expect it. I think you will get to the end of the year and then see much more of a fixed overhead as we enter 2027. Greg Hamm: I agree. It is not tied to volume. It is more of a steady savings throughout the year. Puran Sharma: Okay. Great. Thank you. And then switching over to avocados for my follow-up, are you able to just give us an update on weather conditions, how the trees are looking—just color around that would be great too. Harold Edwards: Sure. It has been pretty much an idyllic winter in California. It really never got cold, which is fantastic, and the east winds, which can oftentimes be a real problem for holding fruit on the trees, have been moderate. The young trees look fantastic. We are actually entering a week here—it is March 12 today—of potentially record heat levels, which will not harm the trees. It will actually accelerate fruit growth, but also the bloom and the flower on the trees for next year’s crop setting. We have had really good rain conditions this year. You know, a normal year of rain in this part of the world is about 7 inches a year. To date, we have received almost 25 inches in nice, steady, warm rains, and that has allowed us to realize good fruit growth. So there is good, big fruit hanging on the trees for this year, and it looks like the flowering and the blooming set for next year with the avocados looks as good as it can right now. So, we feel like it has been almost idyllic weather conditions to set us up for a strong 2027 with avocados. Mark Smith: Okay. Great. Puran Sharma: Thank you very much. Thank you. Thank you. Operator: Our next question comes from Mark Smith with Lake Street Capital. Your line is now live. Harold Edwards: Hey, guys. Similar to the last question, just wanted to talk around pricing around lemons, weather impact—anything that you are seeing there. I will start with avocados, Mark. Thanks for the question. So Mexico has an extraordinarily large crop this year, and through the last three months of weekly shipments, we have seen some of the highest weekly shipments coming into the United States from Mexico. Conventional wisdom was always that the U.S. consumed about 6 million pounds a week. The last week saw 75 million pounds of fruit from Mexico come into the U.S. The good news is that fruit is all being consumed, but the issue is that with that much fruit coming in, it is putting downward pricing pressure on avocados right now. Size 48s are going for about $1.00 a pound right now, and 60s are going for about $1.05 to $1.10. So, ironically, the smaller sizing fruit is more valuable right now. As you see Mexico’s crop tapering off, I would expect pricing to buoy a little bit here in California—maybe $1.10 to $1.20—but right now, you are seeing pricing on the low end because of how much fruit is in the marketplace. Again, it is great news that the fruit is being consumed. You are seeing per capita consumption growing when you see pricing this low as it works its way through the supply chain and consumers are able to access fruit more readily and less expensively. So that sets us up for, you know, a pretty strong environment in 2027. As it relates to lemons, we started out Q1 with pricing that was similar to 2025 in Q1, and then the market became supplied and full, and we have seen lower pricing for lemons. Greg, do you want to maybe comment on lemon pricing? Greg Hamm: We ended up at $17.42 for this quarter versus $18.44, and Sunkist charges $0.60 a carton, so you take that into account, and then coming into February, it softened up to around $16. Harold Edwards: Which is not as low as it was last year, but I predict this is probably the trough for pricing, and it will start picking back up again as we head into—towards May. And, Mark, the other comment I would make on that pricing is that a lemon is not a lemon is not a lemon, because buried into that average pricing is a product mix factor—how much of your valuable fancy fruit, how much of your middle-range choice fruit, and how much of your standards actually got sold fresh. The comment that we made earlier about a much higher percentage of fresh utilization in the first quarter meant that a lot of the standards, which before—like last year—went to juice, actually made it to the fresh market. So the total impact is it drags your average price down, but your units are much higher, and throughout the course of the full season, that should work itself out in a very positive way for us. If that makes sense. So while it seems like it is very, very low pricing on half the fruit, we sold a significantly higher amount of volume fresh in the first quarter than we saw last year, and that bodes very, very well for the rest of the year for us. Mark Smith: Perfect. And— Harold Edwards: —last question for me was just as we look at, you know, certain markets in the West with drought conditions and low snowpack, does this create opportunities for monetization of some of these water assets? Any update you can give us on how that process is going would be great. Thank—yeah. Thanks, Mark. That is a great question. I am glad we get to talk about it just a little bit. So the two most opportunistic situations we have with our water assets are related to our conserved water in the Santa Paula Water Basin, and not much to report there other than that there remains demand for that water. As you probably remember, we sold water last year at $30,000 an acre-foot and did that as a placeholder to show the potential value that could be created as more and more of that water that is conserved is made available into the marketplace in Santa Paula. The real opportunity right now, and I am sure this is what most people are focused on—we certainly are—is what is going on on the Colorado River. For background, as you may recall, we have Class 3 Colorado River water rights. There are seven states now that are negotiating who gets what in terms of a new water accord that is put on the Colorado River. The Department of the Interior and the Bureau of Reclamation have mandated that one-third of the consumptive use of the Colorado River be cut, and so now each of the seven states who derive benefit off the river today are negotiating who gets what and what kind of cuts need to be made. The reality is that the actual agreements for future water use have not been reached. There continues to be quite a bit of turmoil between the states, and there has been an inability, at least to this point, to come up with an agreement for each of the seven states that is satisfactory. With that being said, though, the amount of cuts that need to come off the river put Limoneira Company’s water rights off the Colorado River into a position of being very, very valuable. How they monetize at this point is still a little bit unclear. Although we do believe that there will be long-term fallowing programs that will be positioned for our advantage, and we do expect to announce programs in the near term that we will be able to take advantage of, that will bring value and allow that water from the Colorado River to be monetized in the near term. So nothing specific to report at this time; however, I would say that I would hope that by the next time we talk, at the conclusion of the second quarter, we will have specifics which we can address and speak to about the monetization of our Colorado River water— Mark Smith: Excellent. Puran Sharma: Thank you. Operator: We have reached the end of the question-and-answer session. I would now like to turn the call back over to Harold Edwards for closing comments. Harold Edwards: Great. Thank you very much for all of your questions and your interest in Limoneira Company. Have a great day. Thank you. This concludes today’s conference. You may disconnect your lines at this time, and we thank you for your participation.
Operator: Good day, and welcome to The Beauty Health Company 2025 Fourth Quarter 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 withdraw your question, please press star then two. Please note this event is being recorded. I will now turn the conference over to Mr. Norberto Aja, Investor Relations. Please go ahead. Norberto Aja: Thank you, Operator, and good afternoon, everyone. Thank you for joining The Beauty Health Company's fourth quarter 2025 conference call. We released our results earlier this afternoon via an earnings press release, which can be found on our corporate website at beautyhealth.com. Joining me on the call today is The Beauty Health Company's Chief Executive Officer, Pedro Malha, along with our Chief Financial Officer, Michael Monahan. Before we begin, I would like to remind everyone of the company's safe harbor language. Management may make forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including guidance and underlying assumptions. Forward-looking statements are based on current expectations and beliefs and involve risks and uncertainties that could cause actual results to differ materially. Listeners are cautioned not to place undue reliance on forward-looking statements. For further discussion of risks related to our business, please refer to the risk factors contained in the company's filings with the SEC. This call will present non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to the most comparable GAAP measures is in the earnings press release furnished to the SEC and available on our website. Following management's prepared remarks, we will open the call for a question-and-answer session. I will now turn the call over to our CEO, Pedro Malha. Please go ahead, Pedro. Pedro Malha: Good afternoon, everybody, and thank you for joining us today. The Beauty Health Company has built one of the most recognized platforms in professional skin health, and my first five months with the company have reinforced my conviction in the long-term opportunity ahead of us. But before we review the quarter, I would like to share a few observations here. My background is in global medtech businesses built around differentiated technology and disciplined commercial execution to drive growth. And what attracted me to The Beauty Health Company was the opportunity to bring the same model to the company. The foundation is already in place. We have a globally recognized brand, we have a large installed base of systems placed with providers around the world, and we operate a consumables model that, when executed well, generates meaningful operating leverage. So our task now is straightforward: to unlock the full economic potential of these assets. That means strengthening the commercial engine behind the platform with greater discipline and operating rigor consistent with established medtech companies. It all begins with activating the installed base, improving utilization, reinforcing the economics of our providers, and continuing to invest in clinically meaningful innovation. But before discussing the progress we are making, I think it will be useful to step back a little and look at the broader market. First, the fundamentals of the aesthetic category remain strong. Research shows that consumers continue to invest in their skin even when they pull back in other areas. Skin health is increasingly becoming a lifestyle category, one that is built around prevention, routine care, and clinically proven outcomes. We have seen this evolution before in areas like oral health or wellness, where treatments that once happened occasionally became part of everyday consumer behavior. We believe skin health is following a similar trajectory, which can make the long-term opportunity for this category significant. The market itself has expanded dramatically. According to industry data, the U.S. medspa market has grown from roughly 1,600 locations in 2010 to more than 13,000 today. At the same time, the consumer has evolved. We are seeing broader demographics entering the category: men, Gen Z, and younger consumers are engaging with treatments earlier. Today's consumers are seeking outcomes that look healthy, natural, and authentic. Also, consumers are more informed than ever before. They understand ingredients, treatment mechanisms, and outcomes. They are not simply purchasing a brand; they are looking for results. Providers have evolved as well. They are more focused on return on investment and are increasingly building treatment protocols that combine multiple modalities to deliver better clinical outcomes. Taken together, we believe that all of these trends are well aligned with our core product strengths. HydraFacial treatments are noninvasive, clinically credible, and repeatable. They also serve as an accessible entry price point for consumers into the aesthetic category, which helps to bring new patients into providers’ practices and creates opportunities for additional procedures. HydraFacial is also uniquely versatile. The treatment works across genders, ages, and skin types—a combination that very few technologies in the medical aesthetic space can match. Because our treatment is repeatable and easy to integrate, it also fits naturally into preventive skin health routines and combination protocols, which is exactly where the market is moving. So The Beauty Health Company is uniquely positioned at the intersection of clinical skin health and consumer aesthetics. However, our commercial model was built for an early phase of the market, one where the category was newer, competition was lighter, and placing devices was the primary growth driver. That playbook worked well for a long time, but markets mature, and we need to evolve our model ahead of that curve and shift it from a model of device placement to a model of device utilization, which is where we believe the long-term growth of the business is. Over the past year, the company strengthened its balance sheet, improved its cost structure, and restored financial discipline across the organization. Our fourth quarter results reflect that progress. At the same time, we hold the view that these results do not yet reflect the full potential of The Beauty Health Company. What they do demonstrate is that the foundation of the business has stabilized. For the fourth quarter, total revenue was $82.4 million, representing a decrease of 1.3% compared to the prior-year quarter, a meaningful improvement from the double-digit decline we experienced in Q3. Consumables revenue increased to $57.7 million from $56.7 million in the prior year, representing growth of 1.7% year over year and reinforcing the resilience of our recurring revenue model. Device revenue was $24.7 million, still down 7.9% year over year, but performance improved meaningfully here relative to the third quarter. These numbers still reflect some pressure in the capital equipment segment, which is consistent with the broader macroeconomic environment. That said, the trend is moving in the right direction, and the improvement we saw from the prior quarter is an encouraging sign that the capital equipment business is stabilizing. Adjusted gross margin expanded to 67.4%, while GAAP gross margin expanded to 64.4%, driven primarily by a favorable mix shift towards consumables revenue. Additionally, profitability improved significantly. Adjusted EBITDA was $15 million in the fourth quarter compared to $9 million in last year’s quarter, representing approximately 700 basis points of margin expansion. For the full year, adjusted EBITDA increased to $45.1 million compared to $12.3 million in the prior year—again, a significant improvement. So the results for this quarter highlight two important characteristics of our model. First, this business has meaningful operating leverage. Second, that leverage responds directly to disciplined execution. Operationally, we placed more than 1,000 devices in the quarter and ended the year with over 36,000 systems in our global installed base. That installed base is the strategic core of this company, and it represents a recurring revenue infrastructure that is already in place. While this base has already been built, we think it remains underutilized. We believe that even modest improvements in utilization can drive significant consumables revenue and margin expansion. So our job now is to unlock the full productivity of that installed base. Now, looking ahead, the message here is that we remain optimistic about the category in which we operate. Demand for non- or minimally invasive science-based treatments continues to grow globally. The market is shifting away from procedures driven primarily by short-term trends toward outcomes-driven protocols. The market is also shifting from individual treatments toward combination therapies and from soft marketing claims toward more clinically validated results. These trends favor companies with scale, clinical credibility, stronger provider education, and durable recurring economics, which is exactly where The Beauty Health Company is positioned. At the center of our strategy is a powerful commercial model. Our brand credibility drives consumer demand. Consumer demand drives patient traffic into providers’ practices. Patient traffic drives higher treatment utilization per device. Utilization drives consumables revenue, which is our margin engine. For providers, this generates additional revenue and motivates them to expand, upgrade, and deepen their relationship with us. Utilization is the center of gravity, and we believe that when utilization improves, it creates positive momentum across the model. To accelerate this flywheel, we are focused on three priorities: first, salesforce excellence; second, marketing discipline; and third, focused innovation. Starting with salesforce excellence, historically much of our commercial success was relationship-driven. That worked well in the early stages of the company, but the next phase of growth requires a much more structured, disciplined commercial approach. We are now transitioning to a value-based selling model, one where our teams clearly demonstrate how HydraFacial drives revenue, patient demand, and attractive returns for provider practices. That also means sharpening our clinical economic differentiation, improving how we segment and prioritize accounts, and implementing more structured sales plans. These plans focus not only on acquiring new practices but also on expanding utilization across our installed base and reactivating low-utilization accounts. We are also deploying stronger commercial tools and analytics so we can track activation, utilization, and retention across the installed base in real time. This gives us better visibility into performance and allows us to manage the business with greater precision. Second, marketing discipline. Our marketing strategy needs to be more focused on demand generation that directly supports provider growth. We are refining the positioning of HydraFacial as a clinical-grade skin health platform—one that is supported by science, outcomes, and stronger provider education. At the same time, we are activating an underleveraged asset in our portfolio, SkinStylus. It is a strong technology in the growing microneedling category that historically has never received the commercial focus it deserves, and we see a meaningful opportunity to expand its role within providers’ practices. We are also expanding consumer demand generation programs designed to bring new patients into providers’ offices and strengthen the economic value proposition for these providers. Additionally, we recently brought in a new Brand and Clinical Strategy Office with deep medtech experience to lead our brand and marketing strategy and strengthen the clinical positioning of our technology. Third, focused innovation. Innovation will remain disciplined and targeted at opportunities that strengthen our platform. This includes the development of a next-generation HydraFacial system designed to drive upgrades across the installed base and expand our market share. We are also investing in a much more selective portfolio of clinically backed boosters designed to increase booster attachment rates, improve provider economics, and expand treatment protocols. If we look back, HydraFacial has historically been viewed primarily as a single treatment, but we see it differently. We see HydraFacial as the foundation of a broader skin health platform—one that integrates devices, boosters, protocols, and complementary technology into a comprehensive ecosystem for providers and customers. We are also exploring selective commercial and technology external partnerships aimed at broadening our product ecosystem and enlarging our relationship and offering to providers. All in all, we believe that taken together, these initiatives will strengthen the installed base, expand HydraFacial’s role in providers’ practices, and accelerate the compounding economics of our model. This means that we will shift from a single-product company to a skin health platform. For that reason, 2026 will be an execution year, focused on stabilization and investment into the next phase of growth. With the operational changes that we are implementing, we expect to return to growth in 2027 and accelerate beyond that as innovation and product launches scale. The Beauty Health Company has one of the largest installed bases in the aesthetics industry, one of the most recognized brands in skin health, a proven device-plus-consumables model, and a global commercial infrastructure across North America, Europe, and Asia Pacific. These are proven and durable advantages. Our task now is to match those advantages with the commercial discipline and operating rigor of a best-in-class medtech company. Before I turn it over to Michael, let me quickly frame our expectations for the year. 2026 is likely to come in modestly below the prior year, but as our initiatives take hold, we expect momentum to build through the second half, positioning the company to exit 2026 on a stronger trajectory and setting the stage for returning to growth in 2027. I will now turn the call over to Michael Monahan to walk you through the financials and our 2026 guidance in more detail. Michael? Michael Monahan: Good afternoon, everyone. Key financial metrics for 2025 reflected meaningful improvement. Our global footprint surpassed 36,000 systems. We increased our adjusted gross margins from 62% to over 68%, and GAAP gross margins increased from 54.5% to 65.3%. We grew adjusted EBITDA from $12.3 million to $45.1 million, or 268%. We generated over $37 million in operating cash flows, and we strengthened our balance sheet by proactively restructuring our debt. Because of this, we exited 2025 a stronger company than we were a year earlier. These improvements did not happen overnight and are the result of the hard work of our dedicated teams. As we continue to stabilize the company and prepare to return to growth, we believe we are positioned to drive improved profitability and increased margins in the future. For the full 2025 fiscal year, net sales were $300.8 million compared to $334.3 million in 2024. Consumables revenue totaled $212.7 million, while device revenue was $88.1 million. We ended the year with an installed base of over 36,000 systems globally, which remains the foundation of our recurring consumables revenue model. We delivered adjusted EBITDA of $45.1 million, representing a significant improvement from $12.3 million in the year prior. The year-over-year change was driven by our continued focus on expense discipline and sustained margin improvement, demonstrating the operating leverage of our business model. On the balance sheet, we ended the year with approximately $232.7 million in cash, cash equivalents, and restricted cash compared to approximately $370.1 million at the end of 2024, representing a 37% decrease. The year-over-year change was primarily driven by the repurchase of convertible senior notes during 2025 which, along with the refinancing of our notes, significantly strengthened our capital structure and extended our debt maturity profile. For the fourth quarter, net sales were $82.4 million, a slight decrease of approximately 1.3% compared to the previous year. The year-over-year decline primarily reflects lower delivery system sales. We placed 1,032 delivery systems during the quarter compared to 1,087 units in the prior-year period. GAAP gross margin was 64.4% in the fourth quarter compared to 62.7% in Q4 of last year. The improvement in gross margin was primarily driven by lower inventory-related charges and a favorable mix shift towards consumables, partially offset by lower average selling prices on equipment. As planned, we successfully sold through the majority of our Elite FRC devices during the quarter, which are sold at a lower ASP than our new Syndeo devices. Adjusted gross margin was 67.4% in the fourth quarter versus 67.1% in the prior year. We continued to manage costs tightly throughout the quarter, with GAAP total operating expenses coming in at $52.9 million in Q4, down from $59.5 million in the prior year. Selling and marketing expenses declined to $23.5 million, reflecting lower headcount and disciplined spend management. Research and development expense was $1.7 million, up modestly year over year, reflecting professional services related to early-stage product investments. General and administrative expense declined to $27.7 million, driven primarily by cost controls, lower bad debt expense, and reduced expenses resulting from our shift from direct to distributor distribution in China. As a result, adjusted EBITDA for the quarter came in much stronger than the prior year at $15 million compared to $9 million in Q4 of last year. Net loss for the quarter improved to $8.1 million compared to a net loss of $10.3 million in the prior year. Moving to guidance, 2026 projections reflect the execution priorities Pedro outlined earlier. For the full year, we expect revenue in the range of $285 million to $305 million with positive adjusted EBITDA of $35 million to $45 million. At the midpoint, this implies revenue broadly consistent with 2025 when normalizing for our go-to-market change and softness in China, with a more back-half-weighted cadence as execution initiatives take hold. We believe this is the appropriate framing for 2026 given the work underway to strengthen the commercial foundation of the business, including sales execution, installed base activation, and targeted investments in marketing, education, and innovation. From a cadence perspective, we currently expect 2026 to be modestly below the prior year. This expectation reflects continued macro pressure in capital equipment, increased competitive activity that has lengthened the device sales cycle, the transition work underway within our sales organization, and ongoing adjustments in certain international markets, including China. It is also worth noting that fourth quarter results typically benefit from year-end ordering patterns, which do not repeat in the first quarter. As these actions take hold, we expect improving momentum in the second half, with the business exiting 2026 on a stronger underlying trajectory than where we began. We believe these actions will strengthen the underlying productivity of our installed base and reinforce the durability of our recurring consumables model, positioning the company for a return to growth in 2027. For the first quarter of 2026, we expect revenue of $63 million to $68 million and positive adjusted EBITDA of $3.5 million to $5.5 million. As a reminder, the first quarter is historically our lowest revenue quarter due to seasonal dynamics, including increased sales and marketing activity early in the year and typical ordering patterns among providers. Overall, our outlook reflects a disciplined approach, prioritizing operational execution while investing in long-term growth. With that, I will turn the call back to Pedro. Pedro Malha: Thanks, Michael. To close, our fourth quarter reflects meaningful structural progress in margins, profitability, balance sheet strength, and in the operating foundations of the business. Key characteristics that make The Beauty Health Company a compelling long platform remain unchanged: the scale, the brand equity, a recurring revenue model with operating leverage, and a global distribution. What is changing is the disciplined operational focus we are bringing to those assets. We believe that as utilization improves and innovation strengthens the platform, the compounding economics of this business will become increasingly visible. We expect 2026 to be the year we demonstrate that operationally, and 2027 is when we expect that progress to translate into sustainable revenue growth. We look forward to updating you on our progress in the next quarter. I will now turn the call back to the Operator for questions. Thank you. Operator: Thank you. We will now begin the question-and-answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. We will now pause momentarily to assemble our roster. The first question will come from Alan Gong with J.P. Morgan. Please go ahead. Alan Gong: Hi, thanks for taking the question. So I guess my first is going to be on the guide. I think following, you know, you have been taking the last couple of years to really stabilize the underlying Syndeo business, and I understand that you are doing a pretty substantive overhaul of the underlying sales organization. But when I look at your outlook for next year, despite the fact that you have another year of, you know, sales declines on tap, it looks like you are still expecting to generate pretty good adjusted EBITDA. So just help me to right-set expectations for these investments into the sales force and this overhaul with being able to drive continued leverage. Pedro Malha: I will just—thanks for the question. So I will just summarize back on what we are guiding here. On revenue at the midpoint, we are expecting to be flat year on year once you normalize, actually, most for the China transition, and that is pretty intentional, the guide, because in the end, we view 2026 as an execution year. On adjusted EBITDA, that number means that at the midpoint of the guidance, this will be slightly below 2025 largely because of the reinvestment that we are doing into the business with an increase in R&D for basically fueling future innovation. So the expectation, and Michael alluded to this, is that, all in, the first half of the year we expect to be down mid-single digits, and in the second half, we expect to be flat. Without APAC, which is majorly a China impact here, the first half is expected to be down low single digits and the second half to be positive low single digits in terms of growth. The main drivers are actually both consumables and devices here as we ramp up towards the back half of the year. Michael, I do not know if you want to— Michael Monahan: Sure, Alan. I can add if you also wanted to know where, in the middle of the P&L, how we are thinking about the guide on the gross margin side. I would expect we modeled in gross margin for the full year to be relatively consistent with where we have been in 2025. The team has made a lot of improvements on the cost side of the business to get leverage within overall gross margin. We expect that to continue for the full year of 2026. On the OpEx side of the business, as you mentioned, we still are driving savings and cost efficiencies through the G&A line of the business, but we are reinvesting that back into the R&D line of the business into innovation for new products into the future. Alan Gong: Got it, thanks. And then I guess just on the underlying—I know you called out continued challenges on the capital side, but you clearly had a very, very strong systems placement performance to close out the year. So when we think about the underlying assumptions for the market, especially given all the volatility from a broader macro perspective, can you just help us with your underlying assumptions for trends throughout the year and in first quarter? Pedro Malha: Sure. So in terms of the overall, I will say end consumer signals that we are basing ourselves into, our data shows that the consumer is still spending but is being more select in choosing treatments that deliver clinically proven results at an accessible—we can call it accessible—price point. That actually is exactly the space that HydraFacial occupies. The aesthetics category has been pressured and has been pressured for the last couple of years, and this is mainly due to the tightness of credit and the capital spending decisions taking longer because of that. If these conditions improve, then we can see procedure volume pick up, and after that, we typically see device placements pick up as well. Our ability to return to growth is not relying on a change in these macro trends. Rather, it hinges on our ability to execute on our strategy. If you wanted to go down and dip a little bit to a lower level, in terms of the provider trends that are shaping this market: in the medical segment, which, by the way, is 70% in the U.S. of our business, medical spas occupy a large percentage of that segment and continue to be the engine of this market. We believe that this engine will continue to grow because they are indeed using HydraFacial as a way to bring patients in and upselling them into higher-ticket treatments. Plastic surgeons seem to be losing some traction, and dermatologists are more stable, but this is driven more by the specific patient skin treatments needed rather than just pure discretionary spending. At the high end, the more invasive side of aesthetics seems to be softening, while the noninvasive skin quality treatments like ours are holding up. If you look at the nonmedical segment, which is 30% of our business and includes day spas and single-room estheticians, we see that playing out more stable throughout the year. Operator: The next question will come from Oliver Chen with TD Cowen. Please go ahead. Jonah: Hi, this is Jonah on for Oliver. Thank you for taking our question. Would love to get additional color just around the churn trend that you saw in the quarter, and what is baked in, in terms of the trend rate in your guide? And how do you anticipate tackling the churn rate throughout the year? Another question is you mentioned men and Gen Z are the newer customers. How are you repositioning your marketing messaging, if at all, to target those new customers? Appreciate the color there. Thank you so much. Pedro Malha: No problem. Michael will take the first part of that question. I will take the second. Michael Monahan: Sure. Thanks for the question. Churn was a little bit higher than usual for the full year 2025, but it improved in Q4 both year over year and sequentially from what we saw in Q3. In the fourth quarter, it was about 1.1%. When you look versus the year prior, as I said, it was a little bit higher than that. In Q3, it averaged around 1.8%. So we are moving in the right direction. The driver of the churn is mostly our smaller accounts that do not have a business development manager assigned to them. We began over the last few months restructuring our inside sales and customer service teams to better meet the needs of these accounts. Our focus in 2026 is to potentially improve in that area. The guide, however, assumes that we will hold churn on a year-over-year basis flat, so our hope is that there is upside to the guide that we gave in that particular line item. Pedro Malha: In terms of segments that are moving in our way, as I mentioned in my initial remarks, the strategy is based on three assets. We have a great brand, a very large installed base, and a razor-razorblade model that basically means that every device we place can become an annuity from high-margin consumables that potentially can last many years. Our job as different customers and segments get into the fold is to unlock the full potential of these assets. To support this strategy, we have a market that is moving in various ways our way. As I mentioned, the medspas continue to grow. There is a set of new demographics entering the category, and we are building and addressing their needs and specific concerns in terms of skin health. We are seeing more and more consumers getting into treatments earlier in age, and they want to treat skin very much like a lifestyle routine, which is definitely positioning HydraFacial and The Beauty Health Company well to take advantage of this shift. We are indeed moving towards much more of an outcome-driven protocol, combination therapies, clinically validated results, which is exactly us. All in all, as more consumers and more demographics expand into the category, we are very well positioned to be at the forefront and to offer the exact solution that they are looking for. Operator: The next question will come from Susan Anderson with Canaccord Genuity. Please go ahead. Alex Legg: Hi, good afternoon. Alex Legg on for Susan. Thanks for taking our question. You hinted that you have a potential new system in the works as a focus of your innovation. Is there a timeline that you are targeting for that launch, if you are able to talk about it? And then what type of additional services would that system potentially offer? Pedro Malha: Thank you. Sure. Let me bring you back into our innovation strategy and the initiatives that we have to support that same strategy. We are improving—let me start by saying that we are improving the discipline around new product launches, period. We are not going to go and chase trends. Instead, we are going to invest in and launch products, technologies, and solutions that materially add value to our providers, that are differentiated versus our competitors, that provide outcomes consumers want, and that are accretive financially to our business in terms of margin. That is the framework we are using for innovation. Now, when it comes to the next-gen HydraFacial, the goal here is to build one that will give our existing more than 36,000 providers a compelling reason for upgrade and new providers a compelling reason to get into the HydraFacial universe. I do not want to go too much into the specific features of the next-gen HydraFacial device at this moment, but what I can tell you and commit is that we will launch a device that will materially advance the value proposition and the return on investment of HydraFacial to our providers. In terms of timeline, we are right now at the early stages of development, but the plans are to launch the next gen of HydraFacial in 2028, and we will keep you updated as we get closer to those timelines. Alex Legg: Thanks, Pedro. That is pretty exciting. And then just thinking longer term about sales between consumables and new device placements. Right now, it is around 70% consumables, 30% new devices. Is that the rate that we should think about it? Is there a different target that you are thinking about longer term? Thank you. Michael Monahan: We are not in a position to give a target right now. Our expectation is that as we move through not just this year and into next year, we return to device growth. We have not been able to give the specifics outside of focusing on growing both of those categories into the future. Later in the year and into next year, we will continue to provide updates on where we think that can be. Operator: The next question will come from Jon Block with Stifel. Please go ahead. Joseph Federico: Hey, everyone. Joe Federico on for Jon Block. Maybe just to dig a little bit deeper into the consumables performance in the quarter. EMEA has been pretty strong in terms of consumable sales over the past three or so quarters and in the back half of the year off of more difficult comps as well. Can you just give us some color on what is driving that? Is it just a healthier end market, or is there any sales execution drivers that can be replicated in some of the other regions? Any thoughts would be helpful. Pedro Malha: Sure, Joe. Overall, at the highest level in terms of the full-quarter performance, on consumables we grew low single digits compared to negative substantial growth in Q3. For the full year, we grew as well low single digits, but booster sales grew much more, and that is an important point—high single digits. If you want to break that out by region, in the U.S., looking at the larger provider groups and dermatology practices, both of these are growing, while small independent providers are still under pressure. You touched on a good point, which was EMEA, and within EMEA specifically, Germany is performing exceptionally well. The only pressure that we saw in the quarter when it comes to consumables performance was coming from China, as a direct result of the China transition. If you add this to the underlying trends driving this consumables demand, the core demand is still there. Consumers continue to prioritize our treatments as part of their skin health routine and also because of our price position versus other aesthetic treatments. The average spend per treatment in the U.S. in consumables is up 10% year over year, driven by our premium boosters and the strategy of the booster. Michael Monahan: If I could just add one thing additionally to that, EMEA was a little bit different than the other regions last year because they launched five new boosters throughout the year. Some of them got regulatory approval later. These were boosters that launched earlier in the Americas, and the booster growth that we saw there really demonstrates the power of innovation in this business. When you can launch new, innovative products, that can actually drive demand. Within EMEA, we saw that not just in the direct markets but also in the distributor channel, where we saw really good consumables and specifically booster growth. Joseph Federico: Okay, that is really helpful color. Thank you. And then maybe just a follow-up on guidance. The Q1 2026 revenue guidance at the midpoint implies a more sequential decline than we have seen over the past handful of years. The past couple of quarters’ actual performance has come in pretty solidly ahead of guidance and expectations. Should we assume any more conservatism to the guidance going forward, or is there a specific reason to point to for a more pronounced decline in Q1 quarter over quarter? Michael Monahan: The Q1 midpoint does assume a decline in the mid-single digits. It is primarily due to softness in the APAC region and equipment softness in the Americas. That is reason number one. The second point is on consumables revenue for Q1. We are projecting that to be lower year over year on a consolidated basis for a couple of reasons. First, distributor orders that came in in Q4—there is some timing a lot of times that happens with the distributor channel—they came in strong at the end of the quarter, so we are factoring in a bit of a decline in Q1 just due to timing. Also, overall, as Pedro mentioned, we are seeing lower Signature treatments due to macro pressures. Even though consumers who are coming in to get treatments are electing more boosters than they have in the past, which is driving up the overall treatment, we factored in that lower consumables revenue and treatments into the first quarter. I would suggest the way we guide is towards the midpoint, so we do not really factor in deliberate conservatism. That is what we are seeing in the business. We are obviously always striving to do as best we can, and if we can outperform, we will certainly do so. Joseph Federico: Great. Thank you for taking the questions. Operator: The next question will come from Bruce Jackson with The Benchmark Company. Please go ahead. Bruce Jackson: Looking at the strength in consumables this quarter, was there anything going on in terms of average selling price increases or additional upselling? Can you provide any color on that? And then given the importance of the boosters, what is the anticipated launch cadence for 2026? Pedro Malha: Bruce, in terms of the boosters themselves, roughly they are about a fifth of the treatments. A fifth of the treatments use a booster, and we are seeing that ratio keep improving. For Q4, booster revenue was up 7% year on year, driven by the clinically proven Hydrophillic and HydroLoc boosters launched in the medical channel. Providers and consumers saw the results, and that was a major engine of growth for boosters. This speaks exactly to the strategy that we are putting forward, which is we are going to be over-indexing in launching clinically differentiated boosters with a very disciplined cadence. We are also equipping providers with impactful marketing tools and continuing to invest in education. We are going to amp the post-sales onboarding, making sure that every provider knows how to maximize their return on investment. Finally, we are going to invest our marketing into driving consumer mindshare and investing in the brand. That is the backdrop of the Q4 performance—mainly heavy on the way boosters are taking share out of the main treatments. In terms of 2026, yes, we just spoke that Q1 will be pressured modestly with a modest decline versus prior year, but as Michael said, that is largely driven by the APAC region, the majority due to the change in China. As the year progresses, in terms of consumables, we expect to see modest growth in the Americas to happen. Operator: The next question will come from John-Paul Wollam with ROTH Capital Partners. Please go ahead. John-Paul Wollam: Great. I appreciate you guys taking my questions. If we could maybe start on the consumables side. I think April would have been kind of the first promo or busy season for consumables following the price increase. Just curious if you can talk about reception to the pricing increase and what that means for whether price might be a lever going forward. And just as a follow-up there, when you think about consumable utilization between your best partners and your worst, what is separating them? What does that difference look like? Michael Monahan: I can speak to a couple of those questions. On the price increase, we did the price increase on consumables at the beginning of Q3, so the third quarter was the first quarter where you saw the impact. We did a 5% increase, and we really did not have a lot of complaints or pushback on that. So far, that has been very successful for us. Going forward, the sales and marketing team continue to evaluate the overall pricing strategy. We do not have any plans at this point to make any changes, but we will keep you posted if anything changes there. Pedro Malha: I will just chime in in terms of what we see being the reasons why boosters get higher attachment rates in certain specific segments of customers versus others. Our data shows that a provider who understands how to use a booster uses roughly three times as many boosters as one that does not. That is exactly why we are investing in marketing and investing in education to these providers. John-Paul Wollam: Understood. And maybe, Michael, for you as a follow-up, as we think about OpEx—and you have done such a great job managing expenses—understanding the need to invest from here, but just curious as you think about some offsets to the investment: where are you in terms of maybe centralizing some international double costs, whether that is accounting, finance, anything of that nature? Are there still offsets that you see in terms of the OpEx line for the upcoming investments? Michael Monahan: Yes. In terms of shared service centers, we are creating them. That has been a process ongoing over the last year and will continue. We are continuing to see two things: we are making investments in the back-end system infrastructure that enables us to manage the global business effectively through shared service centers, which is helping us with cost. We expect that to be finalized more so by the end of this year. We made a lot of progress in some of the global entities the past year, and we have a few more to do this year and will continue to do that. Our guide this year assumes that G&A as a whole is stable to slightly up, and then there is additional reinvestment back into R&D. Over the long term, there is opportunity to continue to gain efficiencies in this business. Most importantly, when you look at the overall OpEx, there is a huge opportunity as we return to growth to get leverage out of that fixed-cost infrastructure going forward. As we continue to get more focused on system innovation and processes—we have done a lot of work there—we are positioning the company, in our view, to start to have a lot more of that gross profit drop down to adjusted EBITDA when we return to growth. John-Paul Wollam: Really helpful. Thanks, and best of luck going forward. Operator: This will conclude our question-and-answer session, as well as our conference call for today. Thank you for attending today's presentation. You may now disconnect. Pedro Malha: Goodbye.
Operator: Ladies and gentlemen, thank you for standing by. Our conference will begin momentarily. Please continue to hold. Once again, greetings and welcome to the Vuzix Corporation Fourth Quarter and Full Year Ended December 31, 2025 Financial Results and Business Update conference call. At this time, participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. As a reminder, this call is being recorded. I would like to turn the floor over to Edward McGregor, Director of Investor Relations at Vuzix Corporation. Mr. McGregor, you may begin. Edward McGregor: Thank you, Operator, and good afternoon, everyone. Welcome to the Vuzix Corporation 2025 Fourth Quarter and full year ending December 31 financial results and business update conference call. With us today are Vuzix Corporation CEO, Paul J. Travers, and CFO, Grant Neil Russell. Before I turn the call over to Paul, I would like to remind you that on this call, management's prepared remarks may contain forward-looking statements, which are subject to risks and uncertainties. Management may make additional forward-looking statements during the question and answer session. Therefore, the company claims the protection of the safe harbor for forward-looking statements that are contained in the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those contemplated by any forward-looking statements as a result of certain factors, including, but not limited to, general economic and business conditions, competitive factors, changes in business strategy or development plans, the ability to attract and retain qualified personnel, as well as changes in legal and regulatory requirements. In addition, any projections as to the company's future performance represent management's estimates as of today, March 12, 2026. Vuzix Corporation assumes no obligation to update these projections in the future as market conditions change. This afternoon, the company issued a press release announcing its final 2025 results and filed its Form 10-K with the SEC. So participants in this call who may not have already done so may wish to look at those documents as the company will provide a summary of the results discussed on today's call. Today's call may include certain non-GAAP financial measures. When required, reconciliation to the most directly comparable financial measure calculated and presented in accordance with GAAP can be found in the company's Form 10-K annual filing at sec.gov. It is also available at vuzix.com. I will now turn the call over to Vuzix Corporation CEO, Paul J. Travers, who will give an overview of the company's operating results and business outlook. Paul will then turn the call over to Grant Neil Russell, Vuzix Corporation's CFO, who will provide an overview of the company's fourth quarter and full year financial results, after which we will move on to the Q&A session. Paul J. Travers: Thank you, Ed. And thanks to everyone for joining us today. 2025 was an important year for Vuzix Corporation as we strengthened our financial discipline, improved the balance sheet, and sharpened the company's focus around our OEM and waveguide businesses. As we enter 2026, Vuzix Corporation is moving forward with a clear strategy focused on the areas where we can create the greatest long-term value. Our strategy is built directly on the core technologies, products, and capabilities we have developed over many years. Vuzix Corporation established its position through two closely connected strengths: advanced waveguides and enterprise smart glasses products. Together, those capabilities helped us develop deep technical know-how, real customer experience, and market credibility while also opening doors with larger organizations seeking a partner that understands not just optics, but the full product, deployment, and support equation. That foundation remains highly valuable and we are now building on it in a more focused and strategic way. Going forward, our branded enterprise smart glasses products business remains important and has room for lots of growth over the next five years. It gives us credibility. It gives us real-world customer insight. It helps validate use cases and open doors. But increasingly, we see it more as a strategic enabler for the larger opportunities ahead. Our long-term growth strategy is centered around our engineering services, which has expanded into two growth engines for the company: OEM products and waveguides, including the engineering services needed to support them both. The first leg of this strategy is growing our OEM products business across enterprise, defense and security agencies, and over time, the broader consumer markets where Vuzix Corporation can deliver complete smart glasses solutions as well as key optical components. The second leg of the strategy is capitalizing on our waveguide technology. Our scalable, cost-effective production of advanced waveguides positions Vuzix Corporation to play a central role in the next generation of AI- and AR-enabled smart glasses. These two growth engines are closely linked. Our OEM business is built on our core waveguide design and manufacturing technology, as well as the credibility we have earned over many years in enterprise smart glasses. Companies do not simply see Vuzix Corporation as an optic company with interesting IP. More and more, they see us as a partner that understands how these products need to work in the real operating environments, how customers use them, how they get deployed, and what it takes to support them successfully once they are. We believe that credibility is helping create pull for our OEM opportunities that develop around customized solutions for large-scale enterprises. And once we are in those discussions, we quickly see what differentiates Vuzix Corporation is our waveguide design know-how, high-volume manufacturing capabilities, and of course, our decades of making smart glasses products that we have developed and offered. This strategic shift also affects how we think about our own branded products. Historically, Vuzix Corporation had designed, built, and sold branded enterprise smart glasses. Going forward, we expect to be more selective in how we invest in that business. Rather than broadly funding entirely new enterprise product lines based primarily on our own market assumptions, we expect a greater portion of future product activity to be driven and funded by OEM customer demand. This demand for specialized AI smart glasses solutions in some cases will result in Vuzix Corporation branded offerings where appropriate. We believe our OEM business will become significant and will result in a more efficient and higher-probability path to growth as smart glasses technology continues to rapidly evolve. Expect our award-winning Ultralight platform, especially the Ultralight Pro, to be an important driver of that effort. The enterprise, along with the defense and security agency segments, are already taking shape, with active customer programs underway and visible demand emerging. In the enterprise OEM area, for instance, we are currently under contract with multiple large brands to develop custom smart glasses devices. One example is with a leading auto manufacturer to design a waveguide-based smart glasses solution for widespread use on their factory floors. We expect a derivative of this solution could carry the Vuzix Corporation brand to ultimately be sold into other enterprise market opportunities. Another good example of our expanding enterprise OEM business is Amazon. What began around maintenance use cases in distribution centers using off-the-shelf smart glasses is expanding, with a purpose-built pair of AI-driven smart glasses into additional areas that include server farms, warehousing, and robotics-related applications. We believe this kind of expansion in use cases is important because it shows how a single customer deployment can broaden into multiple operational areas over time, creating a deeper and more strategic relationship. On the defense and security agencies OEM side, we continue to see engagement growth, both in the number of active programs and in the maturity of those discussions. Importantly, this is no longer just early-stage outreach. We now have a mix of activity that includes active deliveries, contracted programs, proposal-stage opportunities, and additional programs that should expand over time. Collins Aerospace is a good example of that progress. We have started receiving production orders, giving us a solid proof point that our defense-related efforts with waveguides and projection engines are translating into real business. Beyond Collins, we are now actively engaged in opportunities with multiple government agencies, traditional defense contractors, and emerging new defense players. Overall, we believe our position in defense and government is substantially stronger today than it was a year ago, with a broader opportunity set and clearer paths to opportunities that should ultimately result in production programs. We also believe geopolitics is beginning to change how defense and security agencies think about wearable technology. For example, the battlefield and the broader security environments are evolving quickly. Drones have rapidly become a critical operational tool, and smart glasses are becoming an increasingly useful interface for helping operators see, control, coordinate, and respond in real time. More broadly, secure information access, situational awareness, and AI delivered through wearable displays are becoming increasingly relevant across defense, homeland security, and public safety use cases. We believe this shift in thinking will become an important driver of long-term demand for smart glasses and related head-worn systems. And that brings me to waveguides. During 2025, we completed the second and third tranches of Quanta's investment, bringing their total strategic investment in Vuzix Corporation to $20 million. That was important not only because of capital for our growth, but because it provided meaningful third-party validation of our waveguide roadmap, manufacturing capabilities, and our ability to support future smart glasses programs at scale. It is very clear that the main reason Quanta invested in Vuzix Corporation is to gain access to our high-volume waveguide manufacturing design capabilities. That said, Quanta is also interested in Vuzix Corporation's smart glasses industry expertise. That is another key strategic prize they gained access to with their investments. We also continued to strengthen our display ecosystem relationships. These relationships matter because the more third-party display partners we can support, the more ways we have to embed our waveguides into wearable products. Our recent collaborations with TCL, CSOT, Safflex, Himax, Avogent, and others matter because the industry increasingly recognizes that success in AI glasses and AR glasses will require the right combination of waveguides, display performance, manufacturability, and cost. Those pieces have to work together. We believe Vuzix Corporation is one of the few companies that can not only supply waveguides that are uniquely optimized for a given display, but also help design, develop, and build full smart glasses products and system solutions from the ground up. We believe our waveguide business represents the largest long-term opportunity for Vuzix Corporation. As display-based smart glasses become a true mass-market computing platform over time, advanced waveguides will become one of the key enabling technologies. In that scenario, the ultimate unit opportunity for waveguides could potentially be enormous. That is why scale matters. That is why manufacturability matters. And that is why Quanta matters. The waveguide market will not be won by having a good lab prototype. It will be won by having technology that performs, can be produced reliably, and can be cost-competitively priced now and more so in the future as volumes ramp. Vuzix Corporation has spent years building toward exactly that value proposition. We believe the broader consumer smart glasses market is now entering an important new phase. Much of the recent growth and attention has been driven by Meta, and that has been positive for the industry because it has helped to validate demand and increase awareness. But we are also starting to see the early signs of a broader market forming with additional technology and eyewear players intending to bring products, platforms, and ecosystem support into the category. On the Vuzix Corporation branded enterprise side, enterprise markets are becoming more mature and more ROI-driven. Customers are increasingly focused on implementing solutions that improve workflow efficiency, enable AI-driven hands-free operation, enhance safety, and produce measurable business value. Our enterprise products continue to demonstrate that Vuzix Corporation understands real workflows, real customers, and their real deployment challenges in maintenance, logistics, warehousing, inspection, and other industrial settings. We will continue to support and monetize the M400 platform and the recently introduced LX1 to the market. To be clear though, the maturity of the enterprise space is providing revenue, but more importantly, opening doors for Vuzix Corporation OEM solutions. Going forward, to support our business, we are allocating a majority of our planned resource and R&D spend toward waveguides, Quanta-related programs, DoD efforts, and funded OEM programs. This is intentional. We are putting our time, money, and talent behind the areas where we believe Vuzix Corporation has its strongest leverage and clearest strategic advantage. I would like to remind everyone that Vuzix Corporation has stayed in this market and continued building when many others, including better-funded players, have stepped back, stumbled, or disappeared. Over that time, we have continued innovating, serving customers, advancing our waveguides and manufacturing capabilities, and building what we believe is a very meaningful intellectual property position: more than 500 patents and patents pending worldwide. That investment in innovation represents a significant asset for the company. The smart glasses market is now moving in a direction that we believe increasingly values exactly those kinds of capabilities. AI is making smart glasses more practical. Customers are becoming more specific about what they need, and waveguide manufacturability and protected enabling technologies are becoming more central to success, not less. We believe that the perseverance Vuzix Corporation has shown over these many years has positioned the company to create meaningful long-term value for our shareholders. With that, I will turn the call over to Grant for the financial overview. Grant? Grant Neil Russell: Thank you, Paul. As Ed mentioned, the Form 10-Ks we filed this afternoon with the SEC offer a detailed explanation of our annual financials. I am just going to provide you with a bit of color on some of the full-year as well as quarterly numbers. For the fourth quarter ended December 31, 2025, we reported $2.2 million in total revenues as compared to $1.3 million for 2024, an increase of 76%. The revenue increase was primarily due to higher unit sales of our M400 smart glasses as well as significantly higher engineering services sales. For the full year ended December 31, 2025, Vuzix Corporation reported $6.3 million in total revenues as compared to $5.8 million for the prior year, an increase of 9%. Product sales increased by 4% year over year on greater unit sales of our M400 products. Sales of engineering services for the year ended December 31, 2025 were $1.6 million as compared to $1.3 million in 2024, an increase of 27%. For the full year ended December 31, 2025, there was an overall gross loss of $1.1 million as compared to a loss of $5.6 million in 2024. The reduced gross loss for 2025 was primarily a function of significantly lower inventory obsolescence reserves that were included in cost of sales in 2024. Research and development expenses for 2025 rose 31% to $12.6 million as compared to $9.6 million in 2024. The increase was primarily due to a $2.6 million increase in external development costs on our new LX1 smart glasses, which did not begin shipping until early 2026, and our waveguide products, and a $700,000 increase of depreciation expense related to underutilized new manufacturing equipment still being optimized before they are placed into full service, partially offset by a $900,000 decline in non-cash stock-based compensation expense due to the completion of the 2024 voluntary salary reduction program. For the fourth quarter ended December 31, 2025, research and development expenses were $4.5 million as compared to $2.0 million in 2024. The increase was largely driven by higher new product development costs related to the completion of the LX1. Sales and marketing costs for all of 2025 fell to $5.5 million from $8.2 million in 2024, a reduction of $2.7 million or 33%. The most significant factors for these expense reductions included a $1.2 million net decrease in bad debt expense, an $800,000 decrease in cash salary and benefits-related expenses driven by headcount decreases, and a $500,000 decrease in non-cash stock-based compensation expense, primarily due to the completion of the 2024 voluntary salary reduction program for equity. For December, sales and marketing expenses were $1.4 million as compared to $2.0 million in 2024. The decreases were primarily driven by a $400,000 reduction in bad debt expense and a $200,000 decrease in stock-based compensation expense. General and administrative expenses for the full year of 2025 decreased 32% to $11.6 million as compared to $17.2 million in 2024. The bulk of this decrease was due to a $4.9 million decline in non-cash stock-based compensation expense related to our 2024 cash salary reduction program in exchange for equity, which ended on April 30, 2025, and the termination of the company's original LTIP, which was canceled on June 16 after shareholder approval. For the fourth quarter ended December 31, 2025, general and administrative expenses were $2.3 million as compared to $4.3 million in the 2024 fourth quarter. The decrease was primarily driven by a decline in non-cash stock-based compensation expense. For the fourth quarter ended December 31, 2025, the net loss attributable to common shareholders was $8.7 million, or $0.12 per share, as compared to a net loss of $13.7 million, or $0.16 per share, for 2024. For the full year ended December 31, 2025, the net loss attributable to common shareholders was $32.3 million, or $0.42 per share, as compared to a net loss of $73.5 million, or $1.08 per share, for the full year of 2024. The decreased net loss was in large part attributable to a $30.1 million impairment loss that was recorded in 2024. Excluding this impairment write-off, overall net loss for 2025 still improved by over $11 million versus the 2024 year. We also ended the year with a stronger balance sheet. Our cash position as of December 31, 2025 was $21.2 million versus $18.2 million as of December 31, 2024. We ended 2025 with a net working capital position of $22.3 million and no current or long-term debt outstanding. Inventory levels improved, with our net inventory declining to $2.2 million as of December 31, 2025, as compared to $4.8 million at the end of 2024. Net cash flows used in operating activities declined to $8.8 million for the year ended December 31, 2025, as compared to $23.7 million for 2024, a decrease of $14.9 million. For all of 2025, we raised $24.4 million from financing activities that consisted of $10.0 million of additional investments by Quanta Computer, and $14.3 million of net proceeds received from equity sales under our ATM program during the year. Cash used for investing activities in 2025 was $2.6 million, down modestly from $2.9 million in 2024. Overall, we continue to control and reduce our operating expenses where possible. Following a 36% reduction in our cash expenses in 2024 resulting primarily from headcount reductions, we held our cash expense growth to just 4% in 2025 despite new product development spending and better positioning ourselves for general business growth in 2026. We remain confident that management's plans, along with potential further equity sales under our ATM program—of note, we raised an additional $6.0 million to date thus far in 2026—provide the company with more than adequate resources to move forward with its operating plan well through into 2027. With that, I would like to turn the call back over to the Operator for Q&A. Operator: Thank you. I will be conducting a question and answer session. We will now open for questions. Our first question today is coming from Christian Schwab from Craig-Hallum. Your line is now live. Christian Schwab: Great. Thank you. Hey, Paul, can you just give us an idea of what you expect for 2026? I know we have this movement in Amazon for purpose-built glasses. It sounds like numerous different opportunities within the defense industry and, you know, hopefully, eventually Quanta bringing a more meaningful program to the business. Can you give us an idea of what the range of outcomes for 2026 revenue would be and where you think the most significant portion of that revenue will come from? Paul J. Travers: I hate saying it this way, but I will spitball a little bit here for you, Christian. You should see the OEM, and in particular, alongside it the waveguide business, start to climb quarter after quarter throughout the year. And you should see it surpass the revenues on the enterprise, the pure Vuzix Corporation branded enterprise side of our business, before the year is up. So an exciting piece of our business right now. It is pretty amazing how the rate of new programs that we are bidding on and that we are winning are coming in the front door. So from that side, exciting stuff. Amazon is multiple different areas and it is a custom-built OEM-style device. This large car company, we expect, should be rolling in through to production by the end of this year also. You guys know we put press releases out about Collins, and they are in with Vuzix Corporation right now. And there is more than a handful of others that are in the queue. Some of these guys could represent some really significant business for Vuzix Corporation, well beyond what 2025's numbers were in the entire enterprise space. But it is going to grow through the year, we expect. Yes, you should see us stepping forward each and every quarter, but it is bumpy, the business, as you guys all know. So it is hard for us to predict exactly, other than to say that it is impossible to miss the fact that there is a wave of OEM business that is coming for Vuzix Corporation. Christian Schwab: And following up upon that, when can we see additional orders, whether they start small in 2026 and meaningfully expand in 2027? Would you anticipate throughout the course of the year that we could have, you know, three to six announcements regarding orders and go-to-market, with production in 2026? Or is that yet to be seen? Paul J. Travers: I think you would be seeing something like that, Christian. And I think you will also see some press releases announcing some great business partnerships that have developed that will not yet be product revenue-generating but will be the beginnings of it through the engineering services and work that needs to get done to get it to that point. So there is a lot. It should be an exciting year from the perspective of new business opening up for Vuzix Corporation. Christian Schwab: Great. No other questions. Thank you. Operator: You are welcome, Christian. Thank you. We have actually reached the end of our question and answer session. I would like to turn the call back over for any further or closing comments. Paul J. Travers: Thank you very much, Kevin, and thank you, everyone, for joining us today. We believe that Vuzix Corporation is entering 2026 with a very clear path to value creation through our OEM programs, the defense and government opportunities, and advanced waveguide technologies, supported by the enterprise smart glasses foundation we have built over many years. We strive to invest where our advantages are the strongest. We have strengthened strategic relationships. We have improved the structure of the business, and we believe the value we have built is becoming clearer both operationally and strategically. Still work to do, clearly, but we are encouraged by where we stand and by the direction we are heading. Thank you again for your continued support, and we look forward to updating you again next quarter and as 2026 unfolds. Operator: Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.
Operator: Good afternoon, ladies and gentlemen, and welcome to the Capricor Therapeutics, Inc. fourth quarter and full year 2025 conference call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press 0 for the operator. This call may be recorded today, Thursday, 03/12/2026. I would now like to turn the conference over to CFO, Anthony J. Bergmann, for the forward-looking statement. Please go ahead, sir. Anthony J. Bergmann: Thank you, and good afternoon, everyone. Before we start, I would like to state that we will be making certain forward-looking statements during today's presentation. Statements may include statements regarding, among other things, the safety and intended utilization of our product candidates, our future R&D plans, including our anticipated conduct and timing of preclinical and clinical studies, enrollment of patients in our clinical studies, our plans to present or report additional data, our plans regarding regulatory filings, potential regulatory developments involving our product candidates, potential regulatory inspections, revenue and reimbursement estimates, projected terms of definitive agreements, manufacturing capabilities, potential milestone payments, and our financial position, and our possible uses of existing cash and investment resources. These forward-looking statements are based on current information, assumptions, and expectations that are subject to change above a number of risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements. These and other risks are described in our periodic filings made with the SEC, including our quarterly and annual reports. You are cautioned not to place undue reliance on these forward-looking statements, and we disclaim any obligation to update such statements. With that, I will turn the call over to Linda, CEO. Linda Marbán: Good afternoon, everyone, and thank you for joining us on Capricor Therapeutics, Inc.’s quarterly conference call. For our investors, collaborators, the team here at Capricor Therapeutics, Inc., and especially the Duchenne muscular dystrophy patient community, thank you for your continued support and belief in our mission. We entered 2026 with a clear focus as we work to advance Garamia cell for potential approval for Duchenne muscular dystrophy in the United States. As we announced earlier this week, we were very pleased to report that the U.S. Food and Drug Administration has stated that our response to our complete response letter is complete and has therefore been accepted, our previously submitted biologics license application, or BLA, for review. The agency assigned a PDUFA target action date of 08/22/2026. Clearly, this represents a significant regulatory milestone for Capricor Therapeutics, Inc., of course, for all of those who have DMD. The BLA seeks full approval of deramycin. While we have not yet had detailed label discussions with the FDA, our goal will be to position deramycin to treat as many eligible patients as possible, consistent with the clinical data generated over more than a decade of development where both skeletal and cardiac muscle function have shown stabilization. If approved, deramycin has the potential to become the first therapy designed to address both skeletal and cardiac disease manifestations of Duchenne muscular dystrophy. We believe that distinction is highly meaningful, particularly given that cardiomyopathy remains one of the most serious and life-limiting aspects of this disease. Our highest priority as an organization is execution, working closely with the FDA, preparing for a potential commercial launch, and continuing to build the capabilities required of a world-class commercial-stage biotechnology company. We believe the strength of our data, our manufacturing readiness, as well as strong balance sheet position us well for this next phase of growth. Our current corporate mission is to build an infrastructure to launch and commercialization of deramycin as well as to expand our pipeline to treat other indications. Now let me turn to a brief summary of the HOPE-3 trial, the top-line results of which were released in late 2025 and is one of the strongest data sets generated in this disease to date. The entire HOPE-3 data set was submitted to the FDA as the response to our CRL and was contained in our CSR. These data will now serve as the foundation for potential approval as well as for the preparation for commercial launch. For those of you who have not been following our story, here is a brief recap of the HOPE-3 clinical trial. HOPE-3 is a pivotal Phase 3 multicenter, randomized, double-blind, placebo-controlled study evaluating deramycin in the treatment of Duchenne muscular dystrophy cardiomyopathy. The study enrolled 106 patients and met its primary efficacy endpoint on the Performance of the Upper Limb, otherwise known as the PUL, as well as all Type 1 error-controlled secondary endpoints. The key secondary endpoint of left ventricular ejection fraction showed a 91% slowing of disease progression in all evaluable patients regardless of cardiac disease status and importantly achieved statistically significant results. Furthermore, the results were even stronger in specific patients with a diagnosis of cardiomyopathy, achieving a p-value of 0.01. Over the last decade, it has become apparent that cardiomyopathy is one of the leading causes of mortality in Duchenne, and stabilizing cardiac function has remained a major unmet need with current guideline-directed care to include standard cardiac medications which are somewhat effective but do not work long term and certainly are not addressing some of the root causes of the cardiac dysfunction. The statistically and clinically significant preservation of left ventricular ejection fraction in patients treated with deramycin observed in HOPE-3 underscores the potential of deramycin to address the DMD-associated cardiomyopathy. In addition to the earlier reporting of the positive top-line results which I just highlighted, yesterday, we presented additional data from the HOPE-3 trial in a late-breaking oral presentation at the 2026 Muscular Dystrophy Association Clinical and Scientific Conference. This data was of great significance not only from a clinical trial perspective, but to the patient community because it highlights the effectiveness of deramycin in multiple endpoints, all pointing to the direction of stabilization of the disease process associated with DMD. I would like to provide a few highlights here. One of the most important was an improvement in a direct activity of daily living and one that is also correlated with quality of life. We show that there was a statistically significant improvement in a measure of upper limb function analyzed in a home-based setting using a validated and published patient-reported outcome measure, the DVA, or Duchenne Video Assessment. The DVA was developed by frustrated caregivers and professionals who were concerned that clinic-based assessments did not tell the whole story, especially in a pediatric population. So they developed a DVA to track their sons at home. The measure we specifically used was called EAT 10 BITE, and it is manifest exactly as it sounds and represents not only the ability to self-feed, but also to move one's arm between table and mouth. Caregivers would video their sons during the task at prescribed times post-infusion of daratumumab and then the videos were analyzed by a core lab and scored based on ability and compensatory measures. The DVA assessment of E10 BITE supports the clinic-based measure of the Performance of the Upper Limb and is supportive of the observed efficacy of deramycin that we have seen clinically. These data will also support payer discussions as it is a measure of feels, functions, survives. We also showed images of the hearts of a treated patient as opposed to a placebo patient in the analysis of cardiac fibrosis. This is measured by MRI, using a dye called gadolinium that can distinguish between healthy tissue and scar tissue. The data showed that there was significant reduction in fibrosis in the hearts of those that were treated with deramycin compared to placebo. For cardiologists, this is one of the most encouraging aspects of the HOPE-3 data because there is the aggregation of scar that ultimately leads the heart to fail and life to end for those with DMD. These data will also be used in our labeling negotiations. It is important to begin treating the fibrosis as soon as it is evident, which can be many years before there are functional implications. Remember, the heart is a terminally differentiated organ, so once a cardiomyocyte is lost, it cannot be easily replaced. Therefore, preservation of functional muscle and attenuation of fibrosis is one of the main goals in treating Duchenne cardiomyopathy. We were delighted to share these results with the Duchenne community as one of only four late-breaking presentations at the Muscular Dystrophy Association Conference yesterday in Orlando. The full HOPE-3 dataset has now been submitted for publication in a major peer-reviewed academic journal. One of the most important features of deramycin is, of course, its safety profile. To date, we have completed more than 800 intravenous infusions of deramycin across multiple clinical studies, and the therapy continues to demonstrate a consistent safety profile. There is evidence of long-term safety in our open-label extension studies. Some of our young men participating in our HOPE-2 open-label extension study have been receiving continuous infusions for up to five years, and with over 100 patients in our collective open-label extension studies at the time. Deramycin offers the potential opportunity for functional stabilization and also a well-tolerated safety profile. Taken together, we believe deramycin will become an important and foundational therapy for the treatment of Duchenne muscular dystrophy. We believe the HOPE-3 results provide compelling evidence supporting deramycin's potential benefit in Duchenne and further strengthen our confidence in the therapeutic profile of this product candidate. The consistency of the data across both cardiac and skeletal muscle-related measures supports our view that deramycin may offer a differentiated and meaningful therapeutic approach for patients living with this devastating disease. Turning now to the regulatory pathway, following receipt of the complete response letter in July 2025, we were able to complete our response based on the results from the already completed HOPE-3 trial. Through both formal and informal interactions with the FDA, we aligned that the HOPE-3 data would be sufficient to support resubmission and we have now submitted that dataset in its entirety. The FDA classified the submission as a Class II resubmission and assigned a PDUFA target action date of August 22, 2026. Importantly, at this stage, the FDA has not identified any potential review issues in its communication to the company, which we view as encouraging. We also expect to be eligible to receive a priority review voucher upon approval of daratumumab. As these vouchers are transferable and can be monetized through sale, they represent a potential source of meaningful capital that could further strengthen our financial position as we execute on our strategy. At the same time, we continue to make meaningful progress operationally. Our in-house GMP manufacturing facility located in San Diego successfully completed its FDA pre-license inspection in connection with the BLA review process last year. All Form 483 observations were addressed, and the facility is operational and positioned to support a potential initial commercial launch. That facility can meet the commercial demand of approximately 250 patients per year. However, our current plan is to begin stockpiling commercial doses as soon as we finalize our label with the FDA. In addition, we are now well underway with an expansion to the second floor of that same facility, which will add approximately six additional clean rooms. At full capacity, this expansion is expected to support treatment of approximately 2,500 patients per year or roughly 10,000 doses annually. Our current projections are that the new facility will come online and be able to support commercial manufacturing in late 2027. Commercial readiness activities are also continuing to advance. We are cognizant that the DMD community is anxiously waiting for approval and launch. Due to the unmet need and our desire to have product to those who need it, our hiring plan is based on preparing across key areas relevant to launch including patient support, market access, reimbursement planning, and physician education. Capricor Therapeutics, Inc. is at a transformational point, and as a result, we are not simply preparing for only the launch of deramycin for DMD, we are building to operate as a world-class commercial biotech company. That means maintaining a disciplined approach to execution, investing in our pipeline, and ensuring that our infrastructure can support both potential commercialization for DMD and beyond. On the scientific front, we continue to strengthen the foundation supporting geromycel. In the fourth quarter of last year, we published a peer-reviewed paper in Biomedicine describing germany cells' anti-fibrotic and immunomodulatory mechanisms of action including the release of exosomes and soluble factors that suppress fibrotic gene expression. These findings were reproduced across more than 100 manufacturing labs supporting the biologic, consistency, and potency of the product. As we move toward approval in Duchenne, we are also beginning to lay the groundwork for potential expansion into other diseases, focusing initially on Becker dystrophy while engaging with regulatory authorities in Europe and Japan with the goal of bringing deromyosil to as many patients as possible globally. Please stay tuned for more updates on this as we move through 2026. Now let me turn briefly to our exosome platform. The Phase 1 COVID vaccine study under Project NextGen with the National Institutes of Allergy and Infectious Diseases remains underway. Preliminary results indicate the Stealth X vaccine has been well tolerated and demonstrated a favorable safety profile across all doses tested thus far. However, limited neutralization was observed in early results at the tested dose levels, which may reflect prior vaccination or infection in trial participants. Preclinical data in naive and primed animal models continue to support the of the Stealth X COVID vaccine. Final results from the trial, the cellular response data, are expected in 2026. NIAID has requested exploration of expanded dosing range at higher dose levels and the potential use of adjuvants. At this time, we are evaluating how these options may fit with our broader pipeline development strategy and will provide additional updates as they become available. Importantly, this program demonstrated the safety of Stealthex exosomes and supported the continued development of our broader engineered exosome delivery platform. It also enables us to expand our manufacturing capabilities to support future exosome programs. We are continuously advancing our StealthX platform, focusing on muscle targeting and capable of delivering multiple payloads including siRNA, proteins, small molecules. The platform is being applied across several therapeutic programs currently progressing toward IND-enabling studies with a target IND filing in 2027. From a financial perspective, we ended last year in a very strong position. As of 12/31/2025, our cash position was approximately $318,000,000. This balance was significantly strengthened in the fourth quarter through a successful financing completed in late December, which included participation from dozens of new institutional healthcare-focused investors who we believe share our long-term vision for the company. Based on our current operating plan, we believe this capital is sufficient to support the business into 2027. Importantly, this outlook does not include any additional sources of capital including potential product revenue, or the potential monetization of a priority review voucher should we receive one upon approval. Earlier this week, Capricor Therapeutics, Inc.’s common stock was approved for uplisting to the NASDAQ Global Select Market, NASDAQ's highest listing tier. We believe this milestone further enhances our visibility within the institutional investment community as we move into what we believe could be a transformational period for the company. Overall, we believe Capricor Therapeutics, Inc. enters this next chapter from a position of strength with our BLA under review, positive pivotal clinical trial data, manufacturing commercial readiness underway, additional pipeline opportunities beyond geramycin, and the capital required to execute on our priorities. Most of all, we remain focused on what matters most, bringing forward a potentially transformative therapy for patients and families affected by Duchenne muscular dystrophy. With that, I will now turn the call over to AJ to review the financial results. AJ? Anthony J. Bergmann: Thanks, Linda. For a brief overview of our financial position, which Linda summarized somewhat a moment ago, cash, cash and marketable securities totaled approximately $3,181,000,000 as of 12/31/2025, compared to approximately $151,500,000 as of 12/31/2024. In December 2025, we completed a public offering resulting in net proceeds of $162,000,000, and in addition, the company drew down approximately $75,000,000 under our ATM program in December 2025. Revenue for 2025 was $0 compared to approximately $11,100,000 for 2024. Revenue for the full year ended 12/31/2025 was also $0 compared to approximately $22,300,000 for the full year ended 12/31/2024. As a reminder, our prior year revenue was primarily derived from the ratable recognition of our upfront and developmental milestone payments under our U.S. distribution agreement with Nippon Shinyaku, all of which has now been fully recognized and was recognized as of 12/31/2024. Total operating expenses for 2025 were $29,200,000 compared to approximately $18,800,000 for 2024. Total operating expenses for the full year ended December 2025 were approximately $108,100,000 compared to approximately $64,800,000 for the full year ended 12/31/2024. The year-over-year increase was primarily driven by continued investment in clinical, regulatory, and manufacturing activities as well as infrastructure expenditures supporting our Duchenne program. Net loss for 2025 is approximately $30,200,000 compared to a net loss of approximately $7,100,000 for 2024, and net loss for the full year ended December 2025 was approximately $105,000,000 compared to a net loss of approximately $40,500,000 for the full year ended December 2024. Based on our current operating plan, as Linda mentioned a moment ago, our financial resource—we believe our available cash, cash equivalents, and marketable securities—will be sufficient to fund anticipated operating expenses and capital expenditures into 2027, and this expectation does exclude potential milestone payments under our agreements with Nippon Shinyaku as well as any strategic uses of capital that are not included in our current base case assumptions. And with that, we are ready to open the line up for questions. Operator: Thank you. We will now open for questions. Ladies and gentlemen, we will now begin the question-and-answer session. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the number two. If you are using a speakerphone, please lift the handset before pressing any keys. Our first question comes from the line of Ted Tenthoff from Piper Sandler. Your line is now open. Edward Andrew Tenthoff: Hi, guys. Sorry about that. I was on mute. So firstly, congrats on all the really exciting progress, you know, this year, this week. Great to see you down at MDA, excited about some new data coming out of that, and, obviously, the BLA acceptance. Are you guys anticipating any AdCom, anything along those lines? And what commercial prep are you doing in preparation for potential deramycin approval? Thank— Linda Marbán: Hi, Ted. I have to say it was great to see you in Orlando and, you and I have been tracking each other for more than a decade on this. And so I am very proud of what we are accomplishing together. Thank you so much for your years of good support. To answer your question, in terms of an AdCom, I have been getting a lot of questions about that. Certainly, they have not made any moves towards that at this point. I do not think anybody has had an AdCom in about a year. And I do not know if they are going to be putting one in place. I think with the departure of Vinay Prasad, it is a little bit up in the air as to what is happening within CBER and what their manifest will be. Either way, we will be prepared. Good news about the HOPE-3 data is it is so very strong. That I really would be delighted whether I presented at an AdCom or we directly to PDUFA without it. In terms of your second question, in terms of commercial readiness, look, deromyophil has been in development for a long time. This data is extraordinary. Skeletal and cardiac disease attenuation and even improvement in those with cardiomyopathy and a product that is very safe and can be foundational and used with pretty much anything else that we can think of that is approved or coming along for DMD. So we are going to be building our own commercial program to support NS at this point. So that we make sure that everything from market access, payers, and all of the other aspects of commercial planning is done with the same precision that we have done the development of deromyosil to this point. Edward Andrew Tenthoff: That is great. And one quick clarification, if I may. When it comes to the actual label, I know this is something that will be negotiated later in the review process. Do you believe the current label would be for the original cardiomyopathy, DMD cardiomyopathy submission, or would this be now for DMD more broadly? Just appreciate any clarity on that. Thanks. Linda Marbán: Thanks, Ted. So I think this, again, is the biggest question that we all have. We have broached this with FDA both in formal and informal meetings, really since the issuance of the CRL last July. They have been relatively noncommittal, saying that they will discuss it during labeling. We certainly believe that the data supports a label both for DMD in terms of some the skeletal muscle ramifications related primarily, I would guess, to upper limb loss, which starts very young, and/or to the treatments and attenuation of Duchenne cardiomyopathy. So that is our plan internally. Obviously, we will keep the street updated as we enter into those conversations with FDA. Currently, we believe that that would be the best path forward both for the therapeutic and also for the regulatory pathway. Edward Andrew Tenthoff: Great. Thanks. Well, either way, a big win. For the boys and for Capricor Therapeutics, Inc. Thanks so much. Linda Marbán: Thanks, Ted. Operator: Our next question comes from the line of Leland James Gershell from Oppenheimer. Your line is now open. Leland James Gershell: Thank you for taking our question and appreciate the updates yesterday at MDA. Just wanted to ask, could you, Linda, refresh us on the import of the two different cohorts of HOPE-3 as you had material that was made at two different facilities. I think in the past, you had said that Cohort B had been more of a regulatory focus. Just wondered where we stand today in terms of how the FDA will consider those two different cohorts and, you know, in the context of the pooled analysis, as they go through their review? And also wanted to ask if you have any expectation around the timing that we should see a peer-reviewed publication of the HOPE-3 data? Thank you. Linda Marbán: Well, thanks, Leland. Yeah, I have not thought about the two cohorts in a while, so the FDA has not mentioned it in any conversation since probably 2024 when we decided to, under their recommendation, file the biologic license application for the cardiomyopathy based on the HOPE-2, HOPE-2 OLE and natural history data. You know, they then agreed that we would pair Cohort A and Cohort B and consider them as one trial because of the nonclinical comparability of the product. So they have not talked about it, and we have not talked about it. They have all of the raw data now. The good news is, and what I feel very confident in is that Cohort B, independent of Cohort A, was statistically significant in both skeletal muscle performance, Performance of the Upper Limb, and in the cardiomyopathy ejection fraction. That would be the more important cohort to look at because that was what their question was originally—was that product comparable. It certainly is comparable in terms of its biologic activity. So we will keep everybody updated if there are any more questions on the cohorts, but as far as we know, they consider one clinical trial, one cohort, and the manufacturing facility here in San Diego passed PLI, so we are manufacturing ready. In terms of an update on an academic publication, I know you are an academic scientist as well as I was, and we both know that one of the reasons people are in academia is because time is not of essence. So, you know, the academic review is ongoing and we will keep the community updated as soon as it is ready to be published or published. Leland James Gershell: Great. Thanks very much. Linda Marbán: Thanks, Leland. Operator: Our next question comes from the line of Joseph Pantginis from H.C. Wainwright. Your line is now open. Joseph Pantginis: Hey there. Thanks for taking the question. So two questions, if you do not mind, Linda. So first, I know you have not had labeling discussions yet, but could you just sort of describe a before and after snapshot of—did you have prior labeling discussions ahead of the CRL? And how you think that may be similar or different. And then second, and this is strictly from a devil's advocate standpoint, could you envision any scenario where this might be a conditional approval? Linda Marbán: So I can answer your second question first because it is easy. No. There is no way this would be a conditional approval. There would be no need for a confirmatory trial on a randomized, double-blind, placebo-controlled trial that has primary and key secondary and Type 1 error-controlled endpoints. I cannot imagine any scenario what they would make it conditional upon. But I will keep you updated on that. In terms of labeling conversations, we did not get that far before the CRL was issued. Last time was actually right before we would have begun them. So we do not have clarity there. The only tea leaves I can read is that they knew that HOPE-3 was powered and primary efficacy endpoint was Performance of the Upper Limb. They knew that we had filed a cardiomyopathy BLA under the existing data. When they gave the CRL and then we had the Type A meeting, they wanted to see the HOPE-3 data unaltered in terms of its primary. So we believe that they will consider both the skeletal muscle aspects of the disease as well as the cardiomyopathy in the labeling. I suppose, you know, they can ask for anything. It is the FDA. And so we will keep the street informed as we get information ourselves. My current belief is that the data is very strong. It supports labeling for both cardiomyopathy and skeletal muscle myopathy, and that is what we are planning for internally at this point. Joseph Pantginis: Appreciate the comments, and here is to the end of the potential FDA drama. Operator: Our next question comes from the line of Kristen Brianne Kluska from Cantor. Your line is now open. Kristen Brianne Kluska: Hi, everyone. Thanks for taking the questions, and nice to spend time with the broad Capricor Therapeutics, Inc. team this week in Orlando. So with the Class II resubmission, can you just help us understand what parts of the review are going to be new versus what parts are already considered checked off with the first process—so, for example, like on manufacturing, mid and late-cycle review meetings, etc.? And then just on capacity, wanted to confirm in your prepared remarks you said it could support 250 patients per year, with potential stockpiling, but then you are expanding to reach 2,500 patients per year. What will you need to show to the FDA to get the expansion up and running? Like, is there any comparability work or runs that you have to do to show them it is the same material, etc.? And then last question for me just on MDA. Obviously, a lot of doctors there. We talked to plenty ourselves, but curious what your takes were from these communications. This is really your big showing of the HOPE-3 data since it came out in December. So curious what the feedback is. Were there people even that were skeptical in the past that, now that you have this data, were willing to take a closer look? Anything you could share would be really helpful. Thanks again. Linda Marbán: Yeah. So thanks. So this is obviously our first go-around with the CRL and a resubmission. What I can tell you is that we know the manufacturing facility passed pre-licensing inspection. All 483s were signed off on, and so we are good to go there. We anticipate there will be several CMC-related questions that come across as we go through this resubmission process just because there were a few loose ends, none of them that were areas that would be a major concern or slow things down. They just want clarification. We think that the nonclinical and other aspects of the BLA have already been signed off on, so we do not anticipate any changes there. Obviously, the only thing that was really cited in this complete response letter that was now officially resubmitted was the HOPE-3 data. So we assume that clinical and stats will be the focus of the new review. Yeah. So, we very strategically built the new clean rooms in the same building as the 250-capacity clean room. So it does reduce the regulatory requirements if it is on the same street address as the original facility. You obviously have to demonstrate, you know, in PPQ runs that the product is the same and passes all of your requirements. I think they come and do another inspection, but they would be slated to do an inspection in early 2027 anyway. As part of, you know, there is general maintenance on manufacturing plants. So I am not anticipating a long run-in terms of getting approval of the site based on sort of those components or that situation. But we will obviously keep you updated as to how that goes. I know Marty Makari has spoken publicly, and I know Vinay Prasad prior to his exit also spoke publicly that they were thinking they would reduce the number of PPQ runs that are necessary from three to one, which, obviously, if that actually is put into place, could significantly reduce the time that a manufacturing facility would need to come online. So we are going very fast and anticipate getting those doses out to commercial community as quickly as the FDA will allow us. Yeah, thanks, Kristen. And let me just say it was wonderful to see you in Orlando, and I appreciate you turning out and spending some time with our team. The event we hosted was exactly what I had hoped for, which is that physicians and investors and patients and everybody could be together to learn about dirhamia cell. And you are correct. You did speak to physicians who I think are echoing now what you just alluded to, which is that the HOPE-3 data has solidified belief in this product across physicians, across patients, really across the entire community. It is, you know, I have said now a few times, randomized, double-blind, placebo-controlled, hits primary endpoint, hits secondary endpoints, hits Duchenne video assessments, which went along with the Performance of the Upper Limb, as I said in prepared remarks. And so yes, I think physicians who before were hopeful are now convinced and looking forward to putting their patients on. We are getting a lot more questions about prescribing availability, launch than we ever have. So we are on fire here getting this product ready for approval and for launch. Kristen Brianne Kluska: Thanks, Linda. Linda Marbán: Thanks, Kristen. Operator: Our next question comes from the line of Madison El-Saadi from B. Riley Securities. Your line is now open. Madison El-Saadi: Hi, Linda and team. Congratulations on the data, and thanks for taking our question. Your partner has previously said that they expect to transition all clinical trial patients to commercial drug within one quarter of launch. So should we think of these, call it, 100 patients as kind of the base case for how many patients may be treated with deromyosil in 2026, assuming approval? And then to follow that, as you know, there are 7,000 to 8,000 DMD boys, maybe more, with cardiomyopathy, and just given the data we saw in this subgroup, you know, it is hard to imagine there being a circumstance in which a patient does not go on this drug. I guess, how do you scale beyond the 2,500 capacity? Is that something you guys are thinking about? What would it cost—do you have the cash? Maybe if you could just kind of help illustrate what that road map may look like. Thanks. Linda Marbán: Yeah. Madison, thanks so much, and also great seeing you in Orlando. Thanks for making the trip. Always great to spend time together. So in terms of the OLE patients, yes, we have over 100 OLE patients on daratomycinol now. They all will be anxious to continue. We have seen that from the HOPE-2 OLE guys that have gone on for years. We anticipate all of them wanting to come over to commercial product. We have not figured out a launch date yet, we just got the PDUFA date. So I do not want to give a year or a timeline as to when, but yes, we will transfer all of them over as seamlessly as possible. That is why we are focusing internally on access at this point so that that can happen seamlessly. There are, Madison, a lot of young men that have been waiting in the wings for deramycin that did not qualify for our trials for whatever reason. And I am getting a lot of calls now from—so we will prioritize getting geromyosil to any and all of those that need or as quickly as possible. And I will say that that is my mandate and why we are taking on manufacturing as aggressively as we are. To that end, pertinent to your question, yes, we are now poised and, in fact, ready to go forward with another manufacturing build-out in San Diego County very close to our current footprint that will be able to accommodate many more thousands of patients per year. We wanted to make sure that we completed our response. We want to make sure that we are proceeding well towards PDUFA before we invest that capital. But we now have internal confidence that that will happen. So we are actively planning to expand manufacturing to accommodate the needs of any and all of those that would like to have it. At diromycin. Madison El-Saadi: Got it. Thanks. Linda Marbán: Thanks, Madison. Operator: Our next question comes from the line of Catherine Clare Novack from Jones Trading. Your line is now open. Catherine Clare Novack: Hi. Good afternoon. Thanks for taking my question. One thing we heard over and over at the meeting was about how patients with DMD do better with earlier intervention. Just thinking about how you can make the case based on HOPE-III that it is a benefit to treat, you know, even before the development of cardiomyopathy, thinking that, you know, since virtually all DMD patients will eventually develop cardiomyopathy, and not thinking of it as then a separate indication, but as part of DMD as a whole. You know, what in the application supports that? And then can you remind us of the status of the European rights deal with NSF? Linda Marbán: Yeah. Thanks. You know, we, of course, are laser focusing on those younger kids and those earlier in the disease process. As we have said and sort of have been stating for a long time, it is very safe. The infusion protocol is really easy. Even a little guy could sustain it very well. And, yes, the data that we have seen has been highly supportive of starting as young as possible. Getting a prevention label is very difficult until you can show prevention, which takes years. We are comfortable right now with the treatment of cardiomyopathy. The good news is because these kids now, most of them start getting MRI at a very young age. As soon as they see one segment of scar, the cardiologists want to get them on deromyophil, and so that will be a way that we will get more and more active in sort of the younger kids and moving towards that prevention target. Of course, if they go on for the attenuation of skeletal muscle function myopathy, then we will be able to track their hearts and be able to ultimately—physicians will use it with skeletal muscle as well as cardiomuscle myopathy independent of progression of the disease. So we have been negotiating with NS Pharma for a while for rights to Europe. Honestly, we have not been focusing on it internally. There was clearly a lot going on here with the CRL and getting the HOPE-3 data ready and submitted. And now that we have a PDUFA date, and I feel like we are on a good pathway there, we can take a little bit of a breath and start focusing on our outside-of-U.S. activities. They do have the rights to Japan, so we are going to start working with PMDA and getting that going in 2026. And then in terms of Europe, we are evaluating those now, and we will see sort of where the road map takes us. And we will provide updates as they become available. Catherine Clare Novack: Got it. Thank you. It was great seeing you and great hearing all these updates. Looking forward to the year. Linda Marbán: It was great to see you as well. Stay well, and see you soon. Operator: Our next question comes from the line of Gubalan Pachayapan from ROTH Capital. Good afternoon, team, and thanks for taking our questions. So a couple from us. Your line is now open. Gubalan Pachayapan: Firstly, you mentioned the Duchenne Video Assessment. Can you maybe tell us how many patients were included in the deramio cell arm and how many in the placebo arm? And also related to that, can you also comment on the inter-rater reliability of DVA? Because it is my understanding that it is rated by both caregivers and professionals. And then is there a reason why the sample size is low for the late gadolinium enhancement secondary endpoint? And maybe one last question from me. So the most recent PRV, as you probably know, was sold for a very high price of $205,000,000. And we are also aware that there is a new sunset date, which is 09/30/2029. But do you think because the new sunset date is a little longer than three years from now, this is going to ease up some pressure from the buyers—maybe that could impact the price that you will be selling your PRV for? Any thoughts on that? Thank you. Linda Marbán: That is right. So the DVA is actually a qualified and validated assessment tool that has been published, and not only been used by us but by others and not only by those with Duchenne muscular dystrophy but in other disease states. So it really is quite rigorous in its measurements. The recorders, or the video takers, are trained in how to do it, what to do, then they are sent to a facility where they are read by a blinded, trained reader and the data is then delivered blinded to the company and ultimately treated like any other data set. So it really is highly valuable data that is collected in a home-based setting. In terms of the number of patients, that were in the DVA was about 50 patients in each group, so 50 in the treatment and 50 in the placebo group. Yeah. So, we added LGE measurement for Cohort B only. When we were designing Cohort A, there had been some press around gadolinium and the fact that it might aggregate in the brain, especially of young children, and could be a safety—so we decided not to look at scar in Cohort A. During the time between Cohort A and the initiation of Cohort B, that was considered not to be a safety risk. And the value of the data collected would be highly necessary to sort of show the correlation between function and scar. The data is beautiful, and having been somebody that has worked in MRI for many decades, I am really excited by this data as are the cardiologists. So it is only those in Cohort B that were eligible for the gadolinium enhancer, and then they also had to have certain levels of kidney function. So that is why those numbers are relatively small. But that dataset is small but mighty. Yeah. If I had a crystal ball, I would be a really wealthy woman. But all that being aside, I do not know. I certainly know that PRVs tend to be valuable. It really depends on how motivated the buyer is to get it when they come available, and we certainly are going to get the maximum price for our PRV should we be able to receive one. Gubalan Pachayapan: Alright. Congratulations. Thank you. Thanks. Operator: Our next question comes from the line of Matthew J. Venezia from Alliance Global Partners. Your line is now open. Matthew J. Venezia: Hi, guys. Congrats on the progress, and thanks for my questions. First, I think I asked this question about six months ago, but how have the conversations at the FDA with you guys changed, if at all, since being—Prasad left the agency once again? And another talking about the age of the patient, it seems to be a drug where early intervention and a disease where early intervention is paramount to treatment. Do you expect a specific age on your label? Do you expect that to come up in labeling discussions with the FDA? I know, like, you guys had four plus on their label. But is that something that you expect to be ironing out with the FDA in your labeling discussions? And just the final question, the StealthX platform—is there a specific time within second quarter when we can expect P1 trial results, or is that kind of just up to NIAID? Linda Marbán: Thanks, Matthew. Good to talk to you. So far, nothing. We got our letter reopening the file, setting our PDUFA date, and that was almost in conjunction with his leaving. So, really, we have had no change in any interaction whatsoever at this point. Yeah. I do not know. We did not ever have a four plus. I do not know who that was. That was not us. Age is a possibility. We have treated down to age eight in our clinical trials. So we have not gone younger than that. We do not know, again. You know, I know everybody is hypothesizing about labeling discussions to build their models, and I certainly am doing the same myself. I do not know if there will be an age cutoff or a function cutoff. As soon as we have clarity, though, we will let you know. I would say in building your models that the youngest we have actually treated to this point are those that are ambulant and down to age eight. Yeah. It is—I was just going to say you take the words from my mouth. It is an NIAID situation, so that data trickles in really slowly. We are super anxious to see the cellular response. We are really interested to see if there is a T-cell response. COVID is kind of a crazy virus to try and get on top of these days because pretty much everybody is either had it or been vaccinated multiple times. And so we are looking forward to seeing that data to continue to work with NIAID. But most importantly, and I will take—thank you so much for asking me—we are very excited about our pipeline right now. We now have the opportunity to deploy on it. We were able to build out manufacturing for this vaccine. We know how to do it now. We know how to, you know, load the exosomes, target the exosomes. And so while the vaccine program is important, it really was that learning experience that is now driving us towards a therapeutic exosome platform, and stay tuned for more information on that as we progress through 2026. Matthew J. Venezia: Alright. Wonderful. Thank you, guys. Again, and congrats on the progress. Linda Marbán: Thanks. Operator: I will now turn the call back to Capricor Therapeutics, Inc. management for closing remarks. Please go ahead. Linda Marbán: Thank you so much for joining us today. Thank you for those of you that attended the Muscular Dystrophy Association and took some time to be with Capricor Therapeutics, Inc. at that event. I will say that it gave me incredible joy and pride to be at that event and see how prominently Capricor Therapeutics, Inc. was featured at MDA, but also in the hearts and minds of those with DMD. We really feel like we have the opportunity now to meaningfully improve their lives and look forward to continue on that journey with them and with all of you. So we look forward to seeing you out in the community, and thank you so much. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Q2 fiscal 2026 earnings discussion for Oil-Dri Corporation of America. At this time, participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. If you would like to ask a question during the session, please press star then 1 on your telephone. You will then hear an automatic message advising you when your hand is raised. To withdraw yourself from the queue, please press star then 1 again. I would now like to turn the conference over to your speaker for today, President and CEO, Daniel Jaffee. Please go ahead. Daniel Jaffee: Thank you, and welcome, everybody. We are in virtual mode, so we have people dialing in from all over. We very much appreciate you getting your questions in early. That gave us a chance to develop our responses and prioritize, so thank you for doing that. With me today is Susan Kreh, our CFO and CIO; Aaron Christiansen, our VP of Operations; Christopher Lamson, Group Vice President of Business-to-Business and Strategic Growth Initiatives; Wade Robey, VP of Agriculture and President of Amlan International; Laura Scheland, Vice President and General Manager of our Consumer Products Division; Bruce Patsey, our Vice President of Fluids Purification; Mervyn de Souza, VP of Research and Development; Tony Parker, our VP, General Counsel, and Secretary; and Leslie Garber, our Director of Investor Relations. I am going to turn it over to Leslie for our Safe Harbor provision. Leslie Garber: Good morning, everyone. I also want to note that John Blake, VP, Corporate Controller, is on the call today. On today’s call, comments may contain forward-looking statements regarding the company’s performance in future periods. Actual results in those periods may materially differ. In our press release and in our SEC filings, we highlight a number of important risk factors, trends, and uncertainties that may affect our future performance. We ask that you review and consider those factors in evaluating the company’s comments and in evaluating any investment in Oil-Dri Corporation of America stock. Thank you for joining us. Now I am turning it back over to you, Dan. Daniel Jaffee: Great. Thank you, Leslie. As always, I am going to have a few comments, but I am really going to turn it over to the team to walk you through a lot of the details and what went on in the quarter. I am very proud of the results. We had a very, very, very strong quarter, especially given the way we navigated through the storm called Fern. I am not going to get into that too much because I know Susan is going to cover it, and Aaron is probably going to cover it. All I am going to say is it was another validation of the commitment and the caring that our global teammates have for doing everything they can to create value from sorbent minerals and help deliver value to our shareholders because we had a lot of heroic effort. We absolutely emphasized safety first, making sure that everyone took care of their family. They were without power; they were without water for some period of time. It was really a dynamic situation, and we navigated it very, very well. I am just very proud of the team. Susan, I am going to turn it over to you to walk us through the quarter. Susan Kreh: Sure. Thank you, Dan. In order to preserve the most time for the Q&A portion of this call, I am going to highlight a few financial matters and then address any of your other questions during the Q&A session. During our second fiscal quarter, Oil-Dri Corporation of America continued to deliver strong financial performance. However, when I reflect back on the second quarter, what makes me so proud to be a part of this team is how everyone, especially our operations leadership, handled the situation with winter storm Fern. They played a team game and demonstrated agility in using our plant network to service our customers, and they did so while embracing the core values of our culture. Those core values shone brightly when the first thing that the operations team addressed as the magnitude of the storm impact unfolded was the safety and well-being of our teammates, followed closely by a focus on taking care of our customers, both of which are key pillars of our We Care values. Aaron, I hope your team is listening and that they know how much the rest of us appreciate what they did to handle such a major disruption and handle it so well. Switching gears back to financial performance, I want to highlight our continued ability to generate strong cash flows. During the second quarter of our fiscal year 2026, Oil-Dri Corporation of America generated EBITDA of $22 million, which was in line with the $22 million of EBITDA generated during the same quarter a year ago. For the first six months of fiscal year 2026, Oil-Dri Corporation of America has generated cash flows from operating activities of just over $28 million. Our strong ability to generate cash was an enabler in building our inventories. The elevated levels of inventory going into January played a key role in being able to service our customers while several of our production facilities experienced outages resulting from winter storm Fern. Our strong cash position also supports our continued investments in growth and infrastructure projects in our manufacturing facilities. We ended our fiscal second quarter with cash and cash equivalents of $47 million. Our outstanding debt at the end of the second quarter, including current maturities of notes payable, was $40 million, meaning that at this point in time, we have more cash than debt, and we are extremely well positioned to make continued investments in our business to support our strategic growth initiatives, such as a couple of the new product launches that we will see in the second half of this fiscal year. In summary, our strong financial performance and our strong cash position, coupled with our deep cultural values of being a team-based organization with a focus on our people and our customers, enabled our resiliency during a major weather-related disruption. I will take your questions during the Q&A if you have any specific accounting or financial questions. With that, Dan, I will turn it back over to you. Daniel Jaffee: Okay. Great. Before I open it up to the Q&A, we had a great board meeting yesterday, and I was not being facetious when I said, look. The one constant—I have been doing this job since 1995, so I have not been promoted in 31 years. You have seen a lot of dynamic growth the last three to five years, and a lot of that was seeds that were planted maybe three years before that. For the fun of it, I was clicking on my app this morning, and if you look at our one-year growth rate on the stock price, it is 36%. When I click the two, it jumps to 88%. When I click the five, it jumps to 258%. I am sincere in saying that is a direct result of the incredible work that our team does on a global basis every single day, led by the people you are hearing on this teleconference. When you invest in Oil-Dri Corporation of America, you are investing in the team, and we have a phenomenal team. I want to thank them publicly for the incredible job they do. Leslie, I will turn it over to you now for the Q&A. Leslie, I am not hearing you. Leslie Garber: I am here. We will now open for questions. Please submit your questions using the Ask a Question field on the webcast and click Submit. Our first question comes from John Bear from Ascend Wealth Advisors, and he asks: Several years ago, Oil-Dri Corporation of America made it known that considerable CapEx cost would be undertaken over a three- to five-year period to upgrade and modernize plant and equipment. Recognizing there are always unexpected developments that pop up, how far along is that effort? Have the major initiatives been accomplished, and can we expect that those costs will diminish over the next few years? Aaron, will you please take that? Aaron Christiansen: Thanks, John. I appreciate the question. As we approach the completion of our fourth year of elevated capital spending, I would say the program has really progressed as intended. We have executed our plan with strong discipline, addressing some foundational areas of the business, including revitalizing portions of our mine fleet, advancing power, air, and other critical infrastructure, and prioritizing core processing assets. Really importantly, we do not view this as a discrete project with a defined endpoint. Although previously communicated as a three- to five-year endeavor, that was an initial belief. Our approach to capital allocation, ongoing, is to increasingly anchor to our long-term replacement cost of our asset base with a focus on sustaining high uptime, optimizing capacity, and consistently meeting customer service expectations. I often say to Dan and Susan, I am the steward of our asset base and manufacturing plants. Reliability and service performance that our customers experience is directly tied to having a manufacturing network that is flexible, continually ready to perform, and that remains central to how we think about capital going forward. Susan and Dan both paid me compliments in the way we managed through winter storm Fern. I will make a direct connection to the ability to have our entire asset base ready to perform when we mashed the pedal coming out of that storm and to use our plants in a way that is flexible and somewhat atypical in the weeks that followed the storm. I hope that answers your question, John. Leslie Garber: Perfect. The next question comes from Ethan Star, and he asks: What is the sales increase in agriculture and horticulture products, and is the increase in sales sustainable? Are you still finding new customers who want to include Verge granules in products they manufacture? I am going to turn that over to Wade. Wade Robey: Yes. Thank you, Leslie, and thank you, Ethan, for that question and for noting the excellent performance we have seen in that division in the first half of this year. There are really two parts of the market that we serve, and I will segregate those for you quickly. The first is what I will call the broad-acre market, which would be directed at grains, oilseeds, or pulses. That is the large-scale farming side of the business that we target with the fine ag products that we sell. The second would be on the turf and ornamental side, where we focus with engineered granules like Verge. In both cases, we have seen good performance out of those segments in the first half of the year. The broad-acre side is really driven mostly by planted acres, and we have seen increases in those planted acres over the last year, which allows our ag retailer partners, who are our customers, to service more acres, and that drives sales. That has been good growth, and we expect that to continue, kind of normal to historic patterns. On the turf and ornamental side, again, it is the engineered side of the business where we target with Verge. That has been good for us as well, and we have seen new product opportunities or new application opportunities come in, specifically with some new customers we have been developing. Those granules are used in products like insecticides or in products like specialty fertilizers for the turf and ornamental markets. Those markets have both been strong. We remain very bullish on the growth of that side of the business as well. Overall, we expect to see good performance over the next couple of years as we continue to expand with current customers and they expand their respective markets as well. Leslie Garber: Great. Thank you. The next question comes from Robert Smith from Center for Performance Investing, and we also have a couple of other questions that are similar: Will there be new product innovation introductions of note during the second half? Which areas, and can you share any color of expectations as to their importance? As always, thank you. I am going to have Laura Scheland cover that. Laura Scheland: Sure. Hi. Good morning. Thanks for the question. At Oil-Dri Corporation of America, we are always dedicated to innovation and improved consumer experience with our robust R&D and product development teams, as evidenced by our recent and new product launches in the past fiscal year and this fiscal year. I am excited to report on some updates there. In recent past years, we launched our EPA-approved antibacterial litter and are excited and pleased with the progress and increased distribution during this fiscal year. Also, last quarter, I reported on three new Cat’s Pride crystal items that test better than competition with 30 days’ guaranteed odor control. We are pleased with these items and performance in the market and the distribution that is growing. I am very excited to announce a new expansion of our crystal litter portfolio just in the past month: a new health monitoring litter that provides great peace of mind to consumers. We are excited to see our proprietary health monitoring formulation that we put a lot of effort into develop—not just what is currently in market, but even improved formulations for real, vibrant color indications. In addition, last quarter, I reported on our new Cat’s Pride scoopable pail that launched in the fall at Walmart. In the second quarter, we added an additional Cat’s Pride Total Odor Guard pail exclusively at Walmart, and they are excited with that expansion of branded items. Additionally, we just launched a new line of Cat’s Pride Max Power Pro items that are exclusively online in our stand-up bags and are designed and optimized for e-commerce fulfillment. We are really excited about the progress of our innovation geared to offer consumers the best experience and to partner with our strategic customers to satisfy their needs and desires and maximize for the growing e-commerce segment as well. Thank you. Leslie Garber: Great. The next question comes from Curry Manikandan from Copeland Capital: Can you give more details on underlying drivers spiking in renewable diesel sales? What are the bottlenecks in Golden Passat and MCP? When can we expect it to be steady? Bruce Patsey: Yes. I will respond to that. This is Bruce Patsey. Currently, the blender’s tax, or the blender’s rebate, was removed, and a producer’s rebate was put in place. This caused a little disruption at some of the renewable customers and actually reduced production as they were trying to figure out how much money they would get back from the federal government. We did see a slowdown. Secondly, the feedstock oils that were brought into these plants changed a little bit, and no longer is there a rebate for feedstocks that come over from China or foreign markets into the U.S. With that, the plants are adjusting. Currently, there is a 45Z rebate put in place, and as these companies start to work with that more in the future, I am sure we are going to see some growth in that renewable market in the coming quarters. Leslie Garber: The next question comes from Ethan Star: Are you selling the co-packaged lightweight litter to the same customer you sell other co-packaged litter to, or is it being sold to multiple customers? Christopher Lamson, please address that. Christopher Lamson: Thanks, Leslie, and thanks, Ethan, for the question. Unfortunately, our contractual obligations really do not allow us to share either the names of the brands or partners that we are working with. That being said, I would like to highlight that the revenue that you saw and that we mentioned in the press release is really a combination of a multiyear, cross-functional effort from our team and the partner to bring our first offering in the lightweight segment that is a contract manufacturing item for us. While we are really excited about the new business and the revenue and profit stream that should be created for us going forward, we are just as excited about what it does for the lightweight segment. You have heard me, and more recently Laura, talk time and time again that our strategy is about growing the lightweight segment. We have a nice-sized pie of it, and we will continue to have that nice-sized pie, but we really want to grow that pie. We think, candidly, as much as there is a big revenue gain here, having a strong player with strong brands participating in the segment with a great product that we worked with them to develop over the last couple of years will continue to do just that. Laura would tell you that segment growth is really continuing to work. If you looked at Nielsen data, you would see that growth rates in the lightweight segment are well ahead of the rest of the segment. In fact, it is the single biggest driver of growth in total cat litter over the last year. We are both pleased about the revenue, and we are pleased about the strategic impact this will make for us for a long time. Leslie Garber: Thank you. John Bear asked: In the recent 10-Q, you indicate that the year-over-year six-month per-ton manufacturing costs were up, but per-ton transportation and packaging costs were lower. Can you speak to the current trends in your manufacturing costs as well as transportation and packaging cost trends? Are the latter improvements due to your efficiency efforts or the macro environment? Aaron, will you please address that? Aaron Christiansen: Yes, John, that is another thoughtful question. There are a few elements in your question; I will try to unpack them one at a time. Starting with manufacturing costs, the year-over-year comparison reflects a combination of timing and normal volatility with no single underlying driver or trend. As both Susan, Dan, and I already discussed, we experienced meaningful operational disruption late in the quarter from winter storm Fern, which included temporary production outages at multiple U.S. plants. That created some short-term fixed-cost absorption pressure as well as some variable costs that came with the event. In addition to the timing of the weather—the winter storm late in January—labor-related inputs, in particular benefits, continue to be an area of cost pressure for us, which is not uncommon in the industry. We have seen that flow through our results. I will add here, our repair costs continue to stabilize, directly related to your prior question and the ongoing reinvestment of capital into our asset base. Turning to transportation, we operate in markets that naturally fluctuate, and recent periods reflected a more balanced freight environment. That being said, we tend to view freight performance less through the lens of spot conditions and more through execution and how we take advantage of those spot conditions. I want to thank and recognize our freight and logistics team for the great work they do to align the right carrier partnerships, network design, and operating discipline to consistently meet customer service expectations—wildly high on-time performance that commonly exceeds 90%. Maintaining strong on-time performance while managing freight costs requires daily coordination across the organization; that remains a core operational focus for us regardless of market conditions. We would always be better than market conditions through our operational execution. On packaging input costs, inputs have been relatively stable overall, with offsetting pressures across different materials and sourcing categories, including tariffs. I will remind the audience that a very large portion of our packaging materials are domestically sourced. We are less exposed to tariff costs than many competitors. Our focus here, as elsewhere, is on structural capability—standardization, specification, diversification where appropriate—and supplier engagement and partnership. Rather than short-term commodity movements, we are focused on long-term strategy with the right partners. Those efforts help us manage variability over time, but we do not view them as eliminating exposure to broader cost dynamics. Overall, we continue to manage the business for reliability, service, and long-term operating resilience, recognizing that cost inputs will move differently across categories and time periods. Leslie Garber: Thanks, Aaron. We have two questions regarding Amlan, one from Ethan Star and one from Robert Smith. I am going to read one of them because Wade Robey will touch on both: Despite the rough quarter for Amlan, what progress are you making with Amlan, and do you expect sales growth for Amlan over the long term? Wade? Wade Robey: Yes. Thank you, Leslie, and thank you to both of you for that question. I appreciate the opportunity to address the performance in the first part of the year for Amlan. As was mentioned in the press release, we did lose a key account, which has impacted our performance to date quite a bit, which is reflected in the numbers. This is really a function of the extraordinarily large size of the accounts that we target in many cases—around the world, not just in the U.S. market, but in LatAm and in Asia Pacific as well. These accounts are enormous in size. That benefits us greatly on the positive side when we gain a new account; it can hurt us on the downside if we lose an account, albeit temporarily. In this case, we did have an account loss very early in the fiscal year, and since then, we have been working very, very hard to recover that business with our distribution partner. They are actually the seller of the products to the account directly and through our distribution network. The second thing we have been doing, which we always do, is work to broaden the base of our customers. This has the best effect long term to mitigate the impact of any single account loss. Those two actions are what we have been focusing on. None of this changes the outlook we have for the business or the excitement we have around these markets that we are targeting for Oil-Dri Corporation of America. The animal nutrition, animal feed additive markets are very large around the globe, as you know, and they tend to be high-margin, high-value markets. We are continuing the strategy, continuing our approach, and are just working hard to recover the loss that we saw early in the year. Leslie Garber: Thank you. Next question is from Robert Smith: From what you see now, what are the headwinds and tailwinds of the oil and gas situation—first with respect to the Fluids segment and then corporate-wide? I am thinking of sustainable aviation fuels, renewables, and then costs. I am first going to have Bruce Patsey address that regarding renewable diesel and Fluids Purification, and then I am going to turn it over to Aaron Christiansen about cost. Bruce? Bruce Patsey: Yes. Thanks for the question. The conflict that is causing increased fuel costs, obviously for us at the pump, also helps increase the margin for our end users that are using our products to make renewable diesel. We are seeing a slight uptick in orders right now, and they are trying to produce more oil to get out into the market. The tailwinds, I guess, for our end user in this case would be if this price stays up high for a long time, the suppliers of the feedstock oil are going to pass increases on to them, which will then negatively impact their margins. At this point, if it stays a 30- to 60-day issue, I think we will see an uptick with that business. That is my answer. Thank you. Aaron Christiansen: Great. Leslie, I will speak to it from a cost perspective. Robert, I will remind you and other investors that several years ago, Oil-Dri Corporation of America resumed the practice of forward buying a portion of our consumed natural gas very mathematically and algorithmically. We purchase strips of natural gas to buffer and dollar-cost average our forward exposure. I deliberately continue to avoid the word “hedge.” We are not trying to beat the market. We are trying to dollar-cost average over time and then buy our organization time to understand where prices are going and, where appropriate, pass those costs along in the marketplace as utility costs rise over a period of time. Periods like we are experiencing right now are the points in time that our current strategy provides me great comfort, knowing that we are not exposed to substantial changes in cost short term and have time to react as we see where prices go longer term. Leslie Garber: Thank you. We have one last question from Robert Smith: Are you already at work using artificial intelligence in the microbiology center to identify targets for new product development for your clay? Mervyn, I will turn that over to you. Mervyn de Souza: Thanks, Leslie. I appreciate the question, Robert. I think we all know artificial intelligence has become a household term now that is in almost every walk of life, both with positive and negative outcomes. Across Oil-Dri Corporation of America and within the R&D team, as I have mentioned in the past, we have a very thoughtful and deliberate approach when it comes to the use of AI to drive us towards both increased efficiency and effectiveness. We are working on integrating both human and artificial intelligence into our day-to-day operations as they become relevant, both for new product development as well as for improving our existing products, to deliver innovative solutions to our Oil-Dri Corporation of America customers. Leslie Garber: Wonderful. Thank you. That is the end of the Q&A portion. Dan, do you have any closing remarks? Daniel Jaffee: Yes. I just want to thank the investors for very thoughtful and on-point questions. It shows you are long-time holders, and you have been very invested in the strategy and growth of the company over many, many years. Your knowledge of where we create value and where we have opportunities is clear by the questions you are asking. Thank you for that. Thank you to the Oil-Dri Corporation of America team. We will be looking forward to our third-quarter teleconference in around 90 days. Operator: This does conclude today’s program. Thank you all for joining, and you may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the HighPeak Energy, Inc. 2025 fourth quarter earnings conference call. At this time, participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. To ask a question during the Q&A session, please press *11 on your telephone. You will then hear an automated message indicating your hand is raised. To withdraw your question, please press *11 again. Please be advised today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Steven W. Tholen, Chief Financial Officer. Please go ahead. Steven W. Tholen: Good morning, everyone, and welcome to HighPeak Energy, Inc.’s earnings call. Representing HighPeak Energy, Inc. today are President and CEO, Michael L. Hollis; Executive Vice President, Ryan Hightower; Executive Vice President, Daniel Silver; Senior Vice President, Chris Monday; and I am Steven W. Tholen, the Chief Financial Officer. During today’s call, we may refer to our March investor presentation and press release which can be found on HighPeak Energy, Inc.’s website. Today’s call participants may make certain forward-looking statements relating to the company’s financial condition, results of operations, expectations, plans, goals, assumptions, and future performance. Please refer to the cautionary information regarding forward-looking statements and related risks in the company’s SEC filings, including the fact that actual results may differ materially from our expectations due to a variety of reasons, many of which are beyond our control. We will also refer to certain non-GAAP financial measures on today’s call, so please see the reconciliations in the earnings release and in our March investor presentation. I will now turn the call over to our President and CEO, Michael L. Hollis. Michael L. Hollis: Thank you, Steve. Good morning, everyone, and thank you for joining us. I thought about kicking off things today by walking through our 2025 results and the execution of our business plan, but that feels like a whole different world today. I am far more energized by what lies ahead than by revisiting what is already behind us and implemented. For anyone interested in a deeper look at the changes that brought us to this point, our prior quarter’s investor presentation and earnings call transcript offer a comprehensive overview. So with that, let us turn the page and talk about 2026 and how we are positioning the company to move forward with purpose, confidence, and a whole lot of momentum. In today’s fast-moving geopolitical and commodity landscape, we are approaching 2026 with focus and discipline. Our focus is clear: protect profitability, maximize cash flow, and strengthen the foundation of our business, not pursue growth for its own sake. Over the past several quarters, we have taken a hard, honest look at every part of our business, and that work continues today. It has given us a firm handle grounded on financial discipline and operational excellence. This means a plan we can fully and confidently execute within cash flow, sustaining stable production with minimal capital intensity, and driving further efficiency gains to expand margins. Our top financial priority is strengthening the balance sheet. As commodity prices rise, incremental cash flow will be directed first toward debt reduction and liquidity improvement. To support that objective, we are taking several decisive steps. First, we right-sized our annual capital budget to ensure our development program stays within cash flow even in a much softer price environment. Second, we expanded our hedging program to reduce exposure to volatility and secure pricing that supports continued investment and debt reduction. Third, we suspended our dividend, which will increase annual liquidity by an estimated $20 million to $25 million. The reality is the market was not giving us credit for the dividend, and most of the investors we speak with regularly have shared that same perspective. We believe that capital is far better deployed strengthening the balance sheet and building long-term value for our shareholders. We are positioning the company to thrive not just for the next couple quarters, but for years to come. Our 2026 development plan is intentionally conservative and built for durability. It is anchored around one drilling rig and roughly one completion crew, which positions us to drill about 30 wells and bring 36 to 38 wells online over the course of the year. We designed this pace of development with three clear objectives in mind. First, to ensure we operate fully within cash flow, covering every financial obligation even if oil prices settle in the mid to upper $50s. Second, to maximize free cash flow in a stronger commodity environment so we can accelerate debt reduction. And third, to maintain strict cost discipline across the organization. Given the recent strength in oil prices, this is an opportune time for us to lean into debt reduction and continue improving our financial footing. Our 2026 program also reflects a balanced approach between investing in new wells and optimizing our existing base production. You can see that balance clearly in our capital allocation. Our capital budget is nearly 50% lower than last year, while unit lease operating expenses per BOE are modestly higher as we invest in targeted initiatives to enhance base production. The result is a development program built for capital efficiency, highlighted by an estimated 65% increase in production per dollar invested. And the early results are encouraging. Quarter-to-date, production is averaging more than 46,000 BOE per day. That is roughly 10% above the midpoint of our 2026 guidance range, even after accounting for the impacts of Winter Storm Firm. Based on today’s market environment, we believe production in the low to mid-40,000 BOE per day range represents a sustainable baseline for our 2026 budget and our plans to reduce absolute debt. Stepping back, it is important to recognize how the market is valuing companies like ours today. In the current environment, SMID-cap E&Ps are rewarded for durable free cash flow, balance sheet strength, and meaningful high-quality inventory depth. What they are not rewarded for is headline production growth. Now there are a few realities shaping our industry right now. Core Permian inventory is becoming increasingly strategic. Tier one shale inventory is finite. Future wells will naturally move down the quality curve as inventory tightens. And preserving and expanding high-quality inventory is what drives long-term value. Now with that in mind, our guiding principle is straightforward: return on capital employed matters more than production growth. Disciplined development today allows us to protect and preserve our tier one inventory for a future time when our financial capacity and a strong, sustained commodity environment align. What are we doing to support this strategy? Our disciplined approach centers on several key priorities. First, we are protecting liquidity and reinforcing our financial position by eliminating the dividend and expanding our hedge position. Second, we are moderating drilling activity so the business remains cash flow neutral even if oil prices move down into the mid to high $50s, while still positioning us to accelerate debt reduction if prices remain strong. Third, we are investing in optimizing across our base production, generating incremental volumes and cash flow without the capital intensity that comes with drilling new wells. And finally, we have continued to delineate additional high-return inventory across our acreage, expanding the long-term opportunity set for the company. Taken together, these actions position HighPeak Energy, Inc. to increase free cash flow, reduce leverage and potentially lower our cost of capital in the future, preserve premium inventory for periods of sustained stronger commodity prices, expand our strategic optionality—whether through drilling, production optimization, or potential accretive M&A—increase long-term NAV realization for shareholders, and ultimately, implementing these key priorities will strengthen the value of our equity. Let me take a moment to talk about our capital allocation philosophy, because it is the backbone of long-term shareholder value. Our approach, again, is straightforward and disciplined. We will protect the balance sheet; a strong financial position gives us the flexibility to navigate commodity cycles and act when appropriate and opportunities present themselves. We will prioritize high-return investments; every dollar we deploy must earn its place, whether it is drilling a new well, optimizing existing production, reducing debt, or pursuing strategic opportunities. We will preserve premium inventory; tier one drilling locations are finite across the industry and disciplined development today safeguards the long-term value of those assets. And finally, we will focus on generating sustainable free cash flow that strengthens the balance sheet, allows us to potentially lower our cost of capital in the future, and ultimately supports a higher long-term equity valuation. When you look at the 2026 development plan through that lens, every decision—from reducing activity levels, eliminating the dividend, expanding our hedging program—is designed to enhance the durability and long-term value of the business. Simply put, our goal is not to grow the fastest. Growth should be the outcome of a well-executed, financially solid plan. This does not happen overnight. HighPeak Energy, Inc.’s goal is to build a resilient, valuable company that delivers for shareholders over the long haul. A key part of our capital efficiency strategy in 2026 is the continued optimization of our existing production base. These efforts include targeted well workovers, artificial lift enhancements, and other operational improvements designed to increase recoveries from wells already online. Projects like these typically generate strong returns on invested capital and allow us to unlock additional value from assets we already own. It is a practical, high-return way to drive incremental volumes and cash flow without the capital intensity of new well drilling. Let me now provide a quick operational update across our core development areas. At Flat Top, our results in the North Borden area—see slide 6 of our presentation—continue to demonstrate strong performance in both the Lower Spraberry and Wolfcamp A. These wells are delivering outcomes comparable to what we see in our core Flat Top area, which reinforces the quality and consistency of this acreage. The northernmost row of wells in our North Borden area is the only part of the field that will require minimal incremental infrastructure, and we expect that work to take place in tranches beginning in late 2026 and into 2027. Now in the core of the Flat Top area, we will continue developing Lower Spraberry and Wolfcamp A locations using the infrastructure already in place, driving corporate efficiency higher. In the Northeast Flat Top area, highlighted by the small red box also on slide 6 of our March investor deck, six wells experienced anomalous water inflows. We completed remedial work on several of those wells and are seeing encouraging early results. Because of the presence of the water flows, our 2026 plan includes no new drilling in the Northeast Flat Top area. Instead, we are focused on maximizing value through the remediation and optimization of the existing producing wells. Importantly, the impact to our long-term inventory is minimal. Even if we chose not to drill any additional wells in this area, it would affect only 18 Wolfcamp A locations that we carry in inventory, as we do not carry any additional zones in inventory for this area. We are also seeing encouraging progress in delineating the Middle Spraberry across both HighPeak Energy, Inc. and our offset operators. There are now nine successful producers, and we expect that momentum to continue with roughly six additional delineation wells planned between HighPeak Energy, Inc. and our offset operators in 2026. Our long-term objective for the Middle Spraberry is clear: convert more than 200 Middle Spraberry locations at Flat Top into fully delineated sub-$50 breakeven inventory. At Signal Peak, we will continue developing our core area in the Wolfcamp A and Lower Spraberry, both of which continue to deliver strong, consistent results—see slide 7 of the presentation. Beyond those core zones, Signal Peak holds substantial upside. We have demonstrated Wolfcamp D performance across the field in two different landing zones. With results that closely track one another, the resource is clearly present across the acreage, and it is not going anywhere. We have not drilled a Wolfcamp D well in roughly three years; however, during that time, the industry has made meaningful strides in optimizing deeper wells. We will continue to evaluate the development of the Wolfcamp D to determine when the economics fully support those wells competing for capital. We also see additional long-term potential in the Middle Spraberry, Wolfcamp B, and Wolfcamp C formations, which add further depth and optionality to our inventory over time. Our drilling results and technical work continue to reinforce what we believe is one of the deepest premium inventories among SMID-cap operators. Today, HighPeak Energy, Inc. has more than 2,600 total drilling locations across the stacked Spraberry and Wolfcamp formations. At our current cadence of drilling, that includes more than 30 years of high-return inventory in the Wolfcamp A, Lower Spraberry, and Middle Spraberry alone, over 100 total rig-years of inventory across the full stack. This level of inventory depth meaningfully differentiates HighPeak Energy, Inc. from most of our peers. One point that we believe the market continues to underappreciate is the growing scarcity of tier one shale inventory across the Permian Basin. The industry has spent the last decade or so developing its best rock, and the reality is that premium locations are not infinite. As that inventory tightens across the basin, the strategic value of companies that still hold significant high-return drilling inventory will only increase. Our responsibility is to develop those locations with discipline, maximizing the long-term value for our shareholders. When we think about the value of this company, several key components stand out. First, our existing production base, a highly visible, reliable source of cash flow that underpins the business today; and at current valuation levels, HighPeak Energy, Inc. is trading close to the PV-10 proved-developed value. But the real long-term value lies with the untapped inventory. That inventory includes approximately 200 proved undeveloped locations in our core zones, more than 400 additional premium Wolfcamp A and Lower Spraberry locations, over 200 Middle Spraberry locations progressing toward the sub-$50 breakeven delineation, and further upside potential in the Wolfcamp B, C, and D zones. All of this is complemented by our continued focus on optimizing existing production, which enhances returns and strengthens the value of our asset base over time. In closing, our focus in 2026 is on returns and resilience, not headline growth. We will apply strict capital and operational discipline to protect the bottom line. We will prioritize free cash flow generation. Any incremental free cash flow will first be directed toward reducing leverage and strengthening the balance sheet, positioning us for a lower cost of capital over time. We will remain precise and selective in how we deploy capital, concentrating on high-return inventory, base production optimization, and disciplined delineation of additional premium locations. At our current development pace, our premium inventory alone represents decades of high-return drilling, even before accounting for the additional upside we can continue to delineate across our acreage. And as tier one shale inventory becomes increasingly scarce across the industry, the strategic value of remaining core drilling locations will only continue to rise. Ultimately, we are building a company designed to generate strong returns across commodity cycles, improve long-term NAV realization, and strengthen our equity value. And it all starts with reinforcing our financial foundation. Before I close, I want to recognize our employees. The progress we have discussed today is a direct result of their hard work, grit, and professionalism. Day after day, they show up, tackle challenges, and keep this company moving forward. Their commitment, both in the field and in the office, is the backbone of everything we are building. Again, I am deeply grateful for what they do. With my comments now complete, operator, please open the call up for questions. Operator: Thank you. Ladies and gentlemen, if you have a question or a comment at this time, please press *11 on your telephone. If your question has been answered and you wish to remove yourself from the queue, please press *11 again. Our first question comes from Noah Hungness with Bank of America. Your line is open. Noah Hungness: Yeah. I just wanted to start off here, Mike, if you could add any more color on some of your cost reduction and production optimization efforts that you have implemented over the last six months? Michael L. Hollis: You bet, Noah. Thank you for the question. Obviously, it is what we do every day, so it is not like this was an initiative started, you know, a quarter ago. But to kind of walk through some of the cost reductions that we have seen both on the capital side and on the expense side. We have done a lot of optimization on how we are drilling and completing these wells. Obviously, we get a little faster every day—drilling, a little faster completions. We have also optimized the completion chemical program, the perforation schemes, how we are landing these wells, as well as kind of structural changes to how we complete these wells like utilizing final frac today versus what we were doing in the first part of 2025. So there is a lot on the capital side being more. On the expense side, we are doing a lot of production base production optimization. So think lowering pumps, changing the type of artificial lift that we utilize, utilizing some chemical opportunities that we have for, you hate to say, restimulation, but being able to pump some things downhole that can increase production and, what—yeah—your return from the wells, as well as remove some of what they call skin damage that allows more of the fluid to flow into the well. So we have a program ongoing doing that. And overall, we have had lower commodity prices over the last couple quarters which, you know, again, not that we do not do this every day, but we constantly rebid, reevaluate, look structurally at what we are doing with our infrastructure, how we treat the wells chemically, and go out for bids very routinely. So we are seeing some cost savings on that front. Not just how we are drilling the wells, but just the unit pieces that go into it and staying on top of that and making sure we are getting the best price for HighPeak Energy, Inc. Noah Hungness: That is helpful. And then for my second question, could you maybe help us think about the split of TILs across your development area for 2026? So what does the split for, you know, Lower Spraberry versus Wolfcamp A versus Middle Spraberry look like? And then also, the different development areas that you have helped highlight this quarter, so, you know, North Borden versus your core Flat Top versus your core Signal—if you could just give us any color there. Michael L. Hollis: You bet. So the good news is what we are drilling for the foreseeable future will look almost identical to what we have done for the last year and a half. Right? It is about 70% of the capital will be spent in Flat Top, the northern block. And, again, that happens to be about the acreage split between the blocks, Flat Top and Signal Peak. So 30% give or take of the capital in Signal Peak. Think 90+% of that capital will be Wolfcamp A/Lower Spraberry co-development. The other 5% to 8% of capital will be Middle Spraberry, and some of the Middle Spraberrys will be co-developed with the Lower Spraberrys as well, but it will be in the Middle Spraberry, not in just the A and Lower Spraberry. Now the split between, you know, again, in the Northern Borden versus Flat Top Core—almost 50/50 for the Flat Top area. That 70% will be almost 50/50 between North Borden and Flat Top Central, I guess you would call it. One point to make is, as I said in the prepared remarks, we will not drill any wells like we did in 2025 in that little red box that is on slide 6 of our presentation; there will be no drilling in that area in 2026. Noah Hungness: And so you are TILing a few more wells than you are drilling this year. Can we assume that the percentages you talked about on the drills are going to be pretty similar to the TILs this year? Michael L. Hollis: Absolutely. Because it was basically the same percentage of drills last year. So those TILs go into 2026. And you make a great point. We are completing, you know, call it roughly seven more wells than we are drilling this year. We brought into 2026 something close to 20+ wells, called, you know, operational DUCs. And then if you kind of math out where we will be at the end of the year, we should carry out into 2027 roughly 14 to 15 DUCs, again setting us up very nicely in 2027 to be able to effectuate exactly the same plan that we have in 2026, again, for further strong reduction in absolute debt. Noah Hungness: That is helpful color. Thank you. Michael L. Hollis: Yes, sir. Thank you. Operator: One moment for our next question. Our next question comes from Jeff Robertson with WaterTower Research. Your line is open. Jeff Robertson: Thank you. Good morning. Mike, on slides 10 and 11, you show the production profile and CapEx and the capital intensity. Can you talk a little bit about where the company’s corporate decline curve was at the 2026 and where you think it might be at the ’26 end, and how that plays into the notion of increasing capital efficiency over time and delevering the balance sheet in ’26 and ’27? Michael L. Hollis: You bet, Jeff, and thank you for that question. I may step back a couple of years prior to that instead of starting just on, you know, ’25 and ’26. It is really important. Again, building a company from absolute greenfield all through the drill bit, and building up to close to 50,000 BOEs a day, we had to drill a lot of new wells with several rigs. So if you go all the way back to kind of the exit of 2024, corporate decline rate was, call it, mid-40%. So, again, pretty steep because you have a lot of new wells. At the end of 2025, we were down to about 38% corporate because, if you recall, we had slowed down at the, you know, kind of midpoint of ’24 and into ’25. We slowed way down. And then even midpoint of ’25, we went down to one rig. So as you look forward into 2026, of course, you came into the year right at 38%. At our current cadence and what we will continue to do for at least the foreseeable future, you can expect about 2% decline in corporate decline rate. So the 38% we came into the year with, we should exit the year into 2027 at, you know, 36% or so. And to your point, as your corporate decline goes down, the amount of CapEx needed for maintenance CapEx to hold your production flat also comes down by that kind of relation. Jeff Robertson: Does HighPeak Energy, Inc.’s amortization on the term loan start again in the third quarter? I think it is about $120 million a year. So if you were to be—if, let’s just say, over the next four quarters beginning this year, $120 million a year is roughly $1 a share, based on 125 million shares outstanding. Are you trying to position the company where you could accelerate the amortization of the term loan? Michael L. Hollis: Absolutely. So, Jeff, and the great thing is the amortization is a set rate, right? It is $30 million a quarter. The great thing about where we sit with the term loan is that we have the ability to pay down any amount on the term loan at par. So to your point, we can take any additional free cash flow that we are generating with this capital-efficient program in 2026, in the backdrop of commodity prices being higher today. And, you know, I think it is a little—literally me. Right? We are geared very heavily to oil price. And as you mentioned, where else could you find in the public world where you have such a high gearing to the debt level that we have? To your point, in this environment, we will be able to pay down debt at a much accelerated rate, and for every $125 million we pay down, as you absolutely said correct, it should be roughly $1 per share. And in today’s price environment, that is close to a 20% increase in market value. By doing exactly the same thing in the next year, you should have similar results except you pay down more debt and there is kind of a snowball effect because we do have a high cost of capital, call it 10+% interest, and it would be reasonable to assume that later down the road, once we get the financial house in order by staying very disciplined, we will have opportunities to hopefully lower that cost of capital going into the future. Jeff Robertson: Thanks. And so, lastly, on operations, Mike, is there anything structurally with respect to, say, water handling or anything else in the field that you are working on in 2026 that might offset some of the production optimization spending that you outlined? Michael L. Hollis: So, you know, the good thing is anything we do to optimize production increases the revenue that we have in, lowers all of the per-BOE metrics that we have. Now, on the water system, the great thing is the water system is there. It is paid for. It has been there for a while. We just utilize what we already have, which makes both on the capital side for recycled water for stimulations, as well as disposal of any of the produced fluids, very, very efficient. And when you look at the capital reduction or what we like to call the intensity of capital needed to produce a certain level of volumes of hydrocarbons, it continues to go down over the last couple years. If you go all the way back to 2023, HighPeak Energy, Inc. spent $1 billion. In 2025, it was, you know, call it $500 million. 2026, half that number. Now, I do not want anyone to think 2027 is going to be half of 2026. It will be slightly lower because we do have some infrastructure that we have planned and in the budget in 2026 that is not going to happen in 2027. So think $15–20 million cheaper total CapEx in ’27 to effectuate the exact plan that we have for ’26. The company will continue to get more efficient. And as you laid out earlier with the corporate decline dropping each year, that also helps accelerate that corporate efficiency. Operator: Thank you. Michael L. Hollis: Yes, sir. Thank you. Operator: Once again, ladies and gentlemen, if you have a question or a comment at this time, please press *11 on your telephone. And I am not showing any further—actually, one moment. We have a follow-up question from Jeff Robertson with WaterTower Research. Michael L. Hollis: Perfect. You ready for one? Jeff Robertson: One question that came up on the November conference call was the distribution of shares by the HighPeak entities. Is there any update you can provide on the planned distributions in 2026 and 2027? Michael L. Hollis: Yeah. Good morning, Jeff. Good question. When we rolled into the 2026 calendar year and oil prices were kind of in the mid to upper $50s at the time, we got with the majority investors in the partnership and ended up extending for an additional year, which will allow us to get into, hopefully, a healthier market environment for fund distribution timing. We do have the flexibility to do it throughout the calendar year, or we could kind of go all the way through 2026 and start the distribution in early 2027. Operator: Okay. Thank you. Jeff Robertson: You bet. Operator: And I am not showing any further questions at this time. As such, this does conclude today’s presentation. We thank you for your participation. You may now disconnect, and have a wonderful day.
Operator: Good morning, and welcome to CION Investment Corporation's Fourth Quarter and Year-End 2025 Earnings Conference Call. Our earnings press release was distributed earlier this morning before market opened. A copy of the release, along with the supplemental earnings presentation is available on the company's website at www.cionbdc.com in the Investor Resources section and should be reviewed in conjunction with the company's Form 10-K filed with the SEC. As a reminder, this conference call is being recorded for replay purposes. Please note that today's conference call may contain forward-looking statements, which are not guarantees of future performance or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of numbers of factors, including those described in the company's filings with the SEC. Joining me on today's call will be Michael Reisner, CION Investment Corporation's Co-Chief Executive Officer; Gregg Bresner, President and Chief Investment Officer; and Keith Franz, Chief Financial Officer. With that, I would like to turn the call over to Michael Reisner. Please go ahead, Michael. Michael Reisner: Thank you, and good morning, everyone. Before I address our quarterly results, I want to step back for a moment and highlight what I believe is the most important takeaway from this quarter. We believe that our core first lien portfolio which represents approximately 81% of our investments continues to perform well. Weighted average interest coverage across our portfolio increased quarter-over-quarter from 1.94x to 2.6x. And EBITDA growth in our portfolio companies primarily continues on a positive trajectory, and our risk rated 4 and 5 names held steady at approximately 2.4% of the portfolio at fair value. We added 1 new term loan to nonaccrual status during the quarter, Healthway. And overall, nonaccruals remained essentially flat compared to the prior quarter at 1.78% of the portfolio at fair value. I would also note that our software exposure stands at approximately 1.8% of the portfolio at fair value, a reflection of our long-standing and intentional decision to avoid that sector. For investors who have expressed concern about software concentrations in BDC portfolios broadly, we believe our positioning should provide meaningful comfort and Gregg will speak further to our sector discipline. Overall, we are not seeing the material cracks in private credit that the press has been eager to report. Now turning to our NAV. Our net asset value decreased 7.4% quarter-over-quarter the $13.76 down from $14.86 at the end of September. I want to stress that this decline was driven almost entirely by unrealized mark-to-market adjustments and a handful of equity positions, specifically, 4-wall entertainment, David's Bridal and Avison. These are unrealized marks, not realized credit losses. And as we have discussed on prior calls, our equity book can introduce meaningful quarter-to-quarter volatility into our NAV. We have always been transparent with the market about this potential volatility, and this quarter, this volatility caused our NAV to decline. We believe this potential volatility should be evaluated in the context of the portfolio, this core lending book is demonstrably healthy and whose equity positions retain long-term appreciation potential. Gregg will walk through each of these names in detail. I'm also pleased with our capital markets execution during and subsequent to the quarter. We raised $172.5 million in senior unsecured notes during the fourth quarter across 2027 and 2029 maturities. And subsequent to quarter end, we raised an additional $135 million in unsecured public baby bonds due in 2031, a combined $307.5 million in unsecured borrowings that further strengthens the flexibility and duration of our balance sheet. Keith will discuss both transactions in greater detail. but we believe that continued access to the unsecured debt markets at these levels reflects the confidence institutional investors have in our credit profile. We also repurchased approximately 556,000 shares during the quarter at an average price of $9.37 per share, which we continue to view as prudent and accretive use of our capital. Looking ahead, we continue to see a resilient underlying economy. While we are mindful of the ongoing geopolitical uncertainty, the underlying domestic economy continues to show resilience, and we believe conditions remain broadly supportive for our portfolio of companies for the remainder of 2026. Our portfolio companies, the vast majority of which serve business-to-business end markets in the U.S. middle market generally continue to perform in line with or better than our expectations. Despite the volume of cautionary commentary in the financial press around private credit, we are simply not seeing broad-based deterioration in our portfolio, and we remain confident in the durability of our first lien focused strategy for the remainder of the year. With that, now I'll turn the call over to Gregg to discuss our portfolio and investment activity during the quarter. Gregg Bresner: Thank you, Michael, and good morning, everyone. Prior to covering our investment and portfolio activity for Q4, I would like to expand on Michael's comments regarding our nominal level of software exposure within the portfolio. We ended the quarter with 3 software portfolio companies totaling 1.8% of portfolio fair value or 2% on an amortized cost basis. All 3 of these software companies were underwritten on a performing positive EBITDA basis with a weighted average net tranche level of approximately 4.4x EBITDA at closing. We have no ARR loans in the portfolio. As a firm, we have historically not invested in software as we were unwilling to lend against an ARR growth methodology with negative EBITDA profile at closing. We view the ARR software profile more as a venture-oriented investment with equity-like risk that require return levels well in excess of the yields typically offered on first-lien debt investments. In terms of our Q4 investment activity, we remain highly selective with new portfolio investments, and we're focused on transactions within our portfolio of companies. We also were effectively at full investment during most of the quarter and work to balance the timing of expected investment pipeline investments versus repayment amounts while maintaining our targeted net leverage range. Overall, we had fewer exiting repayments for the quarter versus our Q3 level as certain repayments drifted into Q1 of 2026. During the quarter, we passed on a historically higher percentage of potential investments in new portfolio companies based on credit and pricing considerations. While secondary credit market conditions were choppy in Q4 due to speculation regarding tariffs and interest rate policies, the government shutdown and market concerns regarding potential cracks in private credit, there remained a significant bifurcation for the new issue market. New issue pricing continued to be driven by the hangover of record 2024 private debt fundraising, which translated into lower coupon spreads, higher leverage levels and looser credit documents in the market. We focused our Q4 activities on incremental opportunities with our portfolio companies. We believe our continued investment selectivity and proportional deployment levels help us to invest in first lien loans at higher spreads when compared to the overall private and public loan markets. The weighted average yield for our new direct first lien investments for the quarter based on our investment cost was the equivalent of SOFR plus 6.43%. As we discussed in previous quarters, the majority of our annual PIK income is strategically derived from either highly structured first lien investments where our PIK income is incremental to our cash coupon. Together, these categories represented approximately 75% of our total PIK investments in Q4. Approximately 73% of our PIK investments are on portfolio companies risk rated either 1 or 2 and 99%, risk-rated 3 or better. As a result, we believe this PIK income does not compare to restructured PIK driven by a deterioration in credit. Turning now to our Q4 investment and portfolio activity. Our Q4 investment activity consisted of a co-lead investment in 1 new portfolio company, strained dental management and incremental add-on investments and secondary purchases in existing portfolio companies, including adaptive laser, American Clinical, Averson Young, BDS Solutions, Carestream Health, Coin Mark, David's Bridal, Statin Med and Work Genius. We additionally refinanced the first lien debt of SleepCo Brooklyn Bedding and Camden with our initial club partners. During Q4, we made a total of approximately $76 million in investment commitments across 1 new and 14 existing portfolio companies, of which $66 million was funded. We also funded a total of $12 million of previously unfunded commitments. We had sales and repayments totaling $79 million for the quarter, which consisted of the full repayment of the first lien term loans for MOS Holding and NorthStar travel. As a result of all these activities, our net funded investments decreased by approximately $1 million during the quarter. As Michael referenced, our NAV decrease during the quarter was driven primarily by declines in the unrealized mark-to-market value of our equity portfolio that was concentrated within a subset of equity investments, including, 4-wall Entertainment, David's Bridal and Avison Young. The common theme among these names is what we internally refer to as the COVID elongation cycle as each of these names were significantly impacted by both COVID and the labor market inflation and interest rate shocks, which sequentially followed, which resulted in the restructuring or recapitalization of balance sheet to rebuild the platforms. The reduction in the equity mark of Juice Plus was driven by a reduction in trailing quarterly revenue performance against its fixed cost base as the company worked to complete its restructuring in the third quarter. With its recapitalized balance sheet in Q4, the company immediately pivoted to operational initiatives and investments to transform its product offerings and sales infrastructure to optimize its go-to-market strategy that is more in line with consumer health and wellness trends and spend. The company has been executing on product development, sales management and information technology initiatives to reposition for growth and profit improvement over the medium term. The market value of our equity investment in Entertainment was negatively impacted by reduced trailing EBITDA performance driven primarily by industry factors, including reduced live event activities from cancellations and lower TV and film production as the sector rebuilds pipelines from the writer strut that delayed the release queue of new scripts and production content. The company successfully restructured its balance sheet in the summer of 2025 and repositioned its sales, business development and CapEx to focus on an expected rebound in both event and production activities. The company is expecting significant EBITDA improvement in 2026 and has already secured a number of high-profile event wins for 2026. As we have mentioned on previous quarterly calls, we expect to see significant quarter-to-quarter volatility in the marks of David's Bridal equity due to the larger overall relative size of our investment as well as the highly seasonal nature of the company's operations and working capital profile. The decline in the Q4 marked primarily reflects the typical seasonal increase in debt as the company builds inventory ahead of the critical bridal season, which historically begins in mid-January. In addition, we invested incremental capital to accelerate the company's growth of its Pearl segment which is a high-growth, higher-margin digital marketplace platform that expands the company's market participation beyond the $5 billion wedding dress segment in the broader $65-plus billion wedding services industry. The Q4 equity marks in Avison Young were negatively impacted by incremental debt raised in Q4 at the top of the capital structure to support the company's investments in sales and other infrastructure in advance of the expected increase in commercial real estate activity in 2026 and 2027. This incremental increase in the quantum of debt negatively impacted the value of Averson equity tranches. CION participated in the latest debt round, it continues to believe this company is well positioned for the expected rebound in commercial real estate. Our investments in Juice Plus, David's Bridal and Avison Young are representative of our opportunistic first lien investment strategy where we acquire either restructured or lightly syndicated first lien loan tranches in quality companies at a discount to par due to technical reasons where we expect to have active roles in the processes that drive the recovery and realization of the investments. Historically, we have been able to realize healthy earnings on our first lien restructured or recapitalized transactions. Illustrative examples include our investments in Longview Power, YacMat, Heritage Power and Dayton Superior. We also had a number of portfolio companies where the equity marks increased for the quarter due to strong financial performance and our projected outlook, including Longview Power, Palmetto Solar and play boeing. From a portfolio credit perspective, our nonaccruals increased slightly from 1.75% of fair value in Q3 to 1.78% in the fourth quarter. This increase was from the addition of 1 new name to nonaccrual, our term loan investment in HW acquisition or Healthway. Healthway initiated a primary revolver raise in the fourth quarter that ultimately funded in early 2026 and contained a substantial lower component that effectively shifted value from the term loan to the revolver tranche. While CION participated in the revolver upsize and ultimately benefit on a total position value basis, from the incremental accretion in the revolver tranche versus our pro rata ownership of the term loan, the shift in value resulted in nonaccrual status for our term loan holding. On an absolute basis, nonaccruals continue to be in line with historical experience, and we are pleased with the continued credit performance of our portfolio, particularly in the current environment. Overall, our portfolio remains defensive in nature with approximately 81% in first lien investments. Approximately 98% of our portfolio remains risk rated 3 or better. Our risk-weighted 3 investments, which are investments where we expect full repayment, but are either spending more engagement time and/or I've seen increased risk to the initial asset purchase increased from approximately 10.4% in the third quarter to 11.5% in Q4. I'll now turn the call over to Keith. Keith Franz: Okay. Thank you, Gregg, and good morning, everyone. During the fourth quarter, net investment income was $18.3 million or $0.35 per share compared to $38.6 million or $0.74 per share reported in the third quarter. Total investment income was $53.8 million during the fourth quarter as compared to $78.7 million reported during the third quarter. The decrease in total investment income was driven primarily by lower interest income earned on our investments, as a result of certain investments being restructured in the prior quarter and other yield-enhancing prepayment fees and accelerated OID that did not reoccur this quarter. We also had lower transaction fees earned from origination and restructuring activities when compared to the prior quarter, which was slightly offset by an increase in dividend income received from 1 of our investments during the fourth quarter. On the expense side, total operating expenses were $35.5 million compared to $40.1 million reported in the third quarter. The decrease in operating expenses was primarily driven by lower advisory fees due to lower investment income earned during the quarter. At December 31, we had total assets of approximately $1.9 billion and total equity or net assets of $708 million with total debt outstanding of $1.1 billion and 51.4 million shares outstanding. Our portfolio at fair value ended the quarter at $1.7 billion, and the weighted average yield on our debt and other income-producing investments at amortized cost was 10.7%, which is slightly down from 10.9% in the third quarter. At December 31, our NAV was $13.76 per share as compared to $14.86 per share at the end of September. The decrease of $1.10 per share or 7.4% was primarily due to unrealized mark-to-market price decreases in our portfolio, mostly from price declines in our equity book, which was slightly offset by the creative nature of our share repurchase program during the quarter. We ended the fourth quarter with a strong and flexible balance sheet with over $1 billion in unencumbered assets, a strong debt servicing capacity with an interest coverage ratio of over 2x and solid liquidity. We had over $120 million in cash and short-term investments and another $100 million available under our credit facilities to further finance our investment pipeline and continue to support our existing portfolio companies. In terms of our debt capital. At December 31, we continue to have a healthy debt mix with about 65% in unsecured and 35% in senior secured. About 70% of our debt is in floating rate, which aligns well and creates a natural hedge with our mostly floating rate investment portfolio. A well-diversified debt structure is focused on unsecured debt in order to maximize our balance sheet flexibility and at the same time, creates a strong buffer for our financial covenants. At the end of the quarter, our net debt-to-equity ratio increased to 1.44x from 1.28x at the end of September, and the weighted average cost of our debt capital was about 7.35%, which is slightly down from the third quarter due to lower SOFA base rates quarter-over-quarter. The increase in the net leverage ratio was impacted primarily by the quarterly decrease in NAV and an increase in the average debt outstanding during the quarter. During the quarter, total debt increased by $48 million due to the timing of paying down our senior secured debt with a portion of the net proceeds raised from the unsecured debt offering in December. During the quarter, we issued $172.5 million of senior unsecured notes from certain institutional investors, consisting of $125 million in senior unsecured notes with a fixed interest rate of 7.7% due 2029 and $47.5 million in senior unsecured notes with a fixed interest rate of 7.41% due 2027. Subsequent to year-end, on February 9, we completed a public baby bond offering, issuing $135 million of new senior unsecured notes with a fixed interest rate of 7.5% due 2031, which listed and commenced trading on the New York Stock Exchange on its ticket symbol, CICC on February 12. The net proceeds from these offerings were used to fully repay our $125 million in senior unsecured notes due 2026 that matured in February, and the remaining net proceeds will be used to further reduce our outstanding senior secured bank debt. Now turning to distributions. During the fourth quarter, we paid a base distribution to our shareholders of $0.36 per share, which is the same as the third quarter base distribution. For the full year in 2025 we declared and paid total distributions of $1.44 per share, all of which was from our quarterly base distributions. As a result, the trailing 12-month distribution yield through the fourth quarter based on the average NAV was about 9.9% and the trailing 12-month distribution yield based on the quarter end market price was 14.9%. As previously announced, we changed the timing of paying base distributions to our shareholders from quarterly to monthly beginning in January 2026 to better align with our shareholder expectations. And as announced this morning, we declared our second quarter base distribution of $0.30 per share, which is the same as the first quarter. The second quarter base distribution will be paid monthly in April, May and June at $0.10 per share per month. Okay. With that, I will now turn the call back to the operator, who will open the line for questions. Operator: [Operator Instructions] And the first question comes from the line of Erik Zwick with Lucid Capital Markets. Erik Zwick: I wanted to start with a question on leverage. And you noted that, that was up in the quarter, and some of that was driven by the fair value marks in the equity portfolio, but it's run fairly above kind of where you've run in the past. So just curious on your thoughts for the appropriate level of leverage today and how you plan to kind of manage that over the next year or so? Keith Franz: Eric, it's Keith. Yes. So in terms of the elevated leverage, I think the way that we're looking at it is over the next few quarters, some organic growth in the NAV positions may help -- but ultimately, we expect to use some of the scheduled on scheduled repayment activity we typically receive to delever. . Erik Zwick: That's helpful. And -- next question, just on PIK income. I think you've previously indicated the desire to reduce the contribution from income. Looking at the results in 2025 that was up on both absolute dollar terms as well as a percentage of total investment income. So First, just wondering, could you provide a split of kind of tick by design versus restructured PIK? And do you still have plans to kind of aim to reduce that overall contribution? . Gregg Bresner: Eric, it's Gregg. From your characterization, we -- as we do this about 75% of our PIK is by design where it's either incremental cash interest or we structured it intentionally that way on a deal basis. So it's about 75% based on those classifications. With respect to going forward, our PIK is concentrated in a few names that we do expect to refinance over the next 12 to 18 months. So we do expect that number organically to come down significantly as those deals repay. . Erik Zwick: I appreciate the update there. Last one for me. In the press release, you noted that the weighted average interest coverage for the portfolio increased quarter-over-quarter from 1.9 to if I round, which is nice to see. I'm curious if that was primarily a reflection of just lower interest rates flowing through the portfolio or if you're also seeing some improvement in EBITDA as well. Gregg Bresner: It's a combination of both. It's a combination of increased EBITDA as well as the reduction in base rates. So it's -- the base rate is obviously more about, but we did see EBITDA growth over the quarter. . Operator: This concludes the Q&A session. I'd like to turn the call back over to Michael Reisner for closing remarks. . Michael Reisner: Great. Well, I want to thank everybody for tuning in today, and we'll be back to you in a couple of months with our Q1 results. Take care, everybody. . Operator: Thank you. This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.
Operator: Greetings, and welcome to the ProFrac Holding Corp. Fourth Quarter and Full Year 2025 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Michael Messina, SVP of Finance. Thank you. You may begin. Michael Messina: Thank you, operator. Good morning, everyone. We appreciate you joining us for ProFrac Holding Corp. conference call and webcast to review our results of the fourth quarter and year ended 12/31/2025. With me today are Matt Wilks, Executive Chairman, Ladd Wilks, Chief Executive Officer, and Austin Harbour, Chief Financial Officer. Following my remarks, management will provide high-level commentary on the operational and financial highlights of the fourth quarter and full year 2025 before opening up the call to your questions. A replay of today's call will be made available via webcast on the company's website at pfholdingscorp.com. You want to know more information on how to access the replay is included in the company's earnings release. Please note that the information reported on this call speaks only as of today, Thursday, March. You are advised that any time-sensitive information may no longer be accurate as of the time on any replay listening or transcript reading. Also, comments on this call may contain forward-looking statements within the meaning of the United States Federal Securities Laws, including management's expectations of future financial and business performance. These forward-looking statements reflect the current views of ProFrac Holding Corp. management and are not guarantees of future performance. Various risks, uncertainties, and contingencies could cause actual results, performance, or achievements to differ materially from those expressed in management's forward-looking statements. The listener or reader is encouraged to read ProFrac Holding Corp.'s Form 10-K and other filings with the Securities and Exchange Commission which can be found at sec.gov or on the company's investor relations website section under the SEC filings tab to better understand those risks, uncertainties, and contingencies. The comments today also include certain non-GAAP financial measures, as well as other adjusted figures to exclude the contribution of Flotek. Additional details and reconciliations to the most directly comparable consolidated and GAAP financial measures are included in the earnings press release which can be found on the company's website. I will now turn the call over to Matthew D. Wilks. Matthew D. Wilks: Thank you, Michael. I will kick off with some high-level remarks about our recent performance, market outlook, and strategic initiatives. Ladd will expand on the performance of our businesses, and finally, Austin will discuss our financial performance. Our results in the fourth quarter improved from Q3 with total adjusted EBITDA increasing 49% on an improvement across our two largest segments: stimulation services and proppant production. This performance was driven by better-than-anticipated activity levels, strong operational execution with optimized uptime, and the early benefits of our cost and capital management initiatives. Notably, our proppant production segment delivered exceptional results, benefiting from increased volumes and improved logistics efficiency that helped us maintain strong margins. Ladd will elaborate on this in a few minutes. Looking at 2025 as a whole, the year presented a challenging backdrop for the completions industry. Tariff-driven economic uncertainty and OPEC's decision to increase supply in early April rattled commodity prices and prompted widespread operator deferrals of near-term activity. Throughout the summer and early fall, operators remained cautious as they balanced hedge books, return commitments, and commodity exposure against continued commodity volatility and broader economic and geopolitical uncertainty. Against this backdrop, the market ebbed and flowed at relatively subdued activity levels. What enabled us to navigate 2025 effectively and emerge well-positioned for 2026 was the fundamental strength of our business model. Throughout the year, our vertical integration and asset management platform were instrumental, providing the operational flexibility and cost advantages that differentiate our performance during difficult market conditions. However, this is not just about weathering downturns; it is about having the structural advantages that allow us to compete more effectively across cycles. The recent conflict in the Middle East resulting in disruptions to tanker flows through the Strait of Hormuz, in addition to the damage to Gulf energy infrastructure, are likely to continue to have a meaningful impact not only on near term, but also potentially on medium term physical supply and demand balances. The severity and duration of these factors remains fluid; however, if disruptions prove lasting, the path to sustainably higher oil prices may crystallize. The conflict in the Middle East is playing out against the backdrop where the setup in North America for onshore activity remains compelling. As we have noted for several quarters, activity has been running below levels needed to sustain flat shale production, and we expect that gap to close as operators accelerate activity to combat natural decline. On the gas side, expanding LNG capacity and rising power demand continue to support a favorable outlook. Layered on top of that, we believe capital discipline across the hydraulic fracturing industry combined with ongoing equipment attrition and restrained new additions sets the stage for supply-demand tightening as activity picks up. Any sustained disruption to Arabian Gulf supply could be the catalyst that pulls the timeline forward. When that acceleration comes, we believe ProFrac Holding Corp. is well positioned to benefit. Some of the same attributes mentioned earlier, including vertical integration and how we manage our asset base, as well as our position in dual fuel and electric technologies, are what keep us squarely where operator demand is highest and position us to move decisively as the cycle turns. Turning to the first quarter for a few moments, we experienced a significant weather impact in January that created near-term operational challenges. Winter storms affected our operating regions during a period when operators were also taking a measured approach to activity amid broader macro uncertainty. However, momentum has been building as we moved through the quarter, which has been encouraging. Our calendar has tightened, activity levels have improved, and with oil prices recovering since the start of the year, operators' sentiment has strengthened. Key to being well positioned for the dynamics we have seen this for several quarters is the work we have done internally to strengthen our cost structure. On our November call, we introduced a business optimization plan targeting annualized savings of $100,000,000 at the midpoint by the end of 2026. This consists of $35,000,000 to $45,000,000 in labor-related COGS and SG&A reductions, $30,000,000 to $40,000,000 in non-labor operating expenses, and $20,000,000 to $30,000,000 in capital expenditure efficiency. We are pleased to report strong progress across all three components of this program. On capital expenditure efficiency, we have already achieved at a minimum the midpoint of our targeted range and expect to be at the higher end of the $20,000,000 to $30,000,000 target. The early benefits of these capital savings were visible in our fourth quarter results, where we delivered a significant beat on net capital expenditures in frac. Austin will provide more detail on what this progress means for our 2026 capital expenditure outlook in a few moments. On labor-related savings, we have fully implemented the cost reduction measures such that we are currently running at an annualized savings rate that positions us at or above the midpoint of our $35,000,000 to $45,000,000 target range. For non-labor operating expenses, we have achieved approximately one-third of the targeted savings on an annualized basis, primarily from fully implemented SG&A reductions. The larger component of this category related to repair and maintenance and asset-level operating expenses remains in earlier stages of implementation and should accelerate as we move through the year. We continue to expect to achieve the full $30,000,000 to $40,000,000 range as these initiatives mature through the second quarter. Taken together, we believe these actions meaningfully improve our cost structure and position ProFrac Holding Corp. to generate stronger returns as market conditions improve. Alongside those efforts, technology differentiation remains a key focus. Let me take a few minutes to walk through our latest technology initiatives, which I believe represent a meaningful and underappreciated part of the ProFrac Holding Corp. value proposition. When we announced our strategic partnership with Seismos back in August, we talked about bringing closed-loop fracturing to the industry, combining ProPilot surface automation with Seismos’ subsurface intelligence to enable real-time optimization during active pumping. The partnership has been performing as we envisioned, and we believe recent field trials have validated the approach. But as we deployed this technology and collaborated with our customers, it became clear the closed-loop control was just one piece of a larger opportunity. Today, I want to discuss Makena, our complete well optimization suite, that we believe takes everything we built with Seismos and ProPilot and extends it into a unified platform that spans the entire completion life cycle. Makena integrates treatment design, real-time measurement, mid-stage intervention, frac hit detection, live pad-level tracking, historical analytics, supply chain optimization, and water quality analysis into a single continuous architecture. Central to Makena’s architecture is a new generation of AI engineering agents that we think of as digital employees embedded directly into the workflow. These agents monitor, interpret, and act continuously across the completion life cycle. Challenges that historically required physical intervention, mechanical testing, or brute force diagnostic runs can now be identified and resolved through a software update. What makes Makena particularly powerful is how it builds on ProPilot 2.0’s foundation. ProPilot served as both a cost optimization tool and an execution precision enabler designed to reduce labor requirements and maintenance expenses while delivering the coordinated pump control and millisecond-level response time that makes closed-loop fracturing possible. Without ProPilot’s execution stability and predictive maintenance capabilities, we could not achieve the rapid, repeatable actuation that Makena requires to translate subsurface intelligence into immediate operational adjustments. Design assumptions now flow directly into execution monitoring. Intervention decisions, designed by our customer, are interpreted algorithmically and executed immediately through ProPilot. Subsurface response is validated in real time, and all of that learning feeds back into future design optimization. What we believe is that this is not only about making one stage better; it is about creating a continuous improvement engine that potentially improves perforations in every stage, every pad, and every program. Ladd will walk through how this works operationally and what we have experienced to date. In summary, we closed 2025 with momentum. Q4 EBITDA was up 49% sequentially, demonstrating the strengths of the business model and cost initiatives, and positioning us to capitalize when the market inflects. Weather headwinds early in the quarter have given way to strengthening fundamentals. While Q1 began with operational challenges, our calendar has tightened with activity accelerating. Our $100,000,000 cost optimization program is ahead of schedule. Labor savings have been fully implemented, CapEx efficiency is tracking to the high end of target, and non-labor reductions are progressing. Makena represents the next evolution in completion technology. By unifying ProPilot’s surface automation with subsurface intelligence into a complete optimization platform, we are not just improving individual stages; we are building a continuous improvement engine. With that, I will turn it over to Ladd, who will provide more detail on our segment performance. Ladd Wilks: Thanks, Matt, and good morning, all. Building on what Matt covered, let us start with stimulation services. As we mentioned on our November call, we were encouraged by signs of stability in the first several weeks of Q4. As noted, deferred September activity returned to the calendar in October, and we successfully kicked off a multi-fleet contract with a large operator early in the quarter. Activity was much more consistent in Q4 relative to our expectations. On fleet utilization and pricing, we maintained a consistent fleet count in the low 20s throughout the fourth quarter into Q1. More importantly, we saw improved utilization and operational efficiency across our active fleets, and pricing remained relatively stable quarter over quarter. What I would emphasize is the meaningful impact our cost and capital savings initiatives had on our margin performance in the fourth quarter. We began to see the early benefits of these programs flow through our results, which was a key driver of our strong adjusted EBITDA performance and contributed significantly to our ability to deliver improved margins. In that reference, January presented weather-related headwinds that impacted operations across both our stimulation and proppant businesses. The winter conditions created operational disruptions that we estimate have resulted in approximately $8,000,000 to $12,000,000 of adjusted EBITDA impact in the quarter, more heavily weighted towards stimulation services. That said, since weather conditions improved, our calendar has tightened and activity has picked up. While we expect Q1 results will be softer than our strong fourth quarter performance, primarily due to the January disruption, the operational momentum we are experiencing positions us well heading into the second quarter. Now turning to proppant services. Matt referenced the strength of Alpine Silica's performance in the fourth quarter. After some challenges in Q3, revenues in the segment stepped up approximately 50% and segment adjusted EBITDA doubled in Q4. We delivered strong operational execution throughout the period with volumes reaching over 2,000,000 tons. Q4 benefited from solid demand across our key markets. Coupled with exceptional operational performance and high uptime, we were able to maximize our production efficiency and cost absorption. From a geographic perspective, West Texas remained a significant contributor to our overall mix, along with continued gains in South Texas. Our cost control initiatives, especially on the logistics side, were a key driver of our ability to maintain strong margins and drive improved profitability in the quarter. In Q1, we expect volumes to be down quarter over quarter. Weather disruptions in January, combined with some operational challenges that impacted production levels, created headwinds after the strong execution we saw in Q4. Customer demand remains solid and as conditions normalize, we are focused on returning to the operational performance that drove our fourth quarter results. Looking ahead, we continue to see momentum building in the Haynesville, where we secured significant customer wins on both the frac and sand side. We expect activity in this basin to continue increasing as we move through 2026, further diversifying our revenue base. Now let me circle back to the technology discussion Matt introduced and get specific about what Makena does on location. The closed-loop module remains our core real-time optimization capability, using acoustic friction analysis to detect perforation efficiency issues and prescribe immediate interventions that ProPilot executes with millisecond-level response. Makena is designed to extend this by integrating a broad operational context into a unified decision engine. Treatment design flows directly into execution monitoring. Intervention decisions are made algorithmically and executed immediately through ProPilot’s precision control. Subsurface response is validated in real time, and all of that learning feeds back into future design optimization. This integration of frac hit indicators, water quality data, supply chain optimization, and fleet health monitoring can create a continuous improvement engine. We believe field results demonstrate the impact. Closed-loop intervention reduced cumulative perforation efficiency degradation by 33% compared to untreated stages. More importantly, every stage adds to our historical database, potentially improving design refinement across entire programs. With that overview of our operational performance and technology progress, I will turn it over to Austin to walk through our financial results in detail. Austin Harbour: Thanks, Ladd. In the fourth quarter, revenues were $437,000,000 compared with $403,000,000 in the third quarter. We generated $61,000,000 of adjusted EBITDA with an adjusted EBITDA margin of 14% compared with $41,000,000 in the third quarter, or 10% of revenue. For the full year 2025, revenues were $1,940,000,000 with adjusted EBITDA of $310,000,000 and an adjusted EBITDA margin of 16%. Free cash flow was $14,000,000 in the fourth quarter, negative $29,000,000 in the third quarter. For the full year 2025, free cash flow was $25,000,000. As Matt outlined, we have been executing on our business optimization targeting $85,000,000 to $115,000,000 of annualized savings and have made strong progress. Within the fourth quarter specifically, we estimate the combined cash impact of labor, non-labor, and capital expenditure savings was approximately $45,000,000, with labor savings accounting for roughly $10,000,000, non-labor approximately $10,000,000, and the remaining $25,000,000 from CapEx savings. Of note, labor and non-labor savings were executed throughout the quarter. As a result, our progress on these initiatives does not reflect the full potential quarterly impact. Turning to our segments, stimulation services revenues were $384,000,000 in the fourth quarter and improved from $343,000,000 in the third quarter. Adjusted EBITDA in Q4 was $33,000,000 above the $20,000,000 we reported in Q3, with margins increasing to 8.7% versus 5.7% in Q3. The improvement was driven by our more consistent activity levels, better fleet utilization, and early benefits from our cost savings initiatives. For the full year 2025, stimulation services revenues were $1,680,000,000 with adjusted EBITDA of $209,000,000 and an adjusted EBITDA margin of 12.4%. Our proppant production segment generated $115,000,000 of revenue in the fourth quarter, materially higher than the $76,000,000 of revenue we reported in the third quarter. Approximately 43% of volumes were sold to third-party customers during the fourth quarter, versus 39% in Q3. Adjusted EBITDA for the proppant production segment was $16,000,000 for the fourth quarter, which was two times the $8,000,000 we delivered in Q3. On a margin basis, EBITDA margins increased to 14% in the fourth quarter versus 10.5% in Q3. Strong segment performance reflected approximately 2,000,000 tons of volume, high equipment uptime, and effective logistics optimization, particularly in West Texas and South Texas markets. As Ladd touched on, for full year 2025, proppant production revenues were $336,000,000 with adjusted EBITDA of $57,000,000 and an adjusted EBITDA margin of 17%. Our manufacturing segment generated fourth quarter revenues of $43,000,000 versus $48,000,000 in the third quarter. Approximately 18% of segment revenues were generated from third-party sales, consistent with Q3. Adjusted EBITDA for the manufacturing segment was $4,000,000 in line with Q3. For full year 2025, manufacturing segment revenues were $212,000,000 with adjusted EBITDA of $19,000,000 and an adjusted EBITDA margin of 8.7%. Selling, general and administrative expenses were $43,000,000 in the fourth quarter, in line with the third quarter. We expect to see continued improvement in SG&A as we execute on our cost savings initiatives. Turning to the cash flow statement. Cash capital expenditures were $37,000,000 in the fourth quarter, down slightly from $38,000,000 in the third quarter. For the full year 2025, CapEx totaled $170,000,000, a material improvement from 2024’s $255,000,000 in CapEx. As Matt discussed earlier, the progress we have made on capital expenditure efficiency has been one of the most encouraging outcomes of our business optimization program. The discipline and execution our teams demonstrated in 2025 gives us confidence in our ability to continue to execute as we move through 2026. To that end, we expect total capital expenditures in 2026, including Flotek spend, to be in the range of $155,000,000 to $185,000,000. Excluding Flotek, we expect our CapEx to be in the range of $145,000,000 to $175,000,000, split between maintenance-related and growth-oriented investments. This guidance reflects our continued commitment to capital discipline while ensuring we maintain our competitive positioning, equipment reliability standards, and the flexibility to capitalize on market opportunities as conditions improve. Turning to cash. Total cash and cash equivalents as of 12/31/2025 were approximately $23,000,000, including approximately $6,000,000 attributable to Flotek. Total liquidity at year-end 2025 was approximately $152,000,000, including $135,000,000 available under the ABL. Borrowings under the ABL credit facility ended the year at $69,000,000, a $91,000,000 reduction from September 30. At year-end, we had approximately $1,050,000,000 of principal debt outstanding, with the majority not due until 2029. We repaid approximately $136,000,000 of long-term debt in 2025. As background, recall that in June, we executed a series of transactions to provide incremental liquidity through 2025, including an initial $20,000,000 issuance of additional 2029 senior notes and commitments for additional tranches at our discretion. We completed the remaining $40,000,000 of that program in December. As discussed on our November earnings call, we also monetized the $40,000,000 Flotek seller note early in the quarter, selling it to a Wilks affiliate at par. Lastly, in Q4, we amended the Alpine term loan to reduce quarterly amortization payments from $15,000,000 to $7,500,000 for 2026 and deferred leverage ratio testing by one year to March 2028. Subsequent to year-end, we closed on an additional $25,000,000 issuance of 2029 senior notes to B. Riley in January, building on the senior notes program we completed in December and further strengthening our liquidity heading into 2026. In addition, earlier this month, we extended the maturity of our senior unsecured revolving credit facility by six months to September 2027, providing further flexibility in our capital structure. The facility now has a capacity of $275,000,000. As we look ahead, we remain disciplined and opportunistic in how we manage our balance sheet, and we will continue to evaluate ways to further strengthen our liquidity and flexibility as market conditions evolve. That concludes our prepared comments. Michael Messina: Operator, let us open up to Q&A. Operator: Thank you. And at this time, we will conduct the question and answer session. Your first question comes from John Daniel with Daniel Energy Partners. Please state your question. John Daniel: Matt, Ladd, I was hoping you could provide a little bit more color on the new technology. Is it software that gets installed in the data van? How does it get rolled out? And what will be the sales cycle in terms of educating customers on what it can do? And how long is your expectation for that education process? Matthew D. Wilks: Definitely. So it is installed on every fleet and ProPilot is our frac automation. It is on every single fleet; it is in the data van. And then Makena is the customer-facing software for well optimization. It allows the customer to pull in real-time data from offsetting wells as well as data from the same well, same stage, and to write rules on how the equipment should respond to that data. So we are extremely excited about this. A great way to think about it is what we are seeing across the entire industry is that operators are only getting about two-thirds of the perfs open on each well. So if there are 15,000 perfs, they are only getting about 10,000 of them actually open. And so our technology allows us to go in, recognize that in real time, respond to it, and initiate what we call interventions to increase the number of open perfs. We cannot improve the resource. We cannot change the rock. But we can open more perfs. We have been able to see where we can open as much as 1,500 extra perfs on a well. Where your D&C cost is $12,000,000 and you are only getting 10,000 perfs open, you are spending $1,200 per open perf. So if we can open an extra 1,500 or 2,000 perfs, that is creating anywhere from $1,800,000 to $2,400,000 of D&C costs that would otherwise have been left behind on each well. John Daniel: Okay. I am curious, and if you said this in the release, I apologize for missing it, but when you have tested this with your customers, did they share with you what the production uplift might have been through the technology? Matthew D. Wilks: You know, it is too early to tell, and it is a slippery slope for us to get into promising well results or an increase in production. Ultimately, it comes to whether or not these perfs are open or closed. If that perf is closed, we are not getting hydrocarbons out of it. But if I can open these additional perfs, that is a better way for us to measure our success and it also has a quicker time cycle. For us to see enough production and work with an operator to get enough data, we would be looking at just one well anywhere from six to nine months before we really get the appropriate feedback. But then we get into the complicated process of trying to establish how much of that production, what were the changes, what other items were going on at the same time, and what is directly attributable to our technology. But just keeping it simple and focusing on whether or not these perfs are open is the best unit of measure and way to establish progress. John Daniel: Okay. And then, I guess, one final one. Not looking for a specific number here, Matt. Q1 down relative to Q4, but just given the cost that you are pulling out, sort of the run rate right now in March, I am assuming Q2 is probably better than Q4? Is that the would be that big gut feel? Matthew D. Wilks: That is a fair assumption. John Daniel: Okay. Thank you. Thank you. Operator: Your next question comes from Saurabh Pant with Bank of America. Please state your question. Saurabh Pant: Hey, good morning, Matt, Ladd, and Austin. Matthew D. Wilks: Morning. Morning. Saurabh Pant: Matt, I know you alluded to some of this in your prepared remarks. What is going on in the Middle East on the margin, I am assuming it does help the U.S. land market a little bit, and I know you were talking about improving operator sentiment. Are you getting more phone calls? Are there more conversations? I know it is too early for anything to show up on the ground, but are you having more discussions? And just along those lines, theoretically, if there is a call on equipment, I know you said you have low-20 frac fleets out there. How easily can you bring more fleets out? And how should we think about any potential CapEx that you would need to spend on bringing fleets out? Matthew D. Wilks: Yes. It is an exercise that we continue to run through. I think things are happening pretty fast over in the Middle East, and what we are looking at is how much of this disruption is temporary from just the strait being closed compared to structural supply and demand imbalances on a go-forward basis from these attacks on infrastructure. Then there is also the possibility of artificial demand as national security interest for each state is reassessed, and we are likely to see some increased reserves on a go-forward basis that should be very constructive for the supply and demand balance. As far as the onshore market here, we are fielding a lot of calls. There are a lot of conversations going on. So far, most of it is centered around DUCs being pulled forward, as well as more robust dense calendars associated with existing activity. It is too early to tell whether this is going to result in a material increase in rig count, but we are watching it very closely and it is interesting to see how our customers are responding and behaving in real time. Hopefully, we will have more to talk about in the near future. Probably the biggest impact regardless of a call on more horsepower and activity is diesel prices have shot through the roof. In some instances, the daily quote has essentially doubled from where it was just a few weeks ago. That is creating a lot of opportunity for us to be better partners with our customers. Where we see customers that typically run all-diesel fleets, the fuel bill is now more expensive than horsepower, and it creates a premium for fuel-efficient fleets. When you look at dual fuel where you can eliminate as much as 70% of your diesel cost or an electric fleet where you can eliminate 100% of it, it is more important now than ever. We can see margin expansion while also saving our customer money and insulating or hedging, giving them a physical hedge against an unanticipated or expected rise in fuel costs. Saurabh Pant: Right. That makes a ton of sense, Matt. That is super interesting. And then, Austin, I have one for you. You talked about this in the prepared remarks about how you strengthened your balance sheet and liquidity, including we saw earlier this week some of the amendments you made to your credit facility. But as we look forward, in terms of just opportunities to deleverage outside of just organic free cash flow, maybe just talk a little bit on what you are thinking, how you are evaluating the balance sheet deleveraging opportunity, and what you may want to do from this point onwards? Austin Harbour: Yes, thanks, Saurabh. With respect to our balance sheet, I think you can tell that we actively manage that, right, and we are constantly looking at a number of opportunities and strategies to optimize what the leverage profile looks like, what the liquidity profile looks like, and then balance that against capital allocation opportunities that we have internally. So as we look forward, I think we will continue to actively manage it and we will continue to focus on making sure that we have liquidity not only to run the base business, but also as opportunistic investments come around. And as we think about the flexibility to be able to respond to this market and also to be able to make investments in some of our other subsidiaries. Saurabh Pant: Okay. Makes sense. Thank you. Thanks a lot, Austin, for that answer. And Matt as well. Thank you. I will turn it back. Operator: Your next question comes from Dan Kutz with Morgan Stanley. Please state your question. Dan Kutz: Hey, thanks. Good morning, and congrats on the quarter. Operator: Dan, could you please go ahead with your question? Dan Kutz: I am sorry. Can you repeat that question? Operator: Dan Kutz, your line is open. All right. Okay. We will move on to the next question. Dan, could you press star-1 again to queue up? Your next question comes from Patrick Woollet with Stifel. Please state your question. Patrick Woollet: Hey, it is Pat Olin on for Stephen Gengaro. Thanks for taking the questions. You highlighted the Q1 2026 results to soften sequentially in the pressure pumping segment, and I know the weather in January plays into that. But you also talked about the frac calendar tightening since then, so I was just wondering if you could give some color on maybe a run-rate basis on how you see the segment exiting Q1 compared to Q4. Matthew D. Wilks: Yes. I think our exit in Q1 is going to be in line to slightly better than what we saw in Q4. It is just that disruption early in the quarter; you do not get those hours back, you do not get those days back. But it did compress the balance of Q1 and has given us a really tight schedule to run and benefit from higher utilization. Patrick Woollet: Okay. Thanks. And you talked about the $8,000,000 to $12,000,000 impact to EBITDA from the weather disruptions. Is this sort of like lost EBITDA or just pushed out to the right and recoverable? Austin Harbour: I would view it as pushed out to the right and recoverable. Certainly, it will be lost in Q1, right? To Matt’s point, we cannot get those days back, right? But as we think about the calendar tightening even further as we move through the quarter and also into Q2, I think ultimately we will be able to earn that back. It is just not all going to come back in February and March. Patrick Woollet: Alright. Thanks. And then if I could just squeeze in one more, if you could just talk a little bit about the guide for the proppant segment. It seems like demand is relatively flat quarter over quarter into Q1. Could you maybe touch on the operational challenges you highlighted? Are those sort of weather-related? And then, you sort of talked about maybe some strength into Q2. Is this driven by maybe better operational efficiency? Or is that demand-driven? Matthew D. Wilks: It is a little bit of both. The disruption early in the quarter impacts your sand mines disproportionately because your wash plants, your working inventory, those freezing temps—these facilities are in areas where you are not used to dealing with this kind of a weather impact. So it is pretty disruptive whenever you get a weather event like this, and it impacts your sand mines a little bit more than it does your frac fleet. With that being said, the operational efficiencies and the quality of our backlog—we have got everything that we can make sold. So now it is just an exercise in execution, and we are starting to see the best performance out of these assets and believe that there is a lot more opportunity in continuing to see that best demonstrated performance climb. Patrick Woollet: All right. Thanks for the color. I will turn it back. Operator: Next question comes from Dan Kutz with Morgan Stanley. Please state your question. Dan Kutz: Hey, good morning, and congrats on the quarter. Sorry about that. I think my headset cut out. So you guys had flagged that you think we are running below production maintenance activity levels in the U.S. currently. Just wondering if you have any guess or any sense for how much higher completions activity would have to be at more of a maintenance-level run rate? Thanks. Matthew D. Wilks: Yes. I think it is easier to look at it from completed lateral feet per month, and depending on the quality of the inventory, you are looking at anywhere from half a million feet to a million feet a month that is below sustainable levels. Dan Kutz: Great. Thanks. That is helpful. And then it sounds like you guys had flagged recently that, in tandem with the cost-out initiatives, you are kind of managing the deployed fleet count to a more range-bound level that leaves some spare capacity on the side. Just wondering if you could talk through what that horsepower, what the plans are for that. Is it going towards bigger fleets, towards continuous fracs? Maybe used to minimize maintenance costs, or maybe some of that just gets stripped and gets retired. But, yeah, just wondering how the spare capacity that you guys have is being utilized or what the plans for that are? Thanks. Matthew D. Wilks: Definitely, that is a great question. The way that we are looking at things right now—tempting and interesting in the environment that we have—is we are going to remain disciplined and keep our fleet count where it is at unless we see a true call on assets and that activity. I think things are too up in the air right now. We are seeing the calendars fill up, seeing DUCs being pulled forward. But once we see this inflection point where there is a true call on activity—of increasing rigs and a demand for frac fleets commissioning full dedicated spreads rather than a few wells here and there pulling DUCs forward—once we see a motivated push to deploy CapEx from operators, we will respond appropriately at that time. And we do have spare capacity. It is just a question of where we are going to put our priorities and focus our capital allocation. At this time, we are going to stick to our plan, stay disciplined, and look for opportunities to create value for our customers. I will highlight, without a call on activity, just the shakeup in the fuel markets is a huge risk for our customers. With the number of fuel-efficient assets that we have, I think we are in a great position to be a great partner with them to help them save money, de-risk their capital allocation, and also to do it while seeing margin expansion on our side. We can help them save a lot of money on fuel and we have been in a low diesel price environment that has really muted the value of these fuel-efficient fleets. But now that you are seeing diesel rise up as quickly and abruptly as it has, it has created a really interesting environment for us to improve our relationship with our customers and get paid handsomely for it. Saurabh Pant: All makes sense. Thanks a lot. I will turn it back. Matthew D. Wilks: Definitely. Thank you. Operator: Thank you. And ladies and gentlemen, no further questions at this time. I will now turn the call back over to Matthew D. Wilks for closing remarks. Matthew D. Wilks: It is good to wrap up 2025. We are excited about 2026. We are managing our business in a very disciplined and thoughtful way. We appreciate everybody's time and look forward to connecting on our Q1 call. Thank you. Operator: Thank you. This concludes today's call. All parties may disconnect. Have a good day.
Operator: Greetings, and welcome to the Algoma Steel Group Inc. Fourth Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. If anyone should require operator assistance, as a reminder, this conference is being recorded. It is now my pleasure to introduce Laura Devoni, vice president of human resources and corporate affairs. Please go ahead. Laura Devoni: Good morning, everyone, and welcome to Algoma Steel Group Inc. Fourth Quarter 2025 Earnings Conference Call. My name is Laura Devoni, vice president of human resources and corporate affairs, and I will be moderating today's call. The prepared remarks are Rajat Marwah, chief executive officer, and Mike Moraca, our chief financial officer. As a reminder, this call is being recorded and will be made available for replay later today in the Investors section of Algoma Steel Group Inc.'s corporate website at www.algoma.com. I would like to remind you that comments made on today's call may contain forward-looking statements within the meaning of applicable securities laws, which involve assumptions and inherent risks and uncertainties. Actual results may differ materially from statements made today. In addition, our financial statements are prepared in accordance with IFRS, which differs from US GAAP, and our discussion today includes references to certain non-IFRS financial measures. Last evening, we posted an earnings presentation to accompany today's prepared remarks. The slides for today's call can be found in the Investors section of our corporate website. With that in mind, I would ask everyone on today's call to read the legal disclaimers on slide two of the accompanying earnings presentation and to also refer to the risks and assumptions outlined in Algoma Steel Group Inc.'s fourth quarter 2025 management's discussion and analysis. Please note that our financial statements are prepared using the US dollar as our functional currency and the Canadian dollar as our presentation currency. As a reminder, the company changed its fiscal year end from March 31 to December 31, resulting in a nine-month fiscal reporting period ending 12/31/2024. For ease of comparison, we will focus our comments today on the three- and twelve-month periods ending 12/31/2025 and 2024. Please also note that amounts referred to on today's call are in Canadian dollars unless otherwise noted. Following our prepared remarks, we will conduct a question and answer session. I will now turn the call over to our chief executive officer. Rajat? Rajat Marwah: Thank you, Laura. And good morning, everyone. Thank you for joining us to discuss our fourth quarter and full year 2025 performance. Before I get into our results, I want to acknowledge this is Mike's and my first earnings call as CFO and CEO, respectively, roles we formally assumed on January 1. I also want to recognize Michael Garcia, who led this company through one of its most consequential transformations and who left Algoma Steel Group Inc. in a fundamentally strong position. Employee safety remains our top priority and a core value. The scale of activity on our site today with the end of blast furnace operations and our EAF running around the clock demands an unwavering focus on safe execution, and I am proud of the discipline our teams have demonstrated throughout this transition. Every milestone we achieved in our transformation must be earned with the same commitment to sending every employee home safely, every day. Before I get into the details of the quarter, I want to highlight three key themes. First, the 50% US Section 232 tariff has permanently altered the landscape for Canadian steel producers. With the American market effectively closed to us, we have responded accordingly, exiting our primary blast furnace and coke oven operations, pivoting our entire commercial strategy towards the Canadian market, restructuring our cost base, and accelerating our transformation that positions Algoma Steel Group Inc. for the realities of this new trade environment. Second, we have the financial foundation to execute. The Canadian $500,000,000 in government-backed liquidity support combined with our ABL facility provides the runway we need to advance our transformation, reduce cash burn, and pursue new opportunities to diversify the business. Third, our operational pivot is not a plan. It is underway. Blast furnace and coke oven operations have been wound down. Our first EAF unit is running on a full 24-hour schedule, and our second unit remains on schedule. Our strategic focus is now squarely on delivering high-value products for the Canadian market. Let me expand on each of these. The extreme tariff environment on steel imports and derivative products from Canada remains the defining challenge for our industry. The unprecedented 50% tariff implemented in June fundamentally broke the cost structure and broader business model that Canadian producers, including Algoma Steel Group Inc., had built over decades. The consequences extended well beyond the US border, creating an oversupply of coil in Canada and driving domestic transactional price as much as 40% below comparable US levels across many categories. For the full year, besides the impact of lower pricing, we absorbed $225,000,000 in direct tariff cost. These are not cyclical headwinds. They represent an unprecedented structural shift that required a structural response. Our fourth quarter financial results reflect that reality: lower shipments, elevated costs, and continued pressure on realized pricing as the Canadian market absorbed excess supply. Shipments to the US were approximately 30% lower than the average US sales over the previous three quarters as we began our exit from the US market. Against that backdrop, our plate mill stands out as a genuine competitive advantage. As Canada's only producer of discrete plate, we are not subject to the same oversupply dynamics that are compressing coil pricing. Demand for plate products across infrastructure, construction, and defense remains healthy, and we expect plate production to increase sequentially as our year ramps through 2026. This is exactly the market position we are leaning into. Next, let me talk about our EAF, the heart of our transformation and the foundation of Algoma Steel Group Inc.'s future. Ramp-up activities are progressing in line with expectations. The furnace and melt shop assets are performing as designed, with stable metallurgical quality and process control demonstrated across a broad range of plate and hot-rolled coil grades. The Q1 power system and other critical process components are operating reliably on a full 24-hour-per-day schedule, a significant milestone from where we were just one quarter ago. As of 12/31/2025, cumulative investment in the project stood at $920,000,000, and we continue to expect a final aggregate cost of approximately $987,000,000. Alongside this operational progress, we have taken deliberate steps to strengthen our strategic and financial position. Mike will walk you through the details of our liquidity actions later in the call. But I do want to highlight one development that speaks directly to where this company is headed. In January 2026, we announced a binding MOU with Hanwha Ocean Company Limited, a long-term strategic arrangement with an aggregate potential value of $250,000,000 US dollars, including a $200,000,000 US dollar contribution towards the potential development of a structural steel beam mill and up to $50,000,000 US dollars in anticipated product purchases connected to the Canadian Patrol Submarine Program. This is a meaningful signal of Algoma Steel Group Inc.'s emerging role as a critical partner in Canada's defense and industrial supply chain. Taken together, these actions reflect a deliberate strategic repositioning. We are moving away from our historical model as a cross-border commodity producer and towards something more focused, more resilient, and more aligned with Canada's long-term industrial priorities. By concentrating on as-rolled and heat-treat plate products, along with selected coil products for the domestic market, we are optimizing for margin quality rather than volume, deepening customer partnerships, and reducing our exposure to tariff-distorted global markets. Repositioning achieves three things. We supply Canadian industry with the high-quality plate products needed for infrastructure, manufacturing, and defense. We create operational stability that supports continued investment in our transformation. And we reinforce Algoma Steel Group Inc.'s role as a critical supplier in Canada's industrial future. In short, we are evolving from a cross-border commodity producer to a Canadian-focused steel supplier with lower cost, lower emissions, and greater long-term resilience. The work is not finished, but the direction is clear, and the foundation is in place. Thank you. I will now turn the call over to Mike for a deeper dive into our financials. Mike? Mike Moraca: Thanks, Rajat. Good morning, and thank you all for joining the call. Before I get into the details, I want to remind listeners that our functional currency is the US dollar; we present our results in Canadian dollars. The Canadian dollar strengthened approximately 5% over the course of 2025, moving from roughly C$1.44 per US dollar at year-end 2024 to approximately C$1.37 at 12/31/2025. I would encourage you to keep that currency backdrop in mind as we go through the numbers. Our fourth quarter results included adjusted EBITDA that was a loss of $95,200,000, which reflects an adjusted EBITDA margin of minus 20.9%, and cash used in operating activities of $3,000,000. We finished the quarter with a strong balance sheet including $77,000,000 of cash, availability of $195,000,000 under our revolving credit facility, and $417,000,000 available under the large enterprise tariff loan facility. Now let me dive into key drivers of our performance. We shipped 378,000 net tons in the quarter, down 31% versus the prior-year quarter. The decrease in shipments was largely attributable to the impact of US tariffs, which, as Rajat said, effectively closed that market to our products. Net sales realizations averaged $1,077 per ton compared to $976 per ton in the prior-year period. The increase versus prior-year level reflects improvements in value-add product mix as a proportion of sales, partially offset by weaker market conditions. Plate pricing continued to enjoy a significant premium relative to hot-rolled coil during the quarter, driven by resilient demand. That resulted in steel revenue of $408,000,000, down 23.9% versus the prior-year period as the lower shipment volumes more than offset higher realized prices. On the cost side, Algoma Steel Group Inc.'s cost per ton of steel products sold averaged $1,332 per ton in the quarter compared to $1,032 per ton in the prior-year period, which was primarily due to tariff costs and worse fixed cost absorption due to lower steel production volumes. It is important to note that during the quarter, accelerated depreciation of blast furnace and basic oxygen steelmaking assets and stranded inventory related to the accelerated closing of the blast furnace was captured in cost of steel revenue. Cash used in operations totaled $3,000,000 in the quarter compared to a use of $77,000,000 in the prior-year period. The significant improvement was driven in large part by a meaningful release of working capital. Inventories at fiscal year end were $569,000,000 compared to $790,000,000 at the end of the third quarter, a reduction of approximately $221,000,000 in the quarter. That reduction reflects the deliberate wind-down of blast furnace raw material inventories as we exited that steelmaking route, as well as continued shipments of finished goods. We also saw a decrease in accounts receivable consistent with lower revenue levels. Taken together, working capital was a significant source of cash in the quarter, largely offsetting the operating losses, and we expect to see further working capital benefits in 2026 as work-in-process inventories are normalized and we recover significant income taxes receivable. Now let me run through the full year comparisons. We shipped 1,700,000 net tonnes for the full year 2025 compared to 2,000,000 net tons in calendar 2024. Net sales realizations averaged $1,080 per tonne compared to $1,107 per ton in the prior year, reflective of softer market conditions on average across the year, partially offset by improvements in value-added product mix as a portion of steel sales. This resulted in steel revenue of $1,900,000,000 compared to $2,200,000,000 in the prior year. On the cost side, Algoma Steel Group Inc.'s cost of steel products sold averaged $1,216 per ton for the year, compared to $1,054 in the prior year, primarily due to tariff costs and worse fixed cost absorption due to lower steel production volumes. Adjusted EBITDA for the full year was a loss of $261,400,000, representing an adjusted EBITDA margin of minus 12.5%, compared to an adjusted EBITDA gain of $22,400,000 and an adjusted EBITDA margin of 0.9% in calendar 2024. The decrease was primarily attributable to lower shipments. Cash flow used in operating activities for 2025 was $66,000,000 compared to cash generated of $82,000,000 in calendar 2024. The decrease year over year was primarily due to factors previously discussed. As mentioned earlier, inventories at fiscal year end were $569,000,000. That compares to $879,000,000 in 2024, a reduction of $310,000,000 over the year. Before I turn it back to Rajat, let me make a few comments on our calendar first quarter 2026 results so far. Due to persistently weak market demand, we expect shipments this quarter to be sequentially lower than the fourth quarter. We expect to see better pricing and cost performance, which should result in adjusted EBITDA that is directionally better as compared to calendar fourth quarter 2025. I also want to briefly note that we are aware of the pending litigation with US Steel in Ontario and arbitration in the USA regarding an iron ore supply agreement. As that matter is now in litigation, we are not in a position to comment further on it today. I would like to now turn the call back over to our CEO, Rajat Marwah, for closing comments. Rajat? Rajat Marwah: Thanks, Mike. Let me close with this. 2025 was the most challenging year in recent memory for Canadian steel producers. The 50% US Section 232 tariff dismantled the cross-border business model that had defined this industry for decades, flooded the Canadian market with excess supply, and forced every producer to fundamentally adjust how they operate. We were not immune to those pressures, and our financial results this year reflect that reality. But what I am most proud of is how this organization responded. We did not wait for conditions to improve. We were compelled to make difficult decisions, accelerating the wind-down of our blast furnace and coke oven operations ahead of our original timeline, pivoting our commercial strategy towards the Canadian market, and securing the financial resources to execute our transformation without compromising our future. Those were not easy calls, and they required conviction, speed, and coordination across every part of this business. None of this came without real human cost. The accelerated transition required us to wind down our blast furnace and coke oven operations earlier than planned, and that had meant issuing layoff notices to approximately a thousand of our colleagues, effective later this month. I want to be direct about this. Those are not just numbers. They are people who helped build this company. We have worked with our unions and government resources to put mitigation programs in place, and I am committed to the view that this is not the end of the story for Algoma Steel Group Inc.'s workforce. We are actively exploring product diversification initiatives to expand our footprint and support Canadian industrial policy, and we applaud the Canadian and Ontario governments for the measures they have taken to support the Canadian steel industry. The result is a fundamentally different Algoma Steel Group Inc. Our EAF is running around the clock, performing as designed, and producing FalTer, our sustainable low-carbon steel brand, at scale. This is the sustainable steel this company has invested years and nearly $1,000,000,000 to bring to life. We are Canada's only producer of discrete plate, with a modernized plate mill, a purpose-built low-carbon steelmaking platform, Canadian $500,000,000 in government-backed liquidity to support our next phase of growth. Defense and shipbuilding demand for our plate product is real and growing. We are already shipping Davie Shipbuilding for the PolarMax program, and the Hanwha Ocean MOU opens a further compelling path into Canada's defense and industrial supply chain. We enter 2026 not defined by the headwinds we faced, but by the ground we gained while facing them. The foundation for long-term value creation is in place, and I am extremely confident in the direction of this company. To our employees, what you accomplished in 2025 was extraordinary. You navigated a period of profound uncertainty and change with professionalism, dedication, and resilience, and you did so while keeping safety at the forefront every single day. I look forward to building on what we have started together. Thank you very much for your continued interest in Algoma Steel Group Inc. At this point, we would be happy to take your questions. Rajat Marwah: Operator, please give the instructions for the question and answer session. Operator: We will now be conducting our question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. Our first question is from Katja Jancic with BMO Capital Markets. Katja Jancic: Hi, thank you for taking my questions. Maybe starting on the shipment side, you mentioned first quarter shipments sequentially are going to be lower. But can you remind us how you are thinking about full-year shipments? And then also how this is going to be split between plate and sheet? Mike Moraca: Hey, Katja. Good morning. It is Mike. I think that over the course of the year, we expect to have total shipments between 1,000,000 and 1,200,000 tons. There will be a little bit of a ramp as we are building up our capacity at the EAF, and we will see slightly lower shipments in the first quarter, but ramping up to a run rate in that 1,000,000 to 1,200,000 tons as the year progresses. So slightly lower in Q1, but growing over the course of the year. Katja Jancic: And then on the mix? Mike Moraca: The mix will be roughly 50/50, I would say, on the plate and sheet based on what we see today. Katja Jancic: Okay. And maybe just shifting gears to your cost side. Can you talk about how much of your energy cost are exposed to the current spot market? Mike Moraca: Sure. I think that we are generating power from our own natural-gas-fired power plant, so there is commodity price exposure to the natural gas price. And we do consume power directly from the grid, which is subject to Ontario's spot rate pricing. So, it is a nice mix to have because we do have the ability to generate our own power. So if the Ontario pricing does swing up to a higher price, we are generating our own as a safeguard. Further to that, as you know, we have the Northern Electricity Advantage Program, which is specific to Northern Ontario-based producers and does give us a C$20 per megawatt advantage on our power pricing. Katja Jancic: And just on the natural gas, are you hedged at all, or are you fully on spot for your own power supply? Mike Moraca: We generally would have fixed price for the most volatile months of the year, which is traditionally the winter months where we have fixed pricing. And then the other months where there is less volatility, we would take it on spot. Katja Jancic: Okay. Thank you. Operator: Our next question is from Ian Gillies with Stifel. Good morning, everyone. Mike Moraca: Morning, Ian. Ian Gillies: Can you provide an update on what you are seeing as it pertains to plate pricing in Canada? Obviously, over the last number of months, there have been some new government initiatives to try and keep imports out of the country, and I am just curious on how that is progressing and whether you are seeing that flow through into your price book. Rajat Marwah: Sure. So the pricing on the plate side is holding up. It is much better than the sheet pricing. On the sheet side, we are seeing a 40% lower pricing from the index. On the plate side, it is less than that. It is ranging anywhere between 15% to 20%. The pricing is definitely better. The measures that the government is taking definitely are helping. It is slow coming in right now, but we see a lot of inbounds coming from customers and some new customers for steel, and that is encouraging. Ian Gillies: As it pertains to the HRC side, and pricing being 40% lower, can you just help reconcile that pricing discount versus what we might be seeing in the Fastmarkets Canadian price quote that is now out that is saying Canadian steel prices are around $800 a ton right now? Rajat Marwah: I do not know how those pricing are calculated by Fastmarkets, but the pricing in the market is roughly 40% lower. And it makes a lot of sense as well when you see what the tariffs are and what is happening in Canada. Over time, what we have seen is that pricing started strengthening a little bit in Canada where it was better. But overall, it is hovering around a 40% discount to the index. Ian Gillies: As it pertains to the beam mill, can you maybe outline how or critical milestones that you think may be achieved or may be announced over the next, call it, twelve to eighteen months? Because it feels like bidding is moving along reasonably quickly, but formal contracts will not be announced until 2028. So just curious there. Rajat Marwah: So from our perspective, we are working on the beam project. It is a big project. So we are doing engineering, cost estimates, and timelines. We are also working on the market side. There is not much that I can share right now, but what I can say is that the beam market is one where the supply is less than the demand in Canada, and we are very well suited to support that market with our EAF. Now from Hanwha’s perspective, that is one of the components of, let us say, the whole project. Their application has been in, and I think the government is really moving pretty fast to decide which one will get it. I think the government will do the right job in finding the right partner for Canada. But from our perspective, we are moving fast on our assessment of this project, and once we have more details around it, we will definitely come out and disclose on the key milestones. Ian Gillies: And last one for me. As you think about how the business progresses through the remainder of this year, where do you think CapEx ends up for the full year? And is there really much left on the EAF at this point? Mike Moraca: Ian, I think that we have said we are at $920,000,000-ish or so. We do not expect any change in the total project budget. So we will incur those capital costs over the first half of this year as we ramp up the second EAF. As for sustaining CapEx, I think we are seeing a step-change lower as we have taken blast furnace and coke-making facilities out of the mix. So you should expect to see significantly lower sustaining CapEx in line with what we had mentioned in the past of being close to around $80,000,000 a year. Ian Gillies: And one last one, actually. On the scrap side, can you just provide an update on how that has gone so far as it pertains to the EAF? And how your JV is working as well on the sourcing side? Rajat Marwah: It is going pretty well. The scrap availability and supply and the use is going pretty well. The JV is working fine, and we are ramping up pretty fast from that. So we are pretty happy with the way things are moving on the scrap side and also the availability. Ian Gillies: Okay. Thank you very much. I will turn it back over. Operator: Thanks, Ian. Thank you. There are no further questions at this time. I would like to hand the floor back over to Laura Devoni for any closing comments. Laura Devoni: Thank you again for your interest in our fourth quarter 2025 earnings conference call and for your continued interest in Algoma Steel Group Inc. We look forward to updating you on our results and progress when we report our first quarter results in the spring. Operator: This concludes today's conference. Thank you again for your participation. You may disconnect your lines at this time. Thanks, Paul.
Paul Johnson: Good morning, ladies and gentlemen, and thank you for standing by. At this time, I would like to welcome everyone to Stellus Capital Investment Corporation's conference call to report financial results for its fourth fiscal quarter ended 12/31/2025. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, this conference is being recorded today, 03/12/2026. It is now my pleasure to turn the call over to Mr. Robert Ladd, Chief Executive Officer of Stellus Capital Investment Corporation. Mr. Ladd, you may begin your conference. Okay. Thank you. Robert Ladd: Thank you, Paul. Good morning, everyone, and thank you for joining the call. Welcome to our conference call covering the quarter and year ended 12/31/2025. This morning's call will be longer and more in-depth than previous calls. We have five topics to cover. First, the financial results for the fourth quarter and year ended 12/31/2025, asset quality, including commentary regarding software exposure, outlook for 2026, our share buyback program recently announced, and our investment advisor joining forces with Ridge Post Capital. Joining me this morning is Todd Huskinson, our Chief Financial Officer, who will cover important information about forward-looking statements as well as an overview of our financial information. Paul Johnson: Thank you, Rob. I would like to remind everyone that today's call is being recorded. Please note that this call is the property of Stellus Capital Investment Corporation and that any unauthorized broadcast of this call in any form is strictly prohibited. Todd Huskinson: Audio replay of the call will be available by using the telephone numbers and PIN provided in our press release announcing this call. I would also like to call your attention to the customary safe harbor disclosure in our press release regarding forward-looking information. Today's conference call may also include forward-looking statements and projections; we ask that you refer to our most recent filing with the SEC for important factors that could cause actual results to differ materially from these projections. We will not update any forward-looking statements unless required by law. To obtain copies of our latest SEC filings, please visit our website at www.stelluscapital.com under the Public Investors link or call us at (713) 292-5400. Now I will cover our operating results for the fourth quarter and year. I would like to start with our life-to-date activity. Since our IPO in November 2012, we have invested approximately $2.8 billion in over 220 companies and received approximately $1.8 billion of repayments, while maintaining stable asset quality. We have paid $333 million in dividends to our investors, which represents $18.27 per share to an investor in our IPO in November 2012, which was offered at $15 per share. In the fourth quarter, we generated $0.29 per share of GAAP net investment income, and core net investment income was $0.29 per share also, which excludes excise taxes. During the quarter, we also realized gains of $5.5 million on five equity positions, which resulted in total realized income for the quarter of $0.48 per share. Net asset value per share decreased $0.23 during the quarter from two components: The first was $0.11 per share of dividend payments that exceeded earnings, which was necessary to continue to pay out spillover income balance from 2024. The second was net realized losses of $0.12 per share related primarily to two debt investments. On the capital front, on December 31, we repaid the remaining $50 million of the $100 million of 2026 notes prior to their March 2026 maturity. Turning to portfolio and asset quality, we ended the quarter with an investment portfolio at fair value of $1.01 billion across 115 portfolio companies, unchanged from $1.01 billion across 115 portfolio companies as of 09/30/2025. During the fourth quarter, we invested $34.1 million in four new portfolio companies and had $18 million in other investment activity at par. We also received four full repayments totaling $37.9 million, five equity realizations totaling $7 million, which resulted in a realized gain of $5.5 million, and received $9.1 million of other repayments, both at par. At December 31, 99% of our loans were secured, and 92% were priced at floating rates. Average loan per company is $8.8 million, and the largest overall investment is $19.2 million, both at fair value. Substantially all of our portfolio companies are backed by a private equity firm. Overall, our asset quality is slightly better than planned. At fair value, 81% of our portfolio is rated a one or two, or on or ahead of plan, and 19% of the portfolio is marked in an investment category of three or below, meaning not meeting plan or expectations. We added one new loan to our nonaccrual list and removed another from the nonaccrual list during the quarter. Currently, we have loans to five portfolio companies on nonaccrual, which comprise 7.5% of the total cost and 4.1% of the fair value of the total investment portfolio, respectively, which represents a slight increase from the prior quarter. We are always focused on diversification, including by industry sector. We have investments in 24 separate industry sectors, and we have approximately 10% in high-tech industries. Over the last months, there has been a lot of press about the impact of artificial intelligence on large-scale SaaS software industry, which has resulted in concern around investment firms’ exposure, both private equity and private credit, to the sector. Let me first say, Stellus does not have exposure to the large-scale SaaS software sector. Rather, we have a small number of loans to software companies that are related to the SaaS space but are better characterized as industry-specific, tech-enabled solutions. This group consists of five companies out of 100 portfolio companies with debt investments and comprises 6.8% of the loan portfolio, the largest position is 1.8%, both at fair value. Each one of these companies provides integral products and services that are embedded in the businesses that they serve. They are using AI to enhance the software and information they provide and, in many cases, are dealing with proprietary data. A common theme for these software businesses is that they are using AI to enhance their value proposition rather than the customer being able to do this all internally with AI. In summary, we believe AI will enable these and many of our portfolio companies across a variety of industry sectors to improve the speed and quality of information, and we do not believe that AI will supplant the need for what our portfolio companies provide. Let me add, each of these companies is owned by a substantial private equity sponsor, is well-capitalized with material equity below us, has modest leverage, and EBITDA that is stable to increasing. The risk rate of these companies is either a one or a two, meaning on or ahead of plan. We will continue to monitor these companies closely as we do with all of our portfolio companies. Importantly, looking forward, we would be surprised if AI had a material negative impact on the recovery of our loans to these companies. And now I would like to turn the call back over to Rob to cover the outlook and a few additional topics. Robert Ladd: Okay. Thank you, Todd. As we look ahead to 2026, I will cover four topics. First, the outlook for Q1 and Q2; the recent announcement concerning our advisor’s plans to join Ridge Post Capital’s platform; a $20 million share buyback program; and our view on the private credit sector overall. So outlook for Q1 and Q2. Today, our portfolio is approximately $996 million across 115 portfolio companies. With the turbulence that we have all been observing, M&A activity has slowed some after a very robust fourth quarter for us. Therefore, we expect in 2026 a portfolio at the current level or slightly less. We expect continued equity realizations in Q1 of approximately $2 million, resulting in a $1 million realized gain. Regarding dividends, in January we declared the dividends for 2026 of $0.34 per share in the aggregate, payable monthly. We expect to keep the dividend at this level of $0.34 for the second quarter, which will be declared in early April, of course subject to Board approval. Just looking at our stock price today that is a little under $9 a share, the second quarter dividend is a 15% annualized yield. Now turning to Ridge Post. On February 5, we announced that our external manager, Stellus Capital Management, agreed to be purchased by Ridge Post Capital, formerly known as PTEN. Ridge Post is a leading private capital solutions provider that similarly serves the lower middle market. Stellus will continue to be managed by its current partners, who will retain control of its day-to-day operations, including investment decisions and investment committee processes. We like to say there will be no changes in how we operate. Todd Huskinson will continue to be Stellus Capital Investment Corporation’s CFO, and I will continue to serve as the company’s Chairman and CEO. Now turning back to Ridge Post. Ridge Post Capital, which has more than $43 billion in assets under management, invests across private equity, private credit, and venture capital and access-constrained strategies, with a focus on the middle and lower middle market. We believe that our advisor joining Ridge Post Capital is a very positive development for a number of reasons, the most important of which is the anticipated investment opportunities that Ridge Post Capital will open up for Stellus Capital Investment Corporation and our affiliates. Ridge Post’s largest strategy is a lower middle market private equity firm specializing in North American small buyouts through primary, secondary, and co-investment vehicles known as RCP Advisors, which is based in Chicago. RCP Advisors has invested with more than 200 lower middle market private equity firms and is typically the largest or one of the largest LPs in the PE funds in which they invest. As you will recall, all of our lending is to companies owned by lower middle market private equity firms. As part of Ridge Post Capital, we expect to see a material increase in investment opportunities coming from those PE relationships, many of which we do not currently have. Given the nearly identical size profile of the RCP sponsor relationships and our sponsor relationships, we think we have a meaningful opportunity to increase the top of our funnel for new origination opportunities. We are excited by this new growth opportunity and we believe it will benefit all shareholders. The transaction with Ridge Post Capital is expected to close in mid-2026, subject to BDC board and BDC shareholder approvals, and other customary closing conditions. Let me add, some of our shareholders have asked, are you selling Stellus Capital Investment Corporation, our public company, or Stellus Capital Management, to Ridge Post Capital? We are not. Stellus Capital Investment Corporation will remain publicly traded. Our leadership will remain the same, as I mentioned earlier, and our independent board members will also remain in place. Our shareholders will continue to own Stellus Capital Investment Corporation stock. Now turning to share repurchase. Our Board of Directors recently approved a stock repurchase program of up to $20 million. This decision reflects the current trading level of our shares, which are at approximately a 30% discount to recently reported net asset value. Historically, our stock has traded at or above NAV for many years. At the current price levels, we believe repurchasing shares represents a compelling opportunity to generate meaningful value for our shareholders. This authorization will remain in place for at least one year. And finally, I am going to turn to private credit today. Given the significant press coverage of perceived stress in private credit, we thought this would be a good time to share our view of private credit overall. I will first cover our strategy versus larger managers; second, a reminder of our history in private credit; and finally, the importance of private credit for the U.S. economy. Stellus Capital focuses on direct-originated senior secured loans to lower middle market, private equity-backed companies rather than participating in large, broadly shared loans or nationally syndicated credits. This represents a fundamental difference between the Stellus platform, including Stellus Capital Investment Corporation, and many of the larger private credit managers and larger BDCs. Larger managers are lending to all types of companies, many without deep-pocketed private equity owners, and some with complex capital structures or off-balance-sheet vehicles. And now a reminder of our history. First, we are one of the longest-tenured active private credit managers, with a history of investing that is 22 years across 400 companies and $10 billion of deployment. The Stellus management team has an investing history that has been resilient across multiple macroeconomic cycles, including the Global Financial Crisis of 2008–2009, COVID-19, the global pandemic, and periods of other market volatility such as the international tariff disruption of 2025. Second, our asset quality across the portfolio has remained stable over time, with a weighted average risk rate of approximately two, which corresponds to investments performing on plan. All of our loans have financial covenants. All but one of our portfolio companies are backed by a private equity sponsor, and all have substantial equity below us at the time the loans are made. Third. All of our investment vehicles, with our public company, have the same investment mandate. All lend to the same businesses. We have no competing strategies or distractions. All of our work is focused on doing well for our shareholders and investors. And lastly, fourth, we have a long history of equity co-investments alongside our debt investments. This is where we buy a small piece of equity in the companies we lend money to, usually 5% of the total portfolio at cost. The equity co-investments have resulted in substantial equity gains. For Stellus Capital Investment Corporation, this has generated approximately $98 million of net realized gains life-to-date, with a historical return on equity co-investments of greater than 2.5x. And now I will turn to private credit, the private credit sector more broadly. We believe there is a lot of opportunity for growth in the private credit space, especially in our market, the lower middle market. In our market, there is a tremendous amount of dry powder in lower middle market private equity firms, who are our client base, if you will. When they buy private businesses, we are there to finance the purchases. The best data we have would indicate there is approximately 10x the dry powder to invest by lower middle market private equity versus the amount of dry powder in lower middle market private credit providers. We will be there to provide the financing. Finally, for private credit overall, the need for this capital is very large. Why? Private credit in our country fills the large gap that commercial banks cannot provide. The reason for this is commercial banks are typically levered 10 to 11 times and are mostly lending out retail and commercial deposits. As a result, their risk profile is very tight, and they are highly regulated to safeguard these deposits. Private credit providers are not highly levered (typically 1 to 2 times), and we are not investing bank deposits. We are investing equity capital coupled with modest institutional leverage. I will say both banks and private credit providers are focused on protecting their capital bases. Private credit, though, has the flexibility to provide more leverage, earn higher returns, and can participate in the equity upside of our portfolio companies. Together, private credit and commercial banks are the growth engine of our U.S. economy. So the takeaway for our shareholders is we have a long history of investing in private credit. We think there is a lot of opportunity to invest going forward in the lower middle market, where we have always been, and also to provide strong returns for our shareholders. And with that, I recognize today’s call was longer than normal. We hope that it was helpful to better understand our business and the industry we operate in. And with that, Paul, please open up the line for Q&A. Paul Johnson: 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. 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. And one moment please while we poll for questions. The first question today is coming from Christopher Nolan from Ladenburg Thalmann. Christopher, your line is live. Christopher Nolan: Hey, guys. Good morning. Thank you for all the detail, Rob. Given the change in the ownership of the external manager and the share repurchase initiative, will there be a change in the leverage targets for Stellus Capital Investment Corporation? Robert Ladd: Thank you. Good morning, Chris. And no. Good question. There will not be a change in our targeted leverage for Stellus Capital Investment Corporation, which, as you will recall, is approximately 1:1 on the regulatory test and approximately 2:1 including SBIC debentures. Christopher Nolan: Okay. And then, turning to SBA for a second, what is the remaining capacity in the SBA, and should we be looking at that to be a growth engine for you guys in the first half of the year? Robert Ladd: Yes. So ultimately, we have quite a bit of new capacity that we will have in the SBA. We, as you may have noted in Todd’s remarks and in our press release, paid down $39 million of debentures on March 1 under our first license, which brings a total of $65 million. So that would be one example. We have $65 million of new debentures that we will be able to take out, plus more when we obtain our third license. So it is a good question. A lot of growth from here, given that we have repaid $65 million of debentures so far. Christopher Nolan: Great. And final question. I noticed that you have done some subsequent investments to Venbrook and Real Estate Services, both of which are nonaccrual. Can you give a little detail of what is going on with those guys? Robert Ladd: Yes. So, of course, we do not talk much about the detailed companies, but these are companies where we have been working with others to provide additional capital to see them through a rough spot. The Partners is a realtor business based in the Midwest, and Venbrook is an insurance agency. These are small advances to further the companies’ operations during a little bit of a slow period. Christopher Nolan: Great. That is it for me. Thank you, Rob. Robert Ladd: Thank you, Chris. Paul Johnson: Thank you. The next question will be from Brian McKenna from Citizens. Brian, your line is live. Brian McKenna: Okay, great. Thanks. Good morning, everyone. So just a bigger-picture fundraising question for you guys as it relates to the broader Stellus platform. What are you hearing from some of your institutional investors in terms of having some incremental exposure to the lower middle markets and moving some capital away from the large-cap managers in the upper middle markets? And I am curious—we will see how the environment plays out from here—but given maybe the dynamic there, could we actually see a scenario where fundraising at Stellus starts to accelerate over the next year or so? Robert Ladd: Yes. Good morning, Brian, and thank you for the question. We have definitely seen, for the overall Stellus platform, an increasing interest in the lower middle market where we operate. This is coming from large institutional investors that have noticed in some of their larger managers some overlap in different credits and found our type of investing interesting. We have definitely seen an uptick in that area, and this would be, of course, across the Stellus platform. Brian McKenna: Yep. Okay. Got it. That is helpful. And then, Rob, you have clearly done a great job managing the business throughout a number of cycles and operating environments over the past 20 years or so. I think you have a great perspective as well. And so, while each cycle and period of dislocation is always a little bit different, history always rhymes. So what past experiences can you lean on today to make sure you are prudently managing your business in the current environment? Robert Ladd: Yes. I would say, historically, it is important in times like this to not be over-levered, which we are not, and I would add that the private credit industry is not. So modest leverage is helpful in these times. Certainly, we are very focused on strong underwriting throughout periods, and you may have heard us say before that when we look at a new company, we are thinking we are going to have a recession within the first 18 to 24 months. Whether we are is another matter, but we underwrite to that. So we will continue that diligent underwriting, expecting if this company got into trouble or there was an economic cycle down, how would it behave or how does the sector behave? So I think strong underwriting will continue for us. And then I would say, we will be very selective about opportunities. My guess is, too, that you may see some improved pricing in our sector. In other words, spreads may widen a little bit to the benefit of our shareholders. But I would say throughout our investing period, this goes back 20-plus years, what we have found in our part of the market, again the lower middle market, is that we have always had large equity checks below us, we have always had financial covenants, and therefore well-capitalized businesses from the start. So, again, I think it is the same that we have been doing historically. But we will be very focused and cautious if we think things are turning. We think there is a lot of noise in the system today that is less about the quality of the portfolios in private credit. Brian McKenna: Alright. Thanks so much. I will leave it there. Robert Ladd: And thanks so much, Brian, for joining. Paul Johnson: Thank you. The next question will be from Justin Marchandt from Capital. Justin, your line is live. Justin Marchandt: Hey, guys. Good morning. On for Eric today. I just want to talk a little bit more about the Ridge Post transaction. Sounds like a good fit for your investment strategy. When do you expect to see the full benefits of increased deal flow and opportunities, should the deal go through in mid-2026? Robert Ladd: Justin, thank you for joining. So, again, as you pointed out, subject to the various approvals, this transaction would close in the summer of this year. We have had initial conversations with the RCP subsidiary, if you will, Ridge Post, and we think there is a great opportunity there. So our hope and plan would be that as we get to this summer, we will hit the ground running. And I think that collectively, we think there is lots of opportunity to open up. So I would say that, not to be overly optimistic, but I would imagine this will kick in in 2026. Justin Marchandt: Okay. Alright. That is great. And then looking at PIK income, it has been a significant increase year-over-year. Are these portfolio companies prioritizing growth, or are there operational issues? And what kind of strategies can you implement to get borrowers back to cash pay? Robert Ladd: Yes. So, although our PIK income has increased, we are still at the low end of our competitor set. We do not go into a new loan with PIK income, and by the way, we understand in the upper market lenders will go into a new credit with some PIK income; we do not. At the outset, all the loans are cash pay. So if you see PIK income with us, it would mean that the company needs some relief from a cash flow perspective. And typically, when we have some PIK aspect to the income, it means that the private equity owner is contributing new capital. So this, we think, is a good trade for both parties. For that PIK to come down, it will be that those companies that needed relief have improved their performance, or we have exited the investment—in other words, the company has been sold or refinanced. So that is the nature of our PIK income, not something that is planned on the front end. Justin Marchandt: And then last one for me. Just on the new base distribution still kind of above the 4Q NII run rate, what sort of levers can you guys pull to get earnings back to or above the new distribution? Or is there a potential to right-size the distribution rate later on this year? Robert Ladd: Yes. We are striving to improve the NII. I would say that if SOFR stays where it is, which perhaps it will for a while, this will be helpful to us. The new leverage that we would receive under a third license from the SBA will get the portfolio back up. Again, as I mentioned, quite a bit of increased portfolio that was resolved from our third license getting recapitalized. So this would be helpful as well. And again, we always strive to receive the best returns on the loans we are making, and so we will continue to work on that. But it would be a combination of things. In any event, we do have a fair amount of spillover from last year, and so as a result, we will have this level of dividend, at least, through the second quarter. And we will reevaluate it. We will have more to talk about this summer as we hopefully get into our third license with the SBA. Justin Marchandt: Okay. Thanks for taking my questions today. Robert Ladd: Thank you, Justin. Paul Johnson: And the next question will be from Robert Dodd from Raymond James. Robert, your line is live. Robert Dodd: Hi, guys. A lot of my questions have been answered, and I appreciate the color you gave at the beginning on how much exposure you have to software or AI risk assets. That kind of feels like last month at this point. On something else, what would you say your exposure is in the portfolio to higher energy prices? Obviously, oil is up, could go meaningfully higher potentially. We do not have a lot of direct oil and gas production, obviously, but there is feed-through to other areas in the economy if oil prices do continue to rise or spike again. Could you give us any color on what the exposure is in the portfolio to that kind of issue? Robert Ladd: Yes, Robert. Good morning. First, as you indicated, we have no direct exposure to the oil and gas industry. I would say that we also, as a matter of underwriting, have a handful of principal tenets, one of which is to not have commodity price risk exposure. So this would transcend direct oil and gas exposure. I think that the larger impact would be just the impact on the consumer if this started to cause consumer stress. We do have some businesses that are exposed to the consumer spending, but I would say not a material amount. So do not expect any material impact, certainly directly with companies. It would end up being more of whether it causes some change in the overall economy, which, my personal opinion, I would not expect. Not to get into the war and to run, but I would expect this will probably moderate over time. But again, I would not expect it to have a material impact on the portfolio. Robert Dodd: Got it. Thank you. On the more stressed assets in the nonaccruals you have, do you have right now a kind of expectation—guess, but about the timeframe for resolution of some of those? Because obviously, to that point right now, there is a decent slug of the portfolio that is not income-producing and maybe could be again at some point in the future. What is the kind of timeline there? Robert Ladd: Yes, sir, Robert. This would certainly range by individual company, so I will not get into that specifically. But I would say that we are having some that are coming off nonaccrual, and we did one in the fourth quarter that came off nonaccrual. I think you will see a gradual change over the next 12 to 18 months with regard to the portfolio. I would say that if something is nonaccrual, it is being or has been restructured, and that we as a lender group and typically the owner, because they are not able to pay interest, are looking for exits to monetize the position, reinvest that capital, and then have earnings on it again. But I think, naturally, it is typically a year to 18-month process as you go. Some may take longer, some may take shorter. So I cannot cover specifics, but a gradual resolution, I would say, throughout 2026 and into 2027. Robert Dodd: Got it. Thank you for that. If I can, one more, just a general question. You mentioned you might see improved pricing. Obviously, the marketplace has been extremely competitive over the last 24 months, with spreads coming down, and there are some early signs maybe that is going to move. What is your confidence that spreads will in fact widen sustainably over the next year or two versus near-term indications being just a short-term phenomenon? I realize that is a really tough question, but any thoughts there would be appreciated. Robert Ladd: Sure. First, the public loan indices have widened materially over the last 60 days, but we have not seen that in the private market that we operate in yet. This will be driven by more than one factor. One would be capital flows—it appears to be less capital coming to the industry, the sector currently. The next would be perceived risk and discipline by the underwriters. Unfortunately, I cannot predict whether it will occur, but we certainly have the ingredients of what we are observing to cause spreads certainly not to get tighter and potentially to widen. Public markets are reflecting it; we have not seen it yet in the private area where we operate, but certainly the ingredients for it are there. Robert Dodd: Got it. Thank you. Robert Ladd: Thank you, Robert. Paul Johnson: Thank you. There were no other questions at this time. I would now like to hand the call back to Robert Ladd for closing remarks. Robert Ladd: Thank you, Paul, very much, and thanks, everyone, for joining the call. Thank you for your support, and we look forward to speaking with you again in early May as we report the first quarter. Paul Johnson: Thank you. This does conclude today’s conference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Good morning, and welcome to the 2025 Financial Results Conference Call and Webcast. As a reminder, all participants are on a listen-only mode, and this conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then 1. You may also signal an operator by pressing star. I would now like to turn the conference over to Jennifer North, Head of Investor Relations. Ma'am, please go ahead. Jennifer North: Thank you, operator. Good morning, everyone, and welcome to Avino Silver & Gold Mines Ltd.'s Q4 and Year-End 2025 Earnings Call and Webcast. To join this webcast and conference call, there is a link in our news release of yesterday's date, which can be found on our new website under Investor Center, then News and Media. In addition, a link can be found on the home page of the Avino Silver & Gold Mines Ltd. website. The full financial statements and MD&A are now available on our website under the Investor Center tab, then Reports and Financials. In addition, the full statements are available on Avino Silver & Gold Mines Ltd.'s profile on SEDAR+ and on EDGAR. Before we get started, I remind you to view our precautionary language regarding forward-looking statements and the risk factors pertaining to these statements, and note that certain statements made today on this call by the management team may include forward-looking information within the meaning of applicable securities laws. Forward-looking statements are subject to known and unknown risks, uncertainties, and other factors that may cause the actual results to be materially different than those expressed by or implied by such forward-looking statements. For additional information, we refer you to our detailed cautionary note in the presentation related to this call or on our press release of yesterday's date. On the call today, we have the company's President and CEO, David Wolfin; our Chief Financial Officer, Nathan Harte; our Chief Operating Officer, Carlos Rodriguez; and our VP of Technical Services, Peter Latta. I would like to remind everyone that this conference call is being recorded and will be available for replay later today. The replay information and the presentation slides from this conference call and webcast will be available on the website. Also, note that all figures stated are in U.S. dollars unless otherwise noted. Thank you. I will now hand over the call to Avino Silver & Gold Mines Ltd.'s President and CEO, David Wolfin. David? David Wolfin: Thanks, Jen. Good morning, everyone, and welcome to Avino Silver & Gold Mines Ltd.'s 2026 outlook discussion, followed by a Q&A. I will start with the discussion on operations and overall performance, and then I will turn it over to Nathan Harte, Avino Silver & Gold Mines Ltd.'s CFO, to discuss the financial performance for this period. Please turn to Slide 5. We are transforming Avino Silver & Gold Mines Ltd. from a single-mine operator into a multi-asset Mexican mid-tier producer. Avino Silver & Gold Mines Ltd. achieved a number of important milestones in 2025, underpinned by strong performance at the Avino mine and the commencement of development and material extraction at La Preciosa. The 2025 year represents a return to being a primary silver producer as silver production represented over 50% of our consolidated silver-equivalent production and puts us on our way to our long-term target. Our continued investment in infrastructure development and mine optimization reflects a disciplined approach to being a scalable multi-asset production platform. As we look forward, our focus remains on executing the next phase of our growth strategy and delivering long-term value for shareholders. The first key driver contributing to our success in 2025 was our continued disciplined approach to financial management and capital allocation. At the end of the year, Avino Silver & Gold Mines Ltd. achieved record revenues of $92,200,000 and held cash of $102,000,000 and a working capital position of $99,000,000, providing another quarter of strong financial performance. A strong balance sheet will provide the foundation to support our transformational growth plan to become a Mexican-focused mid-tier primary silver producer. Nathan will provide a detailed overview of the financials later in the call. Next, key drivers stem from increased development tonnage at La Preciosa. We commenced extraction, haulage, and processing of mineralized development material from La Osa during the quarter at an average rate of 200 tons per day. In total, 11,995 tons of material were processed at the Avino milling and processing facility, which is located 19 kilometers away from the entrance of the La Preciosa mine. The third driver reflected portfolio optimization, highlighted by the August announcement of the acquisition of outstanding royalties and contingent payments on La Preciosa. This milestone reinforces the consolidation of ownership at La Preciosa, improving project economics and operational flexibility. Removing third-party obligations reduces complexity and strengthens Avino Silver & Gold Mines Ltd.'s asset portfolio. We believe this enhances shareholder value by strengthening our portfolio and positioning Avino Silver & Gold Mines Ltd. for sustained growth. Another key driver underpinning our results is the commitment we have made to strategic exploration and drilling that further unlock additional resource potential. We reported drill results from La Preciosa in October 2025, which followed up from August 2025 drilling, and also announced further holes in January. The results exceeded our expectations. Highlights included 7.9 meters true width of 1.6 kilograms of silver and 2 grams gold, including 15 kilograms of silver and 1.55 grams gold over 0.37 meters of true width. Another significant intercept was over 5 meters of true width of 787 grams silver and 0.5 grams of gold. The full results are available in the news release, which can be found on our website. The intercepts are significantly higher than the average grades outlined in our current resource, highlighting the potential we aim to capture by using underground mining methods. In addition, larger widths encountered at both La Gloria and Abundancia were a welcomed surprise, underscoring that there is still much to learn about the deposit despite the 1,500 drill holes on the property and substantial exploration investment performed by previous operators. Since acquiring La Preciosa, we have learned that recent drilling intercepts suggest wider vein structures on Gloria. The original mine plan is evolving to reflect improved geological understanding. Optimization opportunities are being identified that could reduce mining costs. We have engaged independent engineers to deliver a strategic plan that looks beyond the original project scope. The next driver was increasing silver revenues at the right time, a return to primary silver with 54% silver revenue in Q4, and record revenues, operational cash flow, and free cash flow generation in Q4. Our final driver for Q4 and year-end included stronger metal prices alongside increasing market recognition. Higher metal prices at the end of 2025 and into early 2026 have supported our strong performance. Avino Silver & Gold Mines Ltd.'s continued growth and strength in market recognition resulted in being named fifth among the top-performing companies on the Toronto Stock Exchange 2025 TSX 30. For the three years ended 06/30/2025, Avino Silver & Gold Mines Ltd.'s share price performance increased 610% and the market capitalization increased 778%. In addition to this, Avino Silver & Gold Mines Ltd. has been added to several ETFs: MarketVector's Junior Gold Miners Index and VanEck's Junior Gold Miners ETF, the GDXJ, Global X Silver Miners, and more. ETF inclusion signals institutional recognition while improving liquidity and expanding global investor access. These achievements demonstrate the meaningful progress made in advancing Avino Silver & Gold Mines Ltd.'s transformational growth strategy while reinforcing the company's investment case. Moving to Slide 6, we turn to our Q4 and year-end 2025 production results, which were released in mid-January and reflect steady operational performance. On this slide, we show our production results compared to Q4 and year-end 2024, with production remaining consistent at approximately 2,600,000 silver-equivalent ounces while total mill feed increased 14% year over year. On Slide 7, we highlighted production by operation, showing contributions from both Avino and La Preciosa for the year. We are particularly pleased to add just under 12,000 tons of La Preciosa material to our production results. At this time, I will now hand it over to Nathan Harte, Avino Silver & Gold Mines Ltd.'s CFO, to present a record financial performance for Q4 and year-end 2025. Nathan? Nathan Harte: Thank you, David, and thank you to all of you for taking the time to join us as we recap a record year with our financial and operating results for the fourth quarter and full year 2025. Here on Slide 8, we have an overview of some key financial and operating highlights, and our improved balance sheet, with the full table on the next slide. In the fourth quarter, we generated record revenues of over $30,000,000 and a further record of $92,000,000 for the full year, despite lower ounces sold. With higher silver production, the fourth quarter marks a return to primary silver with revenues of 54% being generated from silver in the quarter, with expectations of that to continue into 2026 and beyond. Gross profit was $17,800,000, and on a cash basis, $19,000,000 after removing non-cash expenses. The gross profit margin was 58% inclusive of the non-cash items and 62% excluding these items. This is significantly improved from the 43% margin in the fourth quarter of last year, as well as the 46% in the third quarter. Avino Silver & Gold Mines Ltd. earned its highest-ever earnings for Q4 and the full year 2025 with $10,500,000 in net income, or $0.06 per share, in the fourth quarter, beating last quarter's record of $7,700,000 and $0.05 per share. For the full year 2025, net income was $26,600,000, or $0.17 per share. Fourth quarter adjusted earnings were a record $16,300,000, or $0.10 per share, compared to $10,000,000, or $0.07 per share, in Q4 of last year. The 2025 full-year adjusted earnings were a record $46,500,000, or $0.29 per share, compared to $21,000,000, or $0.15 per share, in 2024. Operating cash flows and free cash flow both improved in the fourth quarter compared to last year as well as compared to the previous quarter. We generated operating cash flows before working capital adjustments of $19,000,000, or $0.12 per share. For the full year, Avino Silver & Gold Mines Ltd. generated $35,300,000 in operating cash flows, or $0.22 per share, with figures being quarterly and annual records. Fourth quarter free cash flow generation was $15,600,000, excluding La Preciosa development cost, and the annual free cash flow generation was just over $24,000,000. Moving to liquidity and treasury, our cash position was a record $102,000,000 at the end of the year and working capital was just shy of $100,000,000. Avino Silver & Gold Mines Ltd. has no secured debt other than leases on operating equipment at both Avino and La Preciosa mining operations. And coming to Slide 9, we see all other financial metrics for the fourth quarter and full year, as well as the year-over-year changes. As everyone can see, almost all categories saw meaningful increases. Highlighting again some of the key per-share metrics for the quarter where we saw $0.06 earnings per share and $0.10 on an adjusted earnings basis. Operating cash flows before working capital changes were $0.12 per share, and free cash flow generated excluding La Preciosa was $15,600,000, translating to $0.09 per share. For the year, net income was $0.17 per share, and adjusted earnings were $0.29 per share. Operating cash flows before working capital changes were $0.22 per share, and free cash flow was $0.16 per share, or $24,300,000. Here on Slide 10, we have an overview of operating results on a per-ounce and per-ton basis, as well as margins at our operations. Cash cost per silver-equivalent payable ounce for 2025 was $16.13, a 9% increase compared to $14.84 in 2024. All-in sustaining cash costs were $23.75 for the year, a 15% increase from $20.57 in 2024. On a per-ton basis, cash costs were $53.69, which was down 3% compared to $55.43 in 2024, and all-in cost per ton were flat compared to 2024, both years being around $78 per ton, demonstrating the consistency of our operation. Our mine operating income and margins for 2025 were significantly increased from 2024, with margins at 53% on the year and $48,500,000 in mine operating income generated, once again demonstrating the leverage producers have in this price environment. In the fourth quarter, we did see some increase in costs for a few reasons, one being the addition of processing La Preciosa development material. I do want to remind everyone that this is development material running through the mill. We are in a unique position that a lot of the development at La Preciosa is in ore and has allowed us to offset some of the costs associated with development work we would have had to do regardless. These costs for La Preciosa are not indicative of long-term cost per ounce and per ton expectations. However, at current metal prices, each ton of development material mined is being done so at a profit. Another item to highlight is that the movement in silver price did have an impact on our silver-equivalent payable ounce calculation, which did have an impact on our cash cost per ounce figures and all-in sustaining cost per ounce figures. Using prices from our forecast at the end of 2025 of $30 silver, $2,700 per ounce of gold, and $9,200 per ton of copper, our cash cost per ounce for the fourth quarter and full year would have come in at $16.50 and $15.17, respectively, in line with our expectations when we set out 2025. On an all-in sustaining cash cost basis, a similar story is told with the silver price impacting figures. Using the same budget prices, our all-in sustaining cost per silver-equivalent payable ounce was $26.68 for Q4. Our full-year 2025 figure would have been $22.43, once again more in line with expectations. We look forward to further economies of scale as La Preciosa begins contributing more and more to our overall production profile in 2026 and the coming years. Going back to the revenue side, here are our expectations for production by metal moving forward. Given the recent price movement in silver, we expect that the silver portion as it relates to revenues will be higher than the estimated production-by-metal figures shown here. In the fourth quarter, Avino Silver & Gold Mines Ltd. generated 54% of its revenues from silver, marking the first quarter with over 50% in silver revenues since we were operating the San Gonzalo mine prior to 2020, and delivering on our promise of a return to primary silver for our future. At this point, I will now turn it back over to David to run through upcoming activities. David Wolfin: Thanks, Nathan. As we summarize our key goals for 2026, our focus remains on strategic exploration and drilling to unlock the full potential of our resource base. This includes the integration of AI technology to enhance data analysis, improve target generation, and increase overall exploration efficiency. We are currently integrating our historical and ongoing geological data into AI-driven models to support the resource and reserve expansion and to identify new exploration opportunities. In 2026, we have planned approximately 30,000 meters of drilling, 15,000 meters allocated to each of the Avino and La Preciosa projects. We also look forward to releasing updated mineral resource estimates and announcing our inaugural mineral reserves at the end of the first half of the year. At La Preciosa, our goal is to reach a production rate of 500 tons per day. As outlined on Slide 13, I would like to again highlight the company's growth strategy. Within a 20-kilometer footprint, we have three key assets including the operating mill complex, which currently processes material from Avino and La Preciosa. We have access to water, power, and tailings storage, critical infrastructure that supports our ability to expand production efficiently. Collectively, our assets host 277,000,000 silver-equivalent ounces in the measured and indicated mineral resources and an additional 94,000,000 silver-equivalent ounces in the inferred mineral resources, providing a strong foundation for future growth. All of our operations are in the safe jurisdiction of Durango, in an area of rolling farmland with several small communities located near both the Avino and La Preciosa projects. We are proud to be one of the largest employers in this area, supported by a 100% Mexican workforce drawn largely from the surrounding communities. Alongside our operational growth initiatives, we continue to advance our CSR programs across both Avino and La Preciosa, supporting local communities and contributing to long-term social and economic development in the region. Our investor relations team is currently preparing the company's second annual sustainability report, which will be published on our website upon completion. The report is intended to provide transparency on how responsible mining practices, strong governance, and community engagement support Avino Silver & Gold Mines Ltd.'s operational performance and long-term growth. Avino Silver & Gold Mines Ltd.'s strong operating foundation supports our long-term growth strategy. As you can see on this slide, our goal is to scale up by 2029 through contributions from our three key assets. By leveraging our existing infrastructure assets and resource base, we believe we are well positioned to execute our growth plans efficiently and effectively. We concluded the quarter and the year with more record-breaking financial metrics, which reflect the strength of our strategy and the dedication of our team, both of which drive our success as we pursue the next phase of growth. On behalf of the leadership, thank you to our entire team for your efforts and contributions. With a clear growth strategy, a strong balance sheet, and significant resource potential across our assets, we believe Avino Silver & Gold Mines Ltd. is well positioned to create lasting value for our shareholders. We will now open for questions. Operator? Operator: Thank you. Ladies and gentlemen, at this time, we will be conducting a question-and-answer session. As a reminder, if you would like to ask a question, please press star then 1 on your telephone keypad. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question is coming from Heiko Ihle with H.C. Wainwright. Your line is live. Heiko Ihle: Hello, David and team. Thanks for taking my questions. So just thinking out loud here, there is obviously a newfound fear in the market. I am just trying to see what you think this will do to M&A opportunities. I mean, we have got silver at $85 and we have got gold just below $5,200. Are the opportunities that you are seeing offset by the fear in the market, or do you see discount rates being at a place where there might be interesting things out there? Just what are you seeing? Nathan Harte: Hey, Heiko. Nathan here. I will take that one. We always say this, but everything is for sale at the right price. I do not think the markets will generally dictate fully all the M&A moves in the industry. Given current prices and the discount rate environment, there is obviously some good stuff out there. But if we are looking at specifically how it affects us, we are focused on organic growth and what we already have. Heiko Ihle: Fair enough. Speaking of the things you already have, the price environment has changed markedly over the past three, six, twelve months. What are you seeing with labor costs, and should there be anything that we should change in our model compared to where we were a year ago? Nathan Harte: I will take this one again, Heiko. On labor cost, we saw a huge jump in 2024 and 2025. Obviously, the post-COVID inflation hit everyone in the mining industry. That has stabilized a little bit based on what we are seeing, but in a rising price environment, there is generally a little bit of cost creep, so we are doing our best to manage that. We are not expecting any material changes at this time. Heiko Ihle: Okay. So once we get the Q1 numbers, we can use those and trend-line them a bit. Nathan Harte: I would say that is fair. Thanks. Heiko Ihle: I will get back in queue. Thank you, guys. Nathan Harte: Thanks, Heiko. Operator: Our next question is coming from Jacob G. Sekelsky with Alliance Global Partners. Jacob G. Sekelsky: Hey, David, Nathan, and team. Thanks for taking my questions. Just looking at the strong balance sheet, I am curious if there are any levers you feel you might be able to pull in order to accelerate some of the planned work at La Preciosa. David Wolfin: We just ordered a new jumbo, so that is going to help. Basically, it is underground development work, so we are working on that. SRK Engineering is revising and looking at a larger mine plan. These are the things that we are looking at. Anything else? That is it, Jake. Jacob G. Sekelsky: Okay. That is helpful. And on that larger mine plan scenario, when do you think we might see some news on that front? Peter Latta: Hey, Jake. Peter here. We are evaluating a few different scenarios and we want to take our time with it because it is a volatile environment. We really want to evaluate a number of different options because we do have optionality with the deposit, with the size that it is, and how we integrate those two operations now, including how that dovetails with oxide tailings, that third leg in the stool. We are taking our time with that optimization. Jacob G. Sekelsky: Got it. Okay, that is all for me. Thanks again. Peter Latta: Thanks, Jake. Operator: Thank you. Our next question is coming from Richard Larson, who is an investor. Sir, your line is live. Richard Larson: Hello? My question is about your share count and your at-the-money. I realize silver prices have kind of struggled for fifteen years or so. It is tempting to issue shares to strengthen the balance sheet. Looking out two, three, four years, you could be doing 8,000,000 production at margins of $60 over kind of mine operating income. I am wondering what is your strategy on potential capital returns or at least minimizing the amount of share dilution? And how are you thinking about that on the balance sheet going forward? Nathan Harte: It is a fair question. Nathan Harte here. Shareholder returns are prevalent in the industry and it is a big discussion point at this time. We do have a few levers we are looking at and some things that are in the works. But at this time, we are focused on delivering the organic growth, and that will require capital. Having said that, the use of the ATM has really been as we have hit 52-week or all-time highs. Now, with a bit of a market pullback, we are staying put at this time. Richard Larson: Okay. Thank you. Appreciate it. Operator: Thank you. Our next question is coming from Joseph George Reagor with ROTH Capital Partners. Your line is live. Joseph George Reagor: Hey, David, Nate, and team. Thanks for taking my questions. Jake kind of touched on this already, but thinking about the fact you have over $100,000,000 on the balance sheet, and I realize you are going through options, is it fair to say that we can start assuming there will be some form of mill expansion coming within the next year or two? David Wolfin: Absolutely. That is a safe assumption, Joe. We are doing the work right now to figure out what is the appropriate size and whether it is at just Avino or if we build a new one, potentially both. We will let the market know once we have made some ideas and decisions on that. Joseph George Reagor: Okay. That is fair. As you think about the operating cost side, inflation has been putting a lot of pressure on everybody. Are there any optimization things that you can do to bring down operating costs, or given margins are where they are, is that not a huge focus? Nathan Harte: As you mentioned, inflation has hit the industry more so in previous years, not necessarily in the last year or so. As far as operating costs go, we are seeing fairly consistent operating costs. There is some volatility with diesel and gasoline prices, but on the labor side, we are seeing fairly stable increases as we reward our employees, but fairly stable overall. David Wolfin: The tonnage cost. Nathan Harte: Our cost per ton has been steady. The evidence is in our cost per ton year over year, and it is very steady. Joseph George Reagor: Can you remind us how much exposure you have to diesel prices? What percentage of cost is fuel? Nathan Harte: It is not overly high, unlike some fairly capital-intensive operations out there. We are not talking high double digits or anything like that. I would have to give you an exact number offline if you want, but in Mexico it is fairly subsidized by the government, and so prices do not get too out of whack. Joseph George Reagor: Fair enough. I will turn it over. Thanks, guys. Nathan Harte: Thanks, Joe. Operator: Thank you. Our next question is coming from Chen Lin with Lin Asset Management. Your line is live. Chen Lin: Thank you, David and Nathan, for taking my questions. A great year. Congratulations. I am just curious, because some of my questions already got answered. Do you see any chance, with the changing Mexico to a more pro-mining environment, that La Preciosa can potentially be an open pit, or are you going to continue the underground operation? David Wolfin: Thanks, Chen. That is one of the scenarios in the four scenarios we are looking at. Coeur did a feasibility study back in 2013, so it is outdated. We are revisiting that. Chen Lin: Okay. So if potentially Mexico opens for the open pit, what kind of impact would that have for your production outlook? Or would you need to upgrade your mill much more significantly? Nathan Harte: Chen, Nathan here. It is premature to put any numbers on it, but if anyone wants to have a look, that study is still available on SEDAR+. But yes, obviously it would be a lot of growth. Chen Lin: Okay. Great. Thank you. Operator: Thank you. If you have any further questions or comments, please. Okay. As we have no further questions in the queue at this time, I would like to hand back over to management for any closing remarks. David Wolfin: Thank you. It has been a year and a final quarter of record-breaking achievements, and we remain focused on executing our organic growth plan. We look forward to building on this momentum and delivering additional milestones and sustained growth for the Avino Silver & Gold Mines Ltd. shareholders. Thank you again for participating in our conference call. Have a great day. Operator: Thank you. Ladies and gentlemen, this does conclude today's conference, and you may disconnect your lines at this time. We thank you for your participation.
Operator: Thank you for standing by. This is the conference operator. Welcome to the Ballard Power Systems Inc. Fourth Quarter and Full Year 2025 Results Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. I would now like to turn the conference over to Sumit Kundu, Investor Relations. Please go ahead. Sumit Kundu: Thank you, operator, and good morning. Welcome to Ballard Power Systems Inc.'s fourth quarter and full year financial and operating results conference call. With us on today's call are Marty Neese, Ballard Power Systems Inc.'s CEO, and Kate Igbalode, Chief Financial Officer. We will be making forward-looking statements that are based on management's current expectations, beliefs, and assumptions concerning future events. Actual results could be materially different. Please refer to our annual information form and other public filings for our complete disclaimer-related information. I will now turn the call over to Marty. Marty Neese: Thank you, Sumit, and good morning, everyone. Today, I will review fourth quarter and full year results. Additionally, I would like to walk you through the structural changes underway at Ballard Power Systems Inc. and the foundations we are laying and building towards sustained positive cash flow over the next two years. Let me begin with last year's performance. I am pleased with our results in Q4 and across the full year. In 2025, we delivered record engine shipments, approaching 800 engines and more than 75 megawatts of power. That represents 38% growth in megawatts shipped compared to 2024. The majority of these shipments were into Europe and North America, with particularly strong activity in Canada. These shipments translated into full year revenue of $99 million-plus, up 43% year over year. We also secured our largest marine order to date, a 6.4-megawatt award from ECAP Marine and Samskip, and on Tuesday, announced our largest commercial agreement with New Flyer of 50 megawatts. But the real shift in 2025 was not just growth. It was structural progress toward our goal of becoming cash flow positive within the next two years. We have made decisive changes to align our cost structure with market realities and position Ballard Power Systems Inc. for durable, sustainable performance. We reduced our cash operating costs in Q4 by 41% compared to the same period last year, fundamentally resetting our cost base. We are now seeing the financial impact of that reset. In Q4, we achieved a positive 17% gross margin and a positive 5% for the full year, both representing meaningful improvement year over year. While quarterly performance is not yet ratable due to seasonality, the margin profile of the business is strengthening and is foundational for us to achieve our profitability goals. Most notably in Q4, we generated $11 million in cash flow from operating activities, which underscores our structural actions are working, and we are making measurable progress towards our profitability targets. With significant improvements in our cost structure and operating discipline, the next phase is clear: expanding revenue and gross margins. Our plan centers on five near-term focus areas: improving commercial terms, product cost reductions, enhanced fleet service offerings, expanding product reach, and business model innovations. Let me briefly touch on each. First, commercial terms. Throughout 2025, we strengthened our commercial foundation. Our newer agreements reflect more comprehensive pricing structures and balanced commercial terms, including protections against tariff exposure, exchange rates, inflation, and precious metal volatility. These changes improve transparency with our customers, enhance margin visibility, reduce earnings variability, and support stronger long-term partnerships. Our customers have been constructive in these discussions as they are navigating similar cost pressures with their customers. In some cases, finalizing these improved structures has shifted certain order announcements into 2026. But the result is higher quality agreements that better protect long-term value for both parties. A recent example is the commercial agreement with New Flyer, their largest commitment to Ballard Power Systems Inc. to date, covering 500 FCmove-HD+ engines, or 50 megawatts. This is an exciting opportunity to support New Flyer as more and more U.S. transit agency customers adopt fuel cell buses. Increasingly, these customers are understanding the value proposition offered by fuel cells, including superior range, especially in cold weather, and lower infrastructure costs related to charging infrastructure. We also expect additional activity in stationary and rail markets in the coming months. Our second focus area is product cost reduction through a holistic approach. We are systematically cost-reducing our products using three key levers: negotiations, execution, and innovation. Our supply chain and sourcing teams are securing and adding new alternative lower-cost suppliers, while our operations team continues to increase productivity and improve manufacturing process yields. We are also innovating in areas that increase performance, simplify our products, and design in more durable components. Nothing reflects this approach better than the FCmove SC. This platform achieves a 40% reduction in total part count while simultaneously improving power density, durability, and capability. Fewer parts translate directly into lower-cost materials, simplified assembly, and enhanced maintainability and serviceability. We are also advancing Project Forge, our high-volume bipolar plate automated manufacturing line, which is on track to begin serial production midyear. This line has fewer processing steps, higher volumes and throughput, improved quality, and process yields. Further, it combines enhanced in-line metrology and state-of-the-art automation, resulting in plate cost reductions of up to 70% at full volume. Together, these systemic approaches significantly improve our cost position, strengthen gross margin, and enhance the competitiveness of our products. Third, we are focused on leveraging our installed base through enhanced fleet services offerings enabled by product-level intelligence. We now have thousands of fuel cell engines operating globally, supported by a deeply experienced service organization and nearly 300 million kilometers of real-world operating experience. Every engine is equipped with a remote data unit, which transmits engine performance data. Each product is smart and adds to the collective intelligence of our installed fleet. Today, our smart engines provide a trove of performance data, enable preventive and customer maintenance, and insights into enhanced customer uptime. In the near future, additional insights will provide the foundation for prognostic and enhanced maintenance services, both co-located with our customers and from our remote operations center in Canada. This installed footprint creates a significant opportunity to expand recurring revenue under Ballard Fleet Services, including long-term service agreements, parts supply, technical support, operational monitoring, customer technician training, and ongoing stack servicing. Ever-increasing fleet intelligence and added services will provide performance benefits to our customers while expanding our fleet services business over time. This service-led approach increases revenue visibility, strengthens customer intimacy and retention, and adds a more stable recurring component to our business mix that scales with every unit and for years after initial delivery. Our installed base is becoming a compounding asset, supporting both customer success and sustained financial performance. We believe this is a significant source of long-term competitive advantage and differentiation, and we will continue to invest in our fleet services capabilities. Our fourth focus area is expanding in near-term markets. We are leveraging our technology platforms and durability expertise to expand into mature and rapidly growing market segments. One example is materials handling. This is a market where cost and durability are critical. By applying our technical and operating experience gained in heavy-duty applications, we have developed a stack that delivers superior total cost of ownership due to its longer lifetime. Another example is stationary power. We are increasingly focused on replacing diesel gensets and powering data centers. While PEM fuel cells have traditionally been positioned as backup solutions, we believe our technology can also support peak power and, in certain applications, even primary power where hydrogen supply is available. We have deployed solutions for a wide variety of off-grid, microgrid, high-uptime, and critical infrastructure applications. These have ranged from historical telecom backup installations to peak shaving and, more recently, to powering TV and film productions and very large construction sites. Our stationary power products have generated over 100,000 hours of power, which is nearly ten years equivalent of reliable service. This scalable, flexible power generation capability is now being deployed and evaluated for multi-megawatt data center applications in select target markets. Our engines provide clean, quiet, emissions-free power with very high reliability. These highly bankable features ease permitting and are welcomed in any jurisdiction. We look forward to continuing to advance our product offerings to address the growth in these exciting markets and will provide additional updates in the coming months. Finally, our fifth focus area is unlocking broader access to the hydrogen ecosystem. In addition to advancing our technology, we are innovating in commercial and operating models that lower both the financial and technical barriers to adoption. As customers evaluate hydrogen solutions, upfront capital costs, infrastructure complexity, and long-term performance risk remain key considerations. We are addressing these through flexible commercial and financial structures, service-based offerings, and partnerships which simplify integration and reduce risk. Innovative business models will provide our customers with complete solutions, including financing models that will allow a win-win value proposition and simplified development. As part of these solutions, we are offering extended warranties based on our proven durability and comprehensive service capabilities. As adoption becomes easier and more predictable, our addressable market expands, creating a virtuous cycle of scale, cost reduction, and growth, while at the same time improving the full-solution value we deliver for our customers. These five focus areas act as a one-two punch in tackling both the revenue and margin side of our cash flow equation, offering a realistic near-term path for achievement. Finally, let me close with a few thoughts. Over the past year, we have fundamentally strengthened the foundation of the business. We improved financial performance, reinforced our commercial discipline, delivered record volumes, reduced our cost structure, and expanded margins, all while navigating a complex market environment. We have a path to improve revenue and margins to build a business designed to generate sustainable positive cash flow within the next few years. With over $500 million of cash, and lower cash utilization, we have the additional flexibility to deploy capital strategically in support of this goal. With a well-managed cost structure, improving gross margins, and a focused execution plan, Ballard Power Systems Inc. is entering its next phase with greater financial and operational clarity. We are very grateful for our long-term customer relationships and are deeply committed to continuing to deliver more and more solutions of value to serve them. Core to our progress are the people of Ballard Power Systems Inc. I want to thank them for their dedication and professionalism. The improvements we delivered in 2025 are a direct reflection of their expertise and commitment. We are confident in the path ahead, and we are committed to deliver fuel cell power for a sustainable planet. With that, I will now pass the call over to Kate to review the detailed financials. Kate Igbalode: Thank you, Marty. 2025 delivered strong financial performance across revenue, margin, and cost structure. As Marty highlighted, fourth quarter revenue was approximately $34 million, up 37% year over year. Full year revenue exceeded $99 million, up 43% from 2024, based primarily on record engine sales approaching 800 units, or over 75 megawatts of delivered power. Our Q4 gross margin improved to 17%, a 30-point increase year over year. Our full year gross margin was positive 5%, up 37 points from 2024. The improvement in gross margin in 2025 as compared to 2024 is due primarily to a decline in onerous contract provisions, product cost reduction initiatives taking hold, and lower manufacturing overhead costs as a result of the global corporate restructuring. Total operating expenses for the full year were approximately $109 million, 32% lower than the previous year due to the rightsizing of our cost structure. This was at the middle of our guidance range, which was between $100 million and $120 million. If we exclude restructuring and related expenses of $23 million, our total operating expenses in 2025 would have been approximately $86 million, below the lower end of the guidance range. In 2026, we expect total operating expenses to range between $65 million and $75 million. Our total capital expenditures in 2025 were $10.2 million, at the midrange of our revised outlook between $8 million and $12 million. In 2026, we expect capital expenditures to moderate further and be between $5 million and $10 million. As Marty highlighted, we are absolutely thrilled with the cash flow progress we have achieved in the fourth quarter. While we have cyclicality in our revenue and do not expect this type of performance to be ratable yet, this is a huge milestone for us. Even more impressive is that this was achieved with nearly all of our revenue from fuel cell product sales. Another huge highlight is that our cash usage for the full year of 2025 was down nearly 50% from 2024, underpinning the improved foundation and financial stability of the organization. We ended the year with nearly $530 million in cash, up $1.4 million from Q3, no bank debt, and no near- or mid-term financing requirements. As we have emphasized on this call and on previous calls, we remain steadfast on disciplined spending, growing our top line revenue, expanding our margins, and maintaining our financial health. With that, I will turn the call over to the operator for questions. Operator: Thank you. We will now open for questions. The first question comes from Baltic Dejo with National Bank of Canada. Please go ahead. Baltic Dejo: Good morning, and thanks for taking my questions. So just on the restructuring side, as you alluded to in the prepared remarks, 2025 OpEx would have been around $86 million, and the midpoint of your guide would imply another $16 million of reduction relative to that. So would you say that the large items have been harvested? And just as a follow-up on that, what are the key drivers of the incremental cost contraction? Kate Igbalode: Thanks for the question, Baltic. So I think that if we are looking at the year-over-year changes, we do not anticipate any additional major restructuring that we saw in 2025 or 2024 to be in the cards for 2026. So I think that the midpoint of our guidance range is a reasonable expectation for our overall cost structure in 2026. And if you could just repeat and clarify the second part of your question, that would be helpful. Baltic Dejo: Yes, just the cost drivers of the incremental contraction. And the first part was are the large items already been harvested, which I think you have touched on? Kate Igbalode: Yes, I would say that they have been, and I would say that the key pieces that we are focusing on, I think that we have really right-sized our overall cost structure at an organizational level. And now it is continuing to drive cost out of our products through additional innovation initiatives, manufacturing efficiencies, and product scaling. So I think you are going to start to see cost reduction show up more on the product side relative to the overall OpEx side. I do not know if you have any other comments on that, Marty. Marty Neese: I would just say that it is really a combination of looking for every penny structurally from the bottom up of the company. Essentially in 2025, kind of a zero-based budgeting approach and re-baseline everything we spend money on. And so that work is starting to pay off in our structural approach, specifically around some of the operating expenses that are variable in nature. Baltic Dejo: That is great color. Thank you. And just one more if I may. Just with these magnitude of reductions, there are always trade-offs in scope prioritization or the pace for it. These actions materially altered your R&D roadmap or the timing of the mission of key initiatives just as you aim to accelerate now? Value from your bus vertical as evidenced with the announcement a few days back. Marty Neese: Materially, we have taken the approach that we are leveraging our product portfolio and prior investments to get as much out of them as we can. So you think about material handling, we had a very long history of material handling and we extended our know-how in that segment to create a new product that we are getting very good feedback that that extended durability product is going to be well received. A similar approach can be taken when you think about heavy-duty applications that can be used for stationary power, if you will. Some of our prior investments in heavy-duty applications can be transferred, if you will, from, let us say, a heavy-duty trucking environment, and the core technology is extensible to a stationary power application when packaging is done differently or configurations are done differently. So that is a way to say the R&D is more focused on how to extract as much value as possible from innovations that have already been materially realized and have been reduced to practice. The longer-term innovations is a different aspect, and I would put that as more in the three- to five-year kind of range of outlook before we need to do something significantly different in our approach. We have a good runway of product portfolio and existing innovations that we can commercialize, and we are getting really, really strong feedback that these products are going to hit the market well. Baltic Dejo: Thanks. Great color. I will leave it there and turn over the line. Thank you. The next question comes from Rob Brown with Lake Street Capital Markets. Please go ahead. Robert Duncan Brown: Good morning. Just wanted to follow up on the New Flyer contract. Great news there. What is the sort of duration of that contract or potential? And how do you see that ramping? Marty Neese: The contract itself is for 500 units, and we are not discussing the duration of the contract. We are more focused on the actual megawatts and unit volumes. And then, of course, we have a long-standing partnership and relationship with New Flyer. It is not really predicated on a quarter here or a quarter there. We have flexibility to work strategically with them to realize their growth ambitions as well as our own, and that is the way we have characterized the relationship. Realize that also includes a long-term service tail that goes with everything we are doing. So that is part of the compounding set of assets. The bigger the New Flyer fleet gets, the more that service tail grows, and the deeper we get in the relationship with them, which is proving to be extraordinarily helpful and valuable for both of us. Robert Duncan Brown: Okay. Great. Okay. That is good color and helps you—I mean, that visibility helps you plan your operations, I am sure. And then second, on the stationary market, how much of a kind of new product portfolio do you need to enter that market? Or can you take what you have and really expand there? And maybe a sense of just the opportunity in the stationary market at this point for you? Marty Neese: Yes, I will just say it in general. We have an XD product, and that XD product and HD products that preceded it or are in conjunction with it—both of those products can address the stationary market, depending on how they are configured and packaged. So really the work is the configuration and packaging. When I say packaging, it is the arraying of multiple engines to do different quantums of work, if you will. Whether that is a single unit that is for a mobile diesel genset replacement or whether that is an array of units that is scaled up to 20-plus megawatts, up to 50 megawatts. The packaging and the numbering up of those core engines, that HD or XD capability, is really being well received. At the same time, we are also making additional innovations so that we can get more kilowatts out of each one of those stacks. So think of that as, if you could imagine getting from 100 kilowatts to 120 kilowatts, up to 135 or 150 kilowatts per engine, and then numbering that up. So that helps drive both performance and cost down and starts making the numbering up more and more attractive from a total cost of ownership and deployment level. Robert Duncan Brown: Okay, great. Thanks for the color. Congrats on all the progress. I will turn it over. Operator: The next question comes from Dushyant Ailani with Jefferies. Please go ahead. Dushyant Ailani: Hi. Thank you for taking my question. I just wanted to touch on one piece real quick. I wanted to dig in on stationary, if that is okay. Could you maybe talk a little bit more in terms of the opportunities, the timing that you are seeing, and also how does the XD and HD compare with other competing offerings that you are seeing or the conversations that you are having with your customers? Marty Neese: Yes. So let us see if we can unpack that a little bit. So the stationary power market—known to all on this call for sure—everyone understands the time-to-power mandate, if you will. So when you see constraints in the global landscape of where data centers are being promulgated, there is a very strong opportunity for us to have a ready-now product to address those needs for power now. So we are seeing more and more interest in that regard. And when I think of that, that is really supporting a thesis along the behind-the-meter side of things in stationary power for now. And then over time, as constraints ameliorate, you might see those transition from behind the meter to be grid-connected, but this is seven to ten years from now. So there is a very strong value proposition for our fuel cells to help solve that time to power if packaged and arrayed correctly. At the same time, our costs and the products were designed to go into largely heavy-duty trucking. So if you can compete at the engine level in heavy-duty trucking, it suggests a very strong capability on a cost-per-kilowatt basis relative to other solutions that are out there that are not PEM fuel cells, but maybe other kinds of fuel cells. And on a cost per kilowatt or a total installed cost of ownership, we feel like we have got a really good value proposition emerging, which will help significantly address the market. Dushyant Ailani: Understood. Thank you. I will turn it over. Operator: The next question comes from Jeffrey David Osborne with TD Cowen. Please go ahead. Jeffrey David Osborne: Thank you. Good morning. Kate, maybe for you. I saw that the year should be back-end loaded, but any hints on the first half versus the second half relative to the makeup of 2025, or sequentially how we should think about Q1 versus a year ago or the prior quarter? Kate Igbalode: I think, as we have discussed and we have seen historically, a 40/60 split H1/H2 is a reasonable expectation for 2026. And I think, as Marty commented in his remarks, we are also really looking into how we can further level-load and smooth out our quarter-over-quarter variability and seasonality across the board in terms of operations, our cost structure, etc. But I think a reasonable planning assumption for this year would be that 40/60 split. Jeffrey David Osborne: That is helpful. Thank you. Marty, maybe for you, just with the refined focus that you have had—you have highlighted stationary this time around, a couple of analysts have asked about that—but if you look back prior to you joining Ballard Power Systems Inc., I think FCWave, ClearGen 2, you had a test with Vertiv and others. Can you just further elaborate on what is so unique about the XD and HD combined with new packaging relative to Ballard Power Systems Inc.'s—I do not want to say failed attempts, but challenged attempts—four or five, six years ago in the stationary power market? I am just trying to understand what is new in light of, at least in many parts of the world, hydrogen availability is still challenged. Marty Neese: Yes. So if you historically rewind the clock a little bit, you have to think about the product wins that we had in 2023, 2024 that were more scaled products like the ones you referenced. Those would have been conceived in the 2020, 2021 timeframe. All of this is the pre-ChatGPT moment. So everything went vertical once the AI moment happened. So the products that we designed prior to the AI boom, if you will, were more designed for off-grid, for microgrids, for island power, things of that nature. And the customers at the time had perspectives that they were doing very similar types of products: “Hey, can we do a one-megawatt microgrid to be deployed in an island-type application?” Things have changed. That is not what the customers want today. So we have had a number of workshops—and I say multi-day workshops with large technical team engagement—with customers who are serving hyperscalers and others, and we are getting a much clearer view of what people care about today and what our product needs to enable. And I have already alluded to a significant portion of it, which is not surprising. It has got to be speed and cost. And speed and cost are front and center with what we are doing. And that is unlocking a significant amount of interest and, taken together with the bridge power requirements that are out there with some of the gap in the market, with some of the delays and constraints and bottlenecks across the AI landscape. It is power that is the problem, as everyone on the call knows, of where the stationary market is going. So we have a role to play in that. We do not know exactly what size or what quantum or what level, but we definitely have a product that meets the market and we will have a role to play in that. And then we have to fight for our share after that based on delivered performance and delivered cost and the ability to really listen deeply to what the customer cares about and package a solution that meets what they want, more capably than the examples you provided from 2021, 2022, and the pre-ChatGPT moment, if you will. Jeffrey David Osborne: Got it. Maybe just one quick follow-up on that. Would the focus be on Europe and Canada, given greater availability of hydrogen as a fuel relative to natural gas? I am just trying to understand where the commercialization efforts would be placed. Marty Neese: Yes, that stands to reason. Those are our home markets. And the number of products or projects progressing to FID—I think the Hydrogen Council referenced some $35 billion in year-over-year projects advancing to FID. All of those projects cannot just feed the refinery business or the industrial application. They are keenly looking for offtake partners such as the kinds of partners that would be associated with integrating fuel cell power or others with data centers of all stripes. Operator: This concludes the question-and-answer session. I would like to turn the conference back over to Marty for any closing remarks. Please go ahead. Marty Neese: Thank you for joining us today. It has been a pleasure speaking with all of you. Kate, Sumit, and I look forward to speaking with you next quarter, and thanks again, everyone. Operator: This brings to a close today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.
Operator: Good morning, ladies and gentlemen, and welcome to the Lifetime Brands, Inc. fourth quarter 2025 earnings conference call. At this time, I would like to inform all participants that their lines will be in a listen-only mode. After the speakers' remarks, there will be a question-and-answer portion of the call. If you would like to ask a question during this time, please press star and 1 on your touch-tone telephone. Please also note today's event is being recorded. At this time, I would like to introduce our host for today's conference, Jamie Kirchen. Mr. Kirchen, you may go ahead. Jamie Kirchen: Good morning, and thank you for joining Lifetime Brands, Inc. fourth quarter 2025 earnings call. With us today from management are Rob Kay, Chief Executive Officer, and Laurence Winoker, Chief Financial Officer. Before we begin the call, I would like to remind you that our remarks this morning may contain forward-looking statements that relate to the future of the company, and these statements are intended to qualify for the safe harbor protection from liability established by the Private Securities Litigation Reform Act. Any such statements are not guarantees of future performance, and factors that could influence our results are highlighted in our earnings release. Other factors are contained in our filings with the Securities and Exchange Commission. Such statements are based upon information available to the company as of the date hereof, and are subject to change for future development. Except as required by law, the company does not undertake any obligation to update such statements. Our remarks this morning and in our earnings release also contain non-GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission. Included in such release is a reconciliation of these non-GAAP financial measures with the comparable financial measures calculated in accordance with GAAP. With that introduction, I will now turn the call over to Rob Kay. Please go ahead, Rob. Rob Kay: Thank you, and good morning. A year ago, we entered 2025 knowing it would be a challenging year. What we did not fully anticipate was just how dynamic the external environment would become. The tariff escalations, retail customer disruption, consumers' reactions, and the operational demands were all significant. And yet, when I look at where we stand today, I am proud of how our team performed and where we finished the year. Let me walk you through the key dynamics that shaped both the fourth quarter and the full year and the decisions we made, including those that carried short-term costs, and why they were right for our business. Overall, what drove Lifetime Brands, Inc.'s 2025 performance was the macro environment largely shaped by U.S. tariff actions and the market's reaction to them. The biggest impact of this was the second quarter implementation of 145% tariffs on goods sourced from China following the Liberation Day tariffs implemented on many countries throughout the globe. This resulted in wide-scale disruption and in some cases cancellation of orders for our products, both by our customers and internally by Lifetime Brands, Inc., as the immediacy of the implementation would have resulted in selling products at a loss. As the year progressed, and some stability was introduced on tariff rates, Lifetime Brands, Inc. was a first mover in implementing price increases across all our channels to offset the tariff cost. While this initially hurt our volumes, as we were selling our products at a higher price than most of our competition, the market eventually caught up and pricing parity was restored. However, Lifetime Brands, Inc. benefited from enhanced profitability due to the price increases, which led to improved performance relative to the overall market and many of our peers. In particular, we note that bottom line results showed positive year-over-year growth by 2025. Contributing to this performance was our pricing strategy, a comprehensive cost efficiency and reduction program, and improved results in our international business. First, as we told you earlier in the year, the impact of the 145% tariffs on China-sourced product was significant. It negatively impacted shipments in the second quarter and flowed into disruption in the third. We specifically called out that some of that deferred volume would come back in 2025 with a fuller normalization expected in 2026. As you can see, we benefited in the current quarter with some resumption in shipment levels from missed second quarter shipments, particularly in tabletop and kitchenware. The most visible example is Costco, our largest year-over-year decline in any single customer through September. They pulled back sharply on tabletop programs as tariff uncertainty peaked. But as conditions stabilized, a portion of those programs shipped in the fourth quarter, and we performed very well with Costco in Q4. That recovery was a meaningful contributor to our strong finish. The second major factor driving performance was Lifetime Brands, Inc.'s decision to move first on pricing to offset tariff costs. We did not wait to see what the market would do. We built a detailed plan with each of our customers, communicating the rationale clearly, and implementing the increases. As I mentioned above, there were short-term consequences. In the third quarter, we were priced higher than the market, and that created some volume headwinds. A portion of our shelf performance suffered while competitors had not yet moved. But by the fourth quarter, the market had largely caught up. Pricing parity had returned across all our categories. And because we had been selling at higher prices earlier than most, we captured better margins during that window. If you look at our results, particularly the bottom line, you can see that clearly. We had a modest outperformance on the top line, but we significantly exceeded expectations on the bottom line. Our first mover pricing decision was a key contributor to that outcome. The third element of our Q4 performance was cost discipline. Variable costs naturally flex with volume, but we also took deliberate action on our cost structure throughout the year. We streamlined infrastructure, and SG&A came in at $38 million in Q4, down 12% versus the prior year quarter. That is a meaningful reduction, and it reflects real work done on the cost base. Combined, these three factors drove a strong quarter and finish to the year. The fourth quarter came in ahead of expectations, and I think the results speak to the strategy working. Revenue was modestly below prior year, which we anticipated, but margins expanded and the bottom line was strong. Laurence will take you through the detail in a moment. While the year was challenging due to tariffs, we took the decisive actions I have discussed to mitigate their effects. Given the circumstances, we performed well, as evidenced by our results. In the fourth quarter, adjusted income from operations was up over 30% from the prior year quarter and full-year adjusted EBITDA was over $50 million despite a 5% decline in net sales. We continue to experience positives from our investment in new product development. The DALL E brand grew to approximately $18 million for the year, an increase of over 150%, a great reflection on where the strategy is gaining traction. We are encouraged by the trajectory heading into 2026. Our International segment continued to demonstrate resilience. For the full year, International sales came in at $56.7 million, up 1.7% as reported. On a constant currency basis, International was down modestly at 17%. A solid result given the backdrop, particularly as we gained share in national accounts in light of a continued decline in independent shops, which historically have been the core of the European customer base. On Project CONCORD, our international restructuring initiative, we made continued progress throughout the year and the financial benefits are flowing through. That said, I want to be transparent. The final phase of CONCORD implementation was delayed modestly due to legal and structural constraints that took longer than anticipated to work through. We expect those to be fully resolved and implemented in the first half 2026. The direction here remains clear, and we remain committed to completing CONCORD and realizing the full benefits of the program. As announced early last year, we also took deliberate action on our distribution infrastructure, announcing the relocation of our East Coast distribution center to Hagerstown, Maryland. The facility will span approximately 1,000,000 square feet, adding 327,000 square feet of incremental capacity over our current New Jersey facility, which it will replace and is expected to commence operations in 2026. This move is consistent with how we approach the business, identifying where we can drive long-term efficiency and positioning Lifetime Brands, Inc.'s operations to support our multiyear growth initiatives while significantly containing Lifetime Brands, Inc.'s future distribution expenses. As we enter 2026, we do so with momentum, a leaner cost structure, and a clearer sense of where the opportunities are. On guidance, consistent with our historical cadence, we intend to provide detailed full-year 2026 guidance in conjunction with our first quarter results in mid-May. At that point, we will have a clearer line of sight into the year and can speak to it with the specificity you deserve. What I can tell you now is that recovering sustainable top line growth is the priority. We have done the work on the cost base and proven we can protect margins. Now the focus shifts to driving volume through our existing customer relationships, through the brands and product lines that are gaining traction, and through the pipeline of strategic activity that we continue to develop. Finally, I want to acknowledge that this type of year—navigating real disruption while delivering results that exceeded where we started—does not happen without an exceptional team. I am grateful for everyone at Lifetime Brands, Inc. who stayed focused, executed under pressure, and kept our commitments to customers and shareholders alike. With that, I will turn the call over to Laurence to review the financials in more detail. Laurence Winoker: Thanks, Rob. As we reported this morning, net income for 2025 was $18.2 million, or $0.83 per diluted share, compared to $8.9 million, or $0.41 per diluted share, in 2024. Adjusted net income was $23 million for the fourth quarter, or $1.05 per diluted share, as compared to $12 million, or $0.55 per diluted share, in 2024. Income from operations was $20 million for 2025 as compared to $15.5 million in 2024. And adjusted income from operations for the fourth quarter 2025 was $26.4 million compared to $20.2 million in 2024. Adjusted EBITDA for the full year 2025 was $50.8 million. Adjusted net income, adjusted income from operations, and adjusted EBITDA are non-GAAP measures, which are reconciled to our GAAP financial measures in the earnings release. The following comments are for 2025 and 2024, unless stated otherwise. Consolidated sales decreased 5.2% to $204.1 million. U.S. segment sales decreased 5.5% to $185.3 million. Sales were favorably impacted by the increase in selling prices to mitigate the impact of higher tariffs on foreign-sourced products. However, retailers' buying disruption and consumers' dampened spending reaction to the high tariff environment dampened demand in our industry. Within this segment, product line decreases were in kitchenware and home solutions, partially offset by an increase in tableware. International segment sales decreased 2.3% to $18.8 million, and excluding the impact of foreign exchange translation, the decrease was $1.4 million, or 6.8%. The decrease came from the U.K. e-commerce. Gross margin increased to 38.6% from 37.7%. U.S. segment gross margin increased to 38.8% from 37.6%. The improvement was driven by lower ocean freight rates, some favorable product mix, and the timing of inventory cost recognized under FIFO inventory accounting. These factors more than offset the adverse effects of tariffs in the current quarter. For International, gross margin decreased to 30.8% from 38.6%, driven by higher customer support spending in the current period. U.S. segment distribution expenses as a percent of goods shipped from its warehouses was 8.3% versus 9.1%. The decrease was attributable to improved labor management efficiencies largely resulting from the fully implemented new warehouse management system in our West Coast facility and the effect of higher tariff-induced selling prices without a commensurate increase in expenses. International segment distribution expenses as a percentage of goods shipped from its warehouses was 19.8% versus 18.1%. The increase is due to higher sales to prepaid freight customers and the expansion of sales into the Asia-Pacific region. Selling, general, and administrative expenses decreased by 12% to $38 million. U.S. segment expenses decreased by $3.2 million to $29.6 million. As a percentage of net sales, the expense decreased to 16% from 16.7%. The decrease was driven by lower employee expenses, including incentive compensation. International SG&A decreased $1.5 million to $3.1 million. As a percentage of net sales, the expense decreased to 16.7% versus 24.2% due to lower advertising expenses as well as foreign currency transaction gains. Unallocated corporate expense decreased $500,000 to $5.2 million due to lower employee expenses, also including incentive compensation, partially offset by higher professional fees. Interest expense decreased by $600,000 due to lower average borrowings and lower interest rates on our variable-rate debt. For income taxes, the benefit rate is primarily driven by the release of a valuation allowance against deferred tax assets reported in the second quarter. Looking at our debt and liquidity, our balance sheet continues to be strong, notwithstanding the higher working capital needs that resulted from tariffs. At year-end, our liquidity was $76.6 million, which includes cash, plus availability under our credit facility and receivable purchase agreement. And our adjusted EBITDA to net debt ratio at year-end was 2.9 times. Lastly, as Rob discussed, the relocation of our East Coast distribution center is expected to begin operating in the second quarter, and I will add that the costs of exiting the New Jersey facility and starting up the Maryland facility, including capital expenditures, are expected to be at or below our forecast. This concludes our prepared comments. Operator, please open the line for questions. Operator: Thank you. We will now begin to conduct our question-and-answer session. If you would like to ask a question, please press star and 1. A confirmation tone will indicate that your line is in the question queue. You may press star and 2 if you would like to remove your question from the queue. It may be necessary to pick up your handset before pressing the star keys to ensure the best sound quality. One moment while we poll for questions. Our first question today comes from Matt Caranda from Roth Capital. Please go ahead with your question. Matt Caranda: Hey, guys. Good morning. I know you do not typically give full-year official guidance until the first quarter, but I would like to hear a little bit more about building blocks for growth in 2026. I know you said you intend to grow in the year. Maybe you could just talk about some of the puts and takes around the price that you took in 2025 that sort of wraps into 2026, new product launches, existing growth with some of the successful lines like Dolly. I guess some of those are maybe a little bit offset by volume declines more recently, but just how do you think about those factors qualitatively as we kind of think about the forecast for 2026? And any commentary on seasonality this year would be appreciated as well. Rob Kay: I mean, from a seasonality perspective, we are expecting more of a normal seasonality. There were disruptions in 2025 that were tariff-oriented, which put a total curve on normal seasonality. So I think we do not expect it to not normalize in 2026. Some of the things you mentioned—pricing increases, which is kind of a one-time event—happened throughout 2025. So the impact of those will be fully felt because they were fully implemented in 2025. So you get the full impact of that in 2026, which, of course, the caveat is who knows what is going to happen. From a new product introduction, I know that we have been introducing a much greater amount of new product than a lot of competition just because times are tough and a lot of people are paring back. But a couple of areas we are seeing good traction. One, we talked about the Dolly brand. That is actually expanding beyond the dollar channel where we have firm commitments. And while we had tremendous growth in 2025, we expect that trajectory to continue in 2026. So we see some good growth there. Our food service initiative—that is a business where you have to build a book of business, and then it becomes a bit of an annuity for a period of time. And particularly, Mikasa Hospitality has gained a lot of traction. So, while a small base, we expect substantial increase in those revenues in 2026. The end market in 2025 for food service establishments was very challenged. You saw new store openings decline. You saw franchises and the like, store closings throughout a lot of multiunit. Unknown where that heads in 2026. The industry thinks it will go up, but nonetheless, we have gained market share and, not end-market driven, we will see some nice growth in that area in 2026. So those are some of the key drivers. Hopefully that gives you some perspective there. Matt Caranda: Yeah, that is helpful. Thanks, Rob. We wanted to also hear a little bit about what you are hearing from your large retail customers in terms of willingness to take on inventory. What does sell-through look like or POS data that you are seeing in kind of your key SKUs versus sell-in? And how are you thinking about that for 2026? Rob Kay: We have seen a pretty large divergence from channel to channel, with certain channels performing very strong from a POS perspective, and certain ones being weaker. We saw a continuing trend in the fourth quarter that we have seen over the last couple of years, that there has been an uptick in e-commerce. So the holiday season continued the trend that we saw in 2024 where a lot of consumers waited to make their purchases from historical purchase cycles because they knew they could get delivery rather quickly, and that helped e-commerce in the fourth quarter, therefore drove full-year performance. So that trend should continue. But there is high bifurcation. From the perspective of what you see from time to time, particularly with larger retailers, and we saw some of this in 2025, they pull back on safety stock issues. So there is a divergence between sell-in and sell-through. We saw some of that in 2025. We do not expect that to be a major impact in 2026. And part of that is some of the people that have done that have pared back a lot, and if they pared back more, they would harm their sell-through, their velocity, which is obviously not in their interest to do so. So we do not expect that to be a factor in 2026. Matt Caranda: Okay. Very helpful. And then maybe just one more if I could. The net leverage at the end of the year looks good, under 4x. I wanted to just hear how you guys are thinking about cash priorities this year. Obviously, you have a lot of organic growth initiatives in place. But then you have the European restructuring that is still maybe ongoing or maybe just recently implemented. How do you balance the organic investments that you need to make versus the M&A funnel versus buying back your stock? Just wanted to hear a little bit about sort of capital allocation decision-making for 2026. Rob Kay: So there is actually a lot of internal growth initiatives that we are pursuing, but they are not capital intensive, except for the DC, which we have already—there is not too much on the come for that. And we also will get the benefit of the $13 million of the government funding, mostly from Maryland. That will offset. So not really any issue and any constraints there, and plenty of availability. We have no intention to change anything on our dividend, our dividend policy. We will look to ultimately restructure our debt arrangements because at this point, in terms of life of that, we are not in the ability to buy back stock, so we are not using cash at this point to do that because we have agreements with our lenders in place. But we will ultimately restructure that and allow us to do so when we do that. And the M&A environment is the strongest I have seen in decades for strategic because, first of all, financials are investing. So our competition for a longest time has been financials at very, very high valuations. So valuations have been down. But a lot of businesses that are institutionally owned, there is something that needs a larger company or infrastructure help. To move product from a China-based system to a distributed geography, you need a lot of infrastructure to do that, both from a supply chain and quality. It takes a lot of effort and work. And with the fluctuations of moving it all over the place, a lot of smaller, less capitalized people are having troubles, let alone the systems and everything to deal with the constant pricing fluctuations as tariffs change and evolve. So that combination has made it very attractive. So we are seeing real deal flow at real valuations that we have not seen literally in decades. So we have some large opportunities we are looking at. You do not know if they will come through, but it is one of the things that we wrote off on a couple of things that we are working—not wrote off, but expensed in the fourth quarter—related to that. And we will see some highly accretive opportunities if we can execute. Matt Caranda: Okay. Sounds great. Appreciate all the detail, and I will turn it over. Operator: Next question comes from Brian McNamara from Canaccord Genuity. Please go ahead with your question. Brian McNamara: Hey. Good morning, guys. Thanks for taking the questions. So this is your best Q4 EBITDA margin that we can recall with sales down, even better than 2020 and 2021 when sales were up. So gross margins were nicely up, presumably from the benefit of tariff pricing. But I am curious what drove SG&A lower and how sustainable that is? Rob Kay: Yes, it is a great question, Brian. So it is sustainable. It is all a function of how fast we want to grow. And if we have opportunities and there is a good return on that, we can increase investment, which would increase your infrastructure and SG&A, but with a return. So in the current state of the business, with what we have on the plate, including the growth we intend for 2026, there is not a need for investing in SG&A. We will also see the further benefits one way or the other with our international operations, which will continue to benefit those line items. Laurence Winoker: Brian, let me just—Rob's going to give me something on his U.S. gross margins, the comment I made about the FIFO inventory. We had talked about how we were increasing our sales price to offset the tariff, which should have a negative effect on the gross margin percentage, neutral to dollars. But because we still have some pre-tariff inventory, we are seeing some benefit there. But that is not going to continue. As that rolls off, it will come back a bit. Rob Kay: Right. Just wanted to—sorry to belabor—but as you know, Brian, you have seen us for a little bit. In any given, particularly quarter reporting period, you are going to get margin fluctuations based upon mix—channel mix particularly, but also product. Brian McNamara: Understood. So next I am curious, which of your brands saw sales increases in 2025? Outside of Dolly, as overall sales decline for a fourth straight year, what gives you guys confidence that the top line inflects this year? Rob Kay: The main confidence that we see there is the disruptions that we saw in 2025. And again, in the fourth quarter, we got some rebound of things that did not ship from Q2 and Q3, but we will have a much more normalization in a lot of the core business in 2026 because some of that did not come back in 2025 and will in 2026. So that is going to be a natural driver for our business. We talked about Dolly will continue to grow. We are seeing good traction there. In cutlery, we have had a tremendous run for a few years, and a lot of that is new product implementation. Our Build to Board line went from nothing; it created a whole marketplace. The growth trajectory of that piece of cutlery will not continue from the trajectory of growth, but we established a new business, and we will maintain. And there are some other things in that line that we are introducing that, hopefully, will produce some good growth. There are some things we have not disclosed that are new that get us into a new space totally, or internal investment that hopefully will hit 2026. If not, it will hit 2027. But, unfortunately, I cannot disclose that at this moment, but there are some things that are total organic internal initiatives that are completely new that hopefully will drive some nice growth for us. Brian McNamara: Great. And then just on the brand growth for the year, any brands perform better than the company average? Rob Kay: Yeah. So, I mean, Taylor had a phenomenal year. Taylor is a great business. From the retailer to our customers' perspective, it is very attractive to them because what they track generally as a key metric, which is the velocity and the margins that they make, it is very profitable for them. It is very good, and it had a very good year across the board in 2025. Again, that trajectory will not continue in 2026, but we had a banner year, and that continues to do well. Farberware, across different things, very strong, and Farberware is our growth engine. KitchenAid, we lost some share a couple of years ago at Walmart. That has run through our numbers. We sold some of that that hit us in 2025, so that is actually the opportunities, and we relaunched the kitchen tool piece of that with a new line that is getting tremendous traction. And we also introduced just recently for 2026 a KitchenAid storage product, which we think is beautiful, but is getting, more importantly, acceptance in the marketplace. So that, not in 2025, but 2026 is looking pretty good—KitchenAid. Brian McNamara: Great. And you mentioned the Dolly brand—obviously sales up really nicely, up 150% for the year. How big is that now? And what is your expectation for sales growth contribution or shipments in 2026? Rob Kay: In 2024, we started that program. It was a small base. So part of that 150% was off a small base. We shipped $18 million in 2025. We will have substantial growth in 2026 as well. Brian McNamara: Got it. Okay. And then finally, obviously, topical given the war in Iran at the moment. Can you remind us how you are positioned on freight in terms of spot versus contract, your cost exposure to oil and resin, anything else we should be mindful of there? Rob Kay: There are so many questions—it may take an hour to answer. But a couple of things on that front. What we are seeing is container rates are starting to go up, and we will probably start to experience that. We have very attractive long-term contracting for freight. But the reality of what happens in very high escalating periods is the shippers start to ignore those, to be honest. So long-term contracts are a benefit, but sometimes there is only so much that you can benefit, and you will get some of it, but not all of it, in very high inflationary ocean freight environments. We do very little business in the Mideast. We will not get much disruption there. We will get no disruption. We actually have a lot of upside that may not come on some new business, but either way, it is not material. Our European business is in jeopardy of seeing some supply disruption because the shipments are coming in a different— it is going to be longer if they have to go around Africa and the like. But we think our inventory levels are not going to impact that. And from a cost of goods sold perspective, your plastics have resins. Resins are impacted by petroleum cost. We have not seen anything. We will see how that plays out. But if you look at it as a total percentage on a bill of material basis, it is not going to have a huge impact on it. Brian McNamara: Great. Very helpful. Thanks very much. I will pass it on. Operator: Our next question comes from Anthony Lebiedzinski from Sidoti & Company. Please go ahead with your question. Anthony Lebiedzinski: Certainly nice to see the better-than-expected results here in the fourth quarter. So it sounds overall like you guys should be able to maintain your SG&A cost. As far as your distribution costs, those also came down in the fourth quarter. How should we be thinking about that line item? And I have a couple of other questions as well. Laurence Winoker: On the distribution, as I noted, our West Coast facility is running very efficiently given the new warehouse management system—that is working quite well. And as I noted, as an expense as a percentage, because we had selling price increases but there was not any meaningful cost increase, we will continue to see that expense benefit as a percentage. And we think there will be some, let us say, mild disruption expenses perhaps when we move into the Maryland facility. But we anticipate those, and we have done this—we have done it many times, these moves. We are putting that new warehouse management system in that facility, so we are anticipating it to run quite well. Rob Kay: And on SG&A—this also goes to Brian's question a little bit—the moves we have taken are sustainable. The only thing where you will see some bounce back in 2026 versus 2025 is, from a target and incentive compensation perspective, we paid out hardly any—typically nothing to management. And with improved performance in 2026, there will likely be corresponding payment of incentive compensation. But that is not the bulk of the SG&A cost reduction that was achieved. The cost reduction was achieved in 2025. Anthony Lebiedzinski: Got it. Okay. Thanks for that. And then, in terms of the International segment, Laurence, you may have said this, but perhaps I missed it. But in terms of the operating loss for the quarter, for the year, can you provide comments on that? Laurence Winoker: Yes. There was a loss. It was not as pronounced as we had in 2024. As Rob mentioned in his comments, we are not done. The CONCORD—and we will call it CONCORD 2.0—continues. And there are some other things that we had hoped to achieve, but there are legal and other roadblocks that slowed us down. We are looking to achieve those during 2026. Anthony Lebiedzinski: Okay. Got it. And then just a couple of other things here. As far as the fourth quarter, you had a tax benefit, which you addressed, Laurence. How should we think about the tax rate for 2026? Any sort of commentary there on that? Laurence Winoker: Sure. I know it is very hard with our numbers to figure out tax rate, but we should be in the high 20% range, and that is based on the thing that—I will just say we have some unusual occurrences this quarter, more unusual than others. But what distorts our provision historically has been the loss internationally where, because of a history of losses, you cannot record a tax benefit, and that would distort it. So as we get the International operations to breakeven or better, our tax rate should be in the 27%–28%, and that is a combination of the U.S. federal rate and state. Anthony Lebiedzinski: Gotcha. Got it. Okay. And then lastly, as far as the Maryland distribution center, it sounds like it is very well on track. So in terms of thinking about the CapEx for this year, do you guys have a ballpark estimate of what that could be? Laurence Winoker: We are anticipating it to be below budget, but we are very confident we can achieve the budget. I think we should beat it. For CapEx, we had originally forecasted $9 million. It may be perhaps less than that, a little less. And we spent a couple of million of it in 2025. So, let us call it around $7 million for that in 2026. But also bear in mind, there will be a little offset compared to historically, because we will not have the maintenance that we typically have in our New Jersey facility, because we are putting in new racking and other things, so in the Maryland facility there will be maybe another $1 million benefit against what we would otherwise spend for routine maintenance. Anthony Lebiedzinski: Understood. Well, thank you very much, and best of luck. Laurence Winoker: Thanks. Thanks, Anthony. Operator: Ladies and gentlemen, I am showing no additional questions at this time. I would like to turn the floor back over to management for any closing remarks. Rob Kay: Thanks, Jamie. Thank you, everyone, for listening and your interest in Lifetime Brands, Inc., and we look forward to further dialogue in the future. Have a great day. Operator: With that, everyone, we will be concluding today's conference call and presentation. We thank you for joining. You may now disconnect your lines. Rory Rumore: Everyone else has left the call.
Operator: Good morning, and welcome to SNDL Inc. fourth quarter 2025 Financial Results Conference Call. This morning, SNDL Inc. issued a press release announcing their financial results for 2025 ended on 12/31/2025. This press release is available on the company's website at sndl.com and filed on EDGAR and SEDAR as well. The webcast replay of the conference call will also be available on the sndl.com site. SNDL Inc. has also posted a supplemental investor presentation, in addition to the conference call presentation we will be reviewing today, on its sndl.com website. Presenting on this morning's call, we have Zachary George, Chief Executive Officer, and Alberto Paredero-Quiros, Chief Financial Officer. Before we start, I would like to remind investors that certain matters discussed in today's conference call or answers that may be given to questions could constitute forward-looking statements. Actual results could differ materially from those anticipated. Risk factors that could affect results are detailed in the company's financial reports and other filings that are made available on SEDAR and EDGAR. Additionally, all financial figures mentioned are in Canadian dollars unless otherwise indicated. We will now make prepared remarks, and then we will move on to analyst questions. I would now like to turn the call over to Zachary George. Please go ahead. Zachary George: Welcome to SNDL Inc.'s Q4 and full year 2025 Financial and Operational Results Conference Call. 2025 marked another step forward in our performance, with multiple new records achieved throughout the year, including record full year net revenue, gross profit, adjusted operating income, and free cash flow. Beginning with free cash flow, our most important KPI for assessing financial health, we are pleased to report that following our first year of positive annual free cash flow in 2024, we more than doubled this result in 2025, reaching $18,000,000. This was achieved through continued operational improvements and disciplined working capital management. Our cannabis business continued to grow, expanding revenue year over year during the last 16 consecutive quarters. While we have seen a market slowdown during 2025, both our Retail and Operations segments continued to gain market share, showcasing the strength of our vertical model. We would also like to highlight that for the first time in our history, we achieved positive full year adjusted operating income, supported by a strong contribution in the fourth quarter. This result underscores our financial discipline and continued traction in delivering operational efficiencies and productivity initiatives, including synergies from the Indiva acquisition. As a reminder, the only adjustments to operating income in 2025 relate to restructuring costs associated with the integration of Endiva and the corporate restructuring program, which is currently in its third and final phase. Delivering consistent year-on-year financial progress remains a priority alongside continuing to build a strong foundation for long-term profitable growth and shareholder returns. Few companies in our industry are positioned to leverage a balance sheet of this strength with no debt and over $250,000,000 in unrestricted cash at the end of 2025, enabling disciplined capital deployment across both organic and inorganic opportunities. In this regard, in 2025, we increased capital expenditures by nearly 50% compared to 2024, with the majority of the investment directed towards new store openings across our cannabis and liquor retail segments. As announced in January, we also completed the first stage of the acquisition of Cost Cannabis retail stores from One Centimeters, incorporating five locations in Alberta and Saskatchewan. We continue to maintain a strong pipeline of initiatives focused on simplification and strategic focus. For example, we are days away from completing a full consolidation of our ERP systems, which is expected to unlock significant opportunities to further optimize our processes and enhance our analytical capabilities. We continue to leverage the share repurchase program approved by our board, and since 2024, we have repurchased a total of 15,100,000 shares, including 4,300,000 shares acquired over the last 90 days. We are also encouraged by the continued momentum toward U.S. cannabis rescheduling as well as the progress toward completion of the restructurings of our Parallel and SkyMent investments, with only a limited number of remaining requirements outstanding. I will now turn the call over to Alberto Paredero-Quiros for more insight on our fourth quarter and full year financial performance. Thank you, Zachary. I want to remind everyone that the amounts discussed today are denominated in Canadian dollars unless otherwise stated. Certain figures referred to during this call are non-GAAP and non-IFRS measures. Alberto Paredero-Quiros: Definitions of these measures, please refer to SNDL Inc.'s Management Discussion and Analysis document. Our fourth quarter financial results demonstrate strong profitability improvements despite softness at the top line. Net revenue of $252,000,000 represents a 2% year-over-year decline, driven by market contractions in both liquor and cannabis retail, particularly liquor retail, partially offset by market share gains across both retail segments. Gross profit of $70,200,000 marked a new absolute quarterly record, increasing by $1,400,000 or 2.1% year over year despite the decline in revenue. A strong margin expansion across both retail segments translated to a 110 basis point increase in gross margin, reaching a new quarterly record of 27.8%. This strong gross margin performance, combined with efficiency improvements across retail and corporate SG&A, resulted in a record quarterly adjusted operating income of $12,800,000, and adjusted operating income of $11,800,000 also represents a new quarterly high. This performance reflects a significant improvement versus the prior year, driven not only by the absence of the $65,700,000 sunscreen adjustment recorded one year ago, but also by meaningful underlying operational margin improvements. Free cash flow of over $10,000,000 in the quarter was another solid result, although slightly lower than the prior year due to differences in the timing of working capital buildup for the holiday season, as well as increased capital expenditures and inventory investments to support new store openings. Our full year financial results demonstrate meaningful year-over-year progress and new records across all key metrics. Net revenue of $946,000,000 represents growth of 2.8%, supported by 11% growth from our combined cannabis segments, partially offset by a 2.8% decline in liquor. Importantly, all of our segments gained market share during the year. This revenue growth, combined with a 120 basis point increase in gross margin, translated to gross profit growth of 7.6% compared to the prior year. Improved promotional execution, mix management, and productivity initiatives were the key drivers of this gross margin expansion. This continuous improvement mindset also enabled us to reduce G&A spending, as in-store efficiency gains and a well-executed corporate restructuring program more than offset cost inflation and the impact of new store openings. As a result, both adjusted and unadjusted operating income reached new highs, with full year adjusted operating income achieving breakeven for the first time in our history. We are also pleased to report free cash flow of $18,000,000 for the year, more than doubling the result achieved in the prior year. Our historical quarterly performance demonstrates a clear upward trend in profitability and a strong multiyear compound annual growth rate. While quarterly operating income and free cash flow will continue to be influenced by seasonality and volatility, we remain committed to sustaining the upward trajectory with a focus on long-term value creation. We have seen market declines across both the liquor and cannabis segments. While declines in liquor have been a multiyear trend, the slowdown observed in cannabis during 2025, which ultimately resulted in a market decline in the fourth quarter, represents a newer development. We intend to address these headwinds through disciplined execution and a balanced approach to both organic and inorganic investment. In particular, as the cannabis industry matures and growth rates moderate, less efficient operators are likely to face increased pressure, creating a favorable condition for industry consolidation. We believe we are well positioned to capitalize on these opportunities. Looking more closely at segment level contributions across our key financial KPIs, we can see these dynamics clearly unfolding. Net revenue reflects the market headwinds impacting both the Liquor and Cannabis segments, particularly in the fourth quarter. On a full year basis, however, growth in the Cannabis Retail and Cannabis Operations more than offset the declines experienced in Liquor. Despite revenue pressure, our Liquor segment was able to offset declines through productivity improvements, allowing it to maintain or expand gross profit. At the same time, our Cannabis segment contributed to gross profit growth at a faster pace than net revenue, particularly over the full year. Adjusted operating income reflects solid contributions from our Cannabis Retail segment, while results from Liquor and Cannabis Operations were more muted. In the context of ongoing market declines, maintaining or expanding adjusted operating income in Liquor represents a strong performance. Cannabis Operations was impacted by costs associated with the volume ramp up at our affordable cultivation facility undertaken to support international growth. The Investment segment saw significant year-over-year improvement, primarily due to the absence of unfavorable valuation adjustments recorded in the prior year. The Corporate segment also delivered strong contributions to bottom line profitability, supported by the cost reductions from the restructuring program initiated in 2024. The $7,500,000 contribution in the fourth quarter reflects both the benefit of these cost reductions and a $3,200,000 from share-based compensation, as a decline in our share price during the fourth quarter partially offset the increase recorded in the third quarter. Once again, both our fourth quarter and full year free cash flow results stand out as key highlights. In the fourth quarter, while we did not achieve a new record, free cash flow levels remained strong. Compared to the prior year, we benefited from higher earnings, reflecting improved P&L performance. This was offset by inventory and capital expenditure investments in newer store openings, as reflected in the working capital and other components of page seven, respectively. On a full year basis, the benefits from improved earnings and strong working capital management more than offset the investments made to support new store openings. On the following page, we can see the seasonality effects in our free cash flow generation. The first part of the year is typically impacted by lower revenue levels and working capital build ups, while the second half of the year benefits from the opposite dynamic. And supported by a particularly strong second half, we more than doubled free cash flow compared to the prior year. When reviewing each commercial segment individually, starting with Liquor, we can see that both the fourth quarter and the full year were impacted by market-driven headwinds affecting net revenues. These declines, approximately 3% in both periods on a rounded basis, were primarily driven by broader market conditions. In this context, our team was able to gain market share, supported by the strong performance of our Wine and Beyond banner and continued growth in our private label offerings, both of which deliver positive results. Improvements in pricing, promotional execution, and mix management were the key drivers behind the gross margin expansion of 120 basis points in the fourth quarter and 70 basis points for the full year, reaching 26% and 25.9%, respectively. Q4 gross profit of $38,700,000 and a full year gross margin of 25.9% both represent new records for the segment. This margin expansion, together with additional efficiency improvement in in-store operations, translated to an increased $1,700,000 or 5% in full year operating income. In the fourth quarter, operating income was close to flat year over year, reflecting the absorption of ramp up costs associated with the two new Wine and Beyond stores that opened in November. Cannabis Retail delivered strong results in 2025 despite the market slowdown experienced in the second half of the year. Fourth quarter revenue was essentially flat year over year. However, supported by a 190 basis point improvement in gross margin and continued efficiency gains in the store operations, operating income reached $8,000,000, representing a 33% increase compared to the same period last year. Full year results reflect a new revenue record of $330,000,000, representing 6% growth supported by 3.9% same-store sales growth and new store openings. Gross profit of $86,100,000 was also a new record, as was the gross margin of 26.1%, which expanded 80 basis points year over year. Similar to the Liquor segment, Cannabis Retail benefited from improved promotional execution and mix management. Operating income of over $30,000,000 was driven by margin expansion and overhead optimization, more than doubling compared to 2024. Following a material step up in 2024, Cannabis Operations experienced greater volatility during 2025. As we began to lap the inclusion of the Enviva acquisition in the baseline starting in 2024, net revenue in 2025 was flat year over year. Gross profit, gross margin, and operating income declined compared to the prior year, reflecting ongoing stabilization efforts related to the volume ramp up and infrastructure improvements at our at the world cultivation facility. For the full year, the segment delivered record net revenue of $144,700,000, representing growth of 32%, supported by the Indeed acquisition and continued growth in international sales. Gross profit of $32,900,000 and a gross margin of 22.8% were also new for the year records for the segment. We continue to see opportunities to further expand margins to increase the scale and additional productivity initiatives. Adjusted operating income of $2,500,000 declined modestly year over year, primarily due to under-absorbed overhead investments. While Cannabis Operations remains the smallest and most volatile of our three commercial segments, we see significant opportunities to enhance our capabilities and footprint, positioning the segment as an increasingly important driver of long-term value creation for SNDL Inc. Over to you, Zachary, for additional comments related to our strategic priorities. Zachary George: Let's now turn to the progress we have made recently against our three strategic priorities: growth, profitability, and people. Starting with growth, each of our cannabis and liquor retail segments gained 20 basis points of market share year over year. Cannabis Retail achieved this through strong execution, new store openings, and conversions to our successful Value Buds banner. Liquor Retail also demonstrated solid execution in a challenging environment, supported by private label growth and the resilience of our Wine and Beyond banner. As previously mentioned, we increased our capital expenditures and working capital investments to support the opening of three additional cannabis stores and two new One and Beyond locations in the fourth quarter. Our Cannabis Operations segment also contributed meaningfully, delivering 32% full year revenue growth, driven primarily by our leadership in edibles following the acquisition of Endeavor as well as continued growth in international sales. Profitability is a strategic priority where we made substantial progress not only throughout full year 2025, but also in the fourth quarter, as demonstrated by nearly $13,000,000 in adjusted operating income and $10,000,000 in free cash flow delivered in Q4. The previously highlighted improvements in gross margin were a key driver of this performance. Alongside our continued focus on G&A optimization. In this regard, our Retail segments delivered full year combined efficiency improvements of $7,100,000 in G&A reductions, and our corporate restructuring program has already surpassed the committed $20,000,000 in annualized savings, even ahead of the implementation of the third and final phase of the initiative. Last but not least, under our people strategic priority, we initiated our annual performance-to-pay process in the fourth quarter, designed to reward employee performance based on both overall business results and individual contributions. We also delivered merit increases ahead of the holiday season across our facilities and retail teams, ensuring market competitiveness and reinforcing a consistent and transparent compensation approach. In addition, we completed our second annual employee engagement survey, gathering valuable insights from across the organization to further enhance our employee value proposition. Building on these insights, we expanded our employee engagement initiatives to include mental and physical well-being as well as diversity, equity, and inclusion, reinforcing our commitment to a safe, inclusive, and supportive workplace. Before concluding this presentation, we would like to share how we monitor our performance relative to our peer group, as we remain focused on delivering superior performance and shareholder returns. Looking at the most recent trailing four quarters reported by this group, and normalizing for equivalent definitions, we can see that SNDL Inc. has climbed the ranks and has positioned itself firmly within the top tier in terms of profitability on an absolute basis. We believe that this progress, combined with the many opportunities ahead of us and our best-in-class balance sheet and significant cash position, creates a compelling investment case. Once again, I would like to thank our entire team for their contributions and our shareholders for their continued trust and support. I am proud of what our team accomplished in 2025, and I am confident in our ability to unlock additional value in the years ahead. With that, I will now turn the call back to the operator for the analyst Q&A session. Alberto Paredero-Quiros: Thank you. Operator: We will now open for questions. Please press star then 11 to ask a question and wait for your name to be announced. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then 11 again. One moment for questions. Our first question comes from Frederico Gomes with ATB Core Mark Capital Markets. You may proceed. Frederico Gomes: Hi. Good morning. Thanks for taking my questions. First question on the cannabis retail segment, same-store sales decline that we saw this quarter and your comment about the market slowdown in the second half. Can you talk more about what is behind that slowdown? Is it related to competitive pressures at retail, overall macro conditions, or maybe just the natural state of the Canadian market becoming more mature at this point? Thank you. Alberto Paredero-Quiros: Hi, Frederico. Good morning. Thank you for your question. Yes. So we have noticed, particularly in the last two months of the quarter, so the months of November and December, absolute declines in the market. We attribute that to multiple factors. Certainly, there is an element of saturation in retail doors across most provinces, particularly where we have the biggest footprint, like Alberta. But in Ontario as well, we are starting to see that dynamic playing out. There are different dynamics as well in terms of what we are lapping and what the industry is lapping from heavy, aggressive promotional period in the prior year. In 2024 and 2025, we are seeing pretty healthy growth rates based on more aggressive price competition. Obviously, we are lapping that, and we believe that not only ourselves, but many other retailers in the industry that are focused a little bit more on profitability and mix improvements, we see margin expansions, but we are seeing as well some reduction in traffic and top line. There is as well a certain dynamic of some doors starting to shut down. We were getting to a dynamic with a lot of independents or some independents reaching their five-year rent commitments, and they are realizing that this is a competitive task and competitive marketplace. Some of the larger operators are starting to build that scale, and it is difficult to compete against those, and as a result of that, as I said, the market in certain areas is starting to shrink, or some doors are starting to shut down. The industry is consolidating as well. So that is another element, not necessarily impacting the market, but clearly the dynamics in the industry. But in general, we think that it is, as I said, saturation in the market and price points. Frederico Gomes: Thank you very much for that. Second question, still on the cannabis retail segment, specifically on M&A. So first, when do you expect the acquisition of the One Centimeters stores in Ontario to close? And in regards to your comment about the industry consolidating, do you expect your growth in cannabis retail to be mainly driven by organic new store openings, or are you more focused on the M&A side and acquiring some of these struggling players? Thank you. Zachary George: Good morning, Frederico. It is Zachary George. Thanks for the question. And this dovetails nicely from your prior question as well. Just in terms of the One Centimeters acquisition, remaining stores in Ontario, we are just finalizing our review with the AGCO. So we expect to, at the latest, report back to shareholders in Q2 on that timing, but it should be resolved shortly. And, just in line with the deceleration of same-store sales growth that we are seeing across the space with almost every major player, if you think about this cyclically, this is exactly the time when operators start to lift their heads up and look for other ways to create value. So we do expect intense focus on consolidation in the space. And I think that would apply to performing independents that may want to monetize their positions, but would also apply to both medium and even the largest portfolios in the Canadian marketplace. If I could just in terms of organic growth, we have we have a pretty active pipeline, you know, double digit count of that are under review in multiple provinces. And we have a very attractive stand-up cost for the opening of new doors. So we are looking at this from multiple perspectives and not relying on M&A outcomes to drive future growth. Frederico Gomes: Thank you. Appreciate that. If I could just ask one final question. Could you just remind us about the status of your EU GMP certification and maybe comment about the international growth outlook for this year compared to 2025 as you expand that capacity? Thank you. Zachary George: Yes. We are waiting for the last visit to our site. It has been a long process that has required some patience, but we expect at this point to have the certification complete sometime over the summer. There has been some change in the administration in Germany that has impacted as well. And in terms of our international business, we saw decent growth off a very, very small base in terms of 2025 versus 2024. And we are in the process of developing relationships and building strong partnerships, but it is still early days. So we do expect material growth, but, again, it is a very small part of the business today. That is a top three priority in terms of future capital deployment as well. Frederico Gomes: Thank you. I will hop back in the queue. Operator: Thank you. Our next question comes from Aaron Thomas Grey with Alliance Global Partners. You may proceed. Aaron Grey: Hi. Thanks for the questions. Maybe touching on retail but in terms of liquor here. Obviously, you still have some challenges within the broader category outside of yourselves, but some highlights for you guys. You guys did have one quarter during the fiscal year of year-over-year growth, you know, return to declines made the past two, you guys are continuing to open up stores as well. So maybe just given your outlook, given you are still making investments in liquor, there are some structural challenges. As you look into 2026, how are you seeing the broader liquor retail? Do you think it is in position to start to stabilize on a year-over-year basis? Thank you. Alberto Paredero-Quiros: Thank you, Aaron, for the question. So, yes, actually, throughout the year, as you saw in the first quarter, we have reported growth in 2025 that was driven primarily by the shift of Easter compared to the prior year. So on a normalized basis, we have seen a pretty consistent roundabout 3% revenue decline and about 4% to 5% market decline in the category. It is very hard to predict where that is going to go. The first part or the first couple of months of 2026, we are seeing similar declines in the market. At the same time, there are a couple of areas within our portfolio that are showing very good strength, and this is where we are focusing our investment. Particularly, if you look at our Wine and Beyond banner, despite the market declines, mid single digits, we are seeing that banner growing healthy. It is a very different business model compared to the rest of the independent network. Just make a convenience business. Ours is a larger scale format, significantly different type of offerings, much broader portfolio base. That resonates very well with consumers, and that is why, as a result of that clear differentiation and unique offering that we have, we are seeing positive growth. It is still in the low single digits, but it is growth rates in the market, and as I said, we see a competitive advantage in that front, and that is where we are deploying the capital, both from a CapEx perspective opening the doors, but as well the inventory associated with those store openings. And then we have as well our private label. One clear dynamic that we are starting to observe as well is the loss in purchasing power. It is making consumers more price-conscious, and they are looking for products that offer very good price points with good qualities as well. We have been expanding our private label offerings that continue to gain penetration. It has been already several years of increases in market share from our private label offering, and that is an area where we are still building additional relationships with producers, and we are expecting to continue making investments and expanding our portfolio on that front because, as I said, that is what is right now resonating with the consumers, and we are seeing the stronger demand. And that part of the portfolio as well is growing in relative terms to the rest of the business, and in absolute terms as well. So that is where we are focusing. We believe that we still have opportunities to manage elements of growth within our portfolio despite the fact that the market we still anticipate to decline in the low to mid single digits for the next several quarters. Aaron Grey: Okay. Great. Appreciate that color. That is helpful. Second question for me just on some of your U.S. exposure, particularly with SunStream. Just if you could provide us an update in terms of some potential outcomes, as we hopefully come to some resolutions either with Parallel or Skymet here in 2026. I know in the past, you have talked about potential changes you might need to be made to best optimize some of the U.S. assets. So, in terms of how you are looking at SunStream, the U.S. assets, and how to best optimize those in 2026, as hopefully we come to some resolutions there. Thanks. Zachary George: Absolutely, Aaron. Thank you for the question. So, the portfolio has been simplified quite significantly. It is really three positions. In the case of cannabis, I think you have been following the liquidation of that portfolio. We have seen a return of capital recently as that position gets monetized and capital repatriated. And then the two larger positions of interest would be in Parallel and SkyMint. Parallel is going through a foreclosure process in the state of Florida, and SkyMint is in receivership in Michigan. For almost the entirety of 2025, the foreclosure process related to Parallel was delayed because of litigation that was in place. There was a key settlement to that litigation in December, and so we think there is now a path to resolve that foreclosure, and we will likely see it sometime in Q2 or just after. So we are finally heading towards a resolution here after a multiyear process. Again, the reason behind these delays and the inefficiencies really comes down to the lack of access to the federal bankruptcy courts in the United States. And so once you are relegated to these other insolvency proceedings at the state level, they are much less predictable, and the adjudication can provide unique outcomes. So we are pleased that we will actually land this plane, so to speak, in 2026. But it has been a frustrating process, and we are eager to have it wrapped up. Aaron Grey: Okay. Great. Appreciate the color then. I will go ahead and jump back to the Operator: Thank you. This concludes the question and answer session. I would now like to turn the conference back over to Zachary George for any closing remarks. Zachary George: Thank you, and thanks for joining our call today. We look forward to updating you in the near future. Have a great day. Thank you. This concludes today's conference call. Operator: You may disconnect your lines. Thank you for participating, and have a pleasant day.
Operator: Please be advised that today's conference is being recorded. Good morning, ladies and gentlemen. Thank you for joining us today for MindWalk Holdings Corp. third quarter fiscal year 2026 earnings call. MindWalk Holdings Corp. trades on the Nasdaq under the ticker HYFT. Today's call will be led by our Chief Executive Officer, Jennifer Lynne Bath, and our Chief Financial Officer, Richard Areglado. A copy of our financial statements and MD&A is available on our website at mindwalkai.com. A replay of today's call will be available on MindWalk Holdings Corp.'s investor relations website following the conclusion of today's call. Before we begin, please note that today's discussion includes forward-looking statements. These statements are based on current expectations and involve risks and uncertainties that may cause actual results to differ materially. For more information, please refer to our filings with the SEC and Canadian securities regulators, including our most recent Form 20-F. Unless otherwise noted, all financial figures discussed today are in Canadian dollars. I will now turn the call over to Jennifer Lynne Bath. You may begin. Jennifer Lynne Bath: Thank you very much, and good morning, everyone. This quarter, MindWalk Holdings Corp. reported its third consecutive year-over-year revenue increase and advanced three pipeline programs toward data readouts. In addition, we recently signed our first one-year enterprise Lens AI platform contract. I will walk you through each of those. On revenue, year over year, we have grown three quarters in a row in a market where pharmaceutical demand for AI-driven discovery is accelerating. On the commercial model, our largest enterprise AI client recently signed a one-year Lens AI platform contract, the first of its kind for us, shifting a part of our revenue from project-based to contracted and recurring. On our pipeline, dengue, GLP-1, and influenza each have data anticipated in the near term. Please let me take those in turn. MindWalk Holdings Corp. just reported its third consecutive quarter of year-over-year revenue growth. Revenue was $4,200,000 this quarter, a 52% increase from $2,700,000 in the same quarter last year. MindWalk Holdings Corp.'s U.S. revenue, our most important commercial market, doubled year over year. That growth reflects a deliberate strategic focus on the U.S. market. North America is where AI-driven discovery demand is concentrated and where the regulatory environment is actively pulling pharma toward domestic partners. We have invested in U.S. commercial presence, including business development and sales resources in the Boston and Cambridge area. Separately, we have also established biologics services operations in the Boston and Cambridge area. Both reflect the same strategic direction. Our clients are pharmaceutical and biotech organizations with their own R&D capabilities. They engage us when the challenge exceeds what conventional tools can address. Which brings me to the second thing I would like to highlight. Recently, our largest enterprise AI client signed a one-year Lens AI platform contract. This contract is structured as a recurring revenue model, revenues being recognized monthly. To be precise about why this matters, until now, our revenue has been primarily project-based. Clients engage us for a program, we deliver, we invoice. That model produces good revenue, but it requires continuous reselling; every quarter starts close to zero. A platform contract is structurally different. It is contracted, recurring, monthly revenue that does not require reselling. It delivers value consistently, which is exactly what Lens AI is designed to do. Lens AI is actively being rolled out across our broader client base, the one-year contract is one we are scaling. Now let's discuss specifically what Lens AI, powered by HIFT technology, demonstrated this quarter. At its foundation is HIFT, our patented biological representation system that operates on the invariant functional layer of the sequence space. Sequence-based AI tools identify patterns in surface similarity. HIFT, conversely, operates on functional architecture, the layer that governs what the molecule does, not just what it looks like. Lens AI puts that capability into practice, integrated across our laboratory operations, now connecting in silico insight directly to bench-level execution. When our scientists design experiments, they identify targets, and they interpret results. That capability runs through the process end to end. Two results this quarter illustrate what that means. First, we advanced our functional adjacency capability, the ability to identify molecules that produce the same therapeutic effect despite having very low sequence similarity. For a pharma partner, this means that Lens AI can detect competitive threats and IP collision risks that conventional sequence analysis would not find. IP protection on this capability has been initiated. Second, in our influenza program, Lens AI has now screened over 2,000 highly diverse influenza sequences spanning influenza A, influenza B, avian, and swine origin sequences. Across all sequences analyzed, HIFT identified a single conserved functional feature that is present in every single one, a conserved functional feature that represents a potential design target for a broadly protective immunogen. For MindWalk Holdings Corp., dengue is proof of concept; influenza is repeatability. Now our pipeline advancements. Dengue infects 390 million people annually. The WHO considers it a top 10 global health threat. After 60 years of research and billions of dollars of investment, the world still does not have a vaccine that reliably protects against all four serotypes without risk of making the disease worse. Two vaccines have reached the market. Neither solved the core problem. Sanofi's Dengvaxia was restricted in 2017 after it was found to increase severe dengue risk in seronegative patients through antibody-dependent enhancement, also known as ADE, and was permanently discontinued in Brazil this year. The vaccine effectively stimulated a primary infection in seronegative recipients, priming them for enhanced disease on subsequent natural exposure. Takeda's Qdenga showed a different failure mode. It demonstrated no efficacy against serotype 3 in seronegative individuals, and remained skewed toward dengue 2. Takeda withdrew its FDA application in 2023. You see, the problem is not generating an immune response. Both of those vaccines do that. The problem is generating a balanced response across multiple serotypes. An imbalanced response triggers ADE, and that makes the patient sicker. The two vaccines that have reached the market both took a tetravalent approach and hoped the immune system would respond equally, but it does not. Across all sequences analyzed, HIFT identified a single conserved functional constraint present in every single dengue sequence, a potential basis for a broadly protective immunogen design. This is a discontinuous epitope; it is invisible to conventional sequence alignment tools. HIFT found it because it operates at the level of functional biological architecture, not surface sequence similarity. Instead of asking the immune system to respond equally to multiple different things, we are training it to recognize one thing that is present in all serotypes. Balanced immunity is built into the design, not hoped for in the final outcome. Currently, rabbit immunization studies for this program are complete. Binding confirmation, which is confirming that the immunized animals generated antibodies that bound to that conserved epitope, is expected yet this week. Upon confirmation, we move to multiserotype neutralization tests with our independent collaborator. No prior program has demonstrated a single epitope immunogen generating neutralizing antibodies across all serotypes that it was immunized for. This is what neutralization data will first test. We are at this preclinical stage, but the hardest scientific questions actually get answered here. In vitro GLP-1 receptor activation was confirmed by an independent third-party assay. Results demonstrate activity relative to semaglutide, a market-leading GLP-1 therapy. We have worked with a pharma collaborator with recognized expertise in this area. They have shared what they consider important to see as this program advances. We are developing the program with that input in mind. Beyond the GLP-1 pathway itself, we have identified a dual regimen linking GLP-1 biology to a second nonoverlapping longevity pathway. We will continue to update the market as this program advances. Our influenza program is advancing on the same design logic. As of this week, we are moving toward manufacturing of the lead in silico candidate. We will update the market as that program continues to develop. U.S. revenue doubled year over year, a direct result of our deliberate strategic focus on North America. AI-driven biologics demand is concentrated in this market, and the regulatory environment is increasingly favorable to domestic partners. We have established biologic services operations in the Boston–Cambridge area, and this strategic direction guided our decision to divest our European operations in favor of North American growth. We ended Q3 with $14,200,000 in cash. The Netherlands divestiture proceeds are being deployed deliberately into commercial growth, Lens AI and its pipeline assets, and our Canadian laboratory capabilities. Our team published a peer-reviewed study in Biomacromolecules, the American Chemical Society journal, in collaboration with Eindhoven University of Technology and Radboud University Medical Center. That work was grant funded and it demonstrates what our wet lab nanobody discovery is capable of and the great importance of this innovation. I will come back to this when I describe our B Cell LAMA platform launch. This quarter, we announced results from a client-driven research engagement in which our scientists generated and validated monoclonal antibodies and intrabodies capable of selectively targeting misfolded, pathogenic TDP-43 while leaving healthy TDP-43 intact. TDP-43 is implicated in ALS, frontotemporal dementia, and some Alzheimer's cases. Last week, we announced the launch of our B Cell LAMA, a nanobody discovery platform built on single B cell isolation from immunized llamas. Let me explain why this matters. Bispecific and multispecific antibodies require two heavy chains, and when those chains need two different light chains, the result is an explosion of possible combinations, only one of which is the product that you actually want. That chain-pairing problem has been one of the central engineering bottlenecks limiting bispecific drug development, and significant capital has been invested in platforms designed to work around it. VHH nanobodies eliminate the problem by design. They carry no light chain; there is no pairing ambiguity. And because they come from a naturally matured llama immune repertoire, they capture sequence diversity that engineered platforms structurally cannot replicate. Our peer-reviewed Biomacromolecules publication demonstrates what that produces. The molecule with the strongest binding affinity in our delivered zero functional activity. A construct built from the same nanobody building blocks achieved 10 to 25 times greater potency in multivalent format. Function-based selection, not affinity, is what matters. That is what B Cell LAMA is designed to deliver. MindWalk Holdings Corp. holds commercial rights to the jointly developed intellectual property from that work. B Cell LAMA operates alongside our 15 molecules advanced to the clinic. The full detail is in last week's announcement. Across our proprietary asset portfolio—GLP-1, dengue, and influenza—and at the request of investors, we are working with legal and financial advisers to design structured asset-level financing vehicles that will allow investors to participate at the program level while preserving parent company equity. Network is active and progressing. I will now turn the call over to Richard. Richard Areglado: Thank you, Jennifer, and good morning, everyone. As a note, all figures are in Canadian dollars and relate to continuing operations unless stated otherwise. Revenue for Q3 was $4,200,000, a 52% increase from $2,700,000 in Q3 of last year. As Jennifer noted, this is our third consecutive quarter of year-over-year revenue growth. U.S. revenue doubled year over year, $2,600,000 versus $1,300,000. The U.S. is named a strategic priority. AI-driven discovery demand is concentrated here, and our commercial investments are reflected in the numbers. For the nine-month period ending January 31, 2026, our revenue was $11,400,000 as compared to $7,900,000, a 45% increase as compared to the prior year period. Gross margin for the three months ended January 31, 2026 was 59% as compared to 65% in the prior year period. For the nine-month period ended January 31, 2026, gross margin was 58% as compared to 53%, a five percentage point improvement over the same period last year. Gross margin can vary depending on our mix of business. However, as we develop and increase adoption of the tools within our Lens AI platform, we would expect margins to expand. Moving on to operating expenses. For Q3 2026, R&D expense was $1,200,000 as compared to $900,000 for the prior year period due to the investments in the dengue, GLP-1, and B Cell LAMA programs and ongoing Lens AI platform development. For the nine-month period ended January 31, 2026, R&D expense was $3,500,000 versus $3,400,000 in the prior year. Sales and marketing for the three-month period ended January 31, 2026 was $1,800,000 as compared to $1,100,000 in the same period last year, reflecting our continued commercial expansion primarily in the U.S., with programs such as our expansion in the Boston area starting to yield revenue. For the nine-month period ended January 2026, sales and marketing expense was $4,300,000 compared to $2,700,000 for the nine months ended January 2025. G&A was $3,100,000 for Q3 2026 as compared to $2,800,000 for Q3 2025. G&A expense was $9,500,000 for the nine months ended January 2026 as compared to $9,100,000 for the prior year period. We expect G&A to remain flat to modest growth as we believe we have the infrastructure to support future growth. Net loss from continuing operations for Q3 2026 was $3,900,000 versus $22,000,000 in Q3 2025. Net loss in the prior year period included an impairment charge of $21,200,000. For the nine-month period ended January 2026, net loss was $11,200,000 as compared to $29,700,000 for the nine-month period ended January 2025, which also reflected the $21,200,000 charge. We are investing ahead of revenue in commercial infrastructure, pipeline programs, and platform capabilities with the expectation that these investments will yield returns. Moving on to the balance sheet. We ended the third quarter with $14,200,000 in cash. Cash used in operations was $10.1 million year to date, consistent with our planned investments. In summary, revenue has grown year over year, and we have demonstrated the ability to execute. We have developed a platform and products that bring value to our customers, and we continue to innovate with programs such as our recent announcement of our B Cell LAMA capability and functional adjacency. We have cash runway for operations and a capital structure to support the ongoing development of our proprietary pipeline assets. We believe this will continue to drive shareholder value. I will now return the call to Jennifer. Jennifer Lynne Bath: Thank you, Richard. Before we open for questions, I would like to leave you with this. Most AI approaches in biologics today operate on full biological sequences. They tokenize, they train, they generate. Many are powerful, and they are operating on a representation of biology that includes a great deal of noise. Evolution is a tolerant process. Most positions in a biological sequence can change without consequence. That variation fills the public databases that these models train on. A much smaller set of subsequences is invariant. They cannot change because essential biological function depends on them. These are the fingerprints that actually carry the information for life. HIFT is our patented representation of that invariant layer. No other company has the rights to use these patterns. That is the foundation of a durable competitive position because every result we generate, every insight we deliver, and every asset we build rests on a biological foundation that competitors cannot replicate. And it is producing results. We identified the dengue epitope conserved across all four serotypes, a target that 60 years of vaccinology did not find. We detected functional adjacency that sequence-based platforms missed and initiated IP protection on that capability. We screened over 2,000 influenza sequences and found a single conserved biological feature present in every single one. Our GLP-1 candidate activity relative to semaglutide, the market-leading GLP-1 therapy, was confirmed by an independent third party in vitro testing. We launched B Cell LAMA, a nanobody platform anchored by peer-reviewed evidence that function-based candidate selection outperforms affinity-based selection at the molecular level. On commercial, we are scaling the enterprise platform model, additional contracted recurring platform agreements with major pharma and biotech partners building a revenue base that grows independently of any single project. On pipeline, dengue neutralization data is our nearest-term pipeline readout. Dengue is proof of concept for what HIFT can do. Influenza is repeatability. Together, they make the platform case to pharma partners better than anything else that we could say. On asset financing, legal and financial advisers are engaged and structures are being designed across the proprietary portfolio. Before we open for questions, I want to leave you with this. The science is patented. The results are peer reviewed. The first enterprise contract is signed. The pipeline has meaningful data approaching. These three consecutive quarters of year-over-year revenue growth and U.S. revenue doubling are made possible by a platform that no competitors can replicate. This is the MindWalk Holdings Corp. investment case. Thank you. We will now open the line for questions. Operator: Thank you. We will now begin the question-and-answer session. To ask a question, please press star then the number one on your telephone keypad. If you would like to withdraw your question at any time, please press star 1 again. Please limit yourself to one question and one follow-up. Please stand by while we compile the Q&A roster. Your first question comes from the line of Swayampakula Ramakanth with H.C. Wainwright. Your line is open. Swayampakula Ramakanth: Thank you. This is RK from H.C. Wainwright. Good morning, Jennifer, Richard. Good morning. This is a great quarter, a lot of good stuff, and really exciting days for you. Thank you. Jennifer or Richard, in terms of the agreement that you just signed—the enterprise client agreement that you just signed on the recurring contract—I am trying to understand what drove this group to do this. What are the primary drivers? And then the second part of that same question is, how many of your other project-based clients are willing to convert into this monthly recurring model, let us say over the next six to 12 months? Jennifer Lynne Bath: Thank you, RK, and thanks for joining, and as usual, for your thoughtful questions. So your first question—what really drove this first pharma client to go ahead and sign this contract—that is a very good question. I think I like this in particular because giving me the opportunity to explain this also gives me the opportunity to demonstrate the validation that needed to occur before a client took this type of a commitment long term with us. I do believe this is a client I have referred to anecdotally historically one or two times, and this is a client who initially came to us having tried multiple other companies that said that they could utilize artificial intelligence to help solve some of their scientific challenges. The group was relatively dismayed. They said that in reality, none of those CRO partners or companies were able to turn back results that were as good as what they could do in the wet lab, and so they were apprehensive and they were doubtful. So when we first brought this group in, it was actually for fee-for-service work, and what we said to them is, you have programs that have been extremely difficult and you have worked on for over a decade. Let us take a crack at it. Let us apply Lens AI to it, and if we are not successful, then you do not pay us. But we really want to show you what we can do. We worked on that program for them, and we were successful, and they saw the outputs coming directly from Lens AI, and even some applications that MindWalk Holdings Corp. in Belgium, also known as BioStrand, built specifically for producing these outcomes in the program. They were tremendously happy with the results, and they have now contracted us, I am not sure, somewhere between seven to 10 times in total for different programs, and Lens AI has continued to successfully solve very challenging problems for them. That is really where we earned their respect and, I think, their trust for this Lens AI program, and that is what really brought them to the table to negotiate a platform license as a SaaS model. Our intent, obviously, is to leverage that experience with them to be able to bring on additional clients, for those clients to understand, and for us also to be able to share the positive experiences this group has had. That being said, for your second question, we are not providing specific numbers or timelines for additional contracts, but one thing that I think is really important to highlight and maybe was not highlighted enough in the earnings call is that Lens AI is now actively being rolled out across our broader client base. All the programs we are working on—not just the programs we are working on in Belgium where Lens AI lives, but also in Canada with all of our wet lab clients—somewhere close to 750 active clients, dozens of programs running at any given time, those results are all now finally coming back in the Lens AI portal. These groups are receiving secure login, and when they log in, they have access to this portal, and they can see the applications that are in there that truly change the way they have done drug discovery historically. Now they can utilize these applications, and instead of going to three, four, five, six other vendors to collect information, or chugging through the process over the course of 18 months to two years, they can literally take a subscription to utilize these applications beyond the base level to harness the power and get the results that they are looking for. Being at that point in this venture is very important to our company, something we have built toward and worked toward. It took longer than we hoped it would to get this software into the hands of these clients, and it is now happening not just across our therapeutic clients but clients who have contracted us for any sort of custom antibody work. With regard to that, when we think about additional contracts and bringing these new clients in, that is where we are really focused. We feel we have an extremely unique situation where these clients are already onboarded. We are in many cases their primary vendor, but in all cases, we are a vendor that is in their system, and we have already built their trust and their respect, and so we have a very unique segue into this market with those clients. Swayampakula Ramakanth: Thanks for that detailed answer. And if I may, second question is on the asset-level financing. I do understand lawyers and investors can take a long time to come to a conclusion about anything, but how much of that are you waiting for in terms of these four different projects or platforms that you have—thinking about the dengue, the GLP-1, LAMA, and influenza as well? Do you need to get to a conclusion with these groups before you move this forward, or are these all independent of each other and they are all moving forward? Jennifer Lynne Bath: That is a great question. The short answer is they are independent of one another as they move forward. A couple of things to keep in mind. When we look at financing these particular programs, one of the things that is easy to overlook is the fact that our program costs are not what you would expect from a traditional drug development company at this stage. Much of our work is in silico, but also much of our in silico work, our in vitro work, and even our preclinical work is either AI-driven or it is conducted in-house. That keeps our cost meaningfully lower than a conventional pipeline of this breadth would require, and it is also one of the structural advantages that we have building on the HIFT platform. As a result of that—and directly in reference to your question, RK—the capital that we currently have is capital that is enough to drive us significantly forward in these engagements. As a matter of fact, as was detailed by Richard, the R&D expenses are not up significantly over last year and yet cover not only our traditional R&D and the build-out of the B Cell LAMA platform, but also cover everything we have done to date here. That gives you, I think, a specific example of that. Now, when it comes to the asset-level financing, that is something that definitely, as these programs become more advanced, one of the things that we have ensured we have in place as we move forward is a professional team that has the experience in the clinical realm and the subject matter experience, with each of these families of viruses or the particular therapeutic or disease that we are targeting, in order to help drive this process along through the preclinical portion and the IND-enabling, the IND filing, and the clinical readiness. When we get to those stages, of course, the cost then does begin to increase. As to whether or not these portions at that stage can move forward prior to the asset-level financing, to some extent, yes, most definitely, once again because we do have a team set forward here with the internal expertise. But in addition to that, the asset-level financing is meant to support once we get to that stage. We have enough runway here that the lead time that it takes to actually get these ring-fenced should be one that enables us to bring in additional capital to support those by that time. Swayampakula Ramakanth: Thank you. I will get back into the queue. Thanks. Jennifer Lynne Bath: Thanks, RK. Operator: Thank you. There are no further questions at this time. We will now turn the call back over to Jennifer Lynne Bath for closing remarks. Jennifer Lynne Bath: Great. Thank you so much. The biggest thing that I want to say is thank you all. Thank you for joining us. Thank you for supporting MindWalk Holdings Corp. We look forward to sharing pipeline results as they become available, and we will speak with all of you on our Q4 and fiscal year-end 2026 earnings call. Thank you. Operator: This concludes today's MindWalk Holdings Corp. Q3 fiscal year 2026 earnings call. Thank you for your participation. You may now disconnect.
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.