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Operator: Welcome to Sleep Number's Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded today, Thursday, March 12, 2026. This conference call will be available on the company's website, ir.sleepnember.com. Please refer to today's news release to access the replay. On today's call, we have Linda Findley, President and CEO; and Amy O'Keefe, Chief Financial Officer of Sleep Number. Before handing the call over to the company, we will review the safe harbor statement. The primary purpose of this call is to discuss the results of the fiscal period ending on January 3, 2026. Commentary and responses to questions may include certain forward-looking statements. These forward-looking statements are subject to a number of risks and uncertainties outlined in the company's earnings news release and discussed in some detail in the annual report on Form 10-K and other periodic filings with the SEC. The company's actual future results may vary materially. In addition, any forward-looking statements represent the company's views only as of today and should not be relied upon as representing its views as any subsequent date. The company specifically disclaims any obligation to update these statements. Please also refer to the company's news release and SEC filings for a reconciliation of certain non-GAAP financial measures and supplemental financial information included in the news release or that may be discussed on this call. I will now turn the call over to Linda Finley, Sleep Number's CEO. Linda Findley: Thank you, Rob, and good morning, everyone. Before I begin, I want to welcome Amy O'Keefe, our new CFO. After an extensive search, she joined us in December and brings with her decades of experience leading operational and financial transformations across public and private companies. Her focus has been on streamlining our business operations and strengthening our capital structure to support our turnaround strategy. You'll hear more from her shortly. In today's call, I will cover 3 things. First, how we're executing on our strategy, both for growth and cost cutting; second, why we believe that our new marketing and product strategies are working; and third, what we're doing to manage liquidity and the capital structure. First, on delivering our strategy. 2025 was a pivotal year for Sleep Number as our ReShape team drove big turnaround changes at every level of the company. from retail and corporate operations to marketing strategy and the rapid development of our new product line. Importantly, we delivered on the guidance we provided in our last call. Full year net sales were $1.41 billion, in line with our guidance despite reduced marketing spend and lower traffic throughout the year. Adjusted EBITDA was $78 million, exceeding our guidance of $70 million. Our use of cash for 2025 was $18 million compared to the $50 million guidance. For the full year pro forma adjusted EBITDA margin was approximately 9%, and Amy will discuss how we plan to improve margins further in 2026. The long-term benefit to adjusted EBITDA margin comes from 2 places. First, the renewed growth from our product line redesign; and second, the significant cost savings we have already done and will continue to do this year. We radically reset the business by lowering our fixed cost structure and built a leaner, more nimble organization. We removed more than $185 million of annualized costs and have identified another $50 million of annualized fixed costs that we are executing on now. We are still in full turnaround mode, and our progress in 2025 doesn't change the fact that we still have hurdles to clear in 2026. We saw the same pressures as the rest of the industry in January and early February from severe weather and macroeconomic impacts. We had 236 stores that were closed for at least 1 day in the month of January, and therefore, sales at the start of the year were significantly down. We adjusted our marketing spend and strategy to lean in when things improved, and we have seen sequential improvement into February and March, driven mostly by our product launch. That brings us to our next point about why we believe our product and marketing strategies are working and will carry us through the next phase of the turnaround. We launched our first new bed and a new adjustable base in January and the response from customers has been fantastic. The Comfort mode mattress priced under $1,600 gives us access to a new group of customers while maintaining personalized comfort as the core of the experience. As of the end of February, sales are 3.5x what we expected and nearly twice all the sales of all 3 C Series beds that this bed replaces. In addition, we are seeing very strong attach rates for adjustable bases and bedding. The success of the first Comfort bed is an important indicator for the rest of the portfolio we announced this morning as it's built off the same principles and the same value proposition. We listened to both current and prospective customers and built a product line that addresses their most critical needs of comfort, durability and value. We also refer to the core of what only Sleep Number can offer, personalized comfort, adjustability, smart technology and temperature benefits, the only bed in the industry that bed owners can fully control whenever they want. It's comfort that shift with you night after night. With 4 new beds available in-store and online starting March 23, Sleep Number beds will now reach a broader set of consumers in the premium category. We are leveraging years of innovation and experience servicing luxury materials, features, comfort, temperature management and adjustability at better price points than ever before. This enabled us to build more value per dollar in each bed, protecting our margins while also achieving a lower price point for today's premium customer. In addition to these innovative new beds, we are also making it easier to find the right bed for you by simplifying the buying experience in store and online. With this launch, we are reducing our core lineup from 12 mattresses to 7 organized into 3 clear collections. First, Comfort mode is our new entry point to the brand. It delivers personalized comfort and temperature management controlled without an app, all at an accessible price. In January, we launched the 10-inch comfort mode bed, and now we're adding an 11-inch model called Comfort mode Luxe with 3-zone comfort layer and advanced temperature materials starting at just $2,099 for. Second, the Comfort next line, starting at $2,999 for a queen is our biggest innovation in the launch with 3 all-new beds, including 2 that feature our new Tribrid design. We are the first company to combine foam, advanced temperature materials and microcoils on top of air adjustability to deliver improved comfort, pressure release and durability with personalized comfort we are known for. These exceptionally luxurious beds will be the start of our smart technology in our portfolio and we'll track and improve your fleet at incredibly competitive price points. Third, we have our climate collection starting at $5,499 for Queen and it includes our existing Climate Cool and Climate 360 beds that differentiate with true active temperature management. This category represents the ultimate and luxurious comfort. When combined with the base, it remains the only line of mattresses on the market that offers personalized firmness, smart technology, adjustability and active temperature control, all in one bed. In fact, our temperature programs on Climate 360 result in up to 52 more minutes of restful sleep per night. But the new product alone isn't what gives us confidence. The marketing changes we have made are substantial. As I've said before, we can do more with the dollars we spend, and that is happening. First, we rebuilt our marketing foundation and modernized how we identify and attract customers. As a result, we saw meaningful improvements throughout 2025 in our funnel metrics. Our marketing into Q4 maintained this improvement, and we're seeing accelerated year-over-year improvement in cost per acquisition so far in 2026. Second, we also started refreshing our creative and messaging last year in social and digital channels. We also recently launched our first new commercial in more than 2 years with a dedicated comfort mode spot where recent performance has now surpassed our prior campaign and current competitive benchmarks. The combination of this work is showing up in our annual brand tracker that we completed in January just before we announced our partnership with Travis Kelce. Despite overall pressure in the industry, we saw significant increases in every aspect of Sleep Number's brand. Brand consideration among premium shoppers grew 10% and achieved the highest consideration in the premium category. We also saw the highest levels in 6 years of critical consideration drivers, including value, quality, aspirational fit, comfort and individualized comfort. Now it's up to us to build on that success and turn that brand strength into sales growth. The marketing changes are still underway, and you will continue to see new creative, new strategies and our partnership with Travis Kelce comes to life. Finally, let's talk about liquidity and capital structure. It isn't news to anyone that we need to fix our capital structure. I knew that when I joined the business less than a year ago, and it remains our top priority. Three things hit us particularly hard in the end of 2025 and beginning of 2026. The industry-wide softness we already spoke about, our work to clear out inventory as we roll out the new product line and our continued careful management of marketing spend as we lap a very high inefficient spend of Q1 last year. This puts pressure on our liquidity, and we are implementing a plan to address this. As part of that plan, we hired Guggenheim Securities to evaluate the inbound interest we have received and advise on other opportunities to refinance our credit facility as we shape Sleep Number back into a profitable growing company. Amy will talk about this in more detail. Before I turn the call over, I want to thank our team members. Delivering a product reset of this scale in just 10 months, work that typically takes more than 2 years, reflects a new level of speed, collaboration and execution across the company. Our work is focused on delivering better value for our customers, shareholders and team members and on bringing Sleep Number back to profitable growth. With that, I'll turn it over to Amy. Amy O'Keefe: Thank you, Linda, and good morning. I joined Sleep Number in mid-December because I view it as a company whose intrinsic value far exceeds its market capitalization. While Sleep Number is in the midst of a turnaround, the value of its underlying assets is undeniable, leading brand recognition, differentiated product and the tens of billions of hours of sleep data that validate the benefit our beds have on the quality of your sleep. We have a lot of work ahead of us, but fortunately for me, Linda and the team have already done a significant amount of the hard work to put the company on a path to profitable growth. One, rightsizing the cost structure to a lower revenue base by executing on $185 million of annualized cost reductions with line of sight to an incremental $50 million to be executed in 2026. Two, executing in record speed for Sleep Number on a completely new line of products that Linda described, which we are launching on March 23; and three, modernizing our marketing engine with new leadership, new creative, new channel-specific media strategies and a new partnership with Travis Kelce to strengthen the brand and drive top line growth. This is a pivotal time for the company, and I'm excited to partner with Linda and add my deep turnaround experience to unlock value for our shareholders. I want to thank the team for their very warm welcome and efforts to get me up to speed quickly. Now let's get into Q4 results, which were better than expected. Net sales were $347 million in Q4 or 8% below the same period in the prior year. As a reminder, fiscal year '25 benefited from a 53rd week, which favorably impacted year-over-year results by approximately 660 basis points. Notably, the performance trend across the year improved sequentially, while the number of stores decreased by 40, exiting the year with 600 stores. And as Linda noted, the impact of our improved marketing offense continues to drive efficiencies. Gross profit margin was 55.6% in the quarter, a 430 basis point decline versus the prior year, primarily driven by a $9.6 million nonrecurring inventory obsolescence charge associated with our new product launch and the impact of unit deleverage and higher tariffs. Excluding the impact of the inventory charge, adjusted gross profit margin was 58.4%. Operating expenses in the quarter were $197 million, down 9% year-over-year, excluding restructuring and other nonrecurring costs. The reduction was driven by ongoing cost savings initiatives to rightsize the fixed cost base and lower variable selling expenses. Media investments were comparable to the fourth quarter of the prior year despite a 53rd fiscal week. Adjusted EBITDA was $19 million, down $7 million versus the same period last year. For the full year, net sales were $1.41 billion, consistent with our expectations, but down 16% versus the prior year. Full year gross margin was 59%, and down 60 basis points year-over-year and aligned with the guidance of 60% that we shared last quarter when excluding the impact of the fourth quarter inventory charge. Operating expenses for the full year were $824 million, a $136 million reduction from the prior year, excluding restructuring and other nonrecurring costs. On an annualized basis, we've executed approximately $185 million of cost savings initiatives, which gives us an estimated $50 million tailwind as we head into 2026. As Linda mentioned, 2025 adjusted EBITDA was $78 million, exceeding our most recent outlook of $70 million. Importantly, for the full year, pro forma adjusted EBITDA margin was approximately 9%, a 200 basis point improvement versus the prior year. Turning to the balance sheet and cash flow. We ended the year in full compliance with our credit agreement and debt covenants. Total liquidity, including cash and revolver capacity, was $58 million at year-end, well above the amended $30 million covenant floor. Full year free cash flow was a use of $18 million. which was just over $30 million favorable to expectations. However, it was unfavorable by $21 million compared to the prior year, primarily due to top line pressure and nonrecurring cash restructuring costs. Capital expenditures of $14 million were down $9 million compared to the prior year. Looking ahead to 2026, as Linda mentioned, January demand was soft versus last year and our internal expectations. As we planned, the media investment in January was down significantly year-over-year and reallocated to after the launch of our new products when the return on investment is likely to be much higher. Moving into February, we saw a sequential improvement in performance during the President's Day event as we launched Comfort mode. Not only were we pleased with Comfort mode sales performance, but gross margin is well above our legacy opening price point beds. This provides another proof point that we can regain competitive positioning in the premium opening price point as we planned. We're excited to launch the rest of our product line in late March. Given the magnitude of the change that we are executing in 2026 as part of our turnaround plan, we will not be providing guidance today. However, I will provide some indications of our performance expectations for the balance of the year. I will also note that we are planning cautiously to ensure that our cost base and our liquidity planning are set appropriately as revenue ramps sequentially over the balance of the year. While we expect Q1 net sales to decline in the high teens because of the softness we saw at the beginning of the year with the full impact of the new product launch in the second quarter, along with an increase in year-over-year media spend, we expect a significant improvement in year-over-year revenue performance in Q2. We further expect double-digit sales growth in the second half with the full benefit of, one, new products, two, new creative assets, and three, marketing reach with our new strategic partner, Travis Kelce. As a result of cost savings initiatives and the expected ARU improvement from new products, adjusted EBITDA for the full year is expected to increase in the high teens to mid-20s percent range year-over-year, and we expect free cash flow to be positive. Lastly, but importantly, and as Linda mentioned, while we are seeing improvement in the business, the softness from the start of the year and the clearance of our existing products have put pressure on our liquidity and covenants. We are actively implementing a plan to address this as further detailed in our Form 10-K and have engaged an advisory bank, Guggenheim Securities, to help us. We will continue to monitor our liquidity position and covenant compliance and we'll work with our advisers to address our credit facility and evaluate inbound interest and other opportunities to improve the company's liquidity, balance sheet and financial flexibility. With that, I will turn it to the operator for Q&A. Operator: [Operator Instructions] Your first question today comes from the line of Dan Silverstein from UBS. Daniel Silverstein: Congrats on the announcement of the product launch. First question is just on that. So with the new product launches, what were the main pain points you were trying to address? And then the Comfort mode product replaced its predecessor at a higher margin. How will this new announcement today, how will these new beds reset the impact on ASPs, cost per bed and margins going forward? Linda Findley: Sure. Yes. So I'll start on both of those, and then I'll have Amy jump in as well. So first of all, thanks very much for the congratulations and the questions. So pain points, first of all, was going back to exactly what we talked about before, customers right now, when you think about the people who are most interested in the premium category, we really wanted to expand our audience to be able to serve our existing customer base and then broaden into younger demographics and additional demographics that would want access to the benefits of a Sleep Number bed. So we focused on comfort, value and durability in everything that we built. But one of the advantages that we have is all of the investments that Sleep Number has made in innovation over the years really came to pay off in this particular product line where we were able to take incredibly luxurious materials, temperature management materials and other new innovations around comfort, including foam and our new micro coils that we're putting into 2 of our new beds, to really say we're going to take luxury materials and bring them to a much more accessible premium price point. So what this allows us to do is both more directly addressed comfort and improve sleep from our past innovation history in a better price point for our customers. And there's a much clearer step-up strategy too now. So there's the beds that don't require an app that allow people to experience the brand for the first time. And then you can move into some of our smart technology and our other beds that we're rolling out today or introducing today. In that concept, we built these beds for manufacturability. And one of the challenges you've heard us say in the past is that in order to really maintain our margin, we were kind of selling up the line. We have some incredible beds, and we still have our climate series beds that we mentioned today. they are doing extremely well. But we wanted to make every bed in the line the same margin and a strong margin profile in order to make sure that our sales team could really sell the best bed for whoever the customer is and not have to worry about the impact to the margin profile. So our comfort mode bed is as margin accretive as our climate 360 beds and that allows us to serve the customer more clearly, more directly and also protect our margins at the same time. So sort of 2 -- double answers there to your questions, but we are really excited about this launch, not only for what it means for customers, but what it does mean for our margin profile. Any thing you want to add, Amy? Amy O'Keefe: And I'll just jump in on gross margin. We are expecting, as I mentioned, a sequential increase in ARU as these products transition out and the legacy products are discontinued. The exciting part for a finance person is that gross margin, if I just look at the comfort mode bed compared -- and this is just the one SKU that we've already launched, which is performing, as Linda mentioned, well above our expectations, 3.5x the plan. The best part of that for me is the gross margin. If I just look at that compared to the 2 beds in the C Series that it's replacing, it's a 10 percentage point gross margin improvement compared to the prior year. So it's really exciting not only for early indications of the performance but also the margin profile of the business. Daniel Silverstein: Very, very helpful. And just one quick follow-up. Could you just touch on the major sources of the $50 million of additional savings you think you can drive this year? And will there be any further clearance activity as we nudge up to March 23? Amy O'Keefe: Sure. And so last year, the Linda and the team, as we mentioned, took a significant amount of cost out of the business. annualized basis, it was $185 million. And I think those were, forgive the term, but sort of blunt force, right, the team needed to move fast in order to protect our liquidity position. I think over the last several months, a quarter or more, we have been looking, I think, more surgically at where opportunity remains to take costs out of the business. And at a super high level on the incremental annualized $50 million, there's a lot of logistics, delivery, last mile labor model resets, and we're still taking a look at our corporate overhead structure. And so I think those things -- those are the big activities in the $50 million. Linda Findley: And importantly, just to add to that, all of the $50 million has already been identified, we're already executing on it, and it is all fixed costs. Amy O'Keefe: Yes, all fixed costs. Operator: Your next question comes from the line of Bobby Griffin from Raymond James. Robert Griffin: Congrats on the first product launch there. I guess, first for me, I think the release or maybe the prepared remarks called out March 23 as the date, but like what's the phasing as we look at getting these 6 new beds now that you talked about on the floors and kind of across the portfolio, how is that phasing work throughout the year? And if you can, just give us a date that you feel the floors will be largely set, the stores will look as you want them to be? . Linda Findley: So I'll jump in on that. First of all, the all 4 -- so we launched 1 bed earlier this year. That was the comfort mode, the first bed that we launched. There are 4 new beds plus the base -- sorry, we launched the first new bed and base in January. There are 4 new beds and a new base that are all going to be available for purchase starting on March 23. Those are the ones that we announced today. And that completes the product reset, plus, of course, the existing climate series that we have Climate 360, Climate Cool that are already obviously on floor. So all the beds will be available for purchase starting on March 23, and we will start setting floors on March 23. So we will start with our first highest volume stores and most of the stores will be set by mid-April. Then we'll have a few more stores that might roll out into May. But for the most part, the key stores will be -- will all be set by mid-April. Robert Griffin: Okay. So basically, Floor will be in good shape for the Memorial Day holiday. That's what I was getting at. Linda Findley: Absolutely. That is exactly what we're planning for. Yes. Robert Griffin: Okay. That's very encouraging. And I guess, just on -- I understand the dynamics around not wanting to give the guide. But just one clarification, Amy, and then maybe a little help. But the EBITDA number that -- the growth that you're referencing, that's versus the reported number in '25, not the pro forma number. Amy O'Keefe: That's correct. That's correct. Of the $78 million adjusted EBITDA base mid-20s percent range improvement. Robert Griffin: Yes. Okay. Perfect. And then if that comes to fruition and you guys are able to deliver that, would that translate into positive free cash flow for the year, I understand this business typically has really good cash flow metrics, but it would? . Amy O'Keefe: Absolutely. Operator: Your next question comes from the line of Peter Keith from Piper Sandler. Unknown Analyst: This is Sarah on for Peter. First, just on marketing spend, given the meaningful reductions in 2025, how are you guys thinking about investment in '26? Should we expect those marketing dollars to start trending back up particularly as the new product lineup rolls out? Or is current on kind of sufficient to drive demand? Linda Findley: Right. So as we spoke about before, what we're actually doing in 2026 compared to 2025 is you'll see marketing held flat as total spend in 2026 over 2025. But what that means in reality because 2025 had very high spend in Q1, much lower spend in Q2 and Q3 and then moderated sort of relatively flat spend in Q4. That was the shape of the curve in 2025, someone compared it to a square root at one point. So when you look at 2026, what we're actually doing is evening that spend out across the entire year. So you don't have any peaks and valleys of spend that can create inefficiencies and so what that means in reality is Q1 is actually down because, again, Q1 spend last year was extremely high before I joined the business. So Q1 spend is slightly down. Q2, 3 and 4 will be up year-over-year relative to last year because of the fact that we're evening out the spend. So you are going to see increased spending, as Amy mentioned, in line with our full rollout of the products. Amy O'Keefe: And the only thing I'd add is that Q2 is up higher than -- the back half by quarter is roughly flat, but the flip flop is really between Q1 and Q2. Unknown Analyst: Yes. Okay. Very helpful. And then just a quick follow-up on the clearance of existing products. Was that primarily greater markdown than expected? And then did you say that was expected to be a headwind once with those newer products and on the reduction? Amy O'Keefe: Sorry, are you finished with your question? Unknown Analyst: Yes. Amy O'Keefe: Got you. We are going to see unquestionably some margin pressure in Q1. So this new product rollout is monumental compared to other product launches in the company's history. I mean, I think we say we haven't seen such significant change in a decade and so with a hard stop, and we definitely didn't want to do a rolling change of these products because we wanted to get the revenue ramp and the margin benefits as early as we possibly could. So we're definitely going to be taking some discounting and hits to margin in Q1 because of the hard stop and the softness that we talked about in January and February, we had a little bit more inventory hangover than we would have liked, and we're working through that in the month of March. Linda Findley: Yes. The only thing I would add to that is it was -- you were asking if it was expected, and we did expect to do some clearance work. So I think that's fairly standard in a launch of this magnitude. One of the things that we are excited about with what we've seen from the launch of Comfort mode is this -- it outsold 3.5x our plan, but it's also out selling all 3 of the beds it replaces by 2x. So you get leverage with volume as well. And that's a big part of what we're thinking about long term is, of course, the volume play and how we can increase leverage that way, too. So there's trade-offs in everything that we're looking at that this was expected. Operator: And as we have no further questions, ladies and gentlemen, this will conclude today's question-and-answer session. I'd now like to turn the conference back over to Linda for any closing remarks. Linda Findley: Thank you very much for your time today. We're excited for our customers to experience our new product lineup later this month, and we remain very focused on the key elements of our turnaround strategies as we actively address our capital structure. . I look forward to updating you on our continued progress in the coming months. As always, if you have any questions, please contact us directly. Operator: This concludes today's conference call. Thank you all for joining. You may now disconnect.
Operator: Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Vivid Seats Fourth Quarter 2025 Earnings Webcast and Conference Call. [Operator Instructions]. I would now like to introduce your host for today's presentation, [ Mr. Austin Arnett ]. Sir, please begin. Unknown Executive: Good morning, and welcome to the Vivid Seat's Fourth Quarter 2025 Earnings Call. I'm Austin Arnett, Vivid Seat's General Counsel. I'm joined today by Larry Fey, Chief Executive Officer; and Joe Thomas, Chief Financial Officer. By now, everyone should have access to the earnings press release we issued earlier this morning. The release as well as supplemental earnings slides are available on our Investor Relations website at investors.vividseats.com. Today's call will include forward-looking statements within the meaning of federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially, including those discussed in our earnings release, our annual report on Form 10-K and our other filings with the SEC. Today's call will also include references to adjusted EBITDA and net debt, which are non-GAAP financial measures that provide useful information to investors. To the extent reasonably available, A reconciliation of these non-GAAP financial measures to their most directly comparable GAAP measures can be found in our earnings release and supplemental earnings slides. And now I'll turn the call over to Larry. Lawrence Fey: Good morning, everyone, and thank you for joining us today. I'm excited to share what we are working on as we chart a refreshed course for Vivid Seats in 2026 and beyond. We believe we have the right team and the right strategy to drive innovation, thought leadership and profitable growth in the coming quarters and years. I'd like to begin with an update on our leadership team. Austin Arnett who provided opening remarks for this call was named General Counsel in December. Austin previously led our corporate legal team after prior roles at Latham & Watkins and McDonald's. Austin steps into the GC role with extensive legal expertise and substantial familiarity with our business. I'd also like to introduce Joe Thomas, our new Chief Financial Officer. Joe, who joined us in January is an accomplished executive with a strong track record of driving financial discipline through data-driven decisions while supporting long-term growth initiatives. I'm excited to join forces with both of them as we embark on this new chapter for Vivid Seats. I'd also like to thank Ted Pikes, who served as our interim CFO during this transition. Ted's deep institutional knowledge and steady hand were critical during a pivotal period for the company. I'm grateful for his continued partnership as our Chief Accounting Officer. With our new team in place, we have refined our long-term strategy and have quickly begun executing against it. Our strategy builds and expands upon visits foundational strength, our leading technology our unique data, a relentless focus on efficiency and an increasingly compelling and differentiated value proposition to customers. I will spend a few minutes touching on our efforts across each of these foundational elements. Starting with our technology and product, we are redoubling our focus on product innovation and efficiency and expect this to benefit our results as we move through 2026. Across both our web and app properties, we are bringing a renewed focus on our core customer funnel to ensure a seamless user experience. Beyond this foundational focus, we are continuing to innovate in an increasingly AI world. In 2023, Vivid Seats became the first company in the live events industry to launch a live events plug-in for open AI's ChatGPT. That early partnership underscored our commitment to innovating at the intersection of technology and live entertainment. Building on that foundation, we recently introduced a dedicated Vivid Seats app within ChatGPT, further advancing our AI-driven shopping capabilities. This new app is designed to capture real-time consumer intent and transform event discovery by making it more personalized, intuitive and efficient while reinforcing our position as a leader, shaping the future of how fans discover and access live events. This launch is an example of our continuous efforts to evolve our platform in a highly dynamic environment. Our path forward will combine innovation with a disciplined focus on efficiency. As previously announced, we significantly expanded our cost reduction program increasing our initial fixed cost savings target from $25 million to $60 million. We have now achieved our increased target of $60 million of annualized savings with reductions in spanning marketing, G&A and stock-based compensation. These savings position us to reinvest selectively in growth initiatives such as our enhanced app value proposition while improving our operating leverage as we return to growth. We also executed our corporate simplification early in the fourth quarter, which included the termination of our tax receivable agreement and the collapse of our dual-class share structure. This meaningfully reduces complexity, improves transparency and generates both immediate and long-term financial benefits. Taken together, our cost reduction program and corporate simplification are creating a more efficient, agile organization that can invest strategically for growth, while maintaining financial discipline. Moving to the compelling and differentiated value proposition we present to customers. Vivid Seats is the most rewarding ticket company. We are centering the Vivid Seats message and experience around that simple but powerful fact. No one rewards fans more than we do. We're sharpening our messaging to highlight how Vivid Seats delivers more value at every step of the journey from rewarding prices to a seamless, stress-free shopping experience to tangible rewards that deepen loyalty over time. By delivering the most rewarding experience in ticketing, we seek to build long-term relationships with our customers and our app ecosystem. App users return more frequently, convert at higher rates and rely less on paid performance marketing channels. We believe the combination of our rewards program and our lowest price guarantee represents the most compelling value proposition in ticketing. We are seeing encouraging trends as we pursue this strategy. App GOV is up over 20% year-over-year through the first 2 months of 2026. Since launching our enhanced app value proposition during Q3 of last year, we have seen app share of GOV increase by more than 500 basis points. We also remain confident that information transparency will only increase as AI continues to reshape how consumers discover and evaluate offerings across the Internet. We believe we are well positioned to benefit as AI-guided consumers increasingly gravitate towards platforms that are delivering the most value to consumers. While we are early in our execution journey, the trends we are seeing thus far in Q1 indicate we are making substantial progress and that our strategy is gaining traction. Accordingly, we are reaffirming our 2026 outlook. We continue to expect marketplace GOV in the range of $2.2 billion to $2.6 billion and adjusted EBITDA in the range of $30 million to $40 million. In addition, we are providing Q1 2026 guidance of $570 million to $620 million of GOV, $8 million to $10 million of adjusted EBITDA and a cash balance of $125 million to $135 million. Turning to the fourth quarter. While our results were challenging, they were largely in line with what we anticipated as we work through a transitional period for the business. As we shared last quarter, a softer Q4 industry backdrop, private label declines and ongoing execution of our strategic realignment were expected to pressure results. While these pressures played out as expected, we were encouraged by emerging momentum across our own properties. In particular, our app performance remained a bright spot, reflecting the impact of our ongoing product investments and enhanced value proposition. The trends we are seeing thus far in the first quarter confirm the actions taken by this new team are translating to tangible progress. These indicators reinforce our belief that the path forward we have put in place is the right one. and that the investments we are making will enable us to return to growth in the second half of 2026 and deliver sustainable, profitable growth for many years to come. With that, I'll turn it over to Joe to walk through our fourth quarter financial results and outlook in more detail. Joseph Thomas: Thank you, Larry, and good morning, everyone. I'm excited to join Vivid Seats and help shape the company's next phase of growth. The business is a strong foundation and significant opportunity. I look forward to working closely with Larry and the leadership team to deliver long-term value. Turning to the results. In Q4 2025, we generated $581 million of marketplace GOV compared with $994 million in the prior year period. Q4 2025 total marketplace orders were down 32% year-over-year with average order size down to $329 from $380 in Q4 2024. According to our SkyBox data, industry volumes were down double digits in Q4, primarily due to less content on sales and a difficult world series comparison, which pressured results when combined with the loss of a large private label customer that occurred in early Q3 2025. Q4 2025 revenues were $127 million, compared to prior year revenues of $200 million. Our Q4 2025 marketplace take rate was 16.8%, up slightly from 16.6% in Q4 2024. We expect our near-term take rates to stay in the 16% range. Adjusted EBITDA for the quarter was $1 million, reflecting the impact of lower volume and negative operating leverage. Importantly, we achieved our annualized cost reduction target of $60 million during the quarter. While we saw a partial benefit from these efforts in Q4 2025, we anticipate full benefit starting in Q1 2026 and with a more agile cost structure, allowing for improved operating leverage moving forward. We ended the fourth quarter with $103 million of cash and $390 million of debt resulting in net debt of $287 million. As a reminder, the fourth quarter brings seasonally lower working capital flow with that flood reduction accounting for a majority of our cash outflows in the quarter. Q1 2026 is seasonally stronger in terms of cash inflow, which supports our guidance for a cash balance range of $125 million to $135 million by the end of Q1 2026. We expect Q1 2026 marketplace GOV in the range of $570 million to $620 million. This GOV level is consistent with Q4 2025 and despite the fourth quarter traditionally being the strongest volume quarter of the year, which reflects sequential improvement in share. We expect Q1 2026 adjusted EBITDA in the range of $8 million to $10 million. This represents a substantial improvement relative to Q4 2025 EBITDA and reflects consistent volumes, improved unit economics and the full impact of our cost reduction efforts. For fiscal year 2026, we continue to expect marketplace GOB in the range of $2.2 billion to $2.6 billion and adjusted EBITDA in the range of $30 million to $40 million. This outlook reflects an expectation of modest industry growth and continued competitive pressures, but also benefits from our cost reduction program and strategic investments and an enhanced customer value proposition. Back to you, Larry. Lawrence Fey: In closing, the positive trends we are seeing in the first quarter support our belief that we are now on the right path. We are seeing encouraging progress across numerous leading indicators. Pointing to a return to volumetric growth across the business outside of private label. We are particularly excited about the app trajectory and believe the combination of a return to growth, a streamlined cost structure and more efficient tax profile positions us to deliver growing profitability and cash flow as we execute our strategy. We are confident that visits foundational advantages our leading technology, unique data, best-in-class efficiency and the differentiated customer value proposition remains. And with disciplined execution, will support our return to profitable growth. With that, operator, please open the call for questions. Operator: [Operator Instructions]. Our first question or comment comes from the line of Ryan Sigdahl from Craig-Hallum Capital Group. Ryan Sigdahl: Welcome, Joe. Larry, I want to start, you've dealt with unfavorable competitive dynamics for the better part of 2 years now. We've heard from that may appear that they plan to focus more on customer acquisition efficiency in 2026, nice change, a fairly big change, I guess, in statement versus the user acquisition Blitz Creek, that they've been going under. I guess curious if you've seen any of that and then how you think about the competitive dynamics heading into 2026 or as we start and how you plan to balance your customer acquisition efficiency versus the value proposition, the app, direct traffic, et cetera, et cetera? Lawrence Fey: Yes. Thanks, Ryan. In terms of competitive landscape and competitive intensity, I think we have seen a degree of moderation, particularly as it relates to some of the peak intensity from StubHub in particular. I think others in the space continue to be pretty aggressive, and I think there continues to be a meaningful priority placed on GOV and volume across a number of our competitors relative to fundamental unit economics and profitability. But I think we continue to see that over time economics play out, financial realities ultimately win. And so I think we will stay the course that we've been on for the last couple of years where -- there is certainly inherent tension between volume and profitability, but we're going to stay true to our unit economics. And in particular, the focus on the app ecosystem, the focus on the app value proposition is trying to enhance our lifetime value which enables you -- if you know you are keeping people in your ecosystem longer with a longer relationship with more repeat rates, you can still solve your unit economic question while being more aggressive on the customer acquisition front. So we think we can try to accomplish both, right, stay true to our unit economic frameworks and enable ourselves to drive better volumetric performance as we continue to execute against that. Ryan Sigdahl: Very good. Then just you mentioned ChatGPT plug-in in '23. Your main competitor press released, I guess, a relationship and partnership with ChatGPT a few months ago. So I guess curious kind of how you fit with your competitive set within there. I think you also have perplexity that you didn't mention, but just talk broadly speaking about LLM if you're willing to quantify kind of the percentage of whether it's customers or GMV or anything there, that would be helpful. Lawrence Fey: Yes. AI, as you can imagine, top of mind an incredibly dynamic space. We haven't yet seen consumer behavior in our space reflects the height, right? It's still a pretty small percentage, very small percentage, probably 1% is the best estimate I would put out there for what we're seeing in terms of direct traffic through the AI channel today. That said, I think we are fundamentally of the belief that this is a one-way street where AI will have more, not less impact and that there are fundamental unlocks that AI can bring for the benefit of consumers in our space, the benefit of consumers across e-commerce with better information transparency. And so we've been in a space where, for many years, being at the top of a search was critical to driving customer awareness and you could charge in many instances, premium pricing to facilitate that. So it hasn't changed yet, but we are making the bet that there will be evolution there where customers will be better able to surface differentiated value propositions over time, better able to research and compare. We do think there's still a place in ticketing where the seat you're in, the angle of your view, the size of the stadium there's a lot of deeply personal preferences. So the desire to do detailed shopping, detailed comparisons in an app, we think will be a longer-term home for a lot of customers, but AI at the top of the funnel when people are researching their options, understanding the choices out there we think will be meaningfully disruptive over the coming quarters. Operator: Our next question comment comes from the line of Cameron Mansson-Perrone from Morgan Stanley. Cameron Mansson-Perrone: One follow-up on the industry trends. Just curious, there's a competitive dynamic, but then there's also been some potentially favorable dynamics happening as well. Wondering if you've seen any benefit or seen anything in the marketplace in conjunction with the changes that Ticketmaster has made around its resale platform and activity. And then as we look forward to 2026, wondering what -- how you guys are framing your thinking about the World Cup and any expectations around participating in that resale activity this summer. Lawrence Fey: Yes. Thanks, Cameron. On the industry front, Q4, not a great quarter. We saw it down double digits I think we mentioned tough MLP comp, but in particular, concert on sales were down dramatically year-over-year. Those on sales picked back up in Q1, whether that was just normal variation in timing or something reflective of some other planning or considerations on the Ticketmaster side, not clear to us. We haven't seen any meaningful impact beyond that in terms of Ticketmaster's overall posture level of aggressiveness in the space. So I'd say those kind of rumored changes or adjustments not to a degree that we could say we've seen, felt or can measure, but we'll continue to keep an eye on it. for broader industry overall, the last time when we gave guidance, we had pointed to expectations of flat over the year. I think with the Q1 on sales, we continue to feel equally as good, if not a little bit better with World Cup volumes equally as good, if not a little bit better. So I think stable to slight growth in the industry is our new estimate. And as we look at the World Cup, I think if you think of the benchmarks or the goalpost -- goalpost as a typical A-List tour would be 1% of GOV for the year. Taylor Swift be the other side of that, that's ever mid- to high single digits as a percentage of I think World Cup is an event will end up somewhere in between. Where in between will be, I think, dictated by do you have great matchups, does the U.S. play Mexico and the semifinals. So that would be a dream. But we think it will be substantial, a couple of hundred basis points of GOVs our best guess. Operator: Our next question comment comes from the line of Dan Kurnos from Benchmark. Daniel Kurnos: Great. Thanks. Good morning. Welcome, Joe. For -- I guess, Larry, just as we think about your customer acquisition strategy around app, I know we've talked about it a little bit, but I don't know if you want to take a second to kind of maybe flesh out obviously, without giving away any trade secrets, how you're thinking about driving incremental traffic beyond just pointing to the value prop? Like are you thinking about different marketing channels, you thinking about better more efficient ways to kind of get people to understand the message there? And then I have a follow-up for you. Lawrence Fey: Yes. I think the last thing you said, having people clearly understand the value prop is a critical threshold element where if we don't do that successfully, we have no reason to believe people will come back more often. We'll build a lifetime relationship. So we're mid-flight on it, but you should see continued improvements in the journey as an app customer. So your onboarding experience. How do we build that initial report if you make it feel like a win-win where you're providing us your information, and we're providing you something of value and return to kick off on the right foot. Well-situated messaging to drive home not only the everyday pricing, but this idea of ongoing rewards, ongoing benefits for loyalty and repeat purchasers, such that if you are a customer who has intentions of going to multiple live events per year for presumably decades to come, you can get peace of mind that you've completed your research, right? You'll do the research and depth, you'll compare the pricing, you'll validate the claims and once that validation is complete, you can with peace of mind buy from us. I think the second dimension beyond making sure that once you arrive at the app, it's very clear what we're doing and why we are making claims about our value proposition. We have a very large database of people who have purchased from us over the years. And so really thoughtfully targeting and messaging that database of folks continuing to use growing AI capabilities to have personalized messages that could resonate right message at the right time. I think that's the second major dimension. And then over time, I think we'll continue to explore complementary marketing channels that are outside of that core paid search funnel, right, whether it's social or other adjacencies. There continues to be an opportunity there, but it has been a relatively long-term play to build that awareness. And so that will be a steady as she goes element. Daniel Kurnos: Got it. That's super helpful. And then I'll just ask if you care to opine on -- I know we've already had sort of the competitive question, but clearly, while you guys aren't in primary, we've had movement from DOJ and live now, and there's always knock-on effects to the competitors that are maybe hybrid or trying to get in there. Into that space, you guys have tested the waters in primary and small doses in the past. Just curious if how you think about regulatory either from that perspective or the bulk seller stuff might just impact overall industry dynamics, consolidation, just anything that you would like to opine on how you think kind of the broader group adjusts to some of the regulatory stuff. Lawrence Fey: Yes. I mean, we've certainly been through the term sheet. I think devil in the details is probably the operative phrase here. So we'll wait for more to come out and probably premature for us to comment in too much depth given the lack of detail on some pretty important provisions in the term sheet. From everything we've seen, I can't see anything that would be deemed or even considered potentially adverse to our position in the marketplace. And at least from our position, I don't see a lot that will change anything meaningfully. But put the [indiscernible] for devil in the details, and we'll see if there's more to it. Operator: Our next question comment comes from the line of Maria Ripps from Canaccord. Maria Ripps: Welcome, Joe. First, I just wanted to follow up on your within. Can you maybe just talk about sort of the type of consumer that you're attracting within ChatGPT and sort of conversion rate? And then do you maintain sort of the customer profile or customer data after that initial engagement? Lawrence Fey: Yes. Thanks, Maria. I think the ChatGPT app is a good example of you need to play in traffic while this world situates itself. As it sits today, finding apps in the LOM journey requires someone who's looking for the app or you need to come in with a targeted search and seek out, whether it's ours or a competitor's app and that open up a different use case, but I don't think it's gone mainstream. I don't think most people have unlocked how to access apps within the LLM journey. And so as a result, what you do see is folks who come through LLM and folks who come through that app convert at structurally higher rates. What is probably too early to tell. Is that because you have a selection bias or the folks who are doing that are the most intent thoughtful tech savvy users and thus you're just revealing that their intent versus tool is fundamentally changing their behavior journey. So we're looking at all the data with eager anticipation. But I don't think we have clear answers yet on that. separately to the broader question on customer personalization, the more interactions you have with someone, right, where you can see if they're logging in, in Chicago, and they're searching cubs tickets. And then 6 months later, they search their tickets, you can start to create a profile of a Chicago-based sports fan and make sure that they see content aligned with those sports preferences and you perhaps deemphasize comedy shows, if they've never shown any interest and over time, figuring out ways to round out that profile, right? There's numerous sources that I think we're increasingly focused on capturing more customer information to create a more bespoke experience. And one of the exciting elements over the intermediate term that we think AI offers aside from the top of the funnel, as you ingest more of this customer information, how do you create a fundamentally better experience for your users. And at the core of that, I think is thoughtful personalization built around a growing dataset. Maria Ripps: Got it. That's very helpful. And then can you maybe give us a little bit more color on what you're seeing on the supply side in concert sort of this year? And to what extent that's a factor for sort of improving trends and returning to growth in the second half of the year? Lawrence Fey: Yes. Yes. Pretty nice lineup of on sales that has come out in Q1. BTS was -- is probably the highest profile of those, but steady stream of meaningful artists coming out in January and February, Harry Styles, Noah Khan, et cetera, which was welcome because the Q4 lineup was underwhelming. When you sum up Q4 and Q1, and we've seen this before where timing moves a little bit between the quarters. It was a solid concert lineup. And so I think maybe consistent with what we've heard Auto Live Nation, where they continue to point to steady growth perhaps double digits for them across their global footprint, but still continued growth in North America on the lower end of that range. I think everything we've seen from the supply side continues to support that perspective. And we had a little bit of hesitation based on how Q4 industry trends were shaping up, and it's been refreshing to see Q1 strengthen from there. Operator: Our next question comment comes from the line of Thomas Forte from Maxim Group. Thomas Forte: So I also want to welcome Joe to the call. One question, one follow-up. Can you talk about your ability to capitalize record recurring sporting events that are not always held on an annual basis, including World Cup, Olympics and World Baseball Classic, in particular, when this type of event is in 1 of your geographies, how confident are you in your ability to get a similar share of GOV as in other sports, baseball, football, et cetera? Lawrence Fey: Yes. Thanks, Tom. Those intermittent sporting events. They're really interesting hybrid because as a general statement, if you were to look at sports versus our concert and theater customer journey, sports. If you're a Cubs fan, you're a Cub's fan, right? You're going to a Cub's game this year, you're probably going to Cub's next year, you'll probably go in the year after that. Same with baseball, football, pick your sport a preference. And so the proclivity for repeat is just higher on sports, whereas concerts are more episodic. Even if you're a lifelong die hard Taylor Swift fan. She's in town once every 5 years, right? And maybe you're going to take it one time and you're not a town the next time so you see our once in a lifetime, right, once every 10 years. And the interest in Taylor Swift may or may not map to Sabrina Carpenter or Pop Star X. And so it's a different relationship, right? It's a bit more intermittent on all things concert comedy theater relative to that more continuous sports relationship. And these intermittent events kind of straddle those. It's pretty hard to say like what on any individual customer basis, their soccer preferences or their World Cup preferences in particular, would be. And whatever we learn about them, it's probably not going to be that valuable going forward as what is going to be 30 years before we get the World Cup here again. But we can leverage folks who are MLSs are soccer fans and target those folks in a thoughtful way. But we actually see the nits of World Cup folks who it ends up being more new customers than you would see in a typical sports league because there is that intermittent element. But less so than concerts because you do have that stable base of sports fans who knows where they want to come and buy a ticket from. Thomas Forte: And then for a follow-up, can you give your thoughts on cash conversion and free cash flow generation for full year '26? Lawrence Fey: Yes. I appreciate that question. So our major cash obligations or CapEx, interest expense and taxes. The sum of those, we think, will fall between $35 million and $40 million. And so a majority of that amount would be our net interest expense. Our CapEx and cap software we think will be in the $15-ish million range. And then post tax simplification, taxes will be quite a bit lower to low single-digit millions. And thus, we need $35 million to $40 million of EBITDA before considering working capital to be cash flow neutral to generative. And then I think as we've demonstrated in spades this past few quarters, if you are growing GOV, working capital can be a source of cash, the inverse is also true. So as we project a return to growth, which we're feeling quite good about as we approach the second half of the year on a year-over-year basis and equally good earlier in the year on a sequential basis. Within working capital shift to being a source of cash and thus, we expect to be modestly but cash generative in 2026. Thank you. Operator: Our next question comes from the line of Andrew Marok from Raymond James. Andrew Marok: One on the comps. I know you called out a difficult world series. This year as a headwind. I guess as we're looking forward into the 2026 trajectory, how are the 2025 championships and maybe special events and sports playing out from a comp perspective as we look into the model? Lawrence Fey: Yes. Great question, Andrew. I think if we were to just go through the calendar, we've already seen some benefit when you had the, call it, up down up in the Super Bowl. So 2024 sort of peak experience with Vegas 2025 with the kind of repeat participants in New Orleans was been underwhelming, much stronger performance, Super Bowl in 2026. As we look at the rest of the year, I'd say there's nothing daunting. I'd say, it ranges from, call it, slightly below -- slightly above average matchups. NCAA tournament was relatively strong last year. We'll see how that goes in the next few weeks. Nothing I would say of note in terms of NDA or NHL I love that Oklahoma City has 47 traffics over the next couple of years, except for the fact that Oklahoma City is not the most dynamic market from a secondary standpoint. So we'll see if anyone topples them on the MBA side. And MLB was off of the peak Yankees Dodgers levels, but Yankee Blueray wasn't bad. So I'd say that was still above average last year. So the MLB comp is probably the most daunting of the remaining major championships coming through the rest of the year. Operator: Our next question comment comes from the line of Benjamin Black from Deutsche Bank. Unknown Analyst: This is Jeff on for Ben. Can you just talk a little bit about the puts and takes to getting to the high and the low end of your guidance, particularly in GLD, would you need to see the competitive dynamics kind of continue to soften from here? Or could you get to the high end with just better performance from events in the industry? Lawrence Fey: Yes, it's a great question. Our presumption is that we can get to the high end of our GOV and EBITDA range. through our own execution. So steady performance from industry volumes consistent with current competitive intensity and continued delivery of a pipeline of product enhancements that we're really excited about that we think will start coming out over the next couple of months and have a meaningful portion of the year to benefit in terms of the back half contribution. And if we deliver in those enhancements flow through as expected. That's the path to the top end of the range. cure if there's better industry volume and/or a further shift in competitive landscape that would make it easier and/or create a path to outperforming. Unknown Analyst: Understood. Got it. And then maybe just one quick follow-up on sort of the app share growth in the gains. You talked about the increase in the FPD. Is that more driven by bringing new customers to the app? Or is it sort of just increasing the velocity or the repeat purchases of existing customers already using the app. Lawrence Fey: I'm happy to say yes to that. So it is across both dimensions, we are seeing app sessions increasing year-over-year. We are seeing app repeat rates increased double digits when we're looking at our cohort subsequent to these changes. And one of the things we talk about a lot over here that when you're playing a longer game with trying to build lifetime relationships to drive long-term repeat, the toughest day of that journey is the first day because you feel all the pain on the enhanced value proposition. We haven't given folks an opportunity to come back and repeat. So we feel like we started the snowball down the hill, and now as we move through subsequent quarters and years, that benefit will compound. And we're seeing all the underlying -- we talk about leading indicators that are flash and positive. That's a perfect example. These repeat rates, the growing size of the cohort and the growing proclivity to repeat within them. are the types of leading indicators that if you could stack over time, become a really powerful trend. Operator: Next question or comment comes from the line of Ralph Schackart from William Blair. Ralph Schackart: Larry, you talked about sort of entering Q2 with a refined strategy. Maybe talk about, I guess, maybe your top 1 or 2 key priorities or adjustments to that strategy? I know you talked about the APRA new focus, I'm not sure if that's [indiscernible] two of them. But just maybe if you could sort of highlight or underscore what those are in progress to date and kind of how that progresses through 2026. That would be great. Lawrence Fey: Yes. Thanks, Ralph. I think as you noted, parts of the strategy were starting to be rolled out back half of last year, executed throughout Q4 and will continue. And so the efficiency, the cost reduction program was the starting point of that, reinvesting some of those savings into the structurally enhanced at value proposition was a part of that. I think when you look at what incrementally we're pursuing, I think there's a refreshed focus on the core customer journey, where you need -- when someone has decided that they want to attend an event, a relentless focus on making that journey as quick, efficient and pleasurable as possible for the customer. Don't distract them with superfluous information, but make sure all of the relevant information is in front of them, make sure every step of the journey works efficiently, you aren't introducing undue friction. And that's been an area where I think we were pursuing a lot of different paths and distracting a little bit. So ultimately, that will manifest in, I think, an enhanced conversion profile, particularly on our web journey. We're very excited about that. I won't go into too much detail on this. I think there's some enhancements to our private label philosophy and approach that we're working on that get that business line returning to growth as we lap the tough comps starting in Q3. They're a little more operational in nature. But if I were to say it in a word, getting back to being operationally elite, it's the core focus in addition to the cost efficiency and the app value proposition, each which has their own sub elements where we'll continue to build on the early gains and wins. Operator: I'm showing no additional questions in the queue at this time. Ladies and gentlemen, this concludes today's program. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.
Operator: Good morning, ladies and gentlemen, and welcome to BK Technologies Corporation Conference Call for 2025. This call is being recorded. All participants have been placed on a listen-only mode, and following management's remarks, the call will be opened for questions. There is a slide presentation that accompanies today's remarks, which can be accessed via the webcast. At this time, it is my pleasure to turn the floor over to your host for today, Brett Maas of Hayden Investor Relations. Brett, please go ahead. Brett Maas: Thank you, operator. Good morning, and welcome to our conference call to discuss BK Technologies Corporation results for the fourth quarter and full year 2025. On the call today are John M. Suzuki, Chief Executive Officer, and Scott A. Malmanger, Chief Financial Officer. Please take a moment to read the safe harbor statements. Statements made during this conference call and presented in the presentation that are not based on historical facts are forward-looking statements. Such statements include, but are not limited to, projections or statements of future goals and targets regarding the company's revenue and profits. These statements are subject to known and unknown risks and factors. The company's actual results, performance, or achievements may differ materially from those expressed or implied by these forward-looking statements, and some of the factors and risks that could contribute to such material differences have been described in this morning's press release and in BK Technologies Corporation filings with the U.S. Securities and Exchange Commission. These statements are based on information and understandings that are believed to be accurate as of today, and we do not undertake any duty to update such forward-looking statements. With that out of the way, I will now turn the call over to John M. Suzuki, CEO of BK Technologies Corporation. Go ahead, John. John M. Suzuki: Thank you, Brett. Good morning, everyone, and thank you for joining us on our fourth quarter and fiscal year 2025 conference call. I will start by reviewing our operational and financial performance and then turn it over to our Chief Financial Officer, Scott A. Malmanger, for a deeper dive into our financial results for the fourth quarter and fiscal year 2025. Following the discussion of our financial results, I will provide an outlook for our fiscal year 2026 and introduce the core objectives of Vision 2030. We will conclude by opening the call for a brief Q&A. The fourth quarter capped off an excellent year for the business, marked by substantial achievements and the successful execution of our Vision 2025 objectives. We delivered results ahead of annual guidance by all measures, including revenue growth, margin expansion, and increased profitability. Our results underscore the strength of our product portfolio and accelerated customer adoption of our solutions in the public safety communications market. Our business performed strongly in 2025, with revenue of $21,500,000, increasing 20% year over year, which is the second consecutive quarter of 20%+ top line growth. Revenue growth was driven primarily by robust state and local agency order volumes, including increased purchase volumes of our BKR Series radios by agencies within our core Tier 2 and Tier 3 target markets. As a reflection of favorable product mix and continued wider-scale adoption of our BKR 9,000, gross margin increased by over 900 basis points in 2025, a material expansion to 50.4% compared to 41.2% in the year-ago quarter. This powerful combination of revenue growth, gross margin expansion, and diligent cost management resulted in a 78% year-over-year increase in adjusted EBITDA, reaching $4,700,000 in 2025. For the third consecutive quarter, we delivered adjusted EBITDA margin north of 20%, expanding to 22% in 2025 from 14.9% in the year-ago period. Profitability continued to advance in 2025, with non-GAAP fully diluted adjusted EPS reaching $1.17, up from $0.61 in 2024. As a result of the strong performance, we closed 2025 with a record cash position of $22,800,000, a significant increase from $7,100,000 at year-end 2024. Our financial strength gives us the flexibility to invest strategically in innovation and commercial expansion, supporting opportunities to capture market share and unlock long-term value creation. Currently, our disciplined capital allocation strategy and inherent operating leverage are driving improving returns, with return on invested capital of over 20% for the second consecutive year. We delivered sustained gross margin improvements during the 2025 period and successfully navigated substantial industry-wide headwinds, starting with the supply chain disruptions in 2022. At that point, we implemented meticulous cost management initiatives, followed by securing a strategic partnership with East West for outsourced manufacturing, which significantly improved supply chain resilience while reducing manufacturing complexity. Stepping into 2025, gross margins steadily expanded throughout the year, supported by firm customer adoption of our high-margin BKR 9,000 multiband radio and resulting favorable product mix. For the full year 2025, gross margin expanded by over 1,000 basis points to 48.8%, comfortably above our 47% target. Gross margins improved from 19.3% in 2022 to 48.8% in four years, a trajectory that is the result of growing customer adoption, disciplined cost management, optimized supply chain, and the successful repositioning of our manufacturing and sourcing footprint. These structural advantages provide us with the ability to invest in long-term growth. To expand on the positive impact from the BKR 9,000, our multiband radios continued to attract agencies for their unmatched combination of performance, interoperability, affordability, and ergonomics. BKR Series radios fueled solid revenue growth into 2025, leading to full-year revenue growth of 12.5%, exceeding our guidance range of high single digits. While fourth quarter revenue declined sequentially from the third quarter due to normal ordering patterns among public safety agencies, it still represented our strongest fourth quarter on record. As I discussed in our third quarter conference call, we shipped 2.5 times the number of BKR 9,000 multiband radios in 2025 than we did in 2024. This continued sales ramp was driven by expanded agency deployments and recurring replacement cycles. This higher-margin mix, in tandem with operating leverage, resulted in a 91% year-over-year increase in operating income for 2025, which outpaced revenue growth. This momentum, coupled with the upcoming launch of the BKR 9,500 radio, positions us with a strong growth lever as we commence our Vision 2030 road map. As we close Vision 2025 and enter Vision 2030, our competitive positioning has never been stronger. Our results validate the strength of our product portfolio, the accelerating adoption of our solutions across public safety communications, and the team's successful execution of our strategic priorities. With that, I will now turn it over to Scott A. Malmanger, our CFO, to give a more detailed overview of our fourth quarter and full year 2025 financial performance. Go ahead, Scott. Thank you. Scott A. Malmanger: Thank you, John. Sales for the fourth quarter totaled $21,500,000, an increase of 20% compared with $17,900,000 in 2024. For full year 2025, sales expanded by 12.5% to $86,100,000, growing ahead of the high single-digit guidance. Gross margin in the fourth quarter was 50.4% compared with 41.2% in 2024, reflecting favorable product mix and continued robust adoption of the higher-margin BKR 9,000. For the year, gross margin expanded by 1,086 basis points from 37.9% to 48.8%, exceeding our guidance of more than 47%. Selling, general, and administrative expenses for the fourth quarter increased to $6,600,000 compared to $5,200,000 in the same quarter last year. SG&A expense for the quarter includes non-cash stock-based compensation expense of approximately $500,000. For the full year 2025, SG&A increased 23% to $26,000,000, primarily driven by marketing and promotion costs for the BKR 9,000 and non-cash RSU compensation expenses within our software engineering team, both of which align with our previously communicated investment strategy to drive sustainable growth. Operating income was $4,200,000 in the fourth quarter 2025, with operating margin expansion from 12.3% in the year-ago quarter to 19.7%. For the full year, operating income more than doubled to $16,000,000 from $7,800,000, with operating margin expanding by over 830 basis points from 10.2% in 2024 to 18.6% for full year 2025. For 2025, the company delivered GAAP net income of $4,200,000, or GAAP EPS of $1.12 per basic and $1.05 per diluted share, compared with net income of $3,700,000, or $1.03 per basic and $0.93 per diluted share, in the prior-year period. For the full year 2025, GAAP net income reached $13,500,000, or $3.69 per basic and $3.44 per diluted share, comfortably above the $3.15 per diluted share guidance. This compares to $8,400,000, or $2.35 per basic and $2.25 per diluted share, in 2024. Net income of $13,500,000 for the full year 2025 includes the impact of tax credits for the remediation of the uncertain tax position recorded in the 2024 financial results. The company's effective tax rate for 2025 was percent compared to an estimated rate of 25% as we look forward to 2026. The higher tax rate reflects the normalization of our tax profile and profitability increases. The impact of our higher tax rate on 2026 fully diluted EPS is estimated to be approximately $0.55 per share. Non-GAAP adjusted earnings, which add back net realized and unrealized loss on investments, non-cash stock-based compensation expenses, non-cash income tax provision expense, and severance expenses, were $4,700,000, or $1.24 per basic share and $1.17 per diluted share, in 2025. This compares to adjusted earnings of $2,400,000, or $0.67 per basic and $0.61 per diluted share, in 2024. For the full year, non-GAAP adjusted earnings reached $17,000,000, or $4.63 per basic and $4.32 per diluted share, exceeding our guidance of $3.80. This compares to full year 2024 non-GAAP adjusted earnings of $6,800,000, or $1.92 per basic and $1.84 per diluted share. We reported non-GAAP adjusted EBITDA of $4,700,000 with adjusted EBITDA margin of 22% in 2025, representing a material increase compared to $2,700,000 and 14.9% in 2024. This marks our third consecutive quarter of adjusted EBITDA margin above 20%. For full year 2025, adjusted EBITDA reached $17,600,000 with adjusted EBITDA margin of 20.5%, a significant expansion from $9,600,000 and 12.5% in 2024. Turning to Slide 7, we have delivered noticeable improvement in our profit trajectory dating back to 2024. Although we have achieved continuous profitability increases overall, we did recognize a slight decrease in non-GAAP adjusted earnings on a sequential basis from the third quarter to 2025, which was related to a non-cash provision for income taxes of approximately $932,000 in 2025. This is associated with a year-to-date R&D tax credit adjustment stemming from the “Big Beautiful Bill” signed in July. Our profitability trend has been strong, and we anticipate this trajectory will continue as product mix shifts and we increase BKR 9,000 sales. Turning to the balance sheet, we ended 2025 with a record cash balance and debt-free balance sheet, underscoring the strong cash-generating capability of the business. At 12/31/2025, we had $22,800,000 in cash on the balance sheet, a significant improvement over the $7,100,000 as of 12/31/2024, as well as no debt. The company, as part of its capital allocation plan, established a Rule 10b5-1 nondiscretionary stock repurchase program in September. During the quarter, the company repurchased approximately 19,000 shares of its common stock as per the conditions of the plan. Working capital improved to $37,300,000 at 12/31/2025, compared with $23,000,000 at 12/31/2024. Shareholders' equity increased to $44,700,000 compared with $29,800,000 at 12/31/2024. To conclude, the strength of our business model and disciplined execution by our team enabled us to deliver on our Vision 2025 objectives and successfully navigate industry-wide challenges. We remain confident that our positioning will enable us to accomplish our Vision 2030 objectives, with our guiding principles being to surpass customer expectations and create and advance value for our shareholders. I will now turn the call back over to John, who will provide our 2026 outlook and Vision 2030 goals. Thanks, Scott. John M. Suzuki: We closed Vision 2025 in a strong financial position and are poised to carry forward the momentum into 2026 and beyond. Accordingly, we are introducing the following full-year 2026 guidance: revenue of at least $90,000,000; full-year gross margin of 50% or greater; full-year GAAP EPS of $3.15; and full-year non-GAAP adjusted EPS of $3.55. These targets reflect our current expectations for continued revenue growth, further margin expansion, and operating leverage, particularly on the SG&A line. However, the above guidance also includes the impact of the estimated income taxes described earlier that we believe we will encounter in 2026. We believe there is upside, and we will adjust guidance as we execute our growth plan. In addition, we continue to make meaningful progress on the development of our soon-to-be-launched 9,500 multiband mobile radio, a companion radio to the 9,000, which is on track now for shipping in 2027. Initial customer validation has been strong, with agencies preferring to buy both handheld and in-vehicle devices from the same manufacturer for seamless interoperability. The 9,500 represents a significant opportunity to deepen existing agency relationships and expand our customer base. As we reviewed the remaining development work for the BKR 9,500 multiband radio, we made the decision to expense future development costs rather than capitalize them. While this reduces reported EPS by approximately $0.50 in 2026, we believe this more conservative accounting treatment better reflects the economics of our R&D investments and strengthens the transparency of our financial reporting. Turning to Vision 2025 and Vision 2030, Vision 2025 was drafted shortly after I arrived in July 2021. Our base year was 2020, and we set a goal to more than double our revenues, increase our gross margins, and dramatically improve our EBITDA to 20% from 3.5%. We did not know within six months we would be at the start of a global supply chain crisis that dropped our gross margins down to 14%. What was perhaps worse, our new flagship BKR 9,000 multiband handheld radio would take another 18 months to be released. Despite these challenges, the team battled back and ended 2025 with results just shy of doubling our revenue while achieving the 50% gross margin target in the fourth quarter. This resulted in a full-year adjusted EBITDA margin of 20.5%, exceeding our 2025 Vision target of 20%. As we look forward to 2030, we have set new targets. Our goals for Vision 2030 include the following: increase our market share and double our revenue to $170,000,000; deliver continued gross margin expansion to 60%; achieve adjusted EBITDA margin of 35%; triple our earnings per share to $13; and flow through to free cash flow generation of over $55,000,000. Year one of Vision 2030 is 2026. We have reiterated our strategic focus on extending our reach beyond wildland fire into structured fire, law enforcement, and everyday mission-critical communications, as we expand our addressable market meaningfully. Our Vision 2030 targets are driven by three primary levers: expanding our installed base of BKR 9,000 radios; the introduction of the BKR 9,500 mobile platform; and continued margin leverage as our manufacturing model scales. Next month at our Investor Day, we will provide a comprehensive deep dive into our Vision 2030 initiatives, including a roadmap for our product innovation, channel expansion, and capital allocation, among other playbook objectives. The event will be held virtually on April 2. Registration details will become available shortly, and we hope you can attend. Before we begin the Q&A, I would also like to mention that Scott and I will be attending the 38th Annual Roth Conference on March at the Ritz-Carlton in Dana Point, California. We encourage you to contact your Roth representative to register. With that, we will now open for questions. Jenny? Thank you very much. Operator: At this time, we will begin polling for questions. If you would like to ask a question, please press star 1 on your phone keypad now. A confirmation tone will indicate that your line is in the queue. You may press star 2 if you would like to remove your question from the queue. For anyone using speaker equipment, it may be necessary to pick up your handset before you press the keys. Please wait a moment while we poll for questions. Our first question is coming from Jason Schmidt of Lake Street Capital. Jason, your line is live. Jason Schmidt: Hey, thanks for taking my questions. John, I know you do not want to give specific details on the 9,000 for competitive reasons, which is understandable. But just curious if you could provide some color on what you are seeing from sort of sales cycle length, if you are seeing any sort of significant pushback from customers. And I guess, relatedly, with the traction you saw in 2025, was most of that coming from initial orders or expanding orders at existing customers? John M. Suzuki: Jason, thanks for joining us this morning, and thank you for the question. The expansion on the 9,000 is definitely coming from new orders. A lot of our customers are coming from the fire side, with some in the law enforcement side. The anecdotal feedback that we receive from our customers who test the radios and have made purchases is that it is a quality radio that performs well. They really like the ergonomics. And the ones that have received their radios, the feedback has been very positive. So no pushback to date. Jason Schmidt: Okay. That is great to hear. And on the 2030 Vision, I want to dig in a little bit to some of those metrics. Obviously, a significant ramp is expected on the top line. Not looking for a specific breakout, but at a high level, how much should we think about sort of that 9,500 being a driver? Or can you get there with just continued penetration of the 9,000? John M. Suzuki: So I think in general, the expectation is that for every two handheld radios that are sold in the marketplace, one in-vehicle mobile radio would be sold. That is just kind of a general rule of thumb in our industry. So we expect the same ratio between the BKR 9,000 and the BKR 9,500. We do believe that come 2030, a substantial amount of that revenue will come from the 9,500, but even more, again, from the 9,000. Jason Schmidt: Okay. That makes sense. And then just the last one from me, and I will jump back into the queue. Sticking with some of these 2030 Vision metrics, free cash flow generation is expected to be significant. How should investors think about sort of capital plans going forward? John M. Suzuki: I think the first and foremost priority is investing in ourselves and in our portfolio. We do believe that we are just starting to penetrate this market on a wider scale, and that there is a huge runway for our solutions. So the funding will always be prioritized towards our core portfolio and building on that portfolio, especially as we look towards the solution side, which should drive further adoption of our BKR Series radios. After that, we are looking at different acquisitions. Those acquisitions would be tailored around, again, our core solution offering. Anything that could drive further adoption of our radios would be top of mind for an acquisition. And then lastly, in terms of priorities, it would be returning the money to the shareholders if we at that time could not find better alternatives, or in the case we did in the fourth quarter, where we felt that our share price was undervalued, we purchased shares back. So that would be the priority. We will talk about that more on our 2030 Vision call coming up, and I will expand on our capital allocation priorities at that time. Jason Schmidt: Sounds good. Thanks a lot, guys. John M. Suzuki: Thank you, Jason. Operator: Thank you very much. Just a reminder, if anyone has any questions, you can still join the queue by pressing star 1 on your phone keypad now. The next question is coming from Robert Van Voorhis of Vanatoc Capital Management. Robert, your line is live. Robert Van Voorhis: Hey, good morning, guys. Great quarter and good execution from the team. I just have a couple quick questions. My first is on the R&D development expense for the 9,500, and I understand it is somewhere around $2,000,000. Does that expense essentially go away once the 9,500 is released, or is it sort of run-rated at a higher rate to sustain the 9,500? Scott A. Malmanger: Yeah. Our expectation is that we are going to continue to invest in our core products, so we do not expect our engineering expense to go down over time. That being said, less of that investment is going to be in the sustainment of the 9,500 versus the development. But we are planning to continue the roadmap and continue our investment in engineering. Robert Van Voorhis: Okay. That makes sense. And then my second question, and maybe this is more suited for the call you guys have coming up, but, John, just long term, in terms of pricing strategy, I understand this industry has quite a lot of pricing power. There is a lot of brand loyalty. What is the pricing strategy long term here? Is it low single-digit increases over time? How do you guys think about that? John M. Suzuki: That is an excellent question, Robert. In the context of where we are today, we have 3%–3.5% market share, so I would say very modest at best. We also think that we can at least get to a 10% market share with our current plan and our marketing strategy. My goal right now is to garner as much market share as I can, and at the point at which we feel that the incremental increase in market share is less than what we could achieve through a price increase, at that point we would start raising prices. That being said, we did have some price increases last year that were related to the administration's tariffs. If we have a disruption in our cost structure, then, of course, we are going to pass that on to our customers, just like all our competitors did in our industry. If I look at the trade-off between the opportunity for us to gain market share, once you gain these customers, the stickiness is there. I think the priority really is to get as much market share as we can, and then at some point, we will be shifting to continued improved profitability through sustained price increases over time. Robert Van Voorhis: Okay. That makes total sense. Very rational. My last quick question, if I could just get one more, is maybe more suited for Scott. On Slide 10, the target 2026 diluted GAAP EPS number is $3.50 versus, I think, the diluted GAAP EPS number that you guys gave in the outlook was $3.15 for this year. How should we look at the difference between those two? What really is the difference? Scott A. Malmanger: It should be $3.15. John M. Suzuki: Apologies, Robert, we did catch that, but, obviously, version control caught us on that. We will get that updated. Scott A. Malmanger: Yeah, GAAP diluted EPS is $3.15. The non-GAAP diluted is $3.55. Robert Van Voorhis: Okay. Thank you. That is it for me. Appreciate it. Operator: Thank you very much. We appear to have reached the end of our question and answer session. John and Scott, would you like to make any closing remarks? John M. Suzuki: Thank you, Jenny. Thank you all for participating in today's call. We are confident the foundation we have built, anchored by continuous revenue and profit growth, a strong debt-free balance sheet, and an increasing free cash flow trajectory, positions us to deliver long-term value creation for both our customers and shareholders. We look forward to speaking to you again at our upcoming Investor Day next month. All the best to all of you, and have a great day. Operator: This concludes today's call. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Rapid Micro Biosystems Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] Please advise that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Mike Beaulieu of Investor Relations. Please go ahead. Michael Beaulieu: Good morning, and thank you for joining the Rapid Micro Biosystems Fourth Quarter and Full Year 2025 Earnings Call. Joining me on the call are Rob Spignesi, President and Chief Executive Officer; and Sean Wirtjes, Chief Financial Officer. Earlier today, we issued a press release announcing our fourth quarter and full year 2025 financial results. A copy of the release is available on the company's website at rapidmicrobio.com under Investors in the News & Events section. Before we begin, I'd like to remind you that many statements made during this call may be considered forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results or performance are forward-looking statements, including, but not limited to, statements relating to Rapid Micro's financial condition, assumptions regarding future financial performance, anticipated future cash usage, statements relating to the company's term loan facility, guidance for 2026, including revenue, expenses, gross margins, system placements and validation activities expectations for and planned activities related to Rapid Micro's business development and growth, including the expected benefits from our distribution and collaboration agreement with MilliporeSigma. Customer interest and adoption of the Growth Direct system and the impact of the Growth Direct system on their businesses and operations and statements regarding the potential impact of general macroeconomic conditions on our business and that of our customers. Actual results may differ materially from those expressed or implied in the forward-looking statements due to a variety of factors, including our ability to meet publicly announced guidance the impact of our existing and any future indebtedness on our ability to operate our business, our ability to access any future tranches under our debt facility and to comply with all of its obligations thereunder. Our ability to deliver products to customers and recognize revenue and market and macroeconomic conditions. For a more detailed list and description of the risks and uncertainties associated with Rapid Micro's business, please refer to the Risk Factors section of our most recent quarterly report on Form 10-Q filed with the Securities and Exchange Commission as updated from time to time in our subsequent filings with the SEC. We urge you to consider these factors and you should be aware that these statements should be considered estimates only and are not a guarantee of future performance. Please note that today's remarks include certain non-GAAP financial measures. These non-GAAP measures should not be considered in isolation or as a substitute for or superior to financial information presented in accordance with GAAP. They have provided a supplemental information to enhance investors' understanding of our operating performance and may differ from similarly titled measures used by other companies. Reconciliations between these non-GAAP measures and the most directly comparable GAAP measures are available in our earnings release issued this morning. We encourage you to review these affiliations carefully. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, March 12, 2026. The Rapid Micro disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events or otherwise. And with that, I'll turn the call over to Rob. Robert Spignesi: Thank you, Mike. Good morning, everyone. I will begin with a brief overview of our fourth quarter performance and recent commercial wins as well as an update on our key priorities. I'll then share a few comments on our 2026 outlook before turning the call over to Sean for a detailed review of our Q4 financial results and 2026 expectations. Before reviewing our fourth quarter results, I'd like to highlight the first press release we issued this morning announcing that Samsung Biologics is expanding its deployment of the Growth Direct platform through a new multisystem order received in the first quarter of 2026. This follow-on order builds on our existing strong partnership and we are proud to support Samsung's next-generation manufacturing strategy. This expansion yet again highlights the impact that Growth Direct delivers to the world's leading pharmaceutical manufacturers as they seek to automate and modernize their critical quality and manufacturing workflows. Now turning to our performance. This morning, we reported total fourth quarter revenue of $11.3 million, representing 37% year-over-year growth and a quarterly record. These results exceeded the increased guidance we provided in November and marked our 13th consecutive quarter of meeting or exceeding expectations. We placed 16 growth direct systems in the quarter, and ended the year with 190 systems placed globally, of which 155 are fully validated. A highlight of the quarter was a record multisystem order from Amgen reflecting our continued investment in the growth -- in the global rollout of the Growth Direct platform. Amgen is deploying systems across multiple sites in North America, Europe and Asia and fully leveraging all applications to include environmental monitoring, bioburden and water testing. Additionally, Amgen will sponsor our first-ever North American Growth Direct Day in the second quarter. Product revenue increased 78% in the fourth quarter with outperformance driven by strong system placements. For the full year, consumable revenue increased 17% reflecting continued strong utilization across our installed base. Consumable growth remains one of the clearest indicators that customers are actively using their systems and realizing meaningful ROI. Importantly, consumable strength underpins recurring revenue, which increased 15% for the full year and accounted for 53% of total revenue, highlighting the durability and visibility of our business model. Turning to gross margin. Fourth quarter gross margin was impacted by inventory-related charges that Sean will discuss shortly. This does not diminish the significant progress we made throughout 2025 in reducing product costs improving manufacturing efficiencies and increasing service productivity. As I look back at our performance over the last 3 years, total gross margin has improved by over 50 percentage points trajectory, we are confident we can sustain. Now turning to the MilliporeSigma collaboration. Our partnership is entering its second year, and we are pleased with the progress to date. In support of their commercial growth strategy, we have completed specialist training and MilliporeSigma has established customer demo labs across Europe and Asia. These labs will serve as an important part of the sales process to give customers hands-on experience with the Growth Direct system. As a reminder, Rapid Micro operates demo labs in North America, Europe and Asia as well. We continue to work with the MilliporeSigma team as they expand their funnel and drive sales, which we expect will meaningfully contribute to our 2026 system placements. Turning to our supply chain. We are advancing opportunities to reduce product costs and leverage MilliporeSigma's broader logistics network and other capabilities. Combined with our internal efforts, we have already secured meaningful consumable cost reduction benefits that will positively impact product margins starting in the first half and accelerating in the second half of 2026. Now I'd like to briefly review our priorities and 2026 outlook. We are off to a strong start of the year and our priorities remain consistent: accelerating system placements, expanding gross margins continue to innovate new products and prudently managing our cash, all while maintaining disciplined and consistent execution. On the commercial front, we remain focused on expanding and converting our sales funnel. The multi-system global rollout at Amgen and today's announcement that Samsung Biologics is meaningfully expanding its deployment of the Growth Direct platform underscore the substantial opportunity we see across the global pharmaceutical market. In addition, our partnership with MilliporeSigma continues to complement our direct sales efforts by broadening our global reach in our core pharmaceutical segments and providing access to attractive adjacent customer segments. As we work to expand the sales funnel, our annual Growth Direct Day remains one of the most effective customer-focused forums. This year, we are expanding the impact by adding events in North America and Asia. In addition to our premier recurring event in Europe. As a reminder, these sessions bring current and prospective customers together to showcase our automation and improved data management delivered by the Growth Direct can drive meaningful operational improvements and compliance within manufacturing and quality control. We are especially pleased Amgen will sponsor the North American event in Q2, reflecting their confidence in and commitment to the Growth Direct platform. Looking at the broader market landscape, there are strong tailwinds augmenting our consistent commercial execution. These include increased adoption of full automation, a greater focus on data integrity by industry and regulators, advanced manufacturing modalities driving the need to modernize and growing investment in the onshoring of pharmaceutical manufacturing in the U.S. We believe these tailwinds will remain strong and durable, which will contribute to position us well for sustained long-term growth. In addition to staying highly focused on our priorities of accelerating growth direct placements and expanding gross margins, we continue to innovate to provide new value-add solutions to our customers. To this end, we expect to release our next-generation cloud-native software platform in the second half of 2026, which will redefine the growth direct experience for our customers. Our AI engineers have spent 15 years developing and refining the industry-leading algorithm for microbial growth detection. And this new platform will leverage that experience to deliver significant additional value through AI-driven analytics and insights across our customers' global data. As a Growth Direct installed fleet expands globally and generates increasing volumes of digital data, this new software and data platform will provide meaningful value to our customers by enabling deeper insights and faster decision-making power for global quality and manufacturing operations. Against this backdrop, we are initiating full year 2026 revenue guidance of $37 million to $41 million, including 30 to 38 system placements. We expect meaningful gross margin expansion and expect to achieve approximately 20% gross margin for the full year, with performance accelerating in the second half. We believe this guidance is both prudent and achievable and reflects our track record of consistent execution. Sean will provide some additional details around the assumptions included in our outlook as well as potential upside opportunities and we look forward to updating you as the year progresses. And with that, I'll turn the call over to Sean to discuss our fourth quarter performance and 2026 outlook in more detail. Sean? Sean Wirtjes: Thanks, Rob, and good morning, everyone. I'll begin my comments this morning with a review of our fourth quarter 2025 results and then discuss our first quarter and full year outlook for 2026. We'll then open the call up for questions. Fourth quarter revenue increased 37% to a record $11.3 million compared to $8.2 million in Q4 2024. During the fourth quarter, we placed 16 Growth Direct systems, which was also a record compared to 6 systems in the fourth quarter last year. We also completed 3 validations in the quarter compared to 4 in Q4 last year. Product revenue, which is comprised of systems and consumable revenue, increased 78% to $9.3 million in the fourth quarter compared to $5.2 million in Q4 2024. This was primarily driven by the increase in system placements. Consumable revenue grew 11% in the fourth quarter compared to Q4 last year. Service revenue was $2 million in the fourth quarter, which was in line with the guidance we provided in November, compared to $3 million in Q4 2024. As a reminder, the timing of validations tends to be the largest driver of quarter-to-quarter variability in service revenue and the validation revenue we generated in Q4 2024 and remains a company record. Fourth quarter recurring revenue, which consists of consumables and service contracts increased 10% to $4.6 million compared to $4.2 million in Q4 2024. Nonrecurring revenue, which is comprised mainly of systems and validation revenue increased 65% to $6.7 million. Turning to margin. Product margin was negative 8% in Q4, this includes a $1.1 million or 12 percentage point impact related to the write-off of unusable consumable inventory in the period. Our manufacturing team has addressed the underlying situation, and we do not expect any further charges related to this in 2026. Excluding the impact of this write-off, Q4 product margin was positive 4%, which was consistent with our guidance. Service margins were 22% in the fourth quarter compared to a record 47% in Q4 last year. The lower service margins in Q4 this year were due to the lower service revenue in the period, which more than offset the positive impact of service productivity improvements and cost reductions made during 2025. On a combined basis, fourth quarter gross margin was negative $0.3 million or negative 3% compared to positive $1 million or 12% in Q4 last year. Excluding the impact of the inventory-related charges we recorded in the period, total Q4 gross margin was positive 7%. This was in line with our guidance and slightly lower than the Q4 last year due to the impact of lower service revenue on service margins. Moving down the P&L. Total operating expenses were $11.9 million in the fourth quarter compared to $11.2 million in Q4 2024. Within OpEx, R&D expenses were $3.2 million, sales and marketing expenses were $3.3 million and G&A expenses were $5.3 million. For the full year, total operating expenses decreased by 3%, while revenue increased by 20%. Interest income was $0.5 million and interest expense was $0.8 million in the fourth quarter. Q4 net loss was $12.5 million. This compares to a net loss of $9.7 million in Q4 last year. The larger net loss in Q4 this year was primarily attributable to the inventory charges we recorded as well as the lower service margin and higher interest expense in the period. Net loss per share was $0.28 in Q4 compared to net loss per share of $0.22 in the prior year quarter. With respect to noncash expenses and capital expenditures, depreciation and amortization expenses were $0.8 million, stock compensation expense was $0.6 million and capital expenditures were $0.1 million in the fourth quarter. We ended the year with $39 million in cash and investments, which was in line with our guidance as well as $25 million of unused capacity under our debt facility with Trinity Capital. Our net cash burn was $3 million in Q4. As a reminder, Q4 is typically our lowest burn quarter, while Q1 is typically our highest burn quarter each year. Now I'll turn to our 2026 outlook. For the full year 2026, we expect total revenue to be in a range of $37 million to $41 million, which assumes we place between 30 and 38 systems. This system placement range reflects a few key variables. First, our guidance continues to account for some ongoing uncertainty around the timing and scale of customer purchase decisions, particularly with respect to larger multisystem opportunities which often involve more complex purchasing considerations. Second, the low end of our guidance range assumes we do not place any new large multisystem orders in 2026 other than the Samsung order announced this morning. And third, we continue to expect MilliporeSigma to contribute meaningfully to system placements in 2026. However, the low end of our guidance range does not assume they satisfy their full year 2 system commitment since some of those systems may be placed in Q1 2027. For Q1, we expect revenue of at least $7.5 million, including at least 5 system placements. Consistent with historical trends, we expect at least 30% of our system placements to be made in the first half of the year with the remainder in the second half. We also expect revenue and placements to peak in Q4, in line with typical seasonality. Turning to consumables. We expect revenue in Q1 and Q2 2026 to be slightly higher than Q4 2025 and then increased gradually over the remaining quarters with variability driven by the timing of customer orders and shipments. Looking at service, we expect revenue between $2.3 million and $2.6 million in Q1. We then expect service revenue to step down slightly in Q2, followed by meaningful increases in Q3 and again in Q4 based on our current expectations with respect to the timing of installation and validation activities. We expect to complete at least 25 validations in 2026 and with at least 3 in the first quarter. Turning to margins. We expect our Q1 gross margin as a percentage of revenue to be in the mid-single digits with product margin of negative single digits and service margin above 30%. Thereafter, we expect to reach and maintain positive product gross margin in each of the remaining quarters of 2026, led by improving consumable gross margin, which we expect to turn positive in the second half of the year as we fully realize the benefit of meaningful material cost reductions we recently locked in as well as benefits from other cost reduction and manufacturing and efficiency initiatives. For the full year, we expect total gross margin of approximately 20% with a Q4 exit rate in the mid-20% range or better, product margin in the high single digits to low teens and service margin above 40%. Consistent with prior years, we expect quarter-to-quarter variability in gross margin to be driven by progress on our product cost reduction and service productivity initiatives, overall revenue volumes and the revenue mix between systems, consumables and service in each period. We expect operating expenses to be between $47 million and $51 million for the full year. We expect $10 million in noncash expenses, including depreciation and amortization expense of $3 million and stock compensation expense of $7 million. We also expect CapEx of $2 million, interest income of $1 million and interest expense of $2 million. Looking further ahead, our strategic priorities of accelerating system placements, improving gross margin, innovating new products and prudently managing our cash remain unchanged. We continue to build momentum in our business, including our partnership with MilliporeSigma, which we expect will further accelerate progress on these strategic priorities over the coming years, including the meaningful contribution to system placements we've incorporated into our guidance for this year. That concludes my comments. So at this point, we'll open the call up for questions. Operator? Operator: [Operator Instructions] And our first question comes from the line of Tom Flaten of Lake Street Capital Markets. Thomas Flaten: I appreciate all the detail on the guide. The gap between placed and validated systems has widened since 2023. What are you guys doing to or are you doing anything to shrink that gap over time? Is that just more engineers to complete the validation? Can you help us think about that a little bit? Sean Wirtjes: Yes, Thomas. I'll take a shot at that. I think part of that -- a lot of that has to do with timing actually in terms of there can be variation between when we deliver a system and when that validation process gets started, depending on the customers' plans and resourcing that goes along with that. So I think we'd expect to see that come down. I think we talked about Amgen this time. I think as we look at that, some of the color we gave in the call -- prepared remarks, it really ties into how we expect that to roll out, which think the majority of that work is right now, our plan working with them would be that a lot of that would happen at the end of this year. So I think if you look at a deal like that, the expectation would be if you'll see that placed in Q4 last year, we'll get most, if not all that work done with them by the end of this year. So that gives you some indication of how these things can typically go. So there is a natural lag in there. I think you'll see that variance come back in a bit as we work through that and a few other customer situations. So I don't -- it's nothing we're concerned about. It is something we keep our eyes on, and it's something that we will continue to work to keep tight as much as we can. So I don't know, Rob, if you have any comment on this. Robert Spignesi: Yes. It's clearly a robust validation year as well. You can see that backlog being worked and some of this is to Sean's point, driven by order timing, size and timing of orders and just the sequencing of our team and our customers' teams and working through the validations. Thomas Flaten: That's great. I appreciate that color. And then just with the Samsung announcement this morning, could you just comment on the percentage of your place systems that are within CDMOs and how you see that space evolving over time relative to the manufacturer -- or to the drug originators themselves? Robert Spignesi: Yes. So it's interesting. I don't know the exact percentage. So I don't want to put that out. But it's sizable. We've previously announced Lonza as a customer. Samsung, obviously, in other CDMOs as well. We have a very strong value proposition for CDMOs as well as probably call principal manufacturers. We're growing clearly, today is a good example of both Amgen and Samsung. So you've got both a principal manufacturer and a CDMO. But CDMos in particular, or benefit from our ability to turn their lines faster or lease product faster. And also, to a certain extent, in some cases, market the use of advanced technologies and their quality control and manufacturing operations. So yes, quite strong in CDMOs and we plan to stay that way and grow with the CDMO space. We also have talk about it significantly on these calls. We also have small mid CDOs globally as well. So generally, it's a very strong segment for us as well as the principal manufacturers. I can't say it's one stronger than the other. They're both strong right now, and we tend to be in both segments, as we've said, generally more in the advanced modalities, primarily biologics and also in the cell and gene categories within CDMOs and also principal manufacturers. Operator: Our next question comes from the line of Dan Arias of Stifel. Daniel Arias: Sean, on gross margins, where is the confidence in the 20% number for 2026 kind of felt like a good 4Q number would be the jumping off point for what you're going to do this year. I understand it was due to the inventory charge, but the number is sort of the number. So what are the key moving pieces and risks when it comes to your own process? And then as we think about product gross margins being back to negative in 2Q, how do we get comfortable with the idea that as we start to feel better about placement momentum, which has been good, we can also feel good about gross margins that there doesn't have to be an offset there. Sean Wirtjes: Yes. Yes. I'll take that one, Dan. I thinking about it, there's a couple of key drivers to focus on from my perspective. One is -- we talked -- or I talked to my comments about the fact that we have recently locked in some meaningful product cost reductions with some vendors that will benefit us beginning in Q2 with that accelerate in Q3 and Q4. So that is a substantial reduction from what we're paying for some of the key materials in our product, and that's consumables, specifically. So that's number one. Number two, I'd say is I talked a minute ago about how we expect the year to roll out from a validation and service revenue standpoint, you kind of see in recent quarters, what lower service revenues can do from a leverage standpoint in our service margins. We expect to see that go back the other way as we work our way through this year. So to get to 20%, I think the two of the largest drivers, if not the largest drivers are that those cost reductions kind of kicking in full bore in the second half and us getting our service revenues back up to levels where they can generate meaningful margins beyond where we've been over the past quarter or two. Volume is also a big part of it. So as we progress through the year, we're manufacturing more. We expect to sell more. I talked about peaking and placements in those things also contribute. So I think it's important to note the comment that we expect Q4 exit to be mid-20s or above. So that trend should be growing as we work our way through the year overall for total margins. And those are the key factors that give us confidence in being able to achieve those kinds of numbers for the year and exiting the year. Robert Spignesi: And Dan, just to put maybe an estimation point on one thing Sean said on the product cost, in particular. With regard to execution risk, we have contractual agreements in place with the supply base, which is meaningful with regard to how we get comfortable and confident in that cost out in addition to the other elements that Sean mentioned. Daniel Arias: No. Okay. Okay. That's helpful. All right. And then maybe on the systems to Samsung and Amgen, how do you see utilization ramping there? And then just on overall utilization, can you maybe just talk about consumables pull-through per system consumables growth has been pretty good here. We all presumably have this placement and pull-through driven model. So Sean, we've talked a little bit about this. Can you just maybe set a baseline for where 2025 pull-through came in? And then to what extent that number might be higher in 2026. Sean Wirtjes: Yes. So I guess on the first question, Dan, I think -- in terms of what will happen with Amgen and Samsung in terms of pull-through, I think I talked about Amgen a little bit ago, latter part of the year, likely when we get those fully validated. Samsung, I don't know that we have a fixed timetable for that yet, but I'm sure it kind of follows that similar time line would be my best guess. So in terms of where we get with them, I think validations are definitely in play for 2026, our expectation, frankly, in terms of when they start to contribute to recurring revenue, I'd expect that to be more a 2027 factor. In terms of pull-through, I think we continue recently, I'd say, to be kind of in that single-digit year-over-year improvement range that we've talked about historically. So I'd expect that, that will be similar. I think with big orders that kind of a bolus of validations like we're talking about with these larger orders, I think there is an opportunity for us to see more meaningful step-ups in that as we bring those systems online kind of in short periods of time. So for now, I'd say, think about it as single digits in 2026. I think as we look at '27 that we would potentially have opportunity to see a bigger step-up than that in '27. Operator: Our next question. Our next question comes from the line of Anna Snopkowski of KeyBanc. Anna Snopkowski: Congrats on the quarter and the exciting announcement with Samsung. Maybe to start do you think you could share more insight on the Samsung multisystem order? Maybe would you say it's fair that this is in the double-digit range and should we expect this to roll out over the course of 2026 or just Q1? And then just also on this more on the strategy. Is this one site? Is this part of the global rollout or maybe a therapeutic area? And then I have one follow-up. Robert Spignesi: Yes. Generally, Samsung. We won't get into the specific quantum of it, but it's the next phase of rollout. I think many of you may remember, we had the initial launch with Samsung a couple of years ago. This is a second way, which is actually a larger order size. And it's focused primarily on their principal area in South Korea, although some of you may know that Samsung is also acquiring around the world. So also in scope. And as I mentioned a couple of years ago, we expect to grow at Samsung in the quarters and years ahead. And I'll say it again, we expect to grow a Samsung in the quarters and years ahead. Interestingly, which we didn't talk about in the prepared remarks, but also discussing other collaboration opportunities with Samsung, which we're quite excited about. So more to follow on that. And part b, Anna? Anna Snopkowski: Okay. Perfect. And then my second question, just more in general on repeat orders versus new customers. Do you expect these customers, repeat customers like Samsung to move through your pipeline quicker? And then just in terms of validation, is that usually a quarter lag? Or what should we expect both from Samsung and just repeat customers in general? Robert Spignesi: Yes. So a general rule of thumb is repeat customers go faster, generally, both in the sales process and the validation process. It's a general takeaway. Now certain things like some of these large orders Amgen as an example, and other large customers. We haven't specifically mentioned by name across several sites around the world. The sites have projects going on at a given time. So the timing could be throttled by a site-based activity. But generally, it's quite faster, generally, we have what's called a modular validation, which basically leverages the knowledge and work we've done on the initial validation usually at a starter site, and we can roll that out in an expedited fashion to accelerate the process. And as you may imagine, our land-expand strategy is focused on that. But also to your point, we're also -- the team is also out there. acquiring new customers as well, which can be a bit longer, both in the sales process and the initial validation. Operator: And our last question comes from the line of Brendan Smith of TD Cowen. Brendan Smith: I wanted to actually first ask about the kind of next-gen cloud-native software platform you referenced in the prepared remarks. Can you maybe just give us a bit more color on how this gets integrated into devices moving forward? Is this something that all new orders will automatically include some of these analytics capabilities? Is that software update push you can monetize into existing installed base? Just kind of wondering how we should think about that contributing to growth. Robert Spignesi: Yes. So thanks for the question, Brendan. It's a -- think of it as a a bit of a phased approach. So out of the box, first of all, it's a complete rewrite of our application software for the Growth Direct. So it's a completely different architecture. So day 1, the customers benefit from a modern UI, much easier integration into some of their IT infrastructure. And by cloud native, it's been built around a cloud infrastructure. We envision the customers' cloud will run it. But from a future revenue standpoint, we could also provide cloud services. Right now, the system is in a prelaunch phase with a major customer operating in their cloud, running the Growth Direct and the feedback has been exceptional. So we're quite excited about that. So out of the box, a couple of benefits. First, a complete rewrite, so customers benefit from easier navigation, easier integration, a more modern UI, the ability to access data from the cloud, from any device versus through their IT infrastructure attached to their limbs. Over time, we see the ability to provide services against that cloud data. So imagine a fleet of Growth Direct generating. And the idea came from we had these Growth Direct around the world is generating all this data. How can we help customers benefit from that. So the Growth Direct would be effectively an appliance other technologies can also plug into this technology and feeds into a cloud infrastructure. And then against that, we could provide services against that, predictive analytics, other types of insights on seasonality, quality failures, potentially speciation and ID services. And that's really part of the vision. We're not going to get into too much detail on what those are and how we plan to monetize it. But think of this as step one to a couple step multiyear process to really advance from the automation side into the, I'll call it, the AI sort of higher-powered analytics and cloud-enabled side of our business, which will -- the goal is to continue to drive to recurring -- high-margin recurring revenue over time. And -- what we've seen is that customers are -- especially in pharma, which can be a little conservative, are open to discussing how AI and cloud, in particular, can enable their environment. So we're not really pushing against the closed door. It's really -- it feels like we're pushing against an open door. And in some cases, customers are asking us for services in this general category. Brendan Smith: Got it. Super helpful. And then maybe just one last one on some of the consumable cost reduction benefits. I think you guys spoke to starting to see now. Can you maybe just expand a bit on what some of the moves you guys have made on your side, even within the Millipore network, I know you referenced maybe what else you're planning there this year to kind of drive that added production in the second half. Sean Wirtjes: Brendan, it's Sean. Yes, so we are still working with MilliporeSigma on several different opportunities. I think some could benefit this year. Some are more longer-term focused in terms of things we could do in very -- as we've talked about in the past, it's quite a broad pallet of things that we're looking at in terms of things that could benefit our margins, not just material cost reduction. I'd say that the locked-in savings that we have at this point that are going to benefit consumables in 2026 are not with Merck Millipore directly, but they are things that are direct inputs with other vendors that we have in place that our procurement team has done a really good job with and leveraging our growth, leveraging other relationships to be able to get us. What I would say is kind of a step change reduction in cost for a couple of different key inputs into the material that will benefit us this year. So we're excited about that. As I said earlier, it's going to be a key driver of our gross consumable margin expansion by association overall gross margin expansion. And we think it's something that we can use as a template to drive future reductions in others in the future and continue to drive those consumable margins up. Robert Spignesi: Thanks, Brendan. Well, thanks, everyone, for your time and attention. We'll wrap the call up at this point. Thanks again, and look forward to speaking with many of you shortly. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Operator: Good morning, everyone, and welcome to the Stoneridge, Inc. fourth quarter and full year 2025 earnings conference call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one on your touch-tone telephones. To withdraw your questions, you may press star and then two. Please also note today's event is being recorded. At this time, I would like to turn the floor over to Kelly K. Harvey, Director of Investor Relations. Please go ahead. Kelly K. Harvey: Good morning, everyone, and thank you for joining us to discuss our fourth quarter and full year 2025 results. The release and accompanying presentation were filed with the SEC and are posted on our website at stoneridge.com in the Investors section under Presentations and Events. Joining me on today's call are James Zizelman, our President and Chief Executive Officer, and Matthew R. Horvath, our Chief Financial Officer. Also on today's call are Natalia Noble, our President of Stoneridge Electronics and incoming Chief Executive Officer, and Bob Hartman, our Chief Accounting Officer who will be stepping into the role of interim Chief Financial Officer on April 1. During today's call, we will be referring to certain non-GAAP financial measures. Please see Slide 2 of the presentation for a more detailed description of these non-GAAP measures, and the appendix for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures. In addition, certain statements today may be forward-looking statements. Forward-looking statements include statements that are not historical in nature, and include information concerning our future results or plans. Although we believe that such statements are based upon reasonable assumptions, you should understand that these statements are subject to risks and uncertainties and actual results may differ materially. Additional information about such factors and uncertainties that could cause actual results to differ may be found on page 3 of the presentation and in our most recently filed Form 8-K and the 2025 Form 10-Ks which will be filed in the next few business days with the Securities and Exchange Commission under the heading Forward-Looking Statements. After our speakers have finished their formal remarks, we will then open up the call to questions. I will now turn the call over to James Zizelman. James Zizelman: Thank you, Kelly, and good morning, everyone. Let me begin on page 4. In 2025, our focused growth strategy, continuous improvements on material and quality-related costs, and rigorous structural cost control enabled us to successfully navigate another year marked by very challenging macroeconomic conditions. We are proud of our ability to continuously outperform our end markets even in a significantly challenged production environment while also limiting the impact on our bottom line. Our outperformance was primarily driven by continued momentum with MirrorEye resulting in sales of over $110,000,000, or approximately 70% growth compared to the prior year. In addition to strong performance this year, our strategy to grow the MirrorEye platform continues to pay off with additional business awards and expansion across many of our global OEMs. Our focus on long-term growth, enabled by our advanced technology offerings, drove significant new business awards in 2025. New business awards announced this year for Electronics and Stoneridge Brazil total approximately $830,000,000 in estimated life revenue. This included the largest business award in Stoneridge, Inc. history for a global OEM MirrorEye program extension, and the largest OEM program award in Stoneridge Brazil's history, as well as several other significant programs for secondary displays, the SmartTube Tachograph, and other electronic control products. In 2025, we limited the impact of significant end market headwinds by reducing material costs by 80 basis points, reducing quality-related costs by $6,600,000, and driving continued inventory reductions to support positive cash flow performance. Our focus on cash performance and inventory management resulted in positive free cash flow of approximately $19,000,000, driven by a significant improvement in inventory balances of $18,700,000. Earlier this year, we announced that we completed the sale of our Control Devices segment for a base purchase price of $59,000,000, reflecting an important milestone for the company's long-term strategy. As a result of this sale, Stoneridge, Inc. will now focus its resources on our highest growth, highest return businesses and reduce overall organizational complexity leading to a clear, focused strategy for the company. Additionally, this transaction strengthens our balance sheet, as proceeds from the sale will be used to pay down debt and reduce interest expense burden. As part of this next chapter for Stoneridge, Inc., we are thrilled to announce that Natalia Noble, our current President of Stoneridge Electronics, has been promoted to President and Chief Executive Officer effective April 1. Natalia will continue focusing on the strategic vision of the company by advancing the rigor and discipline we have built into our daily execution over the last several years to drive long-term sustainable performance. Later on the call, I will more formally introduce Natalia, and she will provide her perspective on the deeply embedded strategy for Stoneridge, Inc. and our unshakable commitment to long-term value creation for our stakeholders. We are proud of our accomplishments in 2025. Yet again, we successfully navigated a year of macroeconomic pressures and maintained operational discipline and focus. With the expected favorable market tailwinds ahead, a revitalized company following the divestiture of Control Devices, sustained momentum from our growth products driving continued outperformance, and keen monitoring of potential headwinds such as geopolitical volatility, we are quite optimistic about the years to come. Page 5 covers our fourth quarter financial performance and summarizes our key financial metrics for the full year 2025 compared to the prior year. While we continue to make significant progress across our key priorities in 2025, fourth quarter results did underperform our prior expectations. The Control Devices segment, which was subsequently divested in January 2026, underperformed by approximately $2,000,000, driven primarily by the unfavorable impact of foreign exchange and incremental tariffs. Similarly, tariffs impacted the remaining business by an incremental $1,200,000 in the quarter relative to our prior expectations. While we expect to recover a significant portion, if not all, of these incremental costs, there are timing differences between when the tariffs are incurred and when the recovery is realized. We have shown historically strong performance in recouping these tariff-related costs and expect to continue to do so with those incurred at the end of the year. Finally, during the fourth quarter, we incurred incremental quality-related costs of approximately $3,300,000 relative to our prior expectations. As evidenced by our full year quality cost reduction of $6,600,000, our relentless focus on continuous improvement has been effective. As stated, we have continued to face challenges with certain legacy warranty issues culminating with settlements with key customers to bring them to conclusion. While this drove incremental cost in the quarter, it also allows us to move on from these historical issues and focus on building stronger relationships with these customers to drive growth in the future. This is why it is imperative that we remain committed to improved quality processes early in the product development cycle to prevent quality issues with long tails as the ones we dealt with this quarter. Now shifting to our full year performance. There is no question 2025 presented some challenges for the broader transportation industry as production volume declined significantly compared to the prior year and fell well below our initial expectations. Even with significantly reduced production volumes, we outperformed our weighted average OEM end markets by 150 basis points in 2025. This market outperformance was driven primarily by the substantial growth in MirrorEye sales as our OEM programs continue to mature, take rates continue to increase in Europe, and new programs launched with Daimler and Volvo in North America. This resulted in MirrorEye OEM revenue growth of 84% compared to the prior year. We continue to be encouraged by the overwhelmingly positive response to our MirrorEye technology from our customers, and their customers alike. Later on the call, we will discuss how this strong market acceptance is expected to continue to drive substantial growth over the long term. Adjusted operating margin was significantly impacted by the decline in sales and the underlying macroeconomic pressures, including tariff-related headwinds and significantly reduced production at certain customers. However, our actions to improve material costs, manufacturing performance, and quality-related costs partially mitigated this impact. Our focused efforts to reduce material-related costs resulted in an 80 basis point improvement relative to the prior year. In addition, and as indicated earlier, quality-related costs improved by $6,600,000, contributing an additional 50 basis points to operating performance, as we continue to focus on built-in quality, responsiveness, and a proactive process to address any historical quality issues. Excluding other non-operating expense of $3,600,000 primarily related to adverse foreign currency impacts, full year adjusted EBITDA was $28,600,000, or 3.3% of sales. This resulted in a 60 basis point decline compared to the prior year and reflects our success in limiting the impact of the significantly reduced volumes faced during the year. We achieved this by our strict focus on improved operational performance, which drove a decremental contribution margin of just 14.2% versus our historical average of 25% to 30%. Finally, as I mentioned previously, our focus on cash and inventory management drove positive adjusted free cash flow of approximately $19,000,000. Lower contribution margin was offset by the significant improvement in our inventory balances, which declined by $18,700,000 this year. Overall, despite continued and significant challenges in our end markets, we were able to outperform our weighted average end markets, significantly improve our operational performance, and drive cash performance in 2025. Turning to page 6. Just a few weeks ago, I announced that I will be retiring effective May 20. As part of Stoneridge, Inc.'s long-term, thoughtful succession planning strategy, the Board has prioritized leadership continuity and a smooth transition to support the company's next phase of growth. That said, I was pleased to announce that Natalia Noble, our current President of Electronics, has been appointed as incoming President and CEO and member of the Board of Directors. I will remain as President and Chief Executive Officer through March 31. On April 1, Natalia will assume the role of President and Chief Executive Officer, and I will remain on the Board of Directors and transition into a Strategic Adviser role to support the transition and key stakeholder relationships through May 20. I will also be a Board nominee for election at our next annual meeting to provide continuity and support for the company. Natalia is the right leader for this company. For nearly two years, Natalia has led the Electronics segment with focus and discipline, making this a natural and well-prepared transition. Natalia is a highly experienced global leader with deep roots in the commercial vehicle industry. She consistently delivers on our commitments and operational excellence while strengthening meaningful relationships with our customers. During her tenure, Natalia led the segment in securing several significant new business awards, including the largest program in company history. Her customer connections and commitment to excellence in execution demonstrate her ability to drive growth, strengthen competitive positioning, and deliver measurable results. Over the course of her career, she has held various senior leadership roles within global transportation technology companies including ZF and Wabco, where she led complex multi-regional businesses with full profit and loss responsibility. Her broad cross-functional leadership experience and proven ability to drive performance make her a natural choice to lead Stoneridge, Inc. through its well-planned evolution. Natalia's appointment marks an exciting new chapter for the company. Over the next few months, we will continue to work very closely together to ensure a seamless, well-organized transfer of responsibilities. I am confident that under her leadership, Stoneridge, Inc. will continue to accelerate its drive forward. Before I conclude, I would like to take a moment to say thank you. Serving as the CEO of this company has truly been an honor. I am incredibly proud of what we have built together—our focus, our rigor, and our discipline to drive operational excellence and the establishment of a strong performance culture. To our employees, our customers, our shareholders, and other partners, thank you for your trust and your commitment. I am confident the improvements we have made are built into the company DNA, positioning it for sustainable long-term growth well beyond my tenure. I will now turn the call over to Natalia to walk us through Stoneridge, Inc.'s refined company strategy and position. Natalia, the floor is yours. Natalia Noble: Good morning, everyone, and thank you, Jim. I am fortunate enough to have already spent nearly two years with Stoneridge, Inc. as President of the Electronics division and as a member of the executive staff where I have contributed to shaping the company's next phase of disciplined, sustainable growth. I look forward to working closely with the Board of Directors, our senior leadership team, and our talented, dedicated global teams as we continue to execute on a strong long-term strategy focused on sustainable, profitable growth. Now turning to page 7. Stoneridge, Inc.'s strength is rooted in our global footprint, with strong operations in Europe, North America, and Brazil, each positioned for significant growth over the long term. Earlier this year, Stoneridge, Inc. took a significant step in its long-term strategic vision by completing the sale of the Control Devices division. As Jim just mentioned, this transaction allows us to focus resources on our highest growth, highest return businesses, and reduce overall organizational complexity leading to a clear, focused strategy for the company. We will continue to utilize our global footprint to serve our customers. Our strong global presence enables us to remain a preferred global supplier of industry-leading technologies to the world's leading commercial and off-highway vehicle manufacturers. Furthermore, we will continue to leverage our global engineering footprint and technology expertise. Our global engineering capabilities remain focused and robust, aligning our technologies with key industry trends, including safety and vehicle efficiency. Brazil remains a critical engineering center that augments our global teams located in Europe and North America, and our dedicated engineering partners in India strengthen our capabilities to meet the evolving needs of our global customers. We will continue investing in and scaling our cost-advantaged engineering presence to deepen customer partnerships. Overall, Stoneridge, Inc. will continue to drive global growth and invest in the resources required to advance our capabilities within a more cost-efficient structure. Turning to page 8. Our portfolio is focused on advanced technologies and electronic solutions primarily serving the global commercial vehicle and off-highway end markets. Over the past several years, the commercial vehicle industry has been undergoing a fundamental transformation with more automation and connected vehicle technologies focused on advanced safety and vehicle efficiency. Our product portfolio related to vision and safety, connectivity, vehicle intelligence, and electronic controls is directly aligned with this transformation and represents significant growth opportunities. Beginning with our vision and safety systems, we are a global leader in camera monitor and vision systems in the truck, bus, and off-highway end markets. Our award-winning, industry-changing MirrorEye technology replaces traditional rear and side-view mirrors with external digital cameras and digital displays inside the cab of the vehicle. The best-in-class technology offers innovative features and functionality that enable fleets to reduce operational costs while enhancing safety for everyone on the road. Our technology sets us apart from the competitors. Next to the fact that it is a significant growth driver, MirrorEye provides us with the opportunity to not only expand on our current product, but also enables a pathway to new technologies and capabilities. This includes connected trailer and 360-degree surround view suite of technologies. With focused resource deployment, we expect to further accelerate these opportunities. Our vehicle intelligence and electronic control products include digital driver information systems and secondary displays primarily for the commercial vehicle end market. These fully configurable displays allow customer differentiation and flexibility. They are the main source of data for a driver in the vehicle and will enable increased in-vehicle connectivity and customized solutions for future technology packages including Schrader connectivity and 360-degree surround view technologies I just mentioned. This category also includes our electronic control units that range from basic controls to highly engineered system-based products. Electronic control units will be at the center of the consolidation of existing products into complex electronic systems. Stoneridge, Inc. is well positioned to take advantage of this consolidation. Furthermore, we recently announced Stoneridge Brazil's largest program in its history for an OEM infotainment controller. Through our continued delivery of high-quality products and focus on customer support, we continue to win in this market. Finally, our connectivity portfolio includes our Telematics and Tachograph products, as well as our digital services. We also offer end-to-end tracking solutions for logistics, cargo security, and fleet management in Brazil. Our connectivity products provide streamlined solutions to efficiently monitor individual drivers and fleets, providing readily accessible data on their vehicles, allowing them to ensure compliance with legal requirements. Decades of design and manufacturing coupled with our insight and experience allow us to remain a leading supplier of connectivity products. Our products occupy a significant amount of real estate inside the cockpit of the vehicle. As such, we plan to further integrate these complex electronic systems into a large system offering. This will bring advanced technology to our customers to help differentiate their vehicles, improve vehicle safety and efficiency, and provide opportunities for long-term profitable growth for the company. Our customers are choosing to work with us for our technology and our proximity and flexibility. We are not just delivering product, systems, and services. We are improving safety on the roads, reducing emissions, improving overall efficiency of the vehicles, and enabling better driver comfort. Our strong product portfolio has built a meaningful and growing backlog of awarded programs, and we expect to continue this momentum in the coming years. Turning to Slide 9. As President and CEO, I will continue the strong focus on excellence in execution, to sharpen our strategy and drive financial performance. As the President of our Electronics division, I played an integral role in establishing our focus on sustainable long-term value creation. Therefore, our key drivers for sustainable performance remain the same: drive market outperformance, margin expansion, and cash flow conversion to create long-term value for shareholders, customers, and employees. To accomplish this, we must continue to deliver a strong customer value proposition and differentiation. First, we will continue to deliver advanced technology solutions that solve critical challenges and help our customers achieve their long-term goals, whether it is improving efficiency, enhancing safety, or increasing driver comfort. Supported by our strong backlog of awarded business and deep customer integration, our robust technology roadmap will continue to create opportunities with both existing and new products to the market. As such, we expect to continue to drive market outperformance of two to three times over the long term. Later in the call, I will provide further perspective on top line growth expectations through discussion of our long-term target. Second, we are focused on excellence in execution in everything we do. This starts with consistent delivery of our promised outcomes. Whether it is to our customers, our employees, or other stakeholders, we must drive disciplined execution to meet the expectations. In turn, this allows us to build trust and confidence of our customers and other stakeholders. We will continue to embed rigor and discipline in all our processes to drive operational efficiency and continuous improvement. By investing in quality-related processes and resources, we not only improve product reliability and performance for our customers, but also reduce internal quality costs. At the same time, our robust pipeline of material and manufacturing cost reduction initiatives, through smarter engineering and more efficient supply chains, enhances cost efficiency. Together, these efforts lower quality, manufacturing, and material-related costs, drive margin expansion, and support sustainable growth. As part of this overarching driver, the executive team and I are committed to organizational cost efficiencies by streamlining corporate costs to better support our company in this structure. Finally, when passion, process, and priorities are aligned, a strong performance culture emerges—one that consistently drives long-term value. By fostering a culture of accountability, creativity, collaboration, and continuous improvement, we drive outcomes that matter most to our customers and business. With empowering leadership, our talent aligned with core technology strategy, and a global footprint providing flexibility and proximity, we can bring faster innovation and problem-solving strategies to better support our customers. By combining our operational levers, we will convert our strategy into measurable outcomes. We want our customers to see tangible results, our teams to feel motivated and aligned, and our stakeholders to benefit from sustainable long-term value. Later on the call, we will provide further detail on how we will drive long-term shareholder value through market outperformance, margin expansion, and cash flow conversion, both in the current year and over the long term. I am excited about this next stage of our strategy and am committed to executing on the long-term plan that Stoneridge, Inc. has in place. I will now turn the call over to Matt. Matthew R. Horvath: Thank you, Natalia, and again, congratulations on your new role. Page 11 summarizes our key financial metrics specific to Electronics and Stoneridge Brazil. For Electronics, full year sales of $551,000,000 outperformed our weighted average OEM end markets by approximately 430 basis points. This market outperformance was driven by MirrorEye sales which totaled $111,000,000 in 2025, resulting in growth of $45,000,000, or 69%, compared to the prior year. This includes increasing take rates in Europe and the ramp-up of new programs for Daimler and Volvo in North America. Additionally, MirrorEye bus revenue grew by approximately 34% as our latest generation camera systems have received extremely positive market feedback. We expect continued expansion of MirrorEye as our end markets improve and our recently launched programs continue to mature. Electronics adjusted operating income declined by 140 basis points, primarily driven by lower contribution from sales. While we were able to offset a portion of our tariff-related expenses, our adjusted operating income was also impacted by incremental tariff-related expenses of approximately $2,000,000. This was partially offset by material cost improvement of approximately 120 basis points and lower quality-related costs of $3,700,000 compared to 2024 for the Electronics segment. Stoneridge Brazil full year sales growth of $15,000,000, or approximately 30%, was primarily driven by incremental OEM sales as our Brazilian OEM business continues to accelerate. OEM sales in Brazil set a record at $26,700,000, which approximately doubled compared to the prior year. We expect OEM sales in Brazil to continue to expand as new programs launch and we continue to win local OEM business. Full year adjusted operating income improved by $4,600,000, or 660 basis points compared to the prior year, primarily driven by increased contribution from incremental sales. As we have previously announced, this will be my final earnings call as I have accepted a role outside the company. It has been a privilege to serve in this role, and I am proud of what we have accomplished. With that, I would like to turn the call over to Bob Hartman, our Chief Accounting Officer, who will serve as the interim Chief Financial Officer upon my resignation from the company effective March 31. Bob Hartman: Thank you, Matt. I am looking forward to stepping into the role of interim CFO and I am confident that this team will continue to drive long-term value for our stakeholders as we transition to a more focused, leaner global company. Turning to Slide 12. As mentioned earlier on the call, the commercial vehicle end market created significant headwinds during 2025. This is highlighted by an almost 7% decline in our weighted average OEM end markets in 2025 compared to our initial expectations of approximately flat end market conditions. That said, in 2026, our end markets are expected to begin to recover. More specifically, the European commercial vehicle market is expected to show stabilization with potential for moderate growth after subdued demand over the last two years. Similarly, in North America, we expect that soft freight demand and continued capital spending discipline will persist, resulting in relatively flat first half revenues. However, we are beginning to see increasing order strength from our customers and third-party production forecasts have improved for the second half of the year. Additionally, with EPA 2027 regulations becoming clearer, we expect a pre-buy effect as the year progresses in our North American commercial vehicle market. As a result, North American OEM production is forecast to improve by 9.8% this year while European production is forecast to improve by 6.6%, resulting in expected full year 2026 weighted average end market growth of 7.1%. For 2027, current third-party production forecasts suggest 6.6% growth for our weighted average OEM end markets. We are seeing moderate improvement in production levels in 2026. More importantly, we are also receiving increasingly positive indications from customers that would align with third-party forecasts, particularly in the second half of the year. That said, turning to Slide 13, we are taking a relatively conservative approach to our revenue expectations for the year as we are assuming OEM end markets will remain flat. While third-party forecasts have indicated potential upside to this expectation, we believe continued geopolitical volatility warrants some level of conservatism. We are expecting yet another year of strong growth for our MirrorEye products. In total, we expect MirrorEye to grow by approximately $50,000,000 to at least $160,000,000, which translates to approximately 45% growth compared to 2025. Of the $160,000,000 in sales forecasted for MirrorEye, we expect approximately $140,000,000 in OEM sales, or approximately 45% growth relative to 2025. We expect continued strong improvement in take rates this year as recently launched programs continue to mature and strong customer feedback drives further adoption in both Europe and North America. Our MirrorEye OEM programs continue to gain positive momentum from our customers’ committed marketing campaigns that highlight the substantial benefits of our system, including improved safety, fuel economy, and driver comfort. We are also expecting significant growth in our MirrorEye bus programs due to strong market feedback on our latest camera system. After two years of strong SmartTube Tachograph aftermarket sales, driven by incremental regulatory requirements, we are expecting a sales decline of approximately $12,000,000 in 2026 relative to the prior year. Overall, SmartTube will still contribute significantly to sales in 2026, with OEM programs expected to be flat year over year. As highlighted by a recent award announced in the second quarter, our SMART II Tachograph continues to win new business in Europe. We will work with our current customers, as well as prospective customers, to drive continued OEM growth in this segment. Finally, we expect that customer price reductions and continued pressures in our aftermarket and other end markets will substantially offset foreign currency tailwinds, tariff-related reimbursements, and continued growth in our off-highway end markets. However, similar to our OEM end markets, recovery in off-highway vehicle production could drive upside to our guidance. In summary, based on our midpoint guidance, we are expecting revenue growth of approximately 4.2% in 2026, primarily driven by continued MirrorEye growth as our weighted average OEM end markets are expected to be flat. Slide 14 outlines our expectations for 2026 EBITDA in detail. We expect that the revenue growth of $26,000,000 will contribute approximately $6,500,000 of EBITDA growth based on the low end of our historical contribution margin of 25% to 30%, as the SMART II Tachograph business generally drove a higher margin and we are expecting lower sales from that product this year. As Natalia discussed earlier on the call, we are committed to driving organizational efficiency by streamlining our corporate costs to more effectively support our company's current structure. This year, we expect the benefit of at least $5,000,000 from these structural cost reductions. In 2027, we expect to realize additional savings as we complete our obligations under the transition services agreements from the sale of Control Devices. As our markets recover and overall company performance continues to improve, we expect that our incentive compensation programs will return to target levels in 2026. This increase, in addition to merit-based wage increases, is expected to drive a $6,700,000 headwind year over year. As Natalia and Jim also mentioned earlier in the call, we remain focused on improving operating and manufacturing performance, including reducing quality-related and material costs to drive gross margin improvement. We have incorporated some incremental warranty costs in our guidance for this year as we address the few remaining legacy issues that Jim mentioned earlier in the call. Overall, we expect that our continued focus on quality during the product development process will drive fundamental improvement in the long-term quality of our product portfolio. In summary, we are expecting revenue growth, continuous improvement in our operating performance, and structural cost reductions to drive EBITDA improvement in 2026 to our midpoint EBITDA guidance of $22,500,000. As it relates to the cadence of our guidance, we are expecting a relatively muted first quarter as production volumes remain lower to start the year, resulting in approximately breakeven EBITDA in the first quarter. This assumes first quarter revenue to be slightly below 2025. Following the first quarter, we are expecting improving volumes and structural cost benefits to drive improved EBITDA in the second quarter and beyond. We are expecting EBITDA to continue to improve in the second half of the year aligned with continued revenue growth and the ramp-up of benefits from structural cost improvement. This expected cadence would result in significant EBITDA improvement in the second half of the year compared to the first half. Turning to page 15. As Matt mentioned earlier on the call, we continue to manage cash efficiently even as production volumes remained significantly lower than originally expected in 2025, driven primarily by inventory reductions and capital expenditure management. In 2026, we will continue to prioritize efficient cash generation as we remain focused on optimizing inventory levels to reduce working capital levels. Additionally, we will maintain disciplined oversight of our capital expenditures. Last week, we completed an amendment of our current credit facility to extend the maturity date to 07/01/2027 to allow ample time to refinance our existing credit facility and align our long-term capital structure with the structure of the company after the sale of Control Devices. Based on our current EBITDA guidance and our amended covenant ratios, we expect to remain in compliance with all of our covenant ratios and have sufficient liquidity to navigate continuing volatility. Based on our 2026 guidance, we expect a compliance ratio between 3.0x and 3.5x by the end of the year. With that, I will turn it back over to Natalia for detail regarding our medium- to long-term targets. Natalia Noble: Thank you both. Slide 17 lays out the drivers of our medium and long-term financial targets. First, as a reminder, our weighted average end markets are expected to improve by 6.6% from 2026 to 2027, which would drive approximately $42,000,000 of incremental revenue in 2027. In addition to a strong market, we are expecting continued expansion of our MirrorEye programs driven primarily by the continued ramp-up of our OEM programs and improved customer take rates in both North America and Europe. Based on the third-party market forecast and our expectations for MirrorEye by 2027, we currently estimate revenue of at least $715,000,000 in 2027, which would represent approximately 12% growth versus our midpoint expectation for 2026. We continue to focus on market outperformance and believe that incremental opportunities in both our Brazilian OEM business as well as our off-highway business could drive upside to these expectations. Looking beyond 2027, we are expecting continued strong growth in our key product categories. In addition to market growth, we expect continued expansion in our MirrorEye programs as they mature. Similarly, we are expecting our other products to outpace market growth, including the continued adoption of camera-based safety systems in the off-highway market, as well as the expansion of our connected trailer and 360-degree surround view technologies as we continue to build on our existing systems and capabilities. In turn, we expect these growth drivers to result in revenue of $850,000,000 to $1,000,000,000 by 2030, representing a five-year compound annual growth rate of 6.8% to 10.3%. We expect that revenue growth will drive significant earnings expansion as well. Based on our historical and expected contribution margin, we expect that our growth will improve EBITDA to at least $44,000,000 in 2027, based only on market growth and continued momentum with our MirrorEye programs. We will have the ability to outperform this contribution-based target as we will continue to execute on our pipeline of material cost improvement activities, quality improvement initiatives, and structural cost reductions. Similarly, based on our long-term revenue targets, we expect EBITDA growth aligned with the midpoint of our historical contribution margins of 25% to 30%. Based only on contribution from incremental revenue, we are targeting EBITDA of approximately $80,000,000 to $120,000,000 in 2030. Again, we will rely on our robust pipeline of material cost improvement activities and the continued focus on long-term excellence in overall execution to drive to and beyond these targets. Stoneridge, Inc. is well positioned to significantly outpace our underlying end markets even as they are forecasted to recover over the next several years and provide a tailwind to overall growth. Our industry-leading product portfolio, focused on our vision and safety, connectivity, and vehicle intelligence and controls products, is expected to drive significant growth forward as we build on recent momentum, particularly with our MirrorEye platform. We expect that this growth will drive meaningful earnings expansion that will be amplified by excellence in execution as we continue to build on the recent success of reducing material costs, improving our quality processes, and utilizing a lean, global structure to optimize performance. Turning to page 18. In summary, with favorable market tailwinds ahead, a revitalized company following the divestiture of Control Devices, and sustained momentum from our growth products driving continued market outperformance, while monitoring potential headwinds such as geopolitical volatility, we are quite optimistic about the years to come. Under Jim's leadership, we built a strong foundation. Now, with our simplified company structure and focused strategy, we will continue to drive strong performance going forward. We will continue to focus on excellence in execution to drive significant earnings expansion and, as a result, strong shareholder returns both in the short and long term. Stoneridge, Inc. remains well positioned to outpace our weighted average end markets, significantly expand our earnings, and drive long-term shareholder value. We will now open for questions. Operator: Ladies and gentlemen, at this time, we will begin the question-and-answer session. To ask a question, you may press star and then one on your touch-tone phones. If you are using a speakerphone, we ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality. To withdraw your questions, you may press star and then two. Again, that is star and then one to join the question queue. Our first question today comes from Gary Prestopino from Barrington Research. Please go ahead with your question. Gary Prestopino: Yeah. Good morning, Walt. Several questions here. First of all, I think I heard you say that there are going to be legacy warranty costs related to the Control Devices business this year and possibly, I do not know how for how long really, but that would assume that when you sold the business, those warranty costs were not part of the sale and transferred to the new owners of the business. Is that correct? Matthew R. Horvath: Gary, actually, no. When we referred to legacy warranty questions, those were legacy warranty questions for issues within our Electronics products themselves. Any warranty that related to Control Devices was passed with the business to the new buyer. Gary Prestopino: Okay. Alright. I guess some other questions here. I just want to refer back to one of the slides where you broke out your sales footprint. Your three markets, I think you talked about here. I am referring to Slide 8, at least on my computer. You have got connectivity, vision and safety, and intelligence and electronic controls. Can you give us an idea of what percentage of the revenues between Electronics and Brazil make up those three markets? Matthew R. Horvath: Yes. Hey, Gary. It is Matt. How are you doing? Generally, you will see two different breakouts. One on Slide 7 there where you see revenue by region and end market. We do not break out specifically by product category. As we talked about, the Brazilian OEM business is growing pretty significantly, so you are seeing some pretty strong growth across a couple of those product categories. In Brazil, for example, the connectivity devices that we call out on Slide 8 has the track-and-trace business and digital services. A large portion of that is Brazil. Of course. So I would say we do not break it out specifically. But the connectivity business is certainly more global than the other businesses. But we are seeing some things—as we talked about, OEM sales doubling in Brazil—we are seeing some increased penetration of some of those other product categories in Brazil. And we would also say that the Europe versus North America, these are global customers. So we really do consider them as a singular customer across the globe. Their purchasing teams are operating that way. So the only real split we would say is Brazil currently about 15% of the business. Electronics business globally is 85%. That is the best way. That is the way we deal with our customers on it as well. Gary Prestopino: Okay. So if we look at the numbers for this past year, your MirrorEye sales were up dramatically, so there had to be a dramatic downturn in the Electronics business in some of these other areas. Is that really a correct assumption? I mean, I have to go through and work through the numbers, but it seems like if your MirrorEye sales were up $111,000,000 but your other sales were down, where are you seeing the most impact across these three areas? Natalia Noble: I agree. It is Natalia. So, yes, the MirrorEye platform was representing a big increase in the sales. Overall, when you look at the vehicle production, especially in North America, but not only, in other products that are really linked with the vehicle production, this is where the biggest downside is coming from. Matthew R. Horvath: Yes. So looking at commercial vehicle volumes, there were some months in 2025 that set all-time record lows for actual orders placed in the commercial vehicle space. That is how weak that sector got during the course of the year. Fortunately, toward the end of the year, we saw a nice uptick there in December. And we expect a lot more of that coming forward. And so do the third-party prognosticators—ACT and S&P Global—they are starting to show a recovery, especially in North America on the commercial vehicle side. Gary Prestopino: Right. I have seen the first two months of the year that that has been pretty strong. And I guess that was a lead into the next question. How has your sales force in the market when trying to sell MirrorEye—what have they been experiencing here for the first two months of the year, given that truck production looks like it is starting to move up? At least, I saw the North America numbers. I did not see European. Natalia Noble: Right. Indeed, we see first very positive signals from the third-party companies that are showing the orders of the trucks, Class 8 in North America, but also looking at Europe. We are also seeing first slight increases in the orders from our customers, primarily in the second half of the year. We are also very cautious of the overall geopolitical situation and monitoring that very closely. But indeed, the first positive signals are out there. Gary Prestopino: Okay. And then just one quick question, and I will jump off. Let me understand something here with your business, especially on the telematics. With everything that you are doing, you are basically selling product that allows for this telematics to happen. Are you also the backbone on the connected service side through a network? Or are the products that you have agnostic and able to work with any network? Natalia Noble: Thank you for that. Indeed, especially in Brazil, but not only, with our track-and-trace business, we are quite successful in digital services. This is direct recurring revenue and a business that is completely different from the hardware or hardware with embedded software. We do also have a certain portfolio of digital services linked with our Tachograph products as well as MirrorEye products. That is an area that we are also growing. The strongest market here for us is Brazil at this point. Gary Prestopino: Okay. Thank you very much. Operator: Thank you, Gary. It is showing no additional questions at this time. I would like to turn the floor back over to Natalia Noble for closing remarks. Natalia Noble: Thank you, everyone, for joining us for the call. I know your time is very important, and as always, we truly appreciate your willingness to engage with us today. We have built a strong foundation that will allow us to drive significant earnings expansion as we grow. We will continue to deliver on our commitments by focusing on our advanced technology and excellence in execution delivered by our talented and passionate team. We expect that our performance, along with our unique mix of industry-changing product platforms, will continue to drive strong shareholder value. Thank you. Operator: And with that, ladies and gentlemen, we will conclude today's conference call and presentation. We thank you for joining. You may now disconnect your lines.
Operator: Good morning, everyone. Welcome to the BGSF, Inc. Fiscal 2025 Fourth Quarter and Full Year Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press 0 on your telephone keypad. As a reminder, this conference call is being recorded. I will now turn the call over to Sandra Martin with Three Part Advisors. Please go ahead. Sandra Martin: Good morning. Thank you for joining us today for BGSF, Inc.’s 2025 Fourth Quarter and Full Year Earnings Conference Call. On the call with me are Keith R. Schroeder, Co-CEO and CFO, and Kelly Brown, President and Co-CEO. After our prepared remarks, there will be a Q&A session. As noted, today’s call is being webcast live. A replay will be available later today and archived on the company’s relations page at investor.bgf.com. Today’s discussion will include forward-looking statements which are based on certain assumptions made by the company under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by the forward-looking statements because of various risks and uncertainties, including those listed in the company’s filings with the Securities and Exchange Commission. Management’s statements are made as of today, and the company assumes no obligation to update these statements publicly, even if new information becomes available in the future. Management will refer to non-GAAP measures including adjusted EPS and adjusted EBITDA. Reconciliations to the nearest GAAP measures are available at the end of our earnings release. I will now turn the call over to Keith R. Schroeder. Keith R. Schroeder: Thank you, Sandra, and thank you all for joining us in today’s call. Fiscal 2025 was a transformational year for the company. After the sale of the professional division, we retired all outstanding debt, returned a meaningful amount of capital to shareholders via a $2 per share special dividend, and announced a $5,000,000 share buyback. As a result of those actions, today, we are a solely focused property management staffing organization, debt-free with a strong cash position. The fourth quarter was a very busy quarter for our team. As discussed in our third quarter earnings call, there are three major directives where we have been strategically focused. First, we utilized the findings from an independent consulting firm to shape our top-line revenue initiatives as we finalized our budget for 2026 and beyond. Kelly will discuss those in more detail following my remarks. Second, we continued to take aggressive actions to resize our general and administrative expenses to be more in line with our stand-alone property staffing business. We are now estimating ongoing G&A costs to be in the $12,000,000 range, with public company costs estimated at approximately $2,000,000. And third, we are utilizing results of an organizational and incentive compensation study to take further actions to reduce selling and G&A costs, primarily in the selling cost area. Those actions have been identified, and we started taking action in late Q1 with the full effect benefiting us in Q3 of this year. The annualized cost savings are approximately $1,000,000. Additionally, we continue to operate under the TSA agreement following the sale of the professional division. The process is going very well, and we expect to wrap it up by the end of Q1. With that, I will now turn it over to Kelly to cover the strategic initiatives that are underway. Kelly Brown: Thank you, Keith, and good morning, everyone. Before we discuss our fourth quarter sales and 2026 initiatives, I would like to highlight an important change to our go-to-market strategy with clients and candidates. At the completion of our TSA agreement in April, we will transition our website to bgstaffing.com. Our analysis of search trends and AI activity proved that including “staffing” in our name consistently ranks us in the top three results for both clients seeking talent and job seekers exploring opportunities. We believe this change will significantly improve SEO performance, clarify our brand positioning, and enhance the overall effectiveness of our marketing efforts. As Keith mentioned, we are executing on our 2026 top-line strategic initiatives, leveraging insights from the market study completed late last year. A key opportunity identified through that work and reinforced through internal discussions is our expansion into the prop tech support market. In February, we announced our first software partnership with Yardi, an industry-leading property management technology platform. Through the Yardi Independent Consultant Network, we are pairing our industry expertise with technology-enabled talent solutions. PropTech is a sizable adjacent market to our core business and further enhances our differentiated positioning across multifamily and commercial property management staffing. Turning to technology-enabled solutions, we continue to optimize our AI investments to further differentiate our platform and deepen engagement with our clients. Our focus is on elevating the overall client and candidate experience, which positions BGSF, Inc. as an innovative workforce solutions partner. These technology- and AI-driven enhancements have improved front- and back-office efficiency while reinforcing our people-first culture. We believe the right combination of talent and technology suite enables us to deliver quality candidates faster and more efficiently, driving better outcomes for our clients. We continue to advance the operational performance initiatives discussed last quarter, and early insights indicate progress in strengthening our competitive differentiation. These efforts and strategic partnerships are beginning to support incremental top-line revenue growth and improve overall financial performance. Finally, we are excited to participate as an exhibitor at the Apartmentalize Conference hosted by the National Apartment Association, as well as the Building Owners and Managers Association International Conference, both of which are held in June. As two of the premier gatherings in the rental housing and commercial real estate industry, we expect the events to be a strong platform for customer engagement and lead generation. I will now turn the call back to Keith to cover our fourth quarter financial results. Keith R. Schroeder: Thank you, Kelly. Our comments today mostly refer to continuing operations unless otherwise noted. Quarter revenues were $22,000,000, a 9.4% decline compared to the prior year, driven by lower billed hours and weak demand due to overall cost pressures on property management companies and property owners. Gross profit in the fourth quarter was $7,700,000 compared to $8,700,000 in the prior year quarter. Gross profit as a percentage of revenue was 35% and was negatively affected by $147,000 in out-of-period workers’ comp costs. Adjusted for those costs, our gross profit as a percentage of revenue was 35.6% in the quarter, consistent with the prior year’s quarter and the year of 2025 in total. SG&A expenses for the fourth quarter were $9,300,000 compared to $10,500,000 in the prior year’s quarter. SG&A this quarter included strategic review costs of $403,000 compared to $88,000 in the prior year quarter. SG&A expenses in 2025 were negatively affected by approximately $460,000 of out-of-period expenses, mostly related to the medical expenses under our self-insurance plan and the process of finalizing our closing balance sheet for the sale of the professional division. Fourth quarter adjusted EBITDA was a loss of $947,000 inclusive of the medical insurance adjustment mentioned above, compared to an EBITDA loss of $1,600,000 in the prior year. This reduction in EBITDA loss came in spite of $1,000,000 of lower gross profit due to lower sales. Significant cost-cutting measures implemented in selling and in general and administrative expenses during 2025 were the main drivers behind the improved EBITDA loss. We reported fourth quarter GAAP net loss from continuing operations of $0.11 per diluted share, compared to a non-GAAP adjusted EPS loss from continuing operations of $0.09 per share. Consolidated adjusted non-GAAP EPS for the quarter was $0.09 per share. For the full year of 2025, net cash provided by continuing operating activities was $117,000, which included a $5,200,000 escrow receivable from the sale of the professional division. We expect to finalize the settlement of this cash escrow amount during Q2. Our capital expenditures were minimal at $138,000. During 2025, we purchased 351,200 shares of stock totaling approximately $1,500,000. Our purchases to date total 522,000 shares at a total of $2,400,000. Finally, the team remains focused on executing our strategic priorities and our new roadmap while also managing the transitional work related to the sale of the professional division. Kelly and I want to thank everyone across the organization for their continued dedication and hard work over the past year. The execution of the TSA was a particularly heavy lift, and we are deeply grateful to the entire BGSF, Inc. team for their thoughtful planning, strong execution, and sustained commitment. We look forward to updating investors each quarter on our progress and hope today’s discussion has been valuable. We will now open for questions. Operator? Operator: Certainly. At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, that is 1 to ask a question. One moment while we poll for questions. Your first question for today is from William Dezellem with Tieton Capital. William Dezellem: Thank you, and good morning. A couple of questions. Let us just start, if we could, please, with the Yardi relationship, and walk us through that relationship, what you are doing with it, and what the potential implications are for the business longer term. Kelly Brown: Yes. Good morning, Bill. Thank you for the question. I will take that one. The Yardi partnership is an exciting one for our group because Yardi, as a company, has established an independent consultant network, and what that means is that Yardi as a company will obviously sell and implement software to our property management customers that they use for their day-to-day operations. So when and if there are gaps between what Yardi provides as a company and the implementation or training that is needed to actually have the end user fully implemented into the software, they will leverage independent consultants to do that work. And that is exactly where we will come in with our consultant base to be able to fill those requests. So Yardi essentially serves as a base when they know they have needs among their clients so that we can then pick that up, and it is a really basic model of hiring the consultant, placing them, and then billing accordingly. William Dezellem: And, Kelly, what is the potential size of that business? Or is it more important, the relationship enhancement that it leads with your customers? Kelly Brown: Yes. You know, we chose Yardi as our first partnership of this nature because they are the most widely used software in the property management space. So the potential is very large across all of our customer base. They are certainly not the only software used; they are the most widely used. So when you look at potential, you think about all the properties that we bill with across the country; they all have software that they use. So every single one of them would have some type of support that they could need at any given point in time. In addition to that, even at the corporate office level, when you think about their accounting needs and things like that, Yardi is also leveraged for those types of services. So there is potential at both the corporate office level as well as the on-site end user level. William Dezellem: Alright. Great. Thank you. I appreciate that. And then, Keith, would you please walk through your comments about SG&A on an ongoing basis, and I did not catch all the numbers, number one, but maybe related to the $9,300,000 of SG&A that was reported in the fourth quarter? Keith R. Schroeder: Okay. So the G&A cost that we are estimating going forward once we are clear of the TSA and all of that is around $12,000,000. Okay? And then the number obviously continues to unfold as we continue to look for ways to cut costs and software costs and things like that. So that is kind of an ongoing work that we have. There is about $2,500,000 or so of public company costs in that number. Alright? So the Q4 number, which you cited, which was selling and G&A, that number is higher than what we expect in 2026 because we were still supporting the sale, and we were not able to get out of all those software changes that we expect to change. So the Q4 number is not reflective of what we expect in 2026. Does that help? William Dezellem: Yes. That is helpful. And, following up on that, the SG&A that includes—there is the $9,300,000—how much of that is the G&A number? Keith R. Schroeder: Oh, the G&A number for the quarter, it is actually in the press release. It was about $3,500,000, but there is about $460,000 that hit in Q4 that did not relate to Q4, and that was the things that I cited that we, as we broke apart the balance sheet for the sale and we looked at our IBNR in our reserve, we ended up taking $460,000 of expense in Q4. So that is included in those numbers. William Dezellem: Great. That is helpful. And then, one additional question, please. Relative to the overall market environment, how would you characterize it today versus what you were seeing a year ago at this time? Kelly Brown: Yes. You know, what we are seeing today based on customer feedback, there is definitely an interest and a budget to spend on our services. This year is a much more optimistic sentiment than what we were experiencing last year. I think our customers have navigated a lot the last couple of years economically. And this year, the feedback is, absolutely, look, we plan to leverage staffing as well as PropTech support services. And so we are finding from a willingness to spend perspective there certainly is a lot more positive feedback this year than what we were navigating this time a year ago. William Dezellem: And, Kelly, is it your sense that since we have had a couple of years of tight or conservative spending that there is some catch-up and delayed or deferred maintenance that could lead to a higher-than-average level of activity, maybe not in 2026, but as we push further into 2027, and you start to see some catch-up? Kelly Brown: I think it is reasonable to assume that there could be a certain level of that. What we have heard from customers is that as much as possible during times when they have to be conservative on their spending, they will do their best to just leverage the existing employee base that they have, even if that means one employee that may typically work at one property needing to float or visit several properties and try to help. So to an extent, there may be a little bit of that. Nothing like what we saw after COVID or anything like that. But there may be a small amount, but I think as much as possible, they really have tried to make it work with the existing employees that they have. William Dezellem: Great. Thank you both for taking all the questions. Kelly Brown: Absolutely. Thank you. Keith R. Schroeder: Bill, one other thing just to back that up with our top-line sales: through the first two months are slightly ahead of 2025. So it has been off to a solid start for this year. William Dezellem: So just to be clear, what you are saying is if March continues the trend that you saw in January and February, the first quarter revenues would be up, which would be the first time in many quarters that that is the case. Correct? Keith R. Schroeder: Yes. That is correct. William Dezellem: Great. Thank you for that additional perspective. Do you want to share a percentage change that you saw in January and February combined? Keith R. Schroeder: No. But I will say that we do expect full-year sales in 2026 to be over 2025, in the mid-single digits. So if that helps. William Dezellem: That is helpful. And I am going to take the bait and go one step further. Thank you, Bill. So relative to the monthly trends, when you look at the fourth quarter, was November decline less than October, and was December better than November? And then January being better than December, and then was February up more than March? Are we seeing that sort of trend, each and every month improving? Keith R. Schroeder: You are going sequentially. Right? William Dezellem: Yes. Basically, Keith, I am essentially saying let us just take, for example, if October was down 6%, then November being down 4%, December being down 2%, January being up 2%. And I totally just made those numbers up for illustration. Keith R. Schroeder: Yep. So I think the best way to answer that is that as we ended 2025, the seasonality effects that we would expect, we were better than those in the last month of last year. And so we have started out where we are higher in sales than last year for January and February. So it is a positive trend. William Dezellem: That is helpful. Did that positive trend begin late in the fourth quarter in December? Or is it really— Keith R. Schroeder: Yes. William Dezellem: Yes. It did. Keith R. Schroeder: And, of course, we had one really tough week in February because a snowstorm basically shut down the entire country for a few days. But, still, we came out pretty strong. William Dezellem: Yes. That is very helpful. Appreciate that additional color. Anything else you would like to add on that front before I turn it back to the operator? Keith R. Schroeder: No. I think that is it. But thank you. William Dezellem: Thank you again. Operator: Your next question is from George Melas-Kyriazi with MKH Management. George Melas-Kyriazi: Thank you. Good morning. Keith R. Schroeder: Good morning. George Melas-Kyriazi: Trying to clarify the answer that you gave, Kelly, to Bill regarding the PropTech. It seems like it is a very different line of business. Right? It is not your regular consultants or staffing that is more focused on maintenance and leasing. So is that a new segment of the business, could we say? And how many consultants do you have and what kind of revenue are you expecting in 2026 from PropTech? Kelly Brown: Yes. Well, good morning, George. Thank you for the question. Yes. It is different from the type of staffing that we have delivered in the past. You are correct. And the reason why we selected PropTech as an adjacent market that we were interested in is because it is a need that the people that we place and our existing customers have on all of their properties. They are leveraging technology, as all of us are, in their day to day. So we saw an opportunity to explore the support of that technology, and it really does two things. It helps solve customer problems that exist today, but it also helps lift up our candidate base as we know they are going to be, when they are out to work, leveraging the same technology. And so, learning about how Yardi structures their independent consultant network really became of interest to us because we are building that consultant base. To answer your question, we are going to start with a pool of 8 to 12 consultants and get them out working, and it will just grow organically over the year. So, early projections for 2026, we expect to be able to organically grow the revenue and ramp up through the year. First-year top line may be $1,000,000 to $2,000,000, but we really are just launching it organically this quarter. So we are going to look at the next couple of quarters very carefully as sales accelerate, and we will be able to give much more accurate forecasting after that point. George Melas-Kyriazi: Okay. That is exciting. And how many people do you have on staff now? How many consultants do you have, and do you train them in the Yardi tech, or are they pretty much already trained and ready to go? Kelly Brown: Yes. They tend to come in with existing Yardi experience. If we are going to hire them, they have existing Yardi knowledge. We are not hiring folks to come in and then train them. Now I will add that Yardi does provide really impressive resources to make sure their consultant base has access to training and to knowledge and continuing education. Yardi does a really great job making sure that their consultant network is very well equipped to stay knowledgeable on their technology. So that is another reason why we selected Yardi as a partner: those resources that they have, the knowledge base that they offer. Therefore, that is not really a lift that we have to take on internally, that type of training. We will hire consultants that have existing knowledge, then leverage Yardi’s resources to make sure that they stay fresh on that knowledge. George Melas-Kyriazi: Great. And maybe I am digging too much into the weeds, but I am really curious. Are you starting in Texas, for example? Are you starting in one market? How do you see the ramp of that business segment unfolding? Kelly Brown: Fortunately, this service is not necessarily geographically driven because a lot of the work that these consultants can deliver is remote. So we will not be a geographically based expansion. It will really be more of a customer-by-customer-based expansion. And so we will grow that way between both our own sales initiatives and Yardi’s referral base. It will not necessarily have a geographic component. George Melas-Kyriazi: Okay. Great. That sounds like an exciting initiative. It is nice to see having these growth initiatives. Maybe just also trying to clarify a little bit what you said at the end regarding a solid start to the year. The fourth quarter, year over year, was down 9.4%, right, I think the top line. Keith R. Schroeder: Yes. That is correct. George Melas-Kyriazi: If part of December was a positive comp, it sort of means that, actually, maybe October and November were down double digits. And then so that seems like a very dramatic change from down double digit in a few months to going up comp. And how do you explain this change, and to what extent is this change market-driven, and to what extent is it your own execution and what you are doing internally that is driving that, in your opinion? Keith R. Schroeder: Yes. I think there is some market improvement in there, but really from our perspective, it is more driven by execution. The things that we learned from one of these studies are the speed to fill, giving them the right candidate in the right spot quickly. Those things all make a big difference, and we have changed some things up, and we are laser-focused on that stuff. George Melas-Kyriazi: And let us see if we can try to extrapolate that to the year. So you expect mid-single-digit growth. Does that mean that you expect growth pretty much in every—year-over-year growth, I mean—in every quarter of 2026? Keith R. Schroeder: Yes. That is correct. George Melas-Kyriazi: Okay. Great. That is really good to know. And to what extent is that driven by—I think, Kelly, you mentioned that you feel like customers have a slightly greater propensity to purchase and to spend. So you have that on the one hand. On the other hand, you have that execution on your side. Is that the way one would look at it? Kelly Brown: Yes. It is definitely a mixture of both of those factors that would lead to the year-over-year performance being more favorable. George Melas-Kyriazi: Okay. Great. Good. And then on the cost side, thank you very much for what you have as the property management segment. It is super helpful, and it really helps us understand the business much better. So if we look at the G&A, it is $3.9. But if we take out the medical and the cost of the review, it comes down to pretty much $3.1. So let us say $3.0 to $3.1, and if we annualize that, it is roughly $12. Which I think is what you said, Keith, as kind of the ongoing expenses of G&A. Does that mean that if we take out those two one-time things, we are pretty much at the steady-state level for G&A? Keith R. Schroeder: Yes. But just to make clear that we are looking at ways ongoing to bring down those costs. So it is not a done deal. That is where we are now, but we are constantly looking at ways to bring down those costs. George Melas-Kyriazi: Okay. And with, of course, seasonality, your second and third quarter are your best quarters from a revenue perspective. That impacts somewhat selling expenses. But would that have an impact on G&A, or is G&A basically flattish from quarter to quarter? Keith R. Schroeder: G&A is pretty flat. So selling would go up some. You have more sales; you have more bonus dollars, commission dollars, things like that. But with the G&A, it is basically pretty fixed across all four quarters. George Melas-Kyriazi: Okay. Great. Thank you very much for taking my questions. Operator: Thank you, George. We have reached the end of the question-and-answer session, and I will now turn the call over to Kelly for closing remarks. Kelly Brown: Thank you for your time today. We appreciate your continued support and look forward to providing an update on our first quarter in a couple of months. Have a great day. Operator: This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Good afternoon, and welcome to the Mission Produce, Inc. Fiscal First Quarter 2026 Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please also note today's event is being recorded. At this time, I would like to turn the conference over to Jeff Sonnek, Investor Relations at ICR. Please go ahead. Thank you. Today's presentation will be hosted by Steve Barnard, Chief Executive Officer; John Pawlowski, President and Chief Operating Officer; and Bryan Giles, Chief Financial Officer. Jeff Sonnek: The comments during today's call and the accompanying presentation contain forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts are considered forward-looking statements. These statements are based on management's current expectations and beliefs, as well as a number of assumptions concerning future events. Such forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from the results discussed in the forward-looking statements. Some of these risks and uncertainties are identified and discussed in the company's filings with the SEC. We will also refer to certain non-GAAP financial measures today. Please refer to the tables included in the earnings release, which can be found on our Investor Relations website, investors.missionproduce.com, for reconciliations of non-GAAP financial measures to their most directly comparable GAAP measures. I will now turn the call over to Steve Barnard, CEO. Steve Barnard: Thank you, Jeff. Last quarter, we shared the news about our leadership transition, and next month, at our annual meeting, that transition becomes official. John steps into the CEO role, and I move to Executive Chairman. So this is my last earnings call in this seat, and I want to take a moment to say how grateful I am. Forty-plus years building this company alongside an incredible team of people. There is nothing else like it. I am proud of what we have accomplished together. With that said, I am even more excited about what is ahead. Between the momentum we are carrying, the pending Calavo acquisition we announced in January, and the team we have in place, Mission Produce, Inc. has never been positioned better. John has brought a level of strategic rigor and global perspective that has elevated this organization, and I have complete confidence in his abilities and vision. I will still be very much involved as Executive Chairman. This company is in my DNA, and that is not going to change. But the future belongs to John and his team, and I cannot wait to watch it unfold. With that context, I will turn it over to John to walk you through the operational and commercial highlights of the quarter. John? John Pawlowski: Thanks, Steve. And on behalf of the entire Mission Produce, Inc. team, thank you. What you have built over four decades speaks for itself, and it is a privilege to carry it forward. I want to use my time today to walk through our first quarter results and the operational progress we are making across the business. I also want to spend some time talking about the future of Mission Produce, Inc., because we have a lot to be excited about. We are off to a strong start in fiscal 2026, and the first quarter is a good illustration of how we are able to manage this business in a shifting supply and price environment. We are a volume-centric business. Volume and per-unit margins are the metrics we manage to. In a quarter in which industry pricing normalized significantly from the elevated levels we experienced over the past year, our team delivered on both of those fronts, and I want to recognize their collaboration which helped drive our results. We grew avocado volumes 14%. We expanded gross margin, and we grew adjusted EBITDA versus the prior-year period. The headline revenue number reflects pricing dynamics that are outside of our control, but the underlying execution was strong, and that is what drives our results. Our commercial teams drove volume growth, improved per-unit margins, and continued to deepen the customer relationships that underpin our business. That is the combination we are always working towards. As expected, Mexican supply was abundant this quarter, with higher yields in the current harvest season versus last year, and our teams programmed that fruit well across our customer base, expanding our reach, strengthening existing partnerships, and leveraging our category management tools to add value for our retail and foodservice customers—precisely what our platform was built to do. The broader demand environment continues to trend in our favor as well, and the structural tailwinds for avocado consumption are real. Domestic GLP-1 penetration continues to accelerate, and the recent inclusion of avocados in the USDA's updated Dietary Guidelines for Americans was a meaningful development, reinforcing what consumers are already telling us day in and day out with their purchasing behavior—that avocados are simply a staple in America's diet. In fact, we are seeing these dynamics play out in syndicated data as well, which showed that household penetration of avocados reached a high watermark of approximately 72% in the fiscal fourth quarter this year. Per capita consumption has nearly tripled over the past two decades, and with the health and wellness trend continuing to accelerate, we see a long runway for category growth that our platform is uniquely positioned to serve. Our International Farming segment plays an important role in driving year-round consumption here in North America and is also helping accelerate the category in emerging growth markets internationally. We have been working hard to maximize returns from our international asset base. For instance, we are focused on driving improved pack house utilization in Peru by running our own blueberry volume and additional third-party fruit through our facilities to generate better overhead absorption all year round. Recently, we also modified a pack line in that same facility to support mangoes as well. These efforts—filling in the seasonal calendar and maximizing the productivity of our Peruvian assets—have been instrumental in helping us deliver more sustainable positive adjusted EBITDA in our International segment during what was historically a seasonally softer quarter. The Blueberry segment itself continues to grow. Revenue was up 12% in the quarter on higher volumes and modestly higher pricing. Per-acre yields on some of our newer acreage impacted profitability, but that is part of the natural maturation process, and we expect yields to improve as those farms reach full productivity. The volumes are building, and we like where this business model is headed, both as a stand-alone category and for what it contributes to our broader platform. It is this sort of thinking that exemplifies our broader strategy and informs our strategic designs for the future of this company—an area that I am especially excited about. When we announced the Calavo acquisition in January, we described it as a unique opportunity to acquire a strategic and synergistic asset—one that strengthens our core avocado business while adding capabilities in prepared foods through an established brand. Two months after announcing that transaction, I am even more confident in this view. To be direct, we believe scaled assets in our space that contain this level of strategic fit are scarce. Calavo was a unique opportunity, and we believe Mission Produce, Inc. is the best-positioned company to unlock value through this combination. This was an absolutely offensive move—an opportunity to accelerate our growth strategy from a position of strength, backed by two straight years of demonstrated execution, robust cash flow generation, and a very strong balance sheet. Integration planning is underway, and deal progress is moving forward. In fact, we recently filed our preliminary proxy for the transaction, which is now under SEC review, and we are advancing the regulatory approval process in both the United States and Mexico. This is all coming together as planned, and we believe the transaction is on track to close during our fiscal third quarter, subject to satisfaction of the closing conditions. On the strategic merits, we continue to believe the combined company will have greatly enhanced supply reliability for all of our customers. Calavo will also bring tomatoes and papayas into our distribution network, which we believe will further enhance the year-round facility utilization goal that I spoke to earlier, while helping reduce the seasonal troughs that have historically been a feature of the produce industry. But it is the prepared foods opportunity that I am particularly excited about. Calavo's guacamole and ready-to-eat product lines sit within a large and growing market, and it is a natural adjacency to our core avocado business. Having spent 20 years in the branded food industry, I have a deep appreciation for leveraging the power of strong execution and category leadership into adjacent business line expansions, and we have a perfect opportunity with an established consumer brand and the operational scale to support its continued growth. We see significant runway to build up this new capability, and one that is genuinely value additive to what Mission Produce, Inc. does today. On synergies, our conviction has only grown as we have started our integration planning. We continue to see at least $25 million of annualized cost synergies achievable within 18 months of close, and we believe, as we have stated earlier, that there is meaningful upside potential to that number as we bring these two platforms together. Importantly, we also believe that this transaction will help create a clear path to delever back to normalized levels within approximately two years of our close, which is a priority for us as we consider our go-forward capital allocation strategy. Stepping back for a moment, on a stand-alone basis, Mission Produce, Inc. has significant runway in front of us, both domestically and internationally. The demand tailwinds I described earlier are durable, and our platform is built to lead category growth along with our customers. Layer on the Calavo acquisition with the expanded North American footprint, the diversified produce portfolio, entry into prepared foods, and cost synergies, and the combined company has the potential to be something truly differentiated in the fresh produce industry. We are building a platform that we believe can drive meaningful EBITDA growth over the next several years through a combination of organic execution and the value we unlock through this combination. Importantly, as we scale this platform and accelerate free cash flow, returning capital to shareholders is part of the equation that we are envisioning. We are actively developing a long-term capital allocation strategy that balances reinvestment in the business with meaningful returns to our shareholders, and we look forward to laying that out alongside our detailed strategic plan at an Investor Day we are planning to hold following the closure of the Calavo acquisition this fall. But I want to be clear. The ambition here is significant, and I believe the foundation we have, combined with the capabilities Calavo brings, gives us a clear and credible path to get there. I will now turn the call over to Bryan for the financial results. Bryan Giles: Thank you, John, and good afternoon to everyone on the call. Fiscal 2026 first quarter revenue totaled $278.6 million, which was down 17% from the prior year and driven by a 30% decrease in pricing given higher industry supply driven by greater availability from Mexico resulting from higher yields in the current harvest season. However, we are pleased to see strong 14% volume growth in the quarter, which, as John mentioned, is the primary focus of our operating strategy. Despite lower revenue, gross profit was consistent with the prior year at $31.6 million in the first quarter, enabling our gross margin to increase 190 basis points to 11.3% compared to the same period last year. As a reminder, profitability in our Marketing and Distribution segment is managed primarily on a per-unit basis, which can lead to volatility in margin percentage when sales prices fluctuate. The increase in margin percentage was primarily driven by improved performance in our Marketing and Distribution segment, reflecting higher avocado volumes and improved per-unit margins compared to the prior-year period. This performance was partially offset by lower gross profit in our Blueberry segment due to lower per-acre yield resulting in higher per-unit fruit production costs. SG&A expense increased $6.9 million, or 31%, compared to the same period last year. The increase was driven entirely by $7.0 million of transaction advisory costs associated with the pending acquisition of Calavo Growers. Excluding transaction advisory costs, SG&A was essentially flat with the prior-year period. Adjusted net income for the quarter was $7.3 million, or $0.10 per diluted share, consistent with prior-year results. Beyond the operating performance, we continued to benefit from a reduction in interest expense, down $0.5 million, or approximately 23% versus prior year, reflecting our continued focus on maintaining a healthy balance sheet and the lower rates we incur on outstanding borrowings. We also realized a significant increase in equity method income to $1.5 million compared to $0.8 million in the prior-year period, driven by strong performance from our joint venture investment in Henry Avocado Corporation. Adjusted EBITDA increased 5% to $18.5 million compared to $17.7 million last year, driven by higher avocado volumes sold and year-over-year improvement in per-unit margins in our Marketing and Distribution segment, partially offset by higher per-unit fruit production costs in our Blueberry segment. Turning now to the segments, our Marketing and Distribution segment net sales decreased 21% to $234.8 million, driven by the avocado pricing dynamics previously described. As we have mentioned, we manage this business primarily to volume and per-unit margins, and on that basis, the segment performed well. Segment adjusted EBITDA increased 33% to $12.9 million, reflecting higher avocado volume sold and solid per-unit margins. In the first quarter, our International Farming results are typically focused on the provision of packing and processing services for our Blueberry segment and for third-party blueberry producers, though this will evolve over time as our operations develop in other areas such as Guatemala. With this seasonality in mind, our International Farming segment total sales increased 15% to $10.6 million. Segment adjusted EBITDA increased $0.5 million, or 28%, to $2.3 million compared to the prior-year period due to improved pack house utilization versus the prior year. As John discussed in his remarks, we are pleased to see the results of improved operating leverage in what has traditionally been a smaller quarter for that segment. In Blueberries, total sales increased 12% to $40.8 million due to increases in average per-unit sales price and volumes sold of 9% and 3%, respectively. Segment adjusted EBITDA decreased to $3.3 million compared to $6.2 million last year. While our volumes were higher, overall yield per hectare was lower than the prior year, which drove up our per-unit production costs. As we have discussed previously, this is part of the natural maturation process for newer acreage, and we expect yields and per-unit cost to improve over time as these farms mature. Shifting now to our balance sheet and cash flow, cash and cash equivalents were $44.8 million as of 01/30/2026, compared to $64.8 million as of 10/31/2025. Net cash used by operating activities was $3.0 million for the quarter, compared to $1.2 million in the prior-year period. The slight increase in cash usage was driven by higher working capital requirements. As a reminder, the first quarter is typically our weakest period for cash generation given the seasonality of our business, and we expect the customary improvement in operating cash flow as we move toward the latter half of our fiscal year. Capital expenditures were $11.9 million for the quarter, compared to $14.8 million for the same period last year, consistent with the anticipated step down we communicated previously. For full fiscal 2026, we continue to expect total capital expenditures of approximately $40.0 million. This setup positions us for accelerated free cash flow generation going forward. Now let me provide some context on our near-term outlook. For 2026, avocado industry volumes are expected to increase by approximately 10% to 15% versus the prior-year period, driven by a larger Mexican crop in the current harvest season. Pricing is expected to be lower on a year-over-year basis by approximately 30% to 35% compared to the $2 per pound average experienced in 2025. While we expect higher volumes, we anticipate contraction in our per-unit margins for the second quarter due to the lower pricing environment, particularly in a setting where we are sourcing primarily from a single origin. The lower price environment is leading to a delayed start of the California harvest season. It is expected to be about a month behind the prior year as growers wait for improved market conditions. This delay reduces our ability to leverage our sourcing capabilities across regions and lowers asset utilization at our California packing facility in Q2 as we await volumes to ramp up. This is expected to result in lower levels of Q2 profitability in our Marketing and Distribution segment versus the prior year. For Blueberries, harvest timing for the 2025/2026 Peruvian blueberry harvest season is accelerated in relation to the prior year, leaving 10% to 15% of the harvest to be sold through in the fiscal second quarter. We expect to see volume reductions from owned farms resulting from earlier pruning and unfavorable weather conditions in the current year, which should translate to lower revenue despite expectations for higher sales prices, as well as create a headwind for our International Farming segment as a result of lower pack house utilization. Blueberries profitability will continue to be impacted by higher costs resulting from lower yields per hectare as we close out the current harvest season in the second quarter. Taking this all together, we anticipate our consolidated adjusted EBITDA performance to be below the prior-year level. Looking ahead, we remain focused on the fundamentals that drive long-term value creation—supporting consumption growth through building volume, strengthening customer partnerships, and maximizing the productivity of our global asset base. The structural tailwinds supporting avocado consumption are accelerating, and our platform is uniquely positioned to capitalize on this sustained category growth. While we will navigate some near-term supply dynamics in Q2, we have great conviction in the underlying strength of our business model and our team that is driving it forward. Combined with the opportunities afforded by the pending Calavo acquisition, Mission Produce, Inc. is building a differentiated platform with significant runway for EBITDA growth and value creation in the years to come. That concludes our prepared remarks. I will now turn the call back to the operator to take us to Q&A. Operator: We will now open for questions. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 to remove yourself from the queue. For participants using speaker equipment, you may need to pick up your handset before pressing the star key. Your first question comes from Puran Sharma Stephens with Stephens. Please go ahead. Puran Sharma Stephens: Good afternoon, and thanks for the question, and congrats on putting up those results in this lower pricing environment. I did want to start off by asking about the Calavo acquisition. You have said a lot here in the past few months about it, but in your prepared comments, you said you feel more confident as you have had more time to maybe digest information about the deal. Does that mean that there could be even more upside to your previous comment about having further upside to the $25 million? And then just as a follow-on, could you give us a sense as to what buckets you are tackling? What do you see as lower-hanging fruit and higher-hanging fruit in terms of synergy realization? John Pawlowski: Hi, Puran. This is John. Thanks for the question. I hope you are doing well. In regards to the synergy question, I am going to stick with my comments that I have been making over the last couple of months. We feel, as we have been having conversations with the Calavo team and we are working towards consummating the relationship here and all the different elements that have to happen structurally, really good about the estimate assumptions that we made around that $25 million. The estimates around that $25 million were really built around some core cost structure items, and the buckets that we have been always talking about have been around the operating footprint and how synergistic that operating footprint is, around some duplicate costs in the overall structure, and we feel really good about our ability to execute against cost-related synergies in a very expedited, timely manner. As we think about the buckets for the future, there is a lot of opportunity around how we think about growing together, how we think about engaging with our customers in regards to what we can do around the selling cycle and adding value in regards to how we think about the opportunities, particularly in adjacent spaces to where we are at today. I am not going to give any more color in regards to where I think those go, except to stress that I feel really confident in the word “meaningful,” as I have been, quite frankly, pretty consistent in saying around where we go beyond that $25 million. Puran Sharma Stephens: That is great. I appreciate the color there, John, and hope you are doing well as well. Just as my follow-up here, I wanted to ask about, and this is, I guess, more on Bryan's comments around guidance here. I understand that we are going into a lower pricing environment, higher supply environment relative to last year, and that you would expect your per-unit margins to show some compression in this type of environment. But I just wanted to get a sense of the benefit you would get from the increased volumes. Are you able to give us any color, qualitative or quantitative, into how much fixed cost deleveraging you are like, benefit you would get from the increased volumes? Bryan Giles: Hey, Puran. This is Bryan. The vast majority of the costs, particularly this time of year, in our cost structure are variable in nature. When we are buying third-party fruit, that is by far the most significant item in our cost of goods sold, and even at lower price points, it is still the most meaningful item in there. Our goal is we focus on making margin on a per-unit basis so we can be profitable in times when prices are high or when prices are low. There is no doubt, though, when prices are at the lower end, that it does compress that a bit. It makes it a little more challenging to really sell customers on getting them to pay every dollar for the premium service that we provide. So it creates challenges. It does tighten up a bit. I think when we are in a single-source market like we are today with Mexico and there is ample supply, again, it just makes it more difficult to lean into the advantages that we really have. I do think that, in the lower price environment—I made reference to California getting a little bit later start this year—last year we were in a pricing environment that was more than 2x where we are at today. In the moment, it was meaningfully higher-end price to retail. When I look at where we are at, there is fixed cost overhead that is associated with that facility that we are not able to utilize completely when we are not in the California season, so that year-over-year comp is a little bit difficult. I do not think the general per-unit margins that we are going to generate are going to be dramatically lower than the historical ranges that we have seen. I just think that we have gone through a period of time where we were seeing elevated per-unit margins that were above that normal range. I think that what we are seeing in Q2 is a continuation of what we saw in Q1, which is a bit of a reversion back to the historical levels on per-unit margins. Operator: Next question, Mark Smith with Lake Street Capital Markets. Please proceed. Alex Turnicks: Yeah. Hi, guys. You have got Alex Turnicks on the line for Mark Smith today. Thanks for taking my questions. First one for me: on the Blueberry segment, you mentioned the yield pressure is largely tied to newer acreage maturing. Could you talk about the timeline for those farms reaching full productivity and what normalized margin profile for that business could look like once yields stabilize? John Pawlowski: Hi, Alex. Thanks for the question. I will start and maybe Bryan will jump in. From a technical perspective, what we do on those farms is what we call double-density introduction into the harvest. What we are doing is putting plants—which is a very typical part of the process in blueberries and in many other crops—very tightly close together as they are maturing from, say, year one into year one and a half, when those plants are becoming much more productive and mature, and then you are spreading them out as they get into the later stages of maturity. Sometimes when you do that and you spread them out, you have a little bit less productivity for those first couple of months or first year of the time that that plant is executing against what it is trying to do, and we are in a phase where we just did that in a lot of the portions of our farm. Over the course of the next 12 to 18 months, we should really be reverting back to our traditional margins from a cost structure standpoint as those plants become mature. I would love to tell you it is three months, but it is probably more along the lines of 12 to 18 months until we reach the full zone where we would like to be. Bryan Giles: And I would just build off what John said. There are a couple of metrics we look at. We are certainly looking at cost per hectare planted—we do that for our avocados and our blueberry farms. We are also looking at costs on a per-unit basis. The triangle here for profitability is overall cost incurred, production yield, and sales price, and then we work those three together. Certainly, the cost per unit is driven heavily by the overall costs that we incur as well as that yield number. To the point that John made, we do expect those yields to improve as they mature. Blueberries do get into mature production much faster than an avocado tree does. Many of these plantings where we are seeing the reduced yield this year are plants that are one to two years old, and we would expect them to ramp their productivity very quickly, whereas an avocado tree can take four years before you even get to breakeven production. So it is a meaningful difference. It is a faster ramp. We were planting a fair amount of new acreage in blueberries. We are up over 700 hectares in production today, but of that 700, probably 25% of it is new acreage that was impacted by the spread-out. Certainly, as we go forward, we expect those yields to ramp fairly quickly. We did mention other factors that play into this. The timing of pruning in a harvest season—where we let the seasons run a little bit longer the year before and we ended them in a more normalized time this year—had a nominal impact. We are also, in decisions around pruning, often driven by the weather conditions that exist at any given time. The timing of pruning is going to determine when harvest is going to begin the following season. So we are making decisions that are really in the best long-term interest of the business, and sometimes they do not always align with an individual quarter. Alex Turnicks: Okay. That is really helpful. The last one for me: you touched on the prepared remarks about developing that long-term capital allocation strategy and your plans to discuss that at the Investor Day after the acquisition closes. But just at a high level, how should we think about the balance between reinvestment, deleveraging, and returning capital to shareholders as free cash flow ramps? Bryan Giles: I think we want to stop short of committing to specifics at this point, but this is really a continuation of the messaging we have started to deliver over the last 12 to 18 months, which is initial priority: paying down debt. We have spent two years doing that. With this acquisition, that will ramp back up a little bit again, so we will have a process to bring it back down. But these combined entities are going to create meaningfully more operating cash flow than we did individually, so we feel like we can bring that debt back down in short order. We have already had discussions about consistently returning cash to shareholders, and those discussions are going to continue to happen as we move forward. The message that we would want to deliver right now is that we are committed to a program to look at that balance. We do not know what the figures are going to be at, we do not know when it is going to start, but we understand it matters to us, and we feel that it creates value for our external stakeholders as well. John Pawlowski: I would add to that, Alex, that I think in the past, we have been very clear on our priorities of using our capital, and that they were around debt management as well as investing in the growth of the business. At this time, I think we are pivoting a little on that by starting to say that, as we develop this capital allocation strategy, the return-to-shareholder piece is rising on the priority list for us. I would say that, as a combined entity, as we think about the future, the priorities do not necessarily have to be mutually exclusive. We think that there is opportunity to parallel path that over the course of the next 12 to 18 months, and we will not have to wait for that deleveraging to be able to provide some of that shareholder return. Operator: Ladies and gentlemen, at this time, I am showing no further questions. I would like to end the Q&A session and turn the conference call back over to management for any closing remarks. John Pawlowski: Thanks, everybody. This is John. Thanks for joining us today. I hope you can feel the positive energy that we have here with respect to our future. We believe Mission Produce, Inc. is at a very critical juncture in our journey, and the pending acquisition of Calavo will only serve to accelerate our growth ambitions. We appreciate your interest in Mission Produce, Inc. I want to thank Steve for all his contributions and let him know I look forward to the future together, and we collectively look forward to speaking with you again next quarter. Operator: Ladies and gentlemen, that concludes today's conference call. We thank you for attending. You may now disconnect your lines and have a wonderful day.
Operator: Good day, ladies and gentlemen, and thank you for standing by. Welcome to Abacus Global Management, Inc.'s fourth quarter and full year 2025 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press star then 2. Please note, this event is being recorded. I would now like to turn the call over to Robert Phillips, Abacus Global Management, Inc.'s senior vice president of Investor Relations and Corporate Affairs. Please go ahead. Robert Phillips: Thank you, operator. And thank you everyone for joining Abacus Global Management, Inc.'s fourth quarter and full year 2025 earnings call. Here with me today are Jay Jackson, Chairman and Chief Executive Officer, Elena Plesco, Chief Capital Officer, and William McCauley, Chief Financial Officer. This afternoon at 4:15 p.m. Eastern Time, Abacus Global Management, Inc. released its fourth quarter and full year 2025 results. This afternoon's call will allow participants to ask questions about our results. Before we begin, Abacus Global Management, Inc. refers participants on this call to the investor webpage ir.abacusgm.com, for the press release, investor information, and filings with the SEC for a discussion of the risks that can affect the business. Abacus Global Management, Inc. specifically refers participants to the presentation furnished today on Form 8-Ks with the Securities and Exchange Commission, and to remind listeners that some of the comments today may contain forward-looking statements and as such will be subject to risks and uncertainties, which if they materialize, could materially affect results. For more information on the risks, uncertainties, and assumptions relating to forward-looking statements, please refer to Abacus Global Management, Inc.'s public filing. During the call, we will reference certain non-GAAP financial measures. Although we believe these measures provide useful supplemental information about our financial performance, they are not recognized measures and do not have standardized meanings under U.S. generally accepted accounting principles or GAAP. Please see our public filings for additional information regarding our non-GAAP financial measures, including references to comparable GAAP measures. I will now turn the call over to Jay Jackson, Chief Executive Officer. Jay Jackson: Thank you, Rob, and good afternoon, everyone. Abacus Global Management, Inc. closed the year by delivering another exceptional quarter, our eleventh consecutive quarter of beating consensus. Today, I want to walk you through how we are executing against our vision and what the path forward looks like grounded, not in projections, but in what I would call our proof point: a track record of consistent, measurable outperformance. Eleven quarters ago, we made specific commitments to our shareholders about how we would scale the business. Every quarter since, we have delivered. Let me put that in concrete terms. We have exceeded guidance and beaten consensus every single quarter. Over that span, we have tripled adjusted net income and adjusted EBITDA, expanded margins from 48% to 60%, and grown our asset base more than 35-fold, from under $100 million to nearly $3.6 billion. We have executed disciplined capital allocation with ROE and ROIC consistently at 20% or higher. These are not aspirational figures, they are results, consistently delivered, independently verified, and compounding quarter after quarter. That track record is precisely why you should have confidence in what comes next. Today, we are initiating our full year 2026 outlook for adjusted net income of $96 million to $104 million. This range implies another year of exceptional double-digit growth, up to 22%, compared to full year 2025 adjusted net income of $85.7 million. This guidance is built on the same execution discipline that has defined every quarter of our public history. Before I walk through our next set of goals, I want to ground this discussion in what makes the Abacus Global Management, Inc. business model fundamentally differentiated. First, our assets are mortality-driven and completely uncorrelated to macro markets. They exhibit what we call positive theta, positive accretion over time. As the insured ages and mortality probability increases, asset value naturally appreciates. There is no interest rate sensitivity, no credit cycle dependency, and no reliance on market sentiment. Second, Abacus Global Management, Inc. is a data-driven business that is insulated from AI disruption, and in fact, positioned to benefit from it. We own proprietary mortality data that AI platforms need to source. As AI adoption accelerates, we become a more valuable data provider, not a displaced one. Third, our assets are backed by regulated A-rated insurance carriers, providing certainty of payment upon maturity. These are contractual obligations from some of the most creditworthy institutions in the financial system. Fourth, they are self-liquidating. Unlike real estate and private equity, we do not need to find a buyer or manufacture an exit. The asset matures by design. Fifth, typical unlevered, uncorrelated returns range from 8% to 12% with limited downside risk, a profile that is exceptionally rare in today's environment. This is why institutional capital continues to flow into the space. The return profile is predictable, durable, and genuinely diversifying. During periods of market uncertainty, our origination business actually accelerates because we provide liquidity to policyholders when they need it most. In 2025 alone, Abacus Global Management, Inc. paid nearly a quarter of $1 billion to policyholders. Here is the broader reality. There is approximately $5 trillion in permanent life insurance outstanding in the United States today. Roughly 75% of policies held by individuals 65 lapse without ever paying a claim. Most policyholders do not realize that life insurance is personal property with meaningful market value, often worth significantly more than surrender value. Millions of Americans unknowingly walk away from six- and seven-figure assets simply because they do not know an active secondary market exists. That is a massive, structurally underserved addressable market. And that is exactly what Abacus Global Management, Inc. was built to capture. So where are we going? Today, I am laying out the path from where we are now, a company that has tripled its revenue over the last two years, to become a mid-cap company, specifically a business operating at approximately $450 million in EBITDA with 70% recurring revenue over the next five years. For those newer to the Abacus Global Management, Inc. story, our strategy is built on four integrated verticals, each one feeding and strengthening the others, creating a flywheel where we control the entire asset value chain. Vertical one, Abacus Life Solutions, the foundation. Abacus Life Solutions is our origination engine and foundation of the entire platform. In a highly regulated industry, we have established ourselves as a clear market leader. In Q4 alone, we deployed a record $230 million of capital, bringing our full year 2025 deployment to over $580 million. Working with 78-plus institutional partners and over 30,000 financial advisers, we expect this momentum to continue accelerating in 2026. This segment delivers consistent, realized earnings while feeding the asset pipeline across all four verticals. Critically, it also generates approximately 10,000 excess leads per month, individuals seeking insurance-related advice who do not qualify for our core business but represent significant wealth management opportunities. That organic lead flow is the engine powering our private wealth vertical, without the expensive customer acquisition costs typical of the industry. Vertical two, Abacus Asset Group, the growth engine. Our asset group is the primary growth engine. We now manage over $3 billion in fee-paying AUM across our longevity funds and ETFs. In 2025, we generated nearly $34 million in management fees, and our longevity funds alone have attracted $630 million in capital inflows. Our new longevity interval fund, which we expect to launch this year, along with our asset-based finance strategy, are creating clear, executable pathways to reach $5 billion in fee-paying AUM by year-end 2026. This is not a stretch target. It is a natural extension of the institutional demand we are already seeing. Vertical three, data and technology are competitive moat. Our data and technology division, now operating as Abacus Intel, continues to grow at strong multiples, adding another durable leg to our recurring revenue strategy. Our flagship product, mVerify, has achieved 4x growth and now tracks nearly 3 million lives, an over 300% year-over-year increase, across 100-plus institutional systems, delivering 97% coverage with less than 1% error rate. To put this in perspective, government mortality systems such as Social Security can lag by up to nine months and carry lower accuracy. Our system identifies mortality events in approximately 48 hours with near complete accuracy. That data advantage is a genuine competitive moat. It enhances our underwriting, asset management, and wealth management capabilities simultaneously. Let me be clear how we leverage AI. We are not using AI to manage portfolios. We are using AI and large language models to aggregate, structure, and interpret health and medical data from policyholders and direct consumers. The result? Broader datasets delivered in usable, summary formats that accelerate underwriting, enhance fraud prevention, and optimize pension liability analysis faster than traditional methods. We are targeting over $3 million in technology revenue for 2026, with significant M&A upside as we expand into insurance, pension, and mortgage verticals. Today, we are already monetizing this data externally, packaging mortality analytics for state pension funds and generating recurring SaaS-like revenue streams. Vertical four, Abacus Wealth Advisors is our client-facing distribution channel, and we expect dramatic acceleration in 2026. Our team build-out and acquisition strategy are ahead of schedule. Over time, we expect private wealth to represent approximately 30% of our recurring revenue mix, supported by organic lead flow from our core business, not expensive external acquisition. And already putting that strategy into action. In a recent development, Abacus Global Management, Inc. has agreed to deploy approximately $50 million to acquire a minority position in Manning & Napier, a proven wealth advisory platform with over $18 billion in AUM, more than fifty years of trusted investment management, and historical EBITDA in excess of $25 million. This investment creates compelling, mutually reinforcing synergies across three dimensions: converting Abacus Global Management, Inc.'s existing policyholder relationships into managed wealth accounts in the Manning & Napier platform, sourcing new life insurance policies through Manning & Napier's adviser network, and accelerating distribution of Abacus Global Management, Inc.-related alternative investment products to Manning & Napier's client base. This investment represents a defining moment in Abacus Global Management, Inc.'s evolution from a life solutions originator to a fully integrated, longevity-focused alternative asset management platform. Combined with our proprietary LifeArc data and actuarial capabilities, the partnership completes the Abacus Global Management, Inc. flywheel, connecting our life solutions origination engine, our growing asset group, and now a dedicated wealth distribution channel. We are not simply acquiring a minority stake. We are building a longevity-focused wealth ecosystem that we believe will generate significant and durable value for our shareholders. With all four verticals now in place and executing, let me walk you through what the long-term financial picture looks like. This is illustrative, but it is grounded in the same execution discipline that has defined the past eleven quarters. Here is the pathway. Our 2028 milestones are targeting EBITDA growth to $250 million while maintaining approximately 50% margins, supported by $30 billion in total AUM. Recurring revenue divisions from 16% of revenue today to 60% of our total revenue mix. As we execute this shift, we align significantly closer to a peer set that commands materially higher valuations, and we expect that valuation gap to narrow accordingly. Our 2030 milestones: EBITDA approaches $450 million supported by $50 billion in AUM, recurring revenue divisions represent 70% of total revenue. That is an approximate 14x increase in AUM and a 3.5x increase in EBITDA from today, while maintaining approximately 50% EBITDA margins throughout. Our long-term goal is to extend this trajectory, and we are looking at approximately $2.5 billion in revenue, $1.5 billion in EBITDA, and roughly $150 billion in assets under management. These targets are not aspirational. They are backed by live pipelines, executed contracts, and the same underwriting discipline this team has demonstrated for two decades. Before I turn it over to Elena, I want to touch on capital allocation because it is central to how we create shareholder value. We deploy capital where risk-adjusted returns are highest, whether it is acquiring policies, funding asset management growth, or repurchasing shares. Following our Q3 earnings, we announced a $10 million buyback program. Most recently, we authorized an additional $20 million share repurchase program on top of that, in addition to paying a dividend derived from our recurring net income. This capital return to shareholders through both dividends and share repurchases reflects our continued confidence in the trajectory of this business. When the market presents opportunities to buy our own stock at, we believe, a significant discount to intrinsic value, we act. When policy acquisition spreads are attractive, we deploy there. It is dynamic, it is disciplined, and it is designed to maximize long-term shareholder value. I also want to address our securitization strategy because it represents an important lever for scaling capital efficiency. In October, we launched our inaugural securitization. That transaction was fundamentally about education, getting institutions, rating agencies, and market participants comfortable with the asset class and its structural characteristics. The underlying asset in our securitizations is a life insurance policy issued by an A-rated carrier that is cash reserved with a default ratio of near zero. This is a consistent, high-quality asset that institutions want to own. And critically, the yield is uncorrelated, mortality-driven, not debt-driven, like traditional private credit. That uncorrelated return profile is exactly what institutional portfolios are seeking in today's environment of elevated rates and credit uncertainty. Securitization creates additional financing and distribution channels, particularly with banks and insurance companies, while improving our capital efficiency and scalability. We expect this pattern to grow into a meaningful and recurring channel going forward. I will now turn the call over to Elena Plesco to walk through our investment performance and detailed KPIs, and then over to William McCauley for the financials. Elena Plesco: Thanks, Jay. I want to use my time today to walk through the current investment environment, how our balance sheet performed, and how we are continuing to build Abacus Global Management, Inc. as a durable, scalable investment platform with growing fee-related earnings, one where we see a clear path for recurring revenue to grow from approximately 16% of total revenue today to 70% over the next five years. We ended 2025 in an environment that reinforces the core thesis behind everything we do at Abacus Global Management, Inc. Traditional asset classes, equities and fixed income, have become increasingly correlated. As a result, institutional allocators are actively searching for return streams that behave differently. That search is structural, not cyclical. It is driven by pension funds, insurance companies, and endowments that need to meet long-duration liabilities with assets that are not tied to the same macro forces. Longevity-linked and asset-backed strategies fit squarely in that gap. Our returns are driven by actuarial outcomes and contractual cash flows, not by market sentiment or broader economic cycles. And it is why institutional demand for our strategies continues to grow. Turning to the performance of our balance sheet. For Q4, our annualized portfolio turnover was 2.6x, above our long-term target of 1.5x to 2.0x, driven by meaningful capital inflows into our longevity-based funds and execution of our first securitization. What matters most is what that number represents: a disciplined, repeatable cycle of originating at attractive cost basis, adding value through underwriting and seasoning, and monetizing at the right time. During Q4, the policies we sold were held for an average of 116 days compared to 269 days for policies still on our balance sheet. Over the last two quarters, we have acquired a larger than usual number of policies referencing an older insured population. We did not deem those assets to need incremental seasoning. Thus, a portion were also sold last quarter. The economics support that. Our average realized gain was 27% for the quarter and 32% for the full year. These margins reflect rigorous origination, accurate actuarial targets, and patience, while exceeding our target of 20%. Portfolio quality continues to be strong. Assets seasoned beyond 365 days had a weighted average life expectancy of 45 months and a weighted average insured age of 88 years, versus 49 months and 86 years for last quarter, respectively. These positions reflect conviction in our underwriting, and we expect them to generate attractive returns as they continue to season. During Q4, we deployed $230.7 million in capital off our balance sheet, bringing full year deployment to $580.8 million, up 82% year over year. Our origination platform reviewed more than 10,000 qualified policies during the year, and we remain highly selective. Our close rate of 12% vis-à-vis qualified policies reflects the selectivity we apply at the front end, which is ultimately what protects margins over time. As we enter 2026, our capital deployment pipeline is robust. Our longevity business remains the core of Abacus Global Management, Inc. At the same time, one of my priorities since joining has been to expand on that foundation in ways that are deliberate and additive. We launched our asset-based finance strategy led by Monty Cook, our head of private credit. Monty and I have partnered on strategies like this over a decade, and we designed our ABF strategy specifically to leverage what Abacus Global Management, Inc. already does well. Asset-based finance involves lending against or investing in pools of tangible and financial assets. Insurance-related structures, equipment, receivables, consumer credit, and other contractual cash flows. These investments generate current income, offer structural downside protection, and exhibit low correlation to traditional markets. What makes our positioning distinct is the intersection of three things. First, our longstanding relationships with insurance carriers and institutional investors, both clients of our longevity platform and natural allocators to asset-backed strategies. Second, over two decades of experience structuring and managing complex, data-driven asset pools where performance depends on granular analytics and disciplined risk selection. And third, our proprietary technology, including the actuarial modeling and insurance analytics infrastructure we have built through Abacus Intel, which gives us a differentiated risk assessment framework we intend to bring to ABF from day one. This is not a departure from our strategy. It is an extension of the same origination philosophy: identifying contractual, asset-based cash flows where we have a structural or informational edge, applied to a broader opportunity set. Asset-based finance is a $22 trillion market, and we believe this strategy will be a critical part of our AUM expansion story. When I step back and look at the business today, the story is straightforward. We have a core origination engine in Web Solutions that continues to perform at a high level, supported by disciplined underwriting and consistent monetization. On top of that, we are developing a scalable asset management platform designed to generate growing fee-related earnings for our longevity funds, ETFs, the ABF strategy, and continued expansion of our distribution capabilities. As of year-end, fee-paying AUM was approximately $3.3 billion and management fee revenue was $33.8 million. We are targeting more than $5 billion in fee-paying AUM by 2026, and we see a path to $50 billion by 2030. That trajectory is driven by three things: continued expansion of our existing strategies, the launch of new strategies like asset-based finance, and the strategic expansion of our wealth management and advisory capabilities. Growing fee-related earnings is a central priority, and it goes hand in hand with growing AUM. As we scale fee-paying assets across our strategies, we generate contractual, high-margin management fee income without requiring additional balance sheet capital. I mentioned at the top we see recurring revenue growing to 70% of total revenue over the next five years. That shift is intentional, and it is the single most important strategic objective for the company. It is about building a fee-related earnings base on top of a proven origination engine and positioning Abacus Global Management, Inc. to be evaluated the way other scaled alternative asset managers are evaluated. We are executing on this deliberately, step by step, with a long-term perspective, and we believe that approach will continue to create value for our shareholders. With that, I will turn it over to William McCauley. Thank you, Elena, and hello, everyone. William McCauley: As Jay mentioned, we closed out 2025 with another exceptional quarter of revenue growth and profitability. Our performance continues to be driven by the strength of our highly efficient origination while we also remain focused on expanding our verticals that we believe will contribute significant earnings growth over time. In 2025, capital deployed increased 82% to $230.7 million compared to $126.5 million in the prior year. As of 12/31/2025, supported by continued policy origination and capital deployment, Abacus Global Management, Inc. holds 804 policies with a balance sheet value of $469.8 million. Total revenue in the fourth quarter grew 116% to $71.9 million compared to $33.2 million in the prior year period. Our growth was primarily driven by strong performance in Life Solutions, higher asset management fees, and contributions from our technology services business. We continue to see substantial growth from within our asset management segment as we expand our product offerings and the demand for uncorrelated assets increases. For the full year 2025, revenue increased 110% to $235.2 million compared to $111.9 million in the prior year. Our Life Solutions segment continues to generate revenue growth at an impressive rate while we focus on diversifying our revenue mix moving forward into 2026 and beyond. Turning to expenses, total operating expenses excluding unrealized gains and losses from changes in the fair value of debt were approximately $41.1 million for 2025 compared to $45.5 million in the prior year. The year-over-year decrease was primarily driven by a drop in non-cash stock-based compensation partially offset by an increase in SG&A expenses. The increase in SG&A expenses is related to the acquisitions at 2024 and in mid-2025, along with increased marketing spend to strengthen our growth profile. On an adjusted basis, excluding non-cash stock compensation, business acquisition costs, amortization, and change in fair value of warrant liability, net income for 2025 grew 71% to $23 million compared to $13.4 million in the prior year. For the full year 2025, adjusted net income grew 84% to $85.7 million compared to $46.5 million in the prior year. Adjusted EBITDA for the quarter grew 132% to $38.6 million compared to $16.6 million in the prior year. Adjusted EBITDA margin was 54% for the quarter compared to 50% in the prior year. And for the full year 2025, adjusted EBITDA increased 115% to $132.6 million compared to $61.6 million for the prior year. Adjusted EBITDA margin for 2025 was 56% compared to 55% for the prior year. We are committed to growing the business responsibly, which is demonstrated in our ability to grow both revenue and EBITDA by over 100% while maintaining our EBITDA margins. GAAP net income attributable to stockholders for the quarter was $7.2 million compared to a net loss of $18.3 million in the prior year, primarily driven by the increase in revenue from our Life Solutions and asset management segments along with a decrease in SG&A expenses. Turning to our balance sheet metrics. For the full year 2025, adjusted return on equity and adjusted return on invested capital were both at 20%, underscoring our highly profitable business model. As of 12/31/2025, the company had cash and cash equivalents of $38.1 million, balance sheet policy assets of $469.8 million, and outstanding long-term debt of $405.8 million. As Jay mentioned in his remarks, in an effort to provide more insight into our business, we are initiating our full year 2026 outlook for adjusted net income to be between $96 million and $104 million. This range implies growth of up to 22% compared to full year 2025 adjusted net income of $85.7 million. In summary, we are very pleased with our strong performance in 2025 as we delivered exceptional top-line growth and significantly expanded profitability on an adjusted basis and maintained our EBITDA margin. We remain highly enthusiastic about the growth opportunities ahead and are well positioned to execute on our long-term plans. I will now turn it back to our CEO, Jay Jackson, for closing comments. Jay Jackson: Thanks, Bill. Let me close with this. We have conviction in our business model, we have confidence in our execution, and we have clarity on the path forward. The current market environment is playing directly to our strengths, and eleven consecutive quarters of outperformance are the proof. We recognize the disconnect between our fundamentals and our current valuation, but also view it as one of the most compelling opportunities in front of us. As we have discussed with our investors over the past several months, the challenge is not performance, it is perception. The real opportunity lies in helping the investment community fully understand what Abacus Global Management, Inc. is today, a data-driven platform operating across life insurance, asset management, technology, and wealth management, with a recurring revenue model, institutional-grade assets, and a track record that stands on its own. We are addressing that gap as it continues to close through transparent communication, proactive investor engagement, and relentless execution across every vertical of our business. That is our mandate for the next two to three years: continue delivering results while closing the education gap in the broader investment community. We are confident that as understanding deepens, the valuation will follow. Our dividend and expanded share repurchase programs send an unambiguous message. We have the financial strength, the cash flow generation, and the conviction to invest aggressively in growth while simultaneously returning meaningful capital to our shareholders. We do not ask investors to choose between growth and returns. We are delivering both. As we look ahead, our priorities remain clear and unchanged: deliver strong, consistent financial performance, deepen institutional adoption of longevity-based assets, educate the market on the massive, structurally underserved opportunity in front of us, and create enduring, compounding value for every shareholder. I am proud of what this team has built. The results speak for themselves. Our job now is to keep delivering. We will now open for questions. Operator: To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. First question comes from Patrick Davitt with Autonomous Research. Please go ahead. Patrick Davitt: Hi. Good afternoon, everyone. You mentioned in the deck that you expect to do another securitization in the first half, and I think you said last quarter you could have done a bigger one. So could you expand on how the investor demand side of the equation has evolved since then? And what that could mean for the size and frequency of these going forward. Thank you. Jay Jackson: Sure. Thank you, Patrick. The demand has continued to be there and, in fact, increase, and we are in, you know, process in Q1 of measuring that demand against building another product to put out via a securitization. And, you know, within that process, I think the demand has met or exceeded our expectations. And particularly in this market, right, one of the things we found really interesting is that with some of the recent volatility in the markets, the underlying asset that we have has actually increased in demand. But to couple that, or to go with that, it is interesting too. You know, we have seen uptick in origination as well. So as individuals may seek capital from their life insurance policies, you know, we are kind of seeing a positive response. So I think with the markets as they are today, you know, relatively around some uncertainty and some volatility, that has presented, I think, more opportunity for us to potentially do something even more sizable. We are still targeting first half versus Q1, but, you know, we feel pretty good about the outcome there. Patrick Davitt: Is it fair to assume it could be bigger than the first one just based on what you said last quarter or too early to say? Jay Jackson: That is yes. I think that is certainly the goal, and the target would be bigger. The first one was $50 million, and,you know, as we look forward, whether that is $100 million or larger, you know, those are some of the areas that we are targeting. And, you know, the demand is certainly there. I would add one thing as well. Whether it is in the securitization, which is great, you know, overall, I, you know, I like to point you to the fund flow. You know, if we look at, you know, the new inflows for, you know, Q4 that we reported, I mean, north of over $400 million should also give you a pretty good indication of the demand that we are seeing for the underlying asset. Patrick Davitt: Yep. And as a follow-up, I have a question on capital. I think you might have answered this in point two on Slide seven, but wanted to hear it from you. Before the stock sell-off last year, you know, episodic equity raises were a more consistent part of the growth algorithm. So now that your stock price has recovered, is that something we should keep in mind? Or do you think that the organic capital generation has kind of reached an escape velocity in terms of being able to address Life Solutions growth without equity raises. Jay Jackson: Yeah. We do not have any intent to put out more equity to fund balance sheet purchases related to policy purchases. You know, for us, you know, we are beating that velocity, and, again, driven by the demand for the asset from our own funds as well. So, you know, we are in a really good spot here and, you know, expect that to continue. And that is why when we put out our guidance for 2026, we are what we believe to be very optimistic. And so we expect that to continue. And from a fund flow perspective and what drives those capital needs, we are in a great spot here, and there is not any need to go to equity markets. Operator: The next question comes from Crispin Love with Piper Sandler. Please go ahead. Crispin Love: Thank you. Good afternoon, everyone. Appreciate taking my question. So on capital deployed, definitely a big quarter there, $230 million. I think that is 125%-plus growth versus just last quarter. And while Life Solutions revenue was strong, and, of course, it matched that growth too, can you walk through that a little bit? Did it come at a lower margin and how was that capital deployed different than past quarters? Just curious if there is any major differences. Jay Jackson: Right. No. There was not anything different. Now there was some, when we look at that gross capital number, you know, there was I think it was $408 million total of gross inflows. One thing that, yeah, you are right to pick up on at least from, you know, how we break that down, there was a little over $100 million that just on the ETF side. So, you know, that would contribute to typically those ETFs have a lower management fee as well as additional recurring revenue fees just in general. And so then when we then look at just the longevity market asset, or just in general inflows, you know, those were higher than Q3. You know, I think what we saw there was that it is some of it is just allocating that capital during the quarter. Right? And so you did see that we also had some excess cash there as we were, you know, finishing out the quarter. And so I think that, you know, those will kind of couple themselves together again a little more closely as we get into, you know, Q1, Q2. But, otherwise, you know, it was really successful. We were able to put a large piece of that capital to work, effectively right away. We are meeting certainly the demand that we have with our origination, and you saw a pretty significant uptick in capital deployed as well, which we were, you know, I think one of the highlights of the quarter is when you look at the capital deployed number of over $230 million. Crispin Love: Great. Thank you, Jay. No. That makes a lot of sense on the ETF side. And then you have talked about five-year path to $450 million adjusted EBITDA. I think you had a little over $130 million in 2025. So if I am doing the math right, I think that is compounding adjusted EBITDA about 28% per year. Can you just discuss how you expect to get there? Is that all organic? Are there acquisitions involved? And then is asset management the overwhelming driver of that growth? Jay Jackson: For sure. And I am glad you asked that because, you know, one of the things we highlighted in the call here was that if you look back over the last three years and I sat back with most of our shareholders and said we expect a 3x growth top and bottom line, you probably would not have taken us very seriously. And yet here we are again looking forward three and five years out with similar aspirations. And that is why we put that illustrative target out there, and partly driven by a couple of things. One, let us not forget we do have a massive addressable market with the underlying Life Solutions business. But even beyond that, when you look at some of the key drivers there, absolutely, it is driven by asset management. It is driven by wealth management. And, you know, there is a blend of organic as well as acquisition. And when I think about the acquisition piece, you know, we highlighted a minority investment in just a terrific firm, a fifty-year firm, in Manning & Napier, where, you know, culturally, you know, we see things a lot of the same way. And that is a first entry point for us. And I think when you start to look at the synergies that we are going to, that we have with that firm already and some of the things I believe we are going to be able to do to jointly grow together, things like, you know, increasing assets under management for both parties by having both a distribution agreement and, you know, being able to monetize the lead generation that we are able to generate from our platform through Manning is incredibly exciting. And I think when you look then at the growth of our business and how we are able to achieve these growth numbers, it is what we are doing really well going forward is capitalizing on the life cycle of our clients. And we are generating significant value for them in both policy purchases and policy payouts. And now we are going to monetize that over time. And so, you know, the growth of this asset driven by our data, specifically longevity and lifespan data and how that applies to financial planning, yes, we are very excited about how that growth is going to continue. And now looking forward, I also think that, you know, it is, as I said in prior calls, we saw both ways from a build-it and buy-it. So I think we will see some of that happen internally. And then, in addition to that, you know, finding phenomenal companies that we can invest in such as Manning & Napier and continue that growth. Crispin Love: Great. Thank you, Jay. Appreciate taking my questions. Operator: The next question comes from Andrew Scott Kligerman with TD Cowen. Please go ahead. Andrew Scott Kligerman: So maybe kind of further to the earlier capital question. In terms of equity issuance, would the founding holders have any appetite to do it this year, or do they have more of a sense that they want to wait and see if the price stabilizes? What is the thinking there? And just further elaborating on that question as well. In terms of capital demands, it sounds like you did a really interesting acquisition with Manning. What is the pipeline like there? Is there, you know, any way, Jay, that you could kind of size it to get a sense that, you know, maybe you might need to issue equity to do some of the deals. It sounds like they have all been very impactful. Jay Jackson: Sure. Thank you for that. Good questions. We will start with the initial question related to, you know, we are predominantly insider-owned. So we remain that way. Myself and three other partners and as well as a large shareholder, the five of us own about 58%, almost 60%, of the outstanding shares. I think it is a fair question. You know, just because we have seen a recent performance in the stock price, I would just like to highlight that when you look at the valuation of our business, it is why we are buying back our stock because we still feel it is dramatically undervalued on a comparative basis. I mean, when you look at businesses on an equivalent basis that have put up these types of numbers in 2025, they do not trade at single-digit multiples. Yet here we are. And I think that when you look at this from a perspective of how we feel about the stock, just look at the numbers we put out, some of these targets for 2028. Again, they are illustrative, but, you know, we are talking about effectively 2x over the next three years just in EBITDA while maintaining similar margins. So I think, you know, over time, you know, we have got a business here where some of the founding members have held their shares for 22 years. And I think that as you, you know, at a thoughtful basis, if we were to ever do anything, it would be something that would be to meet excess demand for the stock. And if that were to happen, you know, we would certainly consider that as those folks are thinking about things like retirement and other things. And this happens in all companies. Right? Like, you know, as people kind of age up, you want to be able to do this in an organized way. What I can assure you is that if there were to be a consideration related to some equity being sold by insiders, it would be in a controlled fashion. It would be in an organized fashion. And but to highlight even more so, let us look at the numbers where we are today. There is not a huge incentive for us to do that. Right? Like, you know, we see a lot of runway left here, and we think that we should be taking advantage of that. The second part of your question was what our pipeline looked like. And yeah. You know, you bring up an interesting point as we evaluate, and we have spoken about this for a year, about opportunities that we think would be really good fits both culturally and financially for Abacus Global Management, Inc. where you can find true synergies. Right? Like, let us take a quick look at the Manning & Napier opportunity. This is a strategic alliance where we are going to help generate new private wealth clients through our own client base. Secondly, we are going to source new policies from their current client base. So that feeds the origination machine. Right? And then we are looking at our own asset management portfolios. These are terrific alternative asset management funds that are now going to be available to Manning & Napier clients. Those are the types of successes that we want to point to and why these synergies we think would be very appealing. In addition to that, are there other firms that might meet that type of description? Of course, there are. And,you know, we are engaged in those kinds of conversations, but it has got to be accretive to shareholders. Right? Both financially as well as synergies. And, you know, there are firms out there. We are just very, very patient, very diligent. But I can tell you that there is a pipeline, and we are excited about it. How would we use capital to best fill that pipeline or to work through that pipeline? I think that, you know, we would use the best resources possible to us. If it were equity, I think it would be a blend of equity and really smart debt structuring. But there are a lot of options open to us. Let us keep in mind, we have a very profitable balance sheet. And we can utilize that capital in the most strategic way that we think will drive long-term returns. And that is what we were saying earlier. Right? Like, we want to use the capital in the best way possible, whether that is buybacks, whether that is buying policies, or whether that is acquisitions or investments. And I think that, you know, Q4 and 2025 and what we are putting out for 2026 demonstrates that. Andrew Scott Kligerman: That was helpful, Jay. And then on the KPIs, I mean, the turnover ratio at 2.6, terrific. Number of days the policy held 116, terrific again. I mean, really good changes there. Kind of curious on the days held 269, which upticked a little bit. What is kind of the backdrop to that? Why holding those policies a little bit longer? Jay Jackson: Yeah. And if you compare it to the prior quarter, we had held some policies a little bit longer to maximize revenue. And for us, it is simply about managing the best opportunistic return that we can. And so many times when you see that movement a little bit, whether held slightly longer or not, it is a smaller percentage of the book, but that is an aging part of the book, and you want to maximize returns. I think that you can look in the Q this quarter and even the K, and you will see things like maturations. These are matured contracts where we were able to effectively collect on the entire claim. And in those circumstances, those returns are substantially higher. So, you know, some of those contracts are best seasoning whether that is an additional quarter or not, and some are best to be optimized within that quarter. So, you know, it is a very thoughtful strategy of looking at it going, do I pick up an ROE of, let us say, 20 or do I hold this for maybe something larger another quarter? And in Q3, what you saw was those trade spreads went up pretty high. That was one of the KPIs that you had not mentioned yet, but the KPI was 37% in Q3 and then, you know, 26% in Q4. And I think that, you know, you are going to see some of that, and that is part of just being really good stewards of capital and maximizing returns. Operator: The next question comes from Timothy D'Agostino with B. Riley Securities. Please go ahead. Timothy D'Agostino: Congrats on the year. I guess focusing on Abacus Intel quickly. You had mentioned in your prepared remarks about how governments are using the data. And on Slide 19, you kind of lay out 100-plus governments and union systems. But you also talked about, and I can see in the slide, the market opportunities, whether that be TPA, pension funds, insurance, mortgage lenders. I guess what I am trying to understand is, with this data and advocacy, how do you provide value to those different opportunities and why they would want to partner with you. I guess trying to get an overall kind of high-level understanding of why Abacus Intel can provide value to these opportunities. Jay Jackson: Sure. I mean, at a high level, when you look at pension funds, for example, one of the resources that Abacus Global Management, Inc. provides is called mVerify, or mortality verification. We are able to verify when a mortality occurs in the United States within 48 hours with nearly 100% accuracy, around 97%. And that is incredibly valuable data for a pension fund, so they no longer continue to make those pension fund payments. Therefore, you know, what that really helps is them manage their own balance sheet much stronger because they do not have money going out that is really hard to reclaim. And then you can apply that against different types of agencies, right, to have a better understanding from an insurance company point of view, you know, how their mortality curves might adjust based on real-time mortality information. The reason why that is so valuable is that it is really hard to get that information from other sources. Even the Social Security Administration, you know, that can take months, if not years, to get that data. And most of the time, it is not very accurate. It is, you know, half as accurate. So, you know, that is where those sources of demand are. You know, we have been speaking to even larger institutions, and as we look into 2026, we expect the Abacus Intel business to continue to grow. I would add one piece that is really valuable. We use that data. Right? It helps us build better prediction models around our own investments. So, you know, being able to capitalize and understand how longevity and how that life arc of an individual is managed. Right? One of the things we started saying is that lifespan is not a straight line, it is an arc of possibilities. We have a program coming out called LifeArc, which that LifeArc program helps us better understand what someone’s mortality distribution curve looks like. And we are going to apply that LifeArc to financial services. Right? If the number one fear is running out of money in retirement, should not people have a better understanding of how long they are going to be in retirement, and capitalizing on that longevity and health data? And that is the type of data that I think, in a much larger scale, that Abacus Intel is going to play a major part in. Timothy D'Agostino: Okay. Great. Thank you so much for the color. It is super helpful. Then I guess, a quick second question for me. In the third quarter earnings presentation for the Abacus Asset Group, you have laid out $4 billion-plus in fee-paying AUM by year-end 2026. That number is obviously, or your guide has increased to $5 billion for year-end 2026. Is that primarily due to the capital inflows you saw in Q4 2025, that $275 million, or was there something else? Just trying to understand what gives you confidence in increasing that number between the earnings calls. Thank you. Jay Jackson: Sure. Yeah. Thank you for asking. And yes, it is driven by what we deem to be visible demand. And so when we see the type of demand that we saw in Q4, then we are looking at the demand in 2026 and match that with, you know, a keen understanding that when you have volatile markets, demand increases for this kind of asset, gave us a lot of comfort around increasing that number. And then you tie into not just new funds, products, and the rollout of additional potential securitizations. We feel comfortable around that number. Timothy D'Agostino: Okay. Great. Thank you so much, and congrats on the year again. Jay Jackson: Thank you. Operator: The next question comes from Michael John Grondahl with Northland Securities. Please go ahead. Michael John Grondahl: Hey, guys. Congratulations. And just wanted to circle back to the capital deployed, $230 million. I think you did that securitization late October. Was any of the $230 million for the securitization you have already done, and is any of that can be broken out for a future securitization? Any way to think about that? Jay Jackson: The second part of that question—sorry, Mike. You cut out a little bit on my line. Michael John Grondahl: Any of the $230 million that can be used in a future securitization. Are you able to bifurcate it in that way? Jay Jackson: Yeah. No. The way to look at it is that, yes, in Q4, when we are looking at total capital deployed, that would include the $50 million that we had in the securitization. But in addition to that, it was still a record quarter for us. Yeah. Right? And I think that is part of the power of the securitization. Right? Like, you know, you just kind of have this really consistent model that you can deploy capital with at a very effective and cost-effective structure. As far as bifurcating that capital deployed into additional securitizations, I would just kind of point to our balance sheet at this point, which is, you know, north of $450 million of policies on the balance sheet. And we have excess capacity to do additional securitization. So I think that we are really well positioned as we look forward to additional securitizations. We already have the inventory built up on our balance sheet for that. Michael John Grondahl: Got it. Great. And then just one more. With Manning & Napier, does that sort of replace your ABX Wealth Adviser strategy? There was some thought that you would be hiring some of your own advisers and grow it out that way. How do we think about it now? Jay Jackson: Yeah. I think it certainly complements everything that we thought we were going to do. And I think just one big takeaway here is, you know, we definitely walked before we ran here. Right? You know, we made, I feel like, a very thoughtful, intelligent, conservative investment into a well-established firm to really take a moment and show that, and demonstrate that, the model that we are putting together for our wealth management division is executable. And I think that is just so valuable in the way that we structured this initially. So, you know, this investment makes a ton of sense for us. How we might move forward with our own advisers within that platform, I think it makes sense for us at this point to focus on the investment that we made and prove that that is successful and show some wins and successes, and then we will continue to build the platform from there. But, you know, make no mistake. This is going to be an important platform for us on a go-forward basis because if you think about it, it feeds so many other things. Right? It feeds origination. It feeds asset management. It feeds the Abacus Intel from the longevity data. So, you know, I think it is a really important stage for our growth, and this is just the first step. Michael John Grondahl: Thanks a lot, guys. Good luck in 2026. Operator: This concludes the question and answer session. I would like to turn the conference back over to Jay for any closing remarks. Please go ahead. Jay Jackson: Well, thank you to all of our shareholders. 2025 was a year in which I believe that we solidified our shareholder base, solidified our story and our communication, and solidified our growth. And we are in a position where, looking forward, as great as the last two and three years have been, we are excited about the next three years. And we hope that when you start to see these numbers and see the direction of where this company is headed, and where we can achieve with the foundation of our business, we are excited about what the next three years can bring to us and our shareholders as well. So thank you all. We look forward to answering any additional questions. Please feel free to reach out to our IR department if you have any additional questions. And we look forward to another great quarter. The conference has now concluded. Operator: Thank you for attending today's presentation. You may now disconnect.
Operator: Good day and thank you for standing by. Welcome to the G-III Apparel Group, Ltd. fourth quarter and full year fiscal 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star one one on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Neal Nackman. Please go ahead, sir. Neal Nackman: Good morning and thank you for joining us. Before we begin, I would like to remind participants that certain statements made on today's call and in the Q&A session may constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are not guaranteed, and actual results may differ materially from those expressed or implied in forward-looking statements. Important factors that could cause actual results of operations or the financial condition of the company to differ are discussed in the documents filed by the company with the SEC. The company undertakes no duty to update any forward-looking statements. In addition, during the call, we will refer to non-GAAP net income, non-GAAP net income per diluted share, and adjusted EBITDA, which are all non-GAAP financial measures. We have provided reconciliations of these non-GAAP financial measures to GAAP measures in our press release, which is also available on our website. I will now turn the call over to our Chairman and Chief Executive Officer, Morris Goldfarb. Morris Goldfarb: Thank you, Neil, and thank you everyone for joining us. Fiscal 2026 was a pivotal year for G-III Apparel Group, Ltd. I'm proud of the results our teams delivered and the meaningful progress we made advancing our long-term strategy despite a tough environment. As we transition out of our Calvin Klein and Tommy Hilfiger businesses, we accelerated the strategic transformation of our portfolio, unlocked new growth opportunities and strengthened the foundation of G-III Apparel Group, Ltd. The power and global recognition of our brands, combined with our disciplined operating model and strong balance sheet, enabled us to deliver compelling product and differentiated brand experiences despite a highly dynamic retail environment, including evolving tariff conditions and cost pressures. As we reshape the portfolio, we're sharpening our focus on a brand builder and long-term steward of both our owned and licensed brands. At the same time, we've made targeted investments in infrastructure, technology and talent to support the next phase of growth. In the fourth quarter, our underlying results were strong. Excluding the impact of the Saks bankruptcy, full year EPS would have exceeded the high end of our guidance. For the full year, our key owned brands, DKNY, Donna Karan, Karl Lagerfeld and Vilebrequin, collectively delivered mid-single-digit growth, helping offset the impact of the exited PVH licenses. These brands are growing with improving quality of revenue, higher full price sell-through and increasing global relevance, a clear validation of our strategic direction. With that, I'll now review our fourth quarter and full year fiscal 2026 results. Net sales were $771 million in the fourth quarter and $2.96 billion for the full year. Relative to guidance, sales were negatively impacted by approximately $20 million as we stopped shipments to Saks in December ahead of the bankruptcy filing. Strong margin for the fourth quarter and the full year was ahead of expectations, driven by higher full price selling and more balanced distribution with less penetration in the off-price channel. We're successfully establishing higher price points with our newer brands and seeing healthy consumer response, further supporting our margin expansion opportunity. Non-GAAP earnings per diluted share were $0.30 in the fourth quarter and $2.61 for the full year. In the fourth quarter, we took an approximate $17.5 million bad debt expense associated with the Saks bankruptcy, which negatively impacted earnings by $0.30. Turning to our balance sheet, our working capital remains in great shape. We exited the year with clean inventories down 4% year-over-year on lower units. We ended the year with more than $400 million in cash and over $900 million in total liquidity. This is after returning more than $50 million to shareholders through share repurchases and our new cash dividend. We remain in a strong financial position with ample flexibility to continue investing in our brands and infrastructure to support long-term growth. Turning to our strategic priorities. Over the past several years, we've been very clear about our strategy, simplifying our portfolio, leaning into our most powerful owned brands, and building a company with greater control and long-term growth potential. Fiscal 2026 was another important step in that journey. Capturing the long-term potential of our own brands is a top strategic priority. These brands are powerful, sustainable drivers of profitability, delivering higher margins and incremental licensing income. During the year, our own brands demonstrated strong consumer resonance, supported by compelling product, disciplined distribution, and effective marketing. We saw solid full price sell-throughs, healthy margins, and increased brand engagement. Our key own brands delivered mid-single-digit growth, accounting for close to 60% of revenue this year, up from roughly 50% last year. We're driving this growth through four key areas. First, product and consumer engagement. We continue to invest in brand-building initiatives through an always-on marketing strategy that leverages top-tier talent, elevated content, and targeted global activations to expand reach and drive conversion. Second, driving direct-to-consumer. We're focused on strengthening our digital business to boost traffic and conversion across owned and partner sites. Meanwhile, we're executing well on our retail segment turnaround initiatives in North America, optimizing the footprint to improve productivity and profitability. Third, international expansion. With just over 20% of fiscal 2026 net sales generated outside the United States, the opportunity remains significant. We're pursuing global expansion with discipline, prioritizing the right markets, partners, and infrastructure to ensure long-term sustainable growth. Fourth, category expansion through licensing. Our partners have helped us expand the lifestyle offerings into complementary categories that broaden our brand reach and deepen consumer connections. In return, G-III Apparel Group, Ltd. earns a highly accretive licensing income stream, the vast majority of which falls directly to our bottom line. We see significant opportunity to grow our brands through new licensing partners over time. I will now walk you through brand highlights from the year. Donna Karan continues to be one of our most powerful and new-to-market growth engines, delivering strong profitability supported by healthy AURs and sell-throughs. In fiscal 2026, the brand delivered approximately 40% growth, underscoring the strength of the relaunch and the momentum we're seeing across channels. Touching on a few highlights. In North America, we're expanding distribution of key wholesale accounts, supported by consistent sell-throughs that continue to build retailer confidence. We ended the year with approximately 1,900 points of sale, with an additional 400 expected for fall. Sales on donnakaran.com grew close to 170% this year, driven by more than 120% increase in traffic. Repeat customers represented close to 20% of sales, and we acquired nearly 100,000 new customers during the year. The brand continued to perform well on retailer sites, and we expect digital momentum to continue as we expand the lifestyle offerings online. Category diversification through licensing and product expansion is broadening the brand's reach. Donna Karan Weekend launched in November to strong reception, while licensed categories continue to perform well. The fragrance business grew approximately 20% this year, led by the continued strength of the Cashmere Mist franchise, which remained one of the top products in prestige fragrance. Our new jewelry line is off to a good start and will roll out in select department stores this spring. Our marketing investments are reinforcing the brand's authority and cultural relevance across key markets globally. This year, our campaigns have featured iconic empowered women like Kate Moss and Claudia Schiffer, who embody the brand and bring authenticity to the collection. At the same time, we've seen strong organic momentum with A-list celebrities choosing the brand, underscoring that it continues to capture how women want to dress today with confidence and effortless ease. Looking ahead, as we build on our success in North America, we remain focused on thoughtfully scaling across categories, doors, and geographies while protecting its premium positioning and strong brand equity. With increasing brand awareness and multiple growth levers still ahead, we expect strong growth in fiscal 2027 and remain highly confident in Donna Karan's long-term trajectory and a billion-dollar annual G-III Apparel Group, Ltd. net sales potential. Karl Lagerfeld delivered another exceptional year, growing high single digits. Brand heat was reinforced through our impactful marketing campaigns with Paris Hilton, strengthening consumer engagement at key touchpoints on a global scale. Building on that momentum, we're continuing our partnership with Paris for spring and summer this year. In North America, sales grew high teens for the year as we broadened the lifestyle assortment and expanded distribution across key accounts. Our footprint in the region grew to approximately 3,000 points of sale, with more than 300 new points of sale expected by fall. In our North American direct-to-consumer business, we continue to optimize the retail footprint and enhance digital. This year, the brand saw positive comp sales increases across stores and e-com, fueled by over 20% growth on karl.com. Internationally, the brand grew mid-single digits with expanding margins despite softer consumer trends in Europe. The Karl Lagerfeld Jeans line remained a primary growth driver, delivering 30% growth for the year, helping to engage a younger consumer. We're prioritizing productivity and improvements in our international operations to drive stronger profitability across channels. With more than 170 Karl Lagerfeld branded freestanding stores worldwide, we're thoughtfully expanding the global retail footprint. This year, 15 new stores were opened in key strategic markets, including Latin America and Mexico, through our partners, and we continue to target under-penetrated regions such as Asia-Pacific for future growth. Our licensing and hospitality business continues to reinforce Karl's position as a global lifestyle brand with aspirational relevance. This year, we signed licensing agreements for luxury brand residences in Portugal and the Middle East. In fiscal 2026, the brand generated approximately $630 million in reported net sales and over $1.7 billion in global retail sales. Looking ahead, we're focused on accelerating global expansion, scaling our digital business, and engaging a broader consumer through expanded lifestyle offerings and brand activations. These initiatives reinforce our confidence in the powerful growth runway for Karl Lagerfeld in capturing over $1 billion in G-III Apparel Group, Ltd.'s net sales opportunity long-term. Turning to DKNY, our strategy remains focused on investing in how and where the brand shows up with a clear emphasis on driving full-price sales. Over the last 12-24 months, we've taken a disciplined approach to elevating brand presentation, refining our distribution, and deepening engagement with a younger consumer. Our North American direct-to-consumer business improved with stores and dot-com delivering double-digit comp growth and higher productivity. Notably, sales on dkny.com increased approximately 40% for the year, reflecting strong consumer engagement with the collections. In North America we increased marketing spend and targeted activations resonated with our target audience, driving strong response to fashion and newness. Internationally, brand-building activations across key markets boosted visibility and fueled ready-to-wear growth led by jeans and handbags. DKNY delivered several standout brand moments. We launched two global campaigns, Spring 2025 with Lila Moss and Fall 2025 with Hailey Bieber, significantly elevating brand visibility and cultural relevance. Social engagement rose nearly 300% year-over-year, with fall campaign generating the strongest social performance in the brand's history. Hailey returns for spring 2026, supported by a global media plan. Our marketing-led storytelling translated into results. The Paula Commuter tote became our number one handbag collection for the year, supported by immersive pop-ups and experiential moments that brought the brand's New York City DNA to key markets. Broader high-impact brand moments, including a landmark Burj Khalifa projection in Dubai and 190-screen citywide digital takeover, further amplified visibility and brand heat. In fiscal 2026, DKNY delivered approximately $650 million in reported net sales and over $2.4 billion in global retail sales. As we look to next year, our focus centers on product newness, expanded lifestyle assortments, and scaling distribution across North America. Internationally, we're unlocking growth in Europe and China, where we recently onboarded a new licensing partner and will open a new Shanghai store this spring. We're also seeing opportunity in markets across Asia-Pacific and India through new partnerships. With disciplined execution and a clear strategic focus, we're confident in DKNY's billion-dollar G-III Apparel Group, Ltd. net sales opportunity. Vilebrequin, our status swimwear brand, delivered low single-digit sales growth despite a challenging European backdrop. Demand remained resilient among our aspirational cos-consumer, supported by strong global brand awareness and engagement. Growth was driven by higher AURs, reflecting the brand's pricing power, premium positioning, and continued demand for its luxury swimwear and lifestyle offering. Performance was led by strength in Europe, particularly in France and the Caribbean, along with continued momentum in digital. In hospitality, we're building on strong performance in Cannes and partner locations in Doha and Crete, with the addition of a fourth partner, a beach operation in Oman. A new rooftop restaurant in Miami is also set to open in the coming weeks. Looking ahead, our strategy remained focused on premium product with higher AURs, creative collaborations to drive global awareness, and hospitality-led distribution at a boutique placement in incremental brand builders. Vilebrequin continues to be a key player in our own portfolio as we unlock its long-term global potential. In addition to owned brands, licensed brands remain the core pillar of our strategy with an enhanced focus on contemporary fashion and sports lifestyle categories. These segments allow us to leverage our core competencies and capture incremental market share and sales. In fiscal 2026, our licensed brands generated mid-single-digit growth, excluding our PVH and other exited licensing businesses. Team Sports, led by Starter, continues to expand our reach within the licensed sports marketplace. This division serves the highly engaged sports fan and unlocks additional distribution across stadiums, sporting goods, and specialty retail, and strategic digital channels. With the addition of Converse, which we launched in the second half of the year and is already contributing to top-line sales, this portfolio represents more than $130 million in net sales in fiscal 2026, and we see a path to growth to $500 million over time. In contemporary fashion, we're building a portfolio that complements our own brands and strengthens our presence in modern lifestyle categories. BCBG, launched for fall 2025, is performing well alongside an increase in door counts this year. In January, we signed a new licensing agreement for French Connection to design and distribute women's and men's apparel and select accessories in North America. This addition enhances our contemporary offering and is expected to contribute revenue beginning this year. In terms of our Calvin Klein and Tommy Hilfiger licenses, we've continued to manage these businesses diligently as a license rolls off. In fiscal 2026, they represented approximately $830 million in revenue, and we expect them to generate approximately $360 million in fiscal 2027 before rolling off in fiscal 2028. Turning to our next priority of enhancing omni-channel, we're on track to return our North American retail segment to profitability in fiscal 2027. Through management changes, reduced store footprint, and better merchandising, we strengthened our execution and improved the brand presence. As a result, we further cut operating losses by more than 50% in fiscal 2026. Digital remained a key growth and profit driver. Sales on our own website grew over 30% this year, led by outsized growth on our donnakaran.com. This momentum reinforces the importance of the channel and our ability to meet consumers wherever they shop. Across our marketplace platforms, including Amazon and Zalando, we delivered strong bottom-line profitability and top-line performance for our go-forward businesses. This was fueled by advertising efficiencies and promotional discipline, driving stronger ROIs on reduced expenses. We'll continue to expand our brand's presence across platforms through new category launches and assortment extensions. At the same time, we're investing in data and AI capabilities, modernizing our enterprise systems, and enhancing digital content and consumer insights to drive higher engagements and conversions. Together, these efforts position us to scale profitably while delivering richer brand experiences across channels. In our cost structure, we remain actively focused on driving cost savings and efficiencies across the business, including optimizing our supply channel infrastructure. As we look forward to fiscal 2027 and the expected volume loss tied to the PVH license give backs, we're implementing further cost reduction to drive profit improvements over time. As we work to enhance productivity and profitability, this will free up resources to invest further in our highest priority growth initiatives. Thus far, we've identified $25 million of cost savings across supply chain, organizational structure, as well as discretionary expenses, and expect to achieve this on a run rate basis in fiscal 2028. We'll continue to evaluate our cost structure and seek additional areas where we can unlock savings to further align our go-forward model. Turning to our outlook. As we continue to transform the business, our outlook reflects an improving margin profile on lower revenues in the near term as the remaining PVH licenses roll off. We're focused on driving gross margin expansion, streamlining our cost structure, and operating with greater discipline to enhance profitability and efficiency. At the same time, we remain committed to growing our go-forward brands, generating healthy cash flow and maintaining a very strong balance sheet. As we enter fiscal 2027, we do so from a position of strength with brand momentum, expanding margins, and the flexibility to invest in both ourselves and in strategic opportunities. For the year, we expect net sales of approximately $2.71 billion, which reflects an approximate $470 million reduction in our expiring Calvin Klein and Tommy Hilfiger businesses. Meanwhile, our go-forward business is expected to grow high single digits driven by continued momentum of our own brands. non-GAAP diluted earnings per share for the year is expected to be between $2 and $2.10. In closing, I wanna thank our global teams for their continued hard work and dedication. Their execution, creativity and commitment are what drive our success. I'll now pass the call to Neil, who'll walk you through the financial results of the fourth quarter and full year as well as our fiscal 2027 outlook. Neal Nackman: Thank you, Morris. Net sales for the fourth quarter ended January 31, 2026 were $771 million, down 8% compared to $840 million in the same period last year. Relative to our guidance, sales results were negatively impacted by approximately $20 million as we stopped shipments to Saks in December ahead of the bankruptcy filing. Net sales of our wholesale segment were $737 million compared to $799 million in the previous year. We saw healthy increases in our owned brands and our go-forward license portfolio, offset by lower sales from our Calvin Klein and Tommy Hilfiger licensed businesses. Net sales of our retail segment were $63 million for the fourth quarter compared to net sales of $56 million in the previous year's fourth quarter. We achieved strong double-digit comp sales in Karl Lagerfeld Paris, DKNY and Donna Karan. Fourth quarter gross margins were 37% compared to 39.5% in the previous year, reflecting the negative impact of tariffs, which was the largest quarter impacted for the year, partially offset by a favorable mix shift toward more full price sales. The wholesale segment's gross margin percentage was 34.8% compared to 38.1% in the previous year's quarter. The gross margin percentage in our retail segment was 46.3% compared to 48.3% in the prior year's period. Non-GAAP SG&A expenses were $260 million in the fourth quarter compared to $244 million in the previous year's fourth quarter. The fourth quarter reflects a $17.5 million bad debt expense associated with the Saks bankruptcy, which drove our SG&A expenses to be higher than planned. Non-GAAP net income for the fourth quarter was $13 million, or $0.30 per diluted share, compared to $58 million or $1.20 per diluted share in the previous year's fourth quarter. Fourth quarter EPS reflects an approximate $0.30 impact from the Saks bankruptcy filing. Excluding this, our fourth quarter earnings would have been ahead of our internal expectations. Let us review the full fiscal year ended January 31, 2026. Net sales for the full year were $2.96 billion compared to $3.18 billion in the previous year. Net sales of our wholesale segment were $2.87 billion compared to $3.08 billion in the previous year. The decrease was driven primarily by the $254 million decline in our Calvin Klein and Tommy Hilfiger businesses, due largely to the exited licenses. These decreases were partially offset by growth of our go-forward owned and licensed brands, particularly our key owned brands, which grew mid-single digits for the year. Net sales of our retail segment were $186 million, up approximately 12% from last year's $166 million. The increase was driven by our owned digital business, particularly donnakaran.com. We also saw strong comparable store sales increases across our Karl Lagerfeld and DKNY retail stores. Gross margins for the full year were 39.4% compared to 40.8% in the previous year. The year-over-year margin decline reflects approximately $65 million of unmitigated impact from tariffs. While gross margins were down to last year, they actualized ahead of expectations, driven by a favorable mix shift toward more full price sales. Gross margins in the wholesale segment were 37.4% compared to 39.4% in the previous year. Gross margin in the retail segment were 50.1% compared to 50.4% in the prior year. Non-GAAP SG&A expenses for the year were $975 million or 33% of sales, compared to $968 million or 30.4% of sales in the previous year. The increase in SG&A as a percentage of sales was driven primarily by the unplanned increase in bad debt expense as a result of the Saks bankruptcy filing. In the second half of the year, we began to see the benefit of our efforts to optimize warehouse capacity and expect this improvement in efficiency to continue into fiscal 2027. We continue our tight review and control over expenses, and we're in line with our plan, excluding the Saks bad debt expense. We also continue to invest in infrastructure, technology and talent, as well as marketing to support long-term growth of our brands. Non-GAAP net income for the year was $116 million, or $2.61 per diluted share, compared to $204 million or $4.42 per diluted share in the previous year. Full year non-GAAP earnings per diluted share would have exceeded the high end of our guidance range, excluding the 30-cent impact from the Saks bad debt expense. Turning to the balance sheet. We strengthened our balance sheet and liquidity position, ending the year with $407 million in cash and more than $900 million in total liquidity, while returning over $50 million to shareholders through share repurchases and a new cash dividend. As a reminder, we initiated our first-ever dividend program in December of last year. Inventories remain in good shape, down 4% to $460 million from the previous year's $478 million, reflecting our disciplined approach to inventory management. Unit decreases are down high single digits compared to the prior year. Cost variances to the prior year reflect higher unit costs this year and as a result of the new tariffs. Our strong financial position and ability to generate cash provide us with ample optionality, and we remain committed to a balanced capital allocation framework. First and foremost, we will continue to invest in ourselves to organically grow our business for the long term. Second, we will pursue strategic opportunities, including acquisitions as well as new brand licenses. Third, we will continue to return capital to shareholders through opportunistic share repurchases and quarterly dividends. Turning to our outlook. For the full fiscal year 2027, we expect net sales of approximately $2.71 billion, down 8% to the prior year. This reflects $470 million of lost sales from Calvin Klein and Tommy Hilfiger products, partially offset by the growth of our go-forward portfolio, which we expect to grow high single digits. Non-GAAP net income for fiscal 2027 is expected to be between $88 million and $92 million, or between $2 and $2.10 per diluted share. This compares to non-GAAP net income of $116 million or $2.61 per diluted share for fiscal 2026. Full year adjusted EBITDA is expected to be between $158 million and $162 million, compared to $192 million in fiscal 2026. For the first quarter of fiscal 2027, we expect net sales of approximately $530 million compared to $584 million in the first quarter of fiscal 2026. We expect a net loss in the first quarter of between $13 million and $18 million or $0.30-$0.40 per share. This compares to non-GAAP net income of $8.4 million or $0.19 per diluted share for the first quarter of fiscal 2026. We are expecting increases in our gross margin percentage of approximately 150 basis points. Our SG&A will be impacted by a higher marketing spend due to timing and our spring marketing initiatives. Now let me discuss a few modeling points. First, on tariffs. Our guidance reflects tariff rates effective prior to the recent Supreme Court ruling and assumes the most recent 2025 IEPA trade policies. We have not anticipated any changes to tariff policy or refunds in our outlook. In terms of sales cadence, we expect the first half sales decline to be larger than the second half, which reflects several new brand licenses that we expect will scale toward the end of this year. On gross margins, we are expecting as much as 300 basis points of gross margin improvement for the year. Resulting in significantly higher gross margin percentage than where we have historically been. Margins will benefit from our tariff mitigation efforts as we lap the impact of tariffs in the second half of the year. Furthermore, margins will benefit from the shift in penetration toward our higher-margin own brands as the more significant portion of the PVH licenses roll off this year. In the first quarter, we expect less margin growth as compared to the balance of the year. As a reminder, our first quarter of last year was not impacted by last year's tariff increases. Regarding SG&A, we expect expense deleverage for the full year as our newer businesses scale and as we continue to invest in people, technology and marketing spend to support growth, while the top line is impacted by significant loss Calvin Klein and Tommy Hilfiger sales. We expect the largest amount of deleverage in the first quarter as a result of the timing of spring marketing initiatives and anticipate sequential improvement as we move through the year. Meanwhile, we have identified several cost savings initiatives that we expect will result in $25 million in run rate savings in fiscal 2028. We expect net interest income of approximately $2 million for the full year and estimate our tax rate to be 30%. We expect capital expenditures to be approximately $40 million. Lastly, we have not anticipated any potential share repurchases for the year in our guidance. Our business remains strongly cash generative, and despite our expectation for lower earnings versus fiscal 2026, we anticipate we will generate very healthy free cash flows for the year to further enhance our current strong financial position. That concludes my comments. I will now turn the call back to Morris for closing remarks. Morris Goldfarb: Thank you, Neal, and thank you all for joining us today. I'm incredibly proud of our team and the progress we're making as we build some of the best fashion brands in the world. I also wanna thank our partners and shareholders for their continued support as we continue to transform G-III Apparel Group, Ltd. and build value for the long term. Operator, we're now ready to take some questions. Operator: Thank you. As a reminder to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. One moment for our first question. Our first question will come from the line of Robert Drbul with BTIG, LLC. Your line is open. Please go ahead. Robert Drbul: Hi. Good morning. Morris Goldfarb: Morning, Bob. Robert Drbul: A couple questions, Morris. On the first one, in terms of, I guess, your visibility on your own brands for this year, in terms of the, you know, the way that retailers are, you know, ordering your wholesale partners, you know, sort of into the fall, I guess. They give great visibility into the spring now, but into the fall. Can you just talk us through how you see inventory levels, how you see the order books, you know, and really from like the own brand perspective? I think that would follow in terms of the marketing investments that you're making, you know, especially, you know, what's happening in that first quarter. Thanks. Morris Goldfarb: Thanks, Bob. Our own brands, as you heard in our presentation and, you know, possibly as you read, we did well last year. Last year, our businesses and our own brands grew high single digits, and the pressure on our company is really the exiting brands and not only the scale of the exiting brands, but also the margin retrieval as you exit brands. There's margin pressure that we didn't anticipate to be as strong as it was. The demand for an exiting brand with uncertainty as to what the future is with those brands put pressure on our ability to move product. We're really comfortable with our own brands. We're garnering additional space as we stated. One brand, you know, we're anticipating at least 400 more points of sale, and the other brand is 300. We're, you know, excited. Our order book anticipates it. Our inventory is very much in line. We're tempering the level of inventory as you have a conscious effort to change your distribution to, you know, more full price business. You're willing to take less risk on inventory levels in protecting some of your premier brands. You'll find in the future that our inventory levels will be more controlled with the conscious effort in bringing down our level of off-price selling. That said, you know, growth is coming from outside of the United States for the first time. We're not, you know, we're not fully penetrated in areas of the world that have high demand for the product. There's not a nickel's worth of product other than fragrance for Donna Karan. That brand will show its face throughout the world in the coming months. The marketing spend, as you touched, will be fairly aggressive to support, you know, our initiative of growing our own brands. We've done well with marketing. We've gotten awards from media publications for our efforts in Donna Karan and DKNY and Karl Lagerfeld as well, quite honestly. Our team challenged really for the first time, you know, the last 18 or 24 months is really the first time our marketing team has been aggressive on campaigns because of our need to grow our own brands. It's worked. It's worked incredibly well. They've achieved notoriety. They've achieved success for our company. Thank you to our marketing team. Robert Drbul: Thanks, Morris. I guess could I ask a follow-up, just a different question, but, can you guys give us an update on the Converse launch? You know, how that's going, you know, what you've learned and sort of the prospects for that this year? Thanks. Morris Goldfarb: We took on Converse. We had an old history with Nike. A little-known fact is that G-III had a studio that developed the Michael Jordan brand as it was coming to market. We had a partnership with Nike in the early 1990s, maybe it was 1995, and I don't recall the date. We continued to do a little bit of private label with them and through a partnership with the Haddads who do kids Converse. They have a great relationship with Nike. We're building the brand globally. Converse gave us the right to expand, you know, beyond North America, and you know, we read the same thing that you do. A little bit of uncertainty and softness maybe in the brand that really doesn't apply to us for the moment. Their strategy for the brand has not really come out yet. When I say theirs, I would go to Nike and ask what the strategy for the brand is because we're again sort of the servant to the licensor. Where Nike wants to take the brand is where we need to follow. You know, there are new accounts that we're opening every day. There is an appetite for the brand. It's an amazing brand, and hopefully you know Nike supports the growth of the brand. We're doing our part, you know. As we've shown, when we have control, you know, we're incredible. Where we have less control, we don't rule. We're guided by the licensor. It's hard to tell you where the brand goes. I could tell you where we could take it. If Nike supports it, you know, I think we have an incredible business. Robert Drbul: Great. Thank you very much, Morris. Operator: Thank you. Morris Goldfarb: Thank you. Thanks for your question, Bob. Operator: Thank you. One moment for our next question. Our next question comes from the line of Ashley Owens with KBCM. Your line is open. Please go ahead. Ashley Owens: Hi, guys. Thanks for taking my question. I just wanted to hit on acquisitions and licensing. As we enter 2026, how are you prioritizing acquisitions versus new licensing opportunities, particularly given the strength in balance sheet and ongoing shift towards these own brands? Morris Goldfarb: Victoria Apostolico, I'm not sure we prioritize. You know, we are looking for an amazing acquisition, and we are at the same time looking for amazing licenses. You know, our balance sheet supports our ability of funding a sizable acquisition, and our talent pool support and our balance sheet, again, supports our ability of managing through a great license. I'm not sure that there's an issue and we can do both, which is exactly what we're doing. We've licensed some amazing brands because that was the opportunity of the moment. The appropriate acquisition had not come up. You know, we've tucked into our competencies brands and businesses that we can manage easily. Ashley Owens: Okay, great. Thanks. You've spoken about category expansion and things such as fragrance, eyewear, home, hospitality. Which of these would you say is furthest along in becoming a meaningful revenue contributor? Morris Goldfarb: If we look at Karl Lagerfeld, you look at hospitality as a key driver in the last, I'd say the last 18 months, and Vilebrequin alongside of that. When you look at DKNY, it's more consumer driven, and we're signing global licenses where we've signed deals in Latin America. We have a new deal in China. We're expanding into India, and that's for a broad range of product. Some will be distributor-based, and some will be classification-based. The highlights for two of the brands are hospitality and DKNY. We're not seeing interest in DKNY as a hospitality or food and beverage provider, but very strong on the consumer side. Ashley Owens: Okay, great. Thank you. Morris Goldfarb: Thank you. Operator: Thank you. One moment for our next question. Our next question will come from the line of Mauricio Serna with UBS. Your line is open. Please go ahead. Mauricio Serna: Hello. Hi, this is Mauricio Serna from UBS. I think the registration got that confused. Just a couple of questions first. On Donna Karan, you know, great to see the strong growth in, you know, last fiscal year, up 40%. Maybe could you give us a sense of how big the business is right now? On the growth outlook, you know, the go-forward business being up high single digits, could you maybe break that down, like how much of that is coming from, you know, like, the key owned brands versus, you know, growth from the licenses that you've been launching over the last few years? Thank you. Morris Goldfarb: You know, your first question, the size of Donna Karan. We don't disclose, you know, the size of the business. I could tell you in 18 months of doing business, let's go back to when we started Calvin Klein, which grew to be $1.2 billion in sales. We're bigger and further along in 18 months of Donna Karan than we were with Calvin Klein. I would say we're very happy with the positioning. We're cautious on the distribution, and it's a very scalable business. It's not intended to be designer. It's not intended to be boutique. It's intended to, you know, fill the racks of department stores that we have our greatest competency in. We're gonna scale it. An added feature that we did not have with Calvin Klein is we have global rights to our own brands. There's an opportunity throughout the world to expand this brand. We're in the early stage. You're gonna see, you know, great percentage increases. We're at a point where the percentages do make a difference in the future. We're not talking about a $10 million initiative that grew 50%. Neal Nackman: Yeah. With respect to the second part of your question, we are seeing and anticipating high single digit growth in the key owned brands. When you look at the in, the total go-forward portfolio, we're also seeing good strong growth. That go-forward portfolio is gonna include the key owned brands. It's gonna include a few other owned brands that we have and then of course the licensed portfolio. We see in total high single digit growth from all of those pieces. Mauricio Serna: Great. Thanks, Neal. Thanks, Morris. Quick follow-up just on the commentary on gross margin. I think you mentioned 300 basis point expansion for the year. Just I think doing the math on that, I think it implies based on what you said on EBITDA or EBIT, like it implies SG&A dollars are gonna be up around 3%. Just wanna make sure that the math around that is correct. You know, if that's the case, if it's gonna be up around maybe 2%-3%, what are the drivers behind that SG&A dollar growth? Thank you. Neal Nackman: Yeah, Mauricio, I think you've got the math fairly close. The expansion in SG&A going forward is really primarily maintaining the talent pool that we have. We are gonna make some additional investments in our infrastructure. We've been on a path of increasing some of our spend on technology with all the new technology that's out there and just continuing to upgrade the systems that we use. It's really those three components that'll continue for us to have investment spend. Of course, you know, when you have such a large fall off the top line, it's hard to leverage that. It's certainly not prudent to leverage that in the near term. We will be looking to, as we mentioned on the call, cost savings initiatives. We've not built that into our plan for fiscal 2027. We expect that will roll in in fiscal 2028. Mauricio Serna: Understood. Thank you so much. Operator: Thank you. I would now like to hand the conference back over to Morris Goldfarb for any closing remarks. Morris Goldfarb: Thank you all for spending time with us and hearing our story, and we will talk to you next quarter. Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day.
Operator: Good morning, and welcome to Ollie's Bargain Outlet Holdings, Inc. conference call to discuss financial results for the fourth quarter and fiscal year 2025. Please be advised that this call is being recorded and the reproduction of this call in whole or in part, is not permitted without the express written authorization of all these. I would now like to introduce our host for today's call, John Rouleau, Managing Director of Corporate Communications and Business Development for Olis. John, please go ahead. Unknown Executive: Good morning. Thank you, everybody. We appreciate your time and participation. Joining me on today's call from Ollie's are Eric van der Valk, President and Chief Executive Officer; and Robert Helm, Executive Vice President and Chief Financial Officer. Following their prepared remarks, we will open the call for questions. [Operator Instructions] Finally, let me remind you that certain comments made on today's call may constitute forward-looking statements, and these are made pursuant to and within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 as amended. Such forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements. Those risks and uncertainties are described in the company's earnings release and filings with the SEC, including the annual report on Form 10-K and the quarterly reports on Form 10-Q. Forward-looking statements made today are as of the date of this call, and the company does not undertake any obligation to update these statements. On today's call, the company will also be referring to certain non-GAAP financial measures Reconciliation of the most closely comparable GAAP financial measures to the non-GAAP financial measures are included in the company's earnings press release. With all of that said, it's now my pleasure to turn the call over to Eric. Eric van der Valk: Good morning, and thank you for joining us today. We had a strong fourth quarter to cap off an exceptional year. Both comparable store sales and earnings were ahead of our expectations and we delivered on all of our strategic objectives in 2025. We entered last year with a number of ambitious goals. Most notable of these was to accelerate our growth and capitalize on opportunities in the market including real estate, merchandise, customers and talent. All of this required considerable planning and execution, and our team delivered. We opened a record 86 stores last year which was significantly higher than our previous record of 50 stores. All stores were opened in the first 3 quarters, another first for us. We moved to a soft opening strategy which simplified the process and improved our execution. Our next goal was to enhance and drive growth in the Ollie's Army loyalty program. We added in Ollie's Army night in June, we made our Ollie's Days event exclusive to members only. We gave members advanced notice on special events, and we rolled out the Ollie's credit card. Our stores did an amazing job communicating the benefits and enrolling customers in the loyalty program. Great job team, your efforts paid off. The result was stronger customer acquisition growth the entire year. New memberships in our Ollie's Army loyalty program increased 23%, and our total customer file increased by more than 12%. On top of the accelerated membership growth, we are welcoming a wider breadth of customers, America loves a bargain. And as we grow from East to West, we are expanding our customer demographics. Our unprecedented deals simply cannot be beat, and we are clearly benefiting from consumers seeking value and trading down. It's not just trade down, however. We are also reaching a younger customer through digital marketing tactics. Finally, we are reinvesting in our stores and improving the customer shopping experience. All of this is driving an expanded customer base. Our next objective was to go after merchandise-related opportunities. Our mission is to sell good stuff cheap. We do this through a flexible off-price buying model that leverages our growing buying power across suppliers and manufacturers around the world. Our growing size and scale and continued consolidation in the retail industry has resulted in better access to merchandise, and our deal flow is off the charts. This gives us more control and flexibility in how we build our merchandise assortment. A good example of this were changes we made to the seasonal category. Seasonal Decor is an area that continues to grow in the marketplace, and there is a white space opportunity here. At the same time, Toys is an area that continues to evolve away from traditional to more interactive products. With this in mind, we increased our investments in seasonal decor and changed our approach to toys. These changes resonated with our customers and were big wins in the fourth quarter. Our last initiative was to continue reinvesting in our business to support future growth. We have strengthened our bench in many critical areas, including playing in allocation, marketing and new store development. We also increased our distribution center throughput through expansion and automation and we continue to improve our store and customer experience. Looking ahead, we will build on our momentum and progress in pursuing these initiatives in 2026. Our flywheel for growth starts with the opening of new stores and the availability of real estate continues to be strong. We are planning to open 75 stores this year, and these will be a mix of new and existing markets as we continue to expand contiguously. We recently celebrated entering our 35th state with the opening of our store in Austin, Minnesota. We celebrated the grand opening last week with a long line of enthusiastic customers that stretched down the side of the building. It was great to meet and talk to so many good people. Austin loves deals, and we are proud to be part of your community. Thank you, Austin and Minnesota, the birthplace of bargains has arrived with more stores coming soon. In addition to Minnesota, we will also be entering New Mexico later this year. With a total of 658 stores in 35 states, we are only at the halfway mark of our long-term goal of more than 1,300 stores. It's such an invigorating time to be with Ollie's with so much growth ahead of us. While new stores remain the quarterstone of our growth, we are also focused on driving comparable store sales through better execution, leveraging our growing size and scale and improving sales productivity. We touched on strengthening our product assortment. We are also seeing opportunities arise in areas such as real estate and talent. Would you combine this with the fact that we reinvested in the business every year because of our strong sales, profitability, cash generation and balance sheet, it feels like we have reached an inflection point. With these dynamics we are confident in our ability to continue executing the business and driving consistent results. Our growth and the continued consolidation of the retail sector is leading to more buying power and expanding our access to products. This gives us the ability to balance our value proposition with our margin profile and strengthen both over time. Based on the structural changes to our business, we feel a comp target of 2% and a gross margin target of 40.5% is sustainable and strikes the right balance between price and margin. We also believe that this stability and strong free cash flow now allows us to commit to returning higher levels of excess cash to shareholders through share repurchases. Combining 10% unit growth, 2% comp growth and a commitment to stepping up share repurchases, we are confident in delivering consistent mid-teens EPS growth while reinvesting back into the business to support profitable long-term growth and reach our target of 1,300 stores. In 2026, our focus will be on improving the in-store customer shopping experience, sharpening our dynamic marketing media mix model expanding our IT application development capabilities and further integrating technology and data analysis across the enterprise, including leveraging proven AI with appropriate solutions for our business model, growing our planning and allocation pension capabilities and increasing our distribution capacity by expanding our Texas and Illinois facilities and laying out plans for our fifth DC. There is so much potential to continue to develop and grow our business, but we are doing this in a calculated fashion, staying true to our business model, strong culture, and our new long-term growth algorithm. We are super proud of our achievements in fiscal 2025. We delivered against virtually every single metric and goal we set out for ourselves at the beginning of the year. But now that's behind us. We are focused on building on our success, seizing new opportunities, delivering another year of good stuff cheap to our customers and strong results for our shareholders. Let me wrap up by recognizing and thinking all of our dedicated associates and team members. Every one of you plays an important role in serving our loyal discount customers and fulfilling our mission, serving our communities by selling good stuff cheap is not just a tagline. It's our purpose, our passion and our reason for being. Thank you for everything you do. Now let me turn the call over to Rob. Robert Helm: Thanks, Eric, and good morning, everyone. We were very pleased with our fourth quarter results and the underlying trends in the business. Earnings were slightly ahead of our expectations, driven by solid comp growth, healthy margins and disciplined expense control. New stores and customer acquisition remain our 2 top priorities, and we continue to deliver on both of these. We opened a record 86 stores last year, an increase of more than 15% and membership growth in Ollie's Army remained strong, up more than 12% for the year to 17 million members. Now let me walk you through the P&L. Net sales increased 17% to $779 million, driven by new store openings and comparable store sales growth. Comparable store sales increased 3.6%, driven by an increase in both basket and transactions. Seasonal, consumables, hardware, stationery and sporting goods, were our top-performing categories. Our comp sales increase was above our expectations in the quarter, even more so when factoring in the impact of severe winter weather. Major storms around Black Friday weekend, the weekend of Ollie's Army Night, and the end of January caused a significant number of store closures and disruptions to the business. Given our store geography, we were particularly hard hit by the weather. While comp store sales were ahead of expectations, new store sales were slightly below our plan. This was a different trend than the rest of the year as our new stores outperformed expectations in the first 3 quarters. In hindsight, we underestimated the flattening of the reverse waterfall for the new stores in year 1 from the soft opening strategy. This proved to be more impactful in the fourth quarter than what we observed earlier in the year because of the higher engagement levels with our Ollie's Army members during the holiday season. The majority of our new stores be planned for this full year and the flattening of the reverse waterfall is something we continue to study. Gross margin of 39.9% was above plan for the quarter but approximately 80 basis points lower than last year which was largely due to planned investments in prices. SG&A expenses were well managed in the quarter. Excluding the $5 million of onetime expense related to the modification of equity awards for our Executive Chairman in last year's third quarter, SG&A expense as a percentage of net sales decreased 40 basis points to 24.2%. The decrease was primarily driven by the leverage of our fixed costs from the increase in comparable store sales and benefits from our optimization efforts and marketing. Preopening expenses decreased 53% to $2.3 million, driven by the earlier timing of new store openings this year versus last year. Moving down to the bottom line. Adjusted net income increased 16% to $85 million and adjusted earnings per share increased 17% to $1.39. Lastly, adjusted EBITDA increased 16% to $127 million, and adjusted EBITDA margin decreased 10 basis points to 16.3% for the quarter. Turning to the balance sheet. Our total cash and investments increased by more than 31% or $134 million to $563 million, and we had no meaningful long-term debt at the end of the quarter. We remain committed to maintaining a very strong balance sheet because of the credibility this gives us with our various partners across the industry. Inventories increased 18% year-over-year, primarily driven by our new store growth and strong deal flow. Capital expenditures were $18 million for the quarter, with the majority of the spending going towards the opening of new stores, the improvement of existing stores and, to a lesser degree, investments in our supply chain. We did pull some new stores forward in early 2026, which drove CapEx and preopening a little higher than our expectations. We bought back $34 million worth of our common stock in the quarter and $74 million for the full fiscal year. At year-end, we had $259 million remaining under our current share repurchase authorization. We are stepping up the buyback in 2026, and I will speak to this more in a moment. Lastly, let me run through the way we are thinking about the business and our initial outlook for fiscal year 2026. Let me start with tariffs. The tariff situation obviously remains very fluid, and the current lower levels could be temporary. Bigger picture, tariffs are just another form of disruption, and we benefit from disruption. Whatever happens, we would expect to mitigate any margin pressure from tariffs. Before running through our guidance for 2026, let me comment on how we are thinking about our new long-term growth algorithm that Eric quickly touched on. We operate a flexible and fluid business that generate stable returns and very strong cash flows. Our strong growth, along with the consolidation of retail gives us greater ability to scale and drive the business. With all of this, we feel confident in targeting annual comparable store sales growth of 2% and annual gross margin of 40.5% moving forward acknowledging that there will be some variability to comps and margin between the quarters based on deal flow, seasonality and a few other factors. The 40.5% annual gross margin target is our current baseline target. And our thought process is to reinvest anything over and above this back into our value proposition to our customers. Lastly, we are targeting to return approximately 50% of our free cash flow back to investors through share repurchases going forward. Our first and best use of cash is all -- is and will always be reinvesting into the business to support long-term growth. However, between our very strong balance sheet and stable cash generation, we are confident in committing to a higher level of share repurchases that benefits long-term EPS growth. Our initial guidance figures reflect these changes and are contained in the table in our earnings release posted this morning, and they include 75 new store openings, net sales of $2.985 billion to $3.013 billion, comparable store sales growth in the range of 2%, gross margin in the range of 40.5%, operating income of $339 million to $348 million and adjusted net income and adjusted net income per share of $270 million to $277 million, and $4.40 to $4.50, respectively. These estimates assume depreciation and amortization expenses of $63 million, inclusive of $15 million within cost of goods sold, preopening expenses of $22 million with the majority of this in the first half of the year, an annual effective tax rate of approximately 25%, which excludes the tax benefits related to stock-based compensation. The tax rate is slightly higher than 2025 due to higher levels of nondeductible compensation. Diluted weighted average shares outstanding of approximately $61.4 million, which includes a stepped-up share repurchase level of approximately $100 million. And finally, capital expenditures are expected to be in the range of $103 million to $113 million, which includes almost $20 million for the expansion of our Texas and Illinois distribution centers. Similar to last year, we expect our new store openings to again be front-end weighted with the majority of openings planned for the first half. In closing, let me also acknowledge and congratulate my fellow team members. While we continue to integrate technology into how we do things, we will always be a people-led business that relies on each and every team member to play their part. 2025 was a terrific year on all accounts. and I am excited about the opportunities that lie ahead for our team. Now let me turn the call back over to Eric. Eric van der Valk: Thanks, Rob. In closing, I'd like to share that we are well positioned and laser-focused on continuing to deliver profitable growth. We are committed to driving strong and consistent execution every hour of every day. We are proud of what we do in service of our customers. We are excited about the opportunities ahead. And last, but certainly not least, we are Ollie's. Operator, we are now ready for questions. Operator: [Operator Instructions] Our first question comes from the line of Peter Keith with Piper Sandler. Peter Keith: Thank you. Good morning, everyone. Interesting on algo change, certainly exciting from moving from the historic 1% to 2% comp annual target up to now 2%. So kind of subtle, but I would still say meaningful. Could you give us a thought process and why you're doing that now? And maybe, I guess, even what gives you the confidence you can sustain that going forward? Eric van der Valk: Sure. Peter, thanks for your question. We do believe we're at an inflection point with the accelerated growth last year and looking at $3 billion in sales for next year. Our growing size of scale is leading to better access to merchandise and deals. It's allowing us to steer our merchandise selection and our category mix much more deliberately than we were able to do in the past. Our flexible buying model allows us to get in and out of products and categories fluidly. So with more consistent access to incredible deals and the improvements we've made throughout the business on the organization, we feel like a 2% comp algo is sustainable. Operator: Our next question comes from the line of Chuck Grom with Gordon Haskett. Charles Grom: I'd read that chance, the 9.5%, I think, this morning, nice effort. My question is on sales productivity. You've noted changes being made to the size of certain assortments such as shrinking carpeting books and toys just now. Where are you guys in that journey and that in sales per square foot. I'm curious for your best stores where that productivity sits. And then last question would be in our field work, we've observed furniture in stores. Is that just a seasonal drop? Or are you guys leaning into that category more deeply? Eric van der Valk: Thanks, Chuck. Appreciate it. I think I was at 1.0 on the [indiscernible] it's all right. You could be a 9.5. Room or improvement. We like that, yes. That's right. In terms of space productivity, we are thinking about space productivity differently now than we have in the past. We first consider where we provide the best values in the most relevant merchandise categories where we can chase a closeout pipeline. So I would stress the fluidity, the flexibility of our business in the category mix is sometimes a following of the closeout pipeline. But our growing size and scale gives us better access to deals, which I said earlier, results in -- it's resulting in more long-term partnerships with the vendor community and more partnerships with the better community. The more expansive access to the merchandise is putting us to the driver seat in steering categories and assortments. We've also been on a journey thinking about this, how we value store space, how we drive higher space productivity within the box for multiple years at this point, beginning with some of the learnings that we took away from our remodel program several years ago, and it's resulted in our confidence to accelerate some investments in the business and to steer categories in a more deliberate way. We're also making investments, as I mentioned on the call, in planning allocation and stores to further seize these opportunities. Furniture is a great example. I'm glad you brought it up of a category that we've looked at, where there's tremendous white space in the market as a result of retail consolidation. So I throw out there, Big Lots, Value City, American Freight are good examples of retail consolidation that's happened sublet recently and it's opened up white space and what I would characterize as the deep discount furniture business with kind of opening price point. Living room furniture is kind of what we're going after with our opportunistic buy model, we are well positioned to chase the business and move in and out of categories. We begin testing expanded furniture last year, actually late last year in some stores, and we like the results of the test. We were looking forward at what we believe to be an outsized tax refund season it sees what we thought would be a unique opportunity to introduce the business in a very big way in almost every store at the same time as the tax refunds were coming in. But to answer your question about is this transitory? Is it deal? Are we driving it now? And what does it mean for the future? We're early innings at this, we're about 7 weeks or so into the introduction of the business. President's Day weekend was the kind of the grand introduction of it. We do believe it has a place in our stores long term. and we're going to stay at the business. It may not be every store, but it's probably most stores or at least more than half of the stores. This being said, the most challenging decisions that we make here are what not to buy, whether that's deals or categories. So those challenging decisions we have to make that we have made for about half the stores is that we're going to exit the wall to wall carpet business, which is relatively unproductive. And we like what we're seeing at furniture. We believe that's an adequate replacement and that we'll get more sales productivity out of furniture versus wall to wall carpet in, again, more than half of our stores. So again, early read, we like what we see. I wouldn't speak today about -- you quoted the $130 sales per square foot about what the road map looks like around that. At this point, we have strategies around category mix management. that will drive improved selling productivity. We're not making a specific commitment to what that looks like in future years today. Operator: Our next question comes from the line of Matthew Boss with JPMorgan. Matthew Boss: So Eric, on the inflection point that you cited to kick off the call. So 2 questions. First, could you elaborate on the comp strength relative to plan that you saw in November and December? How best to quantify the weather impact on the fourth quarter? And have you seen any change in comp momentum so far in the first quarter relative to the 3 to 4 comps that you delivered in the fourth quarter? And Rob, separately, I guess, could you just elaborate on the performance that you're seeing in your new stores relative to plan and just expectations for productivity that you embedded in the guide for this year relative to 2025? Robert Helm: This is Rob, I think I'll take all of that. So the comps at Q4, we were pleased with the comp results. It was driven by both increases in transactions and baskets -- it was back at led with basket taking 2/3 of it and transactions a third. The monthly cadence traded in a pretty tight range. We were pleased with the holiday season. We had a very nice holiday season. In January, our exit rate would have been the strongest comp of the quarter had it not been for the winter storm impact, which was very significant, where we had hundreds of stores closed for a number of days in that last week of the quarter. And momentum is spilled over into Q1. We're pleased with where we're positioned. We feel like we can deliver on our guidance. Our deal flow is amazing, and our assortment for the spring season is incredible. From a new store perspective, I think it's important to put all of it into context. First, the majority of our stores [ be ] planned for the full year. So we're very pleased with that result. Second, the new stores were impacted actually disproportionately from the comp stores during that last week of the quarter because of geographies. So that was also a piece. But in terms of trend and what we're seeing, what we saw in Q4 was the timing dynamic, which related to our soft opening strategy, which flat in the early sales curve, but it improved execution of these stores. This improved execution helped us open the stores earlier and really helped us step up from the historical cadence from 50 stores to 86 stores this last year. We knew this would impact the maturity curve in some way. But what we feel that it does is we feel that it impacts the shape of the curve, but not the long-term productivity, profitability or opportunity in any of these stores over the longer term. In terms of what we've embedded in guidance, we've considered this performance in the fourth quarter into our guidance, into our new store productivity. way that the Street calculates new store productivity is slightly higher this year versus last year because of the step-up in the 86 stores coming into the store base. But we're comfortable with our guidance, and we feel that we're in a good position to deliver. Operator: Our next question comes from Steven Shemesh with RBC Capital Markets. Steven Shemesh: Great. I appreciate you taking the -- there are obviously a lot of consumer cross currents at the moment. If we think about an evolving tariff landscape inflation may be picking up a bit on your tax refunds as you alluded to and now the Middle East situation impacting gas prices and consumer confidence. Anything you can share on the overall state of the consumer and kind of what you're seeing from a consumer behavior standpoint. And a related question, I mean, I think there's always an ongoing debate about closeout availability, you somewhat alluded to this in your response to an earlier question, but maybe just a state of the union there as well of you're confident in maintaining a high degree of quality in stores, especially as you ramp up store growth. Eric van der Valk: Sure. Thanks, Steve. Thanks for your questions. In terms of the state of the consumer, consumers are seeking value and we're here for them. The strength we're seeing in trade down has continued with our upper income cohorts. It's there's momentum there in trade down. The lower income -- the lowest of our cohorts a little bit weak, the trade down is more than offsetting the weakness in the lower income cohorts. We're also seeing strength in consumables, which is an indication of where the consumer's mind set is it's continuing to be a very strong business for us. The deal flow is lining up very, very nicely, which is a good segue into deal flow with the consumer demand consumables for us. Deal flow for us, it's off the charts. With the consolidation of retail that's taking place, definitely outsized consolidation in retail over the past year. We are seeing deal flow in just about every category that's off the charts. And again, I mentioned consumables, but that's definitely been a strong pipeline for us in consumables. So we're extreme value retailer. We're comfortable with where we are from a price gap standpoint very competitively positioned. So we're in good shape. Operator: Our next question comes from Steven Zaccone with Citi. Steven Zaccone: I wanted to ask about the real estate environment. Just help us understand how you're balancing new store growth versing investing in some of these initiatives to drive higher store productivity. And then this year calls for 75 new stores, which is slightly above 10% unit growth, should we expect this unit growth above 10% to continue for a couple of years. Robert Helm: Thanks, Steve. It's Rob. I'll take that question. The real estate environment remains strong, and availability is very good. 2025 was actually one of the biggest years of store closures that we've seen over the last 10. But we're focused on building a long-term durable business model that compounds earnings growth year after year. We feel that the best way to do this now is by balancing our new store growth with other initiatives to improve the in-store shopping experience across the remainder of our fleet. But touching on the go forward, we think that 10% unit growth is probably the right way to think about it. beyond 2026. 2025 and 2026 were really above algo because of the outsized consolidation of stores that we've seen in the last 12 to say, 24 months. Operator: Our next question comes from the line of Kate McShane with Goldman Sachs. Katharine McShane: Is there a way to quantify the comp growth of Ollie membership versus what is coming from new store growth. And we were wondering if the Ollie Army demographic is changing in line with what you're seeing just in the stores. Robert Helm: I'll take the first part, and then I'll hand it off to Eric for the second part. We haven't separated that out in the past historically. We think about Ollie's Army as a single metric. And we're looking to grow it through new stores predominantly. But what I would say is all vintages continue to comp on Ollie's Army store growth. And it's an important goal that we set for our store teams in communicating the benefits out to our customers each and every day. Eric van der Valk: Yes. I mean we're very pleased overall with the Ollie's Army performance on the quarter and on the year in terms of the growth, the excitement that our customers have around the program, the enhancements of the program, the conversion that our stores have driven with the customers, the new customers that are coming in to make them part of the Army to make them part of our loyal bargainauts, Ollie's family. So that's -- we're firing on all cylinders as it concerns Ollie's Army. Operator: Our next question comes from Anthony Chukumba with Loop Capital Markets. Anthony Chukumba: Congrats on a strong 2025 I was interested in the seasonal business in the fourth quarter, specifically, how much of that strength was close out as opposed to some of the direct source stuff that you did, particularly in terms of decorations and also gifts? Eric van der Valk: Sure. The seasonal business typically is more non closeout, more source, more production goods. Last year, we did see a fairly healthy pipeline of closeout goods of ex inhibitory that was out there as a result of retail consolidation with manufacturers and product that was left behind from retailers that are out of business that was in transit, et cetera. So it was a combination. I'm not going to quote the percentage on it, but it was actually a fairly healthy combination of closeouts that is somewhat unusual for that business. Gift is the same to the extent we don't usually get into specific deals on this call, but we did have outsized gift-related deals. A year ago, we were up against that were closeout related. Some of what we bought was closed out and so what we bought was production, and we had a very strong gift business this year. So we were able to comp our business that was a little bit more closeout driven in '24, with a little bit less closeout-driven product in '25, and we were very proud of our value proposition, our price gaps on that product. It does speak to the evolution of our business as we continue to grow, being maybe more like an off-pricer with close out is the most important driver of our value prop. And that's how we see our business as we move forward, especially as we continue to grow in size and scale. Operator: Our next question comes from the line of Simeon Gutman with Morgan Stanley. Simeon Gutman: Good job in '25. If you take the sort of this newer financial algo compared to previous, so two, it's a little bit higher than what you were comfortable underwriting. Gross margin is certainly higher. Can you just tell us then what happens on the other side of it? Are you saying that margin grows at a faster rate to an EPS grows faster? Or is there something inhibiting higher SG&A? I'm sorry if I missed that piece, but I'm trying to put on the before and after together. Robert Helm: This is Rob, Simeon. I'll take that question. We're not thinking about margin growth necessarily differently under the algo. What we're moving from is the 1% to 2% which shows the confidence that we have based on this inflection point based on our size and scale. Margin, we're thinking as the current baseline target. We're thinking not to exceed 40.5% in the short term. We think that this is the right balance between price and margin at the moment. And if we have the opportunity to exceed, we would reinvest that back into customer loyalty to drive additional market share at this moment. From an SG&A perspective, as the 2% comp, we would expect for 10 basis points of leverage, which is built into our guidance. And then EPS will grow in the mid-teens on the bottom line. And that will be supplemented by share repurchases, but that's not -- that's not how we're getting there. We're getting there through the core strength of the algo throughout the P&L. Eric van der Valk: Yes, Simeon, I just want to stress the point on margin about reinvesting in price. Nothing has changed here. We reinvested price, 40.5% is the new 40. Period. Operator: Our next question comes from Scott Ciccarelli with Truist. Joshua Young: This is Josh Young on for Scott. So how much benefit do you think you're capturing at this stage for big lots? And could we see sales slow in the back half as you cycle those orphan sales that you were able to capture? Robert Helm: This is Rob. I'll take that one. The stores that have overlapped the the former big loss locations, whether they closed never came back or they closed and reopened under the variety of wholesalers umbrella, are some of the strongest locations in our fleet over the past year. But similar to COVID, when we were talking about 2-year, 3-year, 4-year comstack, big losses in the rearview mirror and what they were is not coming back. We will continue to benefit from their absence in real estate, in access to product and sourcing and talent, all while continuing to wear share of wallet with our incredible deals and bargains -- but our model has always thrived on the long-term consolidation of retail and Big Lots is no different. Operator: Our next question comes from the line of Jeremy Hamblin with Craig-Hallum Capital Group. Jeremy Hamblin: And I'll add my congratulations on the really strong year. I wanted to ask about dark grant, which you saw impact in 2025. What was the total dark rent in '25? And if you have some dark rent that you're expecting in 2026, what would that amount be? And then also, you talked about returning capital to shareholders maybe in a little bit bigger way. You've got over $0.5 billion in cash and generated about $300 million of operating cash flow in '25. Would you think about stepping up like the share repurchase plan to a $300 million, $400 million level? Just something that given the cash flow that you generate and current balance and strong balance sheet. Just curious if that's under consideration. Robert Helm: Sure. This is Rob. I'll take those questions. Dark rent expense was $5 million for the Big Lots locations in 2025. Not all of this was incremental. And typically, our organic locations incur some level as dark rent. It's typically in the range of a month or so as we merchandise the store. We do have more normalized assumptions included within preopenness last year. But as you do the math, I think the piece that you're trying to solve for is our investment in improving the shopping experience and the remodel program, which we have now added back into 2026 has included our guidance numbers. So that's on the preopening side. On the buyback side, the way we're thinking about buybacks is it's a supplement to our algo. It's not a substitute for earnings growth. We're very comfortable with the commitment of returning 50% of our free cash flow generation back to the shareholders. The $100 million, we believe, is a conservative target. If we are able to generate higher levels of operating cash flow, we'll aim to stick to that 50% return of free cash flow. We're not looking to do a short-term pop. We're looking for steady compounding earnings growth over time. Operator: We have a question from Edward Kelly with Wells Fargo. Edward Kelly: Nice quarter. On the marketing side, I was hoping that you could touch on maybe some of the changes in the marketing strategy, and you mentioned optimization. And then related to this on the flyer, any shifts on the flyer that we should be thinking about this year or other special promotions for '26? Eric van der Valk: I love that you asked flyer questions and count offers and flyers as well. On the marketing question, before I get into flyers, we continue to optimize our marketing through our dynamic media mix model. It allows us to reallocate spend towards higher-return channels and it's more fluid in terms of timing. This has been a journey, multiyear journey at this point as we reduce our reliance on what I call the inevitable reduction of print media. It's been in decline for many, many years, continues to be a decline. It's really not about spending more, it's about using data to be more precise and more efficient. We've already seen the result of some of that work over the past 6 months, as you can see from a reduction of marketing spend over the last 6 months. Again, it's not about reducing, it's about a more efficient spend. We also have meaningfully reduced our print spend over time, a little ahead of the decline of the print media that's available to purchase, which is where all the reduction is coming from. The approach gives us much more flexibility, as I touched on. Digital is much more flexible, which helps facilitate responding to deal flow, seasonality. Customer engagement is much more fluid and flexible, it's a near real time and we can stay very disciplined on expense control. In terms of your flyer-related questions. We -- so we -- our history here is that flyers are big events in the material over the quarter. We're not thinking of it that way anymore. And I am not going to talk about changes to flyer timing going forward. I get a little bit concerned with our growing size and scale and approaching $3 billion in sales next year with, Uncle Ben from Spider-Man, "with great power comes great responsibility". And we have great buying power in the closeout business. And I'd rather not project to the vendor community and to our competitors out there, what we're doing with flyers or what we're doing with managing our mix on a go-forward basis, et cetera. So we're committed to the 2% algo period every quarter. So that's how we're looking at it. So that is the answer to your flyer question. Operator: Thank you. And ladies and gentlemen, this will conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: Ladies and gentlemen, good day, and welcome to Full Truck Alliance's Fourth Quarter and Fiscal Year 2025 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mao Mao, Head of Investor Relations. Please go ahead. Mao Mao: Thank you, operator. Please note that today's discussion will contain forward-looking statements relating to the company's future performance, which are intended to qualify for the safe harbor from liability as established by the U.S. Private Securities Litigation Reform Act. Such statements are not guarantees of future performance and are subject to certain risks and uncertainties, assumptions and other factors. Some of these risks are beyond the company's control and could cause actual results to differ materially from those mentioned in today's press release and discussion. . The general discussion of the risk factors that could affect FTA's business and financial results is included in certain filings of the company with the SEC. The company does not undertake any obligation to update this forward-looking information, except as required by law. During today's call, management will also discuss certain non-GAAP financial measures for comparison purpose only. For a definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results, please see the earnings release issued earlier today. Joining update on the call from FTA finish management are Mr. Hui Zhang, our Founder, Chairman and CEO; and Mr. Simon Tai, our Chief Financing and Investment Officer. We will open the call to questions following a brief of the opening remarks from Mr. Zhang. As a reminder, this conference is being recorded. In addition, a webcast replay of this call will be available on FTA's Investor Relations website at ir.fulltruckalliance.com. I will now turn the call over to our Founder, Chairman and CEO, Mr. Zhang. Please go ahead, sir. Hui Zhang: [Foreign Language] Mao Mao: [Interpreted] Hello, everyone. Thank you for joining us today for our fourth quarter and fiscal year 2025 earnings conference call. In the fourth quarter of 2025, amid a complex market environment, we continue to energize our ecosystem by elevating user experience and strengthening protection mechanisms for both shippers and truckers driving solid business growth across the board. Total fulfilled orders reached 63.9 million for the quarter representing a year-over-year increase of 12.3% and full year total fulfilled orders reached 236 million, up 19.8% year-over-year. Notably, full year orders fulfilled for cold chain logistics grew by nearly 30% year-over-year. Hui Zhang: [Foreign Language] Mao Mao: [Interpreted] In terms of operational performance, key metrics across all business lines improved steadily in the fourth quarter. On the shipper side, our targeted user acquisition strategy and refined membership system gained momentum. Average monthly active shippers reached 3.28 million in the fourth quarter and 3.14 million for the full year 2025 marking year-over-year increases of 11.6% and 18.6%, respectively, demonstrating parallel improvements in both shipper base and user stickiness. For truck users, we continue to optimize the trucker credit rating system and protection mechanisms, maintaining the 12-months rolling active trucker space at a high level and the next month retention rate for truckers who responded to orders above 85%, further strengthening the overall reliability and quality of our truckers network. Our AI-powered heavy truck feed delivered by Giga AI is now operating commercially in the express delivery and fast freight factors. We also piloted AI assistant capabilities for shippers to further enhance fulfillment efficiency during the quarter. Moving forward, we will continue to accelerate the integration of AI technologies and applications across our transactions and fulfillment processes. Hui Zhang: [Foreign Language] Mao Mao: [Interpreted] Now turning to our financial performance. We remain focused on enhancing operating efficiency to strengthen profitability Net revenues reached RMB 12.49 billion for full year 2025 million, up 11.1% year-over-year. Furthermore, our revenue mix continued to improve with transaction service revenues of RMB 5.32 billion for the full year, growing by 38.2% year-over-year. On the bottom line, we achieved a net income of RMB 4.46 billion for the full year, up 42.8% year-over-year. On a non-GAAP basis, adjusted net income reached RMB 4.79 billion for the full year, up 19.3% year-over-year, underscoring our high-quality profitability and increasing economies of scale. Hui Zhang: [Foreign Language] Mao Mao: [Interpreted] Looking ahead, Full Truck Alliance will consistently elevate user experience for both shippers and truckers and fully integrate AI across the logistics value chain, creating greater value for the industry while delivering long-term returns to shareholders and users. Thank you all once again. That concludes our opening remarks. We would now like to open the call to Q&A. Operator, please go ahead. Operator: [Operator Instructions] Today's first question comes from Ronald Keung with Goldman Sachs. Ronald Keung: [Foreign Language] So looking back at 2025, then the company faced a number of external challenges and also made several strategic adjustments. So as we look into 2026, what -- can you share your overall strategic power. Chong Cai: [Foreign Language] Mao Mao: [Interpreted] 2025 was a year marked by both external challenges and proactive transformation for our business -- during the year, we made significant progress in strengthening platform governance, improving operational efficiency and further optimizing our user structure and monetization quality -- at the same time, we steadily advanced our strategic initiatives in areas such as autonomous driving and overseas markets. Throughout the year, we focused on enhancing the user experience and returning to our core principle of being truly user-centric. Our goal is to build a platform that both shippers and truckers can trust. While some of these investments may not yield immediate measurable returns, we firmly believe that both healthy balanced music ecosystem will serve as a foundation for our large sustainable growth. That kind of ecosystem value is something that I think we can reflect. Ronald Keung: [Foreign Language] Mao Mao: [Interpreted] As we move into 2026, we will focus on advancing high-quality growth and intelligent transformation across 3 areas. First, we are shifting our focus from skill-driven growth to a model that balances both scale and quality. While scale remains important for long-term sustainable development. Our priority is to foster a mutually beneficial relationship between this and the platform. we are raising ecosystem standards to ensure more complete and standardized transactions greater protection for freight payment and higher user satisfaction. With the first phase of our ecosystem governance initiatives now largely complete, most fake accounts and low-quality orders have been cleared from the platform. As a result, the platform is operating on a much healthier footing giving us the confidence to further strengthen fulfillment quality and support more sustainable growth going forward. Building on this foundation, we are also continuing to improve the credit rating mechanisms for both shippers and truckers, for example, through systems such as shipper rating scores and trucker behavior scores, we are gradually establishing a more robust 2-sided evaluation framework. This helps regulate user behavior at the source, curb noncompliant connections while also incentivizing high-quality users, ultimately creating a more virtuous cycle between shipper fulfillment efficiency and trucker earnings. Ronald Keung: [Foreign Language] Mao Mao: [Interpreted] Second, we are evolving from an information matching platform into an AI-driven intelligent infrastructure -- over the years, we have accumulated a large volume of authentic transaction data and build a highly active user base. which together provided a strong foundation for this transformation. Going forward, we will further leverage these strengths to advance grade our AI capabilities across key areas, including matching efficiency, credit assessment and dynamic pricing. In doing so, we aim to extend our platform's value beyond simply connecting supply and demand and enabling a more intelligent and efficient transaction process. . Chong Cai: [Foreign Language] Mao Mao: [Interpreted] Third, while maintaining steady growth in our core business, we are laying the ground for additional growth drivers. We remain confident in the profitability of our mature business. Building on this foundation, we are advancing initiatives in areas suggest overseas expansion and autonomous driving in a disciplined manner to support our growth over the next 3 to 5 years. Operator: And our next question today comes from Eddy Wang at Morgan Stanley. Eddy Wang: [Foreign Language] I have 2 questions related to AI. The first 1 is that the AI technology is advancing rapidly and the rise of the AI agent is gaining significant attention how might this trend affect freight matching platforms such as FTA? And how do you plan to respond to the potential disruption that or agents could bring to the traditional platform model. And the second question is, can management share how AI is being applied across the company? And what's the key developments in the fourth quarter? And what is your plan for the... Chong Cai: Thank you, Eddy. This is Simon here. I'll take over from ours. There has been a lot of discussion around the AI topic recently. We have been closely monitoring and evaluating applications. Let me start with our fourth -- we see AI not as a threat to our business, but that's to enhance our capabilities. For the road freight industry in which FDA operates, the emergence of AITs can significantly lower the barriers for shippers to find available carrier capacity, reduce manual costs in the matching process and improve both matching accuracy and fulfillment rates. These changes will meaningfully improve efficiency across the entire industry. We believe this transformation will create significant opportunities for us to capture additional market shares as transactions migrate from highly fragmented offline markets, including ad hoc and relationship-based trucking networks onto our platform. In our view, AI presents more opportunities than challenges for our platform for AI models to deliver meaningful results in the highly long standardized freight matching market. They must rely on large volumes of authentic, high-frequency closed loop transaction data. This includes data such as quotes completed transactions, cancellations, fulfillment records, dispute resolutions, credit behaviors and verified logistics address database. These data sets are the results of many years of operational experience and data accumulation on our platform. Let's take pricing as example first. In long-haul freight market, competitive real-time freight rates are not publicly available. The effective transaction price for each route and time period is influenced by multiple factors, including capacity availability, backhaul demand, trucker preferences and delivery time requirements. These dynamic pricing signals can only be formed and validated within the real transaction network. On our platform, truckers must complete real name registration and facial verification before logging into our app and accessing shipment information. Negotiations between shippers and truckers are conducted through our in-app messaging tools and protected communication channels. While external AI tools, if there's any, let the basic data set to perform accurate pricing. Second, in the long-haul freight matching business, where fulfillment standards are high-end operational processes are complex, transactions involving far more than simply matching information. The capability to execute this SKU is critical. While external AI tools may help a shipper quickly obtain a price quote or even contact several truckers automatically moving our shipment from posting to final delivery requires much more than prices. Effective fulfillment depends on robust platform services and dispatch capabilities, including understanding which truckers are reliable on specific routes, their likelihood of cancellation, how trucking capacity fluctuates during different time periods and maintaining a complete operational assistance from other placement to settlement to protect the interest of both shippers and truckers. In addition, long-haul freight operations frequently involve exceptions and nonstandard situations. These may include specific vehicle requirements, trucks, equipment with gates or refrigeration units. Last mile delivery address -- last-minute delivery address changes adjustments to cargo volume, highway closure and damage disputes after delivery, handling this situation requires well-established platform rules to determine responsibilities extensive historical data to assess reliability and responsive dispatch network capable of quickly arranging alternatives when disruptions occur. These are not capabilities that a stand-alone generative AI model can deliver on its own. They are built on years of operational experience and data accumulation and are precisely where our core competitive advantage lies. In addition, our platform connects a large number of shippers and truckers and through years of operation has formed a stable transaction network and credit system. Truckers and shippers not only rely on the platform to obtain orders and capacity but also depend on the platform for credit evaluation fulfillment protection, dispute resolution and dispute resolution mechanisms. This long-term accumulation of trust and ecosystem relationships is something that a stand-alone AI agent application would find difficult to replicate. Given these structural characteristics, we believe that as AI technology continues to mature, our competitive advantages will become even more pronounced. The reason is very straightforward. The more capable AI becomes, the more it depends on real transaction data and the stronger the resulting network effects. We're actively integrating AI capabilities across multiple aspects of our platform, including matching, dispatching, pricing, risk management and customer service. As mention becomes more efficient fulfillment become more reliable and exceptional handling becomes faster and more effective. Both truckers and shippers will naturally prefer to transact on our platform. This, in turn, leads to continued data accumulation and ongoing model improvement, which further strengthens our network effects and the moat around our platform. Overall, we are very optimistic about the industry transformation and the opportunities brought by the AI era, and we are fully prepared to embrace the opportunities and challenges that come with this technological shift. For us, AI represents a capability upgrade rather than a disruption to our business model. We will leverage AI capabilities to capture the broader industry opportunities it creates making our platform more efficient and improving the user experience for both shippers and truckers. At the same time, these capabilities will further strengthen our network effects, thereby reinforcing our long-term competitive advantage in the road freight market. To address your second question on our plan for AI for 2026. Yes. As I discussed earlier on the -- on our view on AI, let me walk through the progress we made over the past quarter and our plan onwards. During the fourth quarter, our AI initiatives progress from the experimental phase to broader deployment. We're currently building an AI agent framework that covers key scenarios across our platform, including shippers, dispatch operations and customer service gradually embedding AI capabilities throughout the entire transaction workflow. Starting with the user side, our focus from shippers is simplified shipping shipment posting an automated dispatch. In the fourth quarter, we launched an AI-empowered assistant that enables shippers to submit shipping requests through a simple voice input via a floating entry point in the app. The AI can then handle the entire workflow, including freight listing, trucker screening, price negotiation and order matching significantly streamlining what previously required multiple manual steps. This capability is particularly beneficial for direct shippers as it lowers the barriers to posting shipments and improved shipping efficiency helping the platform better attract and retain SME shippers. This solution also supports vcom-based shipment posting as well as API integration delivering meaningful efficiency improvements for enterprise customers that require system integration. Our pilot results so far demonstrate the effectiveness of our AI-powered dispatch system. First, AI-driven dispatch has attracted a large number of valid trucker bids, reflecting that more accurate matching is increasing truckers' willingness to accept orders. And second, the vast majority of completed transactions are now processed entirely through automated workflows and the need for manual intervention continues to decline. Compared to traditional freight listing, AI-driven dispatch is delivering superior outcomes in both transaction efficiency and fulfillment rates. In short, the AI assistant is helping shippers reduce the time required to find truckers and helping truckers improve order pickup efficiency and enhancing overall matching quality across the platform. Internally, AI has been integrated into our customer service operations, significantly improving response times and processing efficiency while also enhancing overall service stability. Looking ahead to 2026, AI will continue to serve as a core technology foundation for improving efficiency and enhancing user experience across FTA platform. As our models continue to evolve and data advantages deepen, we expect AI to unlock additional value in areas such as matching efficiency and operational cost optimization becoming an increasingly important driver of our medium long-term growth. Thank you. Operator: And our next question comes from Brian Gong at Citi. Brian Gong: [Foreign Language] I will translate it myself. With respect to the capital allocation, how does management prioritize among investments in core business growth, new initiatives and the shareholder returns. Thank you. Chong Cai: Thank you, Brian. Our approach to capital allocation is guided by a very clear principle and that is to delivering sustainable returns to shareholders while maintaining healthy growth in our core business. We remain firmly committed to this objective and committed to creating long-term value for our shareholders. In 2025, we continue to deliver our commitment to returning value to shareholders through both dividends and share repurchases. Over the course of the year, we distributed approximately USD 200 million in cash dividend under our semiannual dividend policy. In addition, we continue to implement our share repurchase program to further optimize our capital structure. Since the beginning of 2025, we have repurchased approximately USD 52.4 million worth of our shares, demonstrating management's confidence in the company's long-term value. . In addition, in January 2026, we announced a medium- to long-term shareholder return plan. For 2026, we plan to return approximately USD 400 million to shareholders and today, we also announced a dividend of approximately USD 87.5 million for the first quarter. To support the shareholder return commitments, we must continue to strengthen our core business while identifying new growth drivers to sustain strong cash generation. As you know, long-term freight matching remains our primary source of cash flow and profitability and forms the foundation for our long-term competitive advantage. Looking ahead, we will continue to invest in user acquisition, technology upgrades, product innovations and ecosystem development to support a steady and sustainable growth of our core business. With respect to strategic investments in new initiatives, including overseas expansion and autonomous driving, we emphasize a disciplined approach characterized by controlled pacing, manageable cash outflows and measurable milestones. We will not pursue high-risk asset heavy expansion Instead, we will advance these initiatives in a measured manner with the evaluation of expected returns and progress at each stage. These investments are intended to build long-term growth capacity and further strengthen our competitive moat rather than pursuing short-term scale. Overall, we believe that the core business growth, investment in new initiatives and shareholder returns are not mutually exclusive objectives. We will strive to maintain a dynamic balance between growth and shareholder returns while preserving strategic flexibility. Operator: And our next question today comes from Thomas Chong at Jefferies. Thomas Chong: [Foreign Language] We have seen the fulfilled orders grew by 12.3% year-on-year in Q4 and both ways is slowing down. Was this mainly driven by the ecosystem governance initiatives? How long do we expect this impact to last? And what is our outlook for order volume in 2026. Chong Cai: Thomas, that's a very good question. Let me first clarify the reasons behind the slowdown in order volume growth during the fourth quarter. The slowdown was primarily driven by the ecosystem governance initiatives, we proactively implemented on platform rather than any significant change in underlying freight demand. This round of ecosystem governance primarily focused on 3 areas. First, we addressed misclassified carpooling orders where Full Truck shipments were posted as less-than-truckload orders. which can compromise transportation safety and fulfillment experience. And second, we strengthened rename verification requirements for both truckers and shippers which resulted in the removal of a number of fake or noncompliant accounts. Thirdly, we implemented a systematic measures to curb freight with selling and other irregular transaction activities. These issues had accumulated over time, and we were beginning to -- and we're beginning to affect the platform -- and fulfillment liability. Therefore, we believe it was both necessary and time to address -- through focus governance work. These government measures primarily affected low-quality orders with limited monetization potential. During the initial phase of the governance initiatives, some of the misclassified car pooling orders have shifted back to the full load product -- full truckload product while others have temporarily moved to offline channels. We view this as a normal structural adjustment. From a revenue perspective, these orders historically contributed only a small portion of the platform's revenue. And in fact, transaction service revenue, as you can see, still grew by nearly 3% year-over-year in the fourth quarter, which clearly demonstrate that the ecosystem governance has not affected the platform's core monetization capability. Based on the results achieved so far, the governance initiatives have delivered meaningful improvements, for example, the resale and trading of trucker accounts on third-party platforms have been nearly eliminated, and the trucker vehicle verification rate is now close to 100%. In addition, freight reselling activities in January decreased significantly compared with the end of third quarter and customer complaint rates have continued to decline. At the same time, trucker engagement has remained stable with the rolling 12-month active trucker base, maintaining at a high level and the next month's retention rate for truckers responding to others exceeding 85%. The principal measures under the round of governance have been largely completed, and the main impacts have been fully reflected. Real name verification has been fully implemented freight reselling is now managed under a normalized framework and misclassified car pooling orders have been structurally addressed through product rules. As we move to 2026, our focus will shift from targeted governance campaigns to continuous optimization. We will leverage credit scoring and algorithm model to safeguard the long-term health of the ecosystem and placing greater emphasis on balancing growth pace and operational quality. In the near term, we do not expect to carry out another large-scale governance campaign. Based on our operating data so far into the year in 2026, sequential order growth has already shown clear signs of recovery. Looking ahead to the full year as the impact of governance initiatives continue to diminish, the share of direct shippers continue to increase and matching efficiency further improves, we remain cautiously optimistic about steady order growth on our platform in 2026. Thank you. Operator: Our next question comes from Ritchie Sun at HSBC. Ritchie Sun: [Foreign Language] My first question is about the fulfillment rates. So how did the fulfillment rate perform in fourth quarter? And what is the outlook for this metric. And secondly, in terms of the commission revenue growth is nearly a 30% year-on-year growth in fourth quarter despite slower order growth. So what were the key drivers behind this? And what is the outlook for this set metric going forward? Chong Cai: Thank you, Ritchie, for your question. fulfillment rate. In the fourth quarter, the overall fulfillment rate reached 42.7%, representing a year-over-year increase of more than 5 percentage points, and it also set a new record. Notably, the average fulfillment rate for the mid- and low frequency direct shippers approach 65%. This is a key metric we monitor closely. And as this segment represents a higher quality source of freight demand. Several factors drove the improvement in the fulfillment rate. First, we implemented systematic optimization to our cancellation policy. Historically, arbitrary cancellations by both truckers and shippers weighted heavily on fulfillment rate. In the fourth quarter, we introduced 2 key measures. We increased the cost of unjustified cancellations by imposing behavioral restrictions on users with frequent cancellations. And we also upgraded our credit scoring system. The evaluation framework shifted from a primary focus on transaction frequency to a more holistic assessment of behavior quality with greater emphasis on fulfillment rate user ratings and complaint rates. These adjustments are designed to encourage more consistent and responsible transaction behavior among both truckers and shippers. Secondly, the continued improvement in our user mix also contributed to the higher fulfillment rate. In the fourth quarter, fulfillment orders from direct shippers accounted for 55% of total fulfilled orders up from the previous quarter. And direct shippers generally have higher expectation for fulfillment reliability and a stronger commitment to execute so the increase in your share directly supported the improvement in the platform's overall fulfillment performance. Thirdly, ongoing product enhancement also contributed to the improvement. In the fourth quarter, we continue to iterate on the new freight zone and introduce a secondary confirmation step for shipment posting, which improved fulfillment rates for newly listed shipments. At the same time, upgrade to our matching algorithm and more refined operations significantly accelerated truckers' response times, supporting a steady increase in transaction conversion rates. Looking ahead, as our credit scoring system, continues to improve, the base of direct shippers expand and low-quality freight listings are further phased out. We expect fulfillment performance to maintain a steady upward trend. This will not only enhance the user experience, but also support further monetization of the platform. Regarding your second question on commission revenue growth. In the first -- in the fourth quarter, transaction service revenue reached approximately RMB 1.49 billion. That's a year-over-year increase of around 28%. Despite the moderation in order volume growth, revenue maintained a relatively strong growth momentum primarily driven by 2 factors. The first driver was the continued increase in commission penetration. In the fourth quarter, commission penetration rate reached 88.6%, up roughly 6 percentage points year-over-year. The number of cities covered by the transaction covered by the commission model reached 273 effectively achieving nationwide coverage across major freight markets. This improvement reflects the platform's continued progress in identifying high-quality freight demand, ensuring fulfillment reliability and enhancing merchant efficiency, enabling the commission model to be applied to a broader range of orders. The second driver was the improvement in monetization per order. Q4 average monetization per order reached RMB 26.3 million, this reflects the effectiveness of our refined tiered operating strategy by offering differentiated services tailored to different shipper segments, we improved monetization efficiency and overall profitability while safeguarding the interest of truckers. Looking ahead, we remain confident in the continued growth of our transaction service revenue. There's room to further optimize both commission penetration and monetization per order. At the same time, continued enhancement of our trucker membership program will help ensure a stable supply of high-quality trust transportation capacity and further strengthening the foundation for transaction service revenue growth. Going forward, we will continue to refine our commission structure and operational strategies without compromising user experience to support more stable and sustainable long-term growth in this particular revenue stream. Thank you. Operator: And our next question comes from Wenjie Zhang with CICC. . Wenjie Zhang: [Foreign Language] I'll translate for myself. My question is about Credit Solutions business within value-added services. I wonder what's related to the progress of this business. Chong Cai: Thank you. In the fourth quarter, amid an evolving regulatory environment, we continue to advance our credit solutions with a focus on compliance, risk management and business model transformation and maintain a steady pace of development. As of the end of the fourth quarter, we completed the transition to interest rates of 26% or below for both existing and newly issued loans, reflecting our proactive alignment with regulatory guidance and commitment to compliance. While this adjustment created some short-term pressure on revenue, we believe it will support a more robust and sustainable financial services framework over the long term and lay a stronger foundation for our future growth. In terms of asset quality, our overall risk exposure remains manageable. Since mid-last year, regulatory changes across the credit industry have led to fluctuations in credit risk and our credit business has also been affected. . In the fourth quarter, the 90-day delinquency ratio reached 2.9%. In response, we proactively tightened our risk management measures by raising credit approval thresholds for both new and existing users and implementing earlier interventions through model optimization and a more tiered risk control framework. As a result, our outstanding loan balance remains at a healthy level, and the overall risk exposure is well contained. Looking ahead, while some volatility may persist in the coming months, we expect asset quality to gradually improve with the overall NPL ratio stabilizing and beginning to decline in the second half of this year. In terms of our business model, we are proactively transitioning towards a more asset-light approach. We have established partnerships with multiple banks and financial institutions and are increasingly originating loans through guarantee backed and facilitation models. This approach allows us to significantly reduce the use of our own capital while maintaining service coverage and improving capital efficiency and better managing risk exposure. As a result, we are building a more balanced and sustainable risk return profile for our credit business. And overall, we will continue to prioritize compliance, maintain disciplined risk management and support our core business through our credit operations. Going forward, we will balance growth and risk while further improving asset quality and expanding penetrations across operational scenarios. This will help ensure that our Credit Solutions business develops in a more sustainable manner as the regulatory environment continues to evolve. Thank you. Operator: And our next question comes from Yuan Liao with CITICS. Yuan Liao: [Foreign Language] Management share us what progress have you met in your overseas business so far. And so what are the trends for your city expansion and your strategic priorities for 2026. And is there any time line for your monetization of your overseas business? Chong Cai: Thank you. Our overseas business is an important part of our mid- to long-term growth. We're building our international operations under the Q move brand, and we are currently in the model validation and capability replication stage. In terms of our market selection logic, the emerging markets, we're targeting share key trails large road freight volumes, low level of digitalization, highly fragmented truckers and the shipper base, large information gaps and high reliance on traditional broker models. This is very much like China over a decade ago. And much like China over a decade ago when we first started our business. . This makes our domestic experience and capability is highly transferable allowing us to replicate our model in those markets with minimal learning curves. We are pursuing a asset-light and localized approach advancing investments gradually as we validate the business model and team capabilities, leveraging our technology and operational know-how to drive platform rollouts. QMove is already integrating fragmented local trucking capacity in select markets and steadily building user network on both the trucker and shipper side. The priority for 2026 remains deepening our presence in existing markets while expanding into new ones in a disciplined manner. We will first focus on boosting network density and user engagement in established countries while gradually advancing city expansions in markets that are operationally ready and steadily broadening the platform's reach. We maintain a pragmatic flexible attitude toward regarding the pace of the monetization emerging market, digital freight platforms typically progress to user acquisition, network formation and efficiency improvement before reaching stable commercialization. With timing varying by market, our priority is to grow the platform network and expand our user base sustainably rather than simply pursue early monetization at the expense of long-term growth. And in summary, we remain confident the long-term growth potential of these emerging markets whose digital transformation is expected to follow a path very similar to China's road logistics industry. We'll continue expanding overseas in a disciplined, steady manner and gradually move towards commercialization as the operating model matures. Thank you. Operator: Thank you. And that concludes the question-and-answer session. I would like to turn the conference back over to management for any additional or closing comments. Mao Mao: Thank you once again for joining us today. If you have any further questions, please feel free to contact FTA directly or reach out to TPG. Our contact information for IR in both China and the U.S. can be found in today's press release. Have a great day.
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