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Operator: Good day, everyone, and welcome to the Consumer Portfolio Services, Inc. 2025 Fourth Quarter and Full Year Operating Results Conference Call. Today's call is being recorded. Before we begin, management has asked me to inform you that this conference call may contain forward-looking statements. Any statements made during this call that are not statements of historical facts may be deemed forward-looking statements. Statements regarding current or historical valuation of receivables, because dependent on estimates of future events, are also forward-looking statements. All such forward-looking statements are subject to risks that could cause actual results to differ materially from those projected. I refer you to the company's annual report filed 03/12/2025 for further clarification. The company assumes no obligation to update publicly any forward-looking statements as a result of new information, further events, or otherwise. With us here is Mr. Charles Bradley, Chief Executive Officer; Mr. Danny Bharwani, Chief Financial Officer; and Mr. Michael Lavin, President and Chief Operating Officer of Consumer Portfolio Services, Inc. I will now turn the call over to Mr. Bradley. Charles Bradley: Thank you, and welcome, everyone, to the fourth quarter and year-end conference call. 2025 was a very good year. We might have expected it to be even better, but we did not quite get the growth we were looking for. But still, overall, a very strong year. We focused on credit. We focused on keeping our margins. All in all, it was very good. Couple of highlights. We renewed, or actually, we signed a new warehouse line with Capital One for $150 million. We also signed a $900 million prime forward flow commitment. Both of those will be very instrumental in how we grow and what we are going to do in 2026. But more highlight than that is the fact that, you know, credit is readily available. The company has done well enough to where lots of people, banks, and such, not to mention on the securitizations, are very eager to either buy our bonds or lend us money. So we are in a very good spot in terms of moving into 2026. 2026, you know, is a quick peek, already looks like it could be very, very good. So 2025 was really good. Again, we had focused on getting the 2022 and 2023 paper, which was not particularly profitable and did not perform as well as we would have liked. I think at the beginning of 2025, that was almost 40% or more of the portfolio. Today, it is 2026. We would expect that number to gradually decrease over the year to where it is de minimis by the end of 2026. So getting that kind of piece of bad credit out of the portfolio is very good. Portfolio is nearly $4 billion. We expect that to grow substantially in the coming year. Now reached a size where we are really at a good size in terms of our industry standing. Overall, we are in a very good position. Credit remains strong. Interest rates look good. We will get back to that more, but for now, I will turn it to Danny to go through the financials. Danny Bharwani: Thank you, Brad. Looking at some of the numbers, revenues for the fourth quarter, $109.44 million, an increase over the $105.3 million in 2024. For the full year 2025, revenues were $434 million, a 10% increase over the $393 million in 2024. The interest income on our fair value portfolio is the main driver of our total revenues, and that is actually up 16% year over year. The fair value portfolio now sits at $3.6 billion and is yielding 11.4%, remembering that that yield is net of expected losses. Outside of interest income, the other component of our revenues are fair value marks. These are adjustments to our fair value portfolio that we occasionally record to revenues as needed. We had no marks in 2025, compared to $5 million in the fourth quarter of the year before. For the full year, we had fair value marks of $6.5 million compared to $21 million the prior year. In terms of expenses for the fourth quarter, $102.2 million is a 4% increase over the $98 million in 2024. For the full year 2025, expenses were $406 million, which is 11% higher than the $366 million in 2024. The biggest component of that increase is interest expense. Interest expense was $59 million in the fourth quarter. It was $53 million in the fourth quarter a year ago, and that is a 13% increase. The increase is largely due to our higher securitization debt balance from our higher loan portfolio. Our loan portfolio, which I will cover when we look at the balance sheet, but the loan portfolio is actually, the securitization debt from that loan portfolio is up 15% year over year. Looking at pretax earnings, $7.2 million for the fourth quarter, compared to $7.4 million in 2024. For the full year, pretax earnings were $28 million compared to $27.4 million for the full year 2024. If you look deeper into the numbers and exclude the fair value marks, pretax income would have been $7.2 million in the fourth quarter, compared to $2.4 million in the fourth quarter of 2024. So there is some significant improvement there if you strip out the marks and focus on interest income. For the full year, the pretax income would have been $21.5 million in 2025, compared to $6.4 million in 2024. Again, there is significant improvement in 2025 if you exclude the nonrecurring items. Net income for the quarter, $5 million compared to $5.1 million in the fourth quarter of 2024. For the full year, net income, $19.3 million compared to $19.2 million in 2024. Similar trends for net income as pretax income, but again, if you exclude the fair value marks in 2024, which were higher than 2025, there is significant improvement there. Diluted earnings per share, $0.21, is flat from the $0.21 in the fourth quarter last year. For the full year, $0.80 versus $0.79 in 2024. Moving now to the balance sheet. Our total cash, cash and restricted cash, finished the year at $172.2 million, which is up from $137.4 million at the end of 2024. Our fair value portfolio is up 10% to $3,655,000,000 compared to $3.3 billion at the end of 2024. Looking at our debt, I guess the biggest jump would be from our securitization debt we talked about earlier, 15% higher to $2,986,000,000 compared to $2,594,000,000 in the prior year. Moving to shareholders' equity. The $309.5 million ending balance for equity at December 2025 is a 6% increase over $292.8 million at the end of 2024. Equity continues to climb and currently sits at an all-time high for us. This translates to a book value, measured on a fully diluted basis, of about $13 a share. Looking at other important metrics, our net interest margin, $50.1 million in the fourth quarter, compared to $52.8 million in the fourth quarter of 2024. Full year net interest margin, $202.5 million, flat from $202.3 million in 2024. Again, the fewer marks in 2025 from the fair value portfolio have an impact on that. If you strip that out, the net interest margin would have been $50.1 million versus $47.8 million. And for the full year, $196 million versus $181 million, which is an 8% increase year over year. Our core operating expenses, $43.4 million in the fourth quarter, compared to $46.2 million, is a 6% decrease. For the full year, core operating expenses of $177 million are down 2% from $180 million last year. So besides growing our auto loan portfolio and increasing our interest income, we have also put a lot of focus on improving operating efficiencies, which you can see in the decline in our core operating expenses as a percentage of the managed portfolio, which is now down to 4.8% from 5.6% a year ago. I will turn the call over to Mike. Michael Lavin: Thanks, Danny. A few operational notes today. In 2025, we originated $363,000,000 of new contracts. For the full year of 2025, we purchased $1,638,000,000 of new contracts compared to $1,682,000,000 during the same period in 2024. So pretty good year, as Brad said, but a little flat. In 2025, it ended up being our third-best origination year in our thirty-five-year history. This, despite our continued practice of originating with the tight credit box, which we did in 2025. We heard from the trenches that dealers were reporting lower foot traffic, and we saw at times increased and, in some cases, irrational competition for less business. So overall, when you consider all the factors that were against us, $1,620,000,000 was a pretty good year. In 2025, we grew our portfolio of assets under management from $3,760,000,000 to $3,779,000,000. And for the full year, we grew the portfolio from $3.4 billion to $3.7 billion, which is an increase of 8.24%. Our focus in Q4 and as we turn to the new year is to grow via, one, hiring new sales reps and adding new territories. I think the second one is adding more active dealers to our funding dealer pool. We have been successful doing that. In the fourth quarter, we added about a thousand in December alone. Three, we have a goal to drive our applications from 250,000 a month to 325,000 a month. And four, we started doing this in the fourth quarter and into this year so far as mix and strategic risk initiatives that we have seen be successful so far. Also in the fourth quarter, we implemented our Generation 9 credit scoring model that, as with our previous generation models, utilizes AI/machine learning in its development. We have found that, at least so far, the new model has increased our approvals 11%. So they were running in the low 40 percentiles, and now they are running in the low fiftieth percentiles. It has kept our cap capture flat, which is good news. And, you know, doing the math, it has increased our total fundings about 8.4% just by implementing that new model. Also in the fourth quarter, as Brad alluded to, a little more detail on the partnership regarding the prime program. We partnered with a large credit union to source, originate, and service prime auto loans. As part of that deal, we get an origination fee and a servicing fee to sell that credit union prime auto loans that we source. Interestingly, the credit union has committed to buying up to $50,000,000 a month, $600 million annually. Over eighteen months, $900 million. But it is important to note that we think that the growth will be a slow buildup, as we kind of have to rebrand ourselves to our dealer base as more of a full-spectrum lender, considering we have been a subprime lender for thirty-five years. We are getting good feedback from the dealers. We are growing month over month. But, again, it is going to be a slow build. I kind of compare it to when we started our meta near-prime program years ago. It did not come out of the gates too strong, but eventually, you know, it is now 5% to 6% of our originations, and we are kind of hoping the prime program gets to be about the same. Just sort of following up on what Danny said on our OpEx. We were able to decrease it year over year from 2024 to 2025 by 14%. One note is on the employee cost front, we were able to lower employee cost as a percent of the portfolio from 2.6% in 2024 to 2.4% in 2025. And, you know, we did this despite growing the portfolio 8.24%. That is a little more evidence that we have properly scaled the business. We are at the right size. And, you know, as we continue to grow in 2026, we look for that OpEx to continue to trend downward. Turning to credit performance, the total DQ greater than thirty days for the full year 2025 was 14.77%, as compared to 14.85% for the full year 2024. The total annualized net charge-offs for the full year 2025 were 7.76% as compared to 7.62% for the full year 2024. Further, repossessions were down a little bit year over year. Potential DQs, which we call pots, were down year over year. And extensions remain at our historical average as a percent of the portfolio. Our extensions are also about the same as benchmarked against our competitors in the subprime space. So taken together, our improved portfolio performance in 2025 was quite an accomplishment considering the macroeconomic headwinds we faced in servicing with affordability, stubborn inflation, increased interest rates, some stagnant wage growth affecting, you know, some of our customers' cash flow. We found that using the right collection techniques and processes, you know, along with our customers still prioritizing their car payments, sort of fought off those trends. I mean, to lower delinquency year over year in this environment is quite a tip of the hat to our servicing department. Looking more closely at the vintage performance, we continue to see significant positive credit performance sort of starting with our 2023v vintage and continuing vintage over vintage through 2025. Now that it has more time to season, we are sort of looking at the 2024 vintage performance as being a positive result, probably due to our credit tightening that we took in early 2023. And we continue to do today. It is early, but a steep peek at our 2025 vintages shows even better potential for that performance than the 2024s. As Brad alluded to, the trouble of 2022 vintage and 2023 vintages are running off quickly. And as compared to our competitors' credit performance, the Intex data that our bond investors use to evaluate the space reveals that we remain among the very best credit performers in the subprime space when you compare us apples to apples to our competitors. Finally, turning to recoveries, they remain somewhat relatively light, settling into the 28% to 30% range. We typically want them to be in the low forties. But our analysis suggests that there is a light at the end of the tunnel. Our data revealed that recoveries for vehicles from the 2022 and 2023 vintages, those cars are actually driving down our overall recoveries. So, for example, in Q4 2025, looking at Q4, vehicles from the 2022 vintage were recovering at about 20.5%, and vehicles from the 2023 vintage were recovering 22.9% on the recovery. Compare that to, you know, recoveries on the 2024 vintages are more palatable at 36.3%, and recoveries for the 2025 vintage, at least so far, are hitting 43.4%. So we feel once the 2022 and 2023 vintages sort of flush out, as Brad said, by the end of this year, our recoveries will get back to normal. And as everybody knows, recoveries are a critical part of reducing our losses and increasing our net income. And with that, I will throw it back to Brad. Charles Bradley: Thank you, Mike. Switching over, taking a look at our industry. Normally, not a lot going on in the industry. As we have sort of pointed out already, it was a little bit slow. Traffic was down in the dealerships. And that seems to have changed in 2026 so far. But the interesting notes were GLS, one of our friendly competitors, got purchased. I think that is a good, it was a very good valuation, or extremely good valuation. So having that happen was interesting. Also, Flagship, which had kind of been sinking for a while, was purchased also, but, again, more at a discount. I think Flagship, for instance purposes, had ceased originations when they were sold, but that would be, you know, some of the M&A movement in the industry. And lastly, Prestige, more recently, stopped originating loans as well. You do not really see a lot in our industry. More importantly, we have seen almost no new entrants into our industry in, like, five years. So it has gotten to the point where unless you really have some size, we will call a minimum of a billion-dollar portfolio, you are really in a tough competitive standpoint within the industry. So being at $4 billion and on our way growing puts us in a very good spot. Having a couple of our competitors go away and maybe try and reinvent themselves is fine. Certainly Prestige is not. And then having to say, also GLS puts a valuation on the industry players, all good news across that board. I think, you know, the industry is very solid without having people blow up. The trichloro thing was a bump in the road, but really had nothing to do with the real industry. It did affect the market slightly for us in doing securitization, and that had no impact whatsoever. So moving into the future, what we care about, as we have mentioned many times, are the interest rates and unemployment. We believe the interest rate environment is very positive. If anything, the interest rates may come down as opposed to go up. Down is obviously way better. As long as they are not going up, we are kind of fine with where they are, but it would be nice if they came down a little bit more because those pretty much go straight to the bottom line, those improvements. Unemployment seems to be relatively steady. Unemployment could bounce around a little bit, and we really would not be affected. We really do not want unemployment to skyrocket. Obviously, that could trigger a recession, which is all bad. But we do not really see any of that. We see unemployment holding steady. We see interest rates steady or coming down. It really sets us up for a very good environment right now. Generally, other than the Iran war, which hopefully will go away pretty soon, the economy seems very stable and very strong. Again, we would think 2026 and beyond look very positive in terms of where we are going with the company. So having said that, I mean, the goal in 2026 is to focus on growth. We want those margins to improve through better interest rates. We want the overall portfolio performance to improve by getting rid of that 2022–2023 paper. We believe a good economy is good. We think we are, as I mentioned earlier, in great position to raise money. We did a residual deal recently, which is cheaper by a bunch than the last couple we have done. So again, there are a lot of favorable tailwinds as we move into 2026. So we are really looking forward to see what we can do this year. Got a bunch of stuff going the right way. We raised the money. We have the warehousing. The credit model looks great. We are very positive in terms of where things go from here. With that, thank you all for attending the conference and the conference call, and we will speak to you in a month or two. Thank you. Operator: Thank you. This concludes today's teleconference. A replay will be available beginning two hours from now for twelve months via the company's website at www.consumerportfolio.com. Please disconnect your lines at this time, and have a wonderful day.
Operator: Greetings, and welcome to Broadwind, Inc.'s Fourth Quarter and Full Year 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Mr. Thomas A. Ciccone. Thank you. You may begin. Thomas A. Ciccone: Good morning, and welcome to the Broadwind, Inc. Fourth Quarter and Full Year 2025 Results Conference Call. Leading the call today is our CEO, Eric B. Blashford, and I am Thomas A. Ciccone, the company's vice president and chief financial officer. We issued a press release before the market opened today detailing our fourth quarter results. I would like to remind you that management's commentary and response to questions on today's conference call may include forward-looking statements which, by their nature, are uncertain and outside of the company's control. Although these forward-looking statements are based on management's current expectations and beliefs, actual results may differ materially. For a discussion of some of the factors that could cause actual results to differ, please refer to the risk factors section of our latest annual and quarterly filings with the SEC. Additionally, please note that you can find reconciliations of the historical non-GAAP financial measures discussed during our call in the press release issued today. At the conclusion of our prepared remarks, we will open the line for questions. With that, I will turn the call over to Eric. Eric B. Blashford: Thanks, Tom. And welcome to our call. 2025 was a pivotal year in our evolution as a leading manufacturing partner of choice for global OEMs in power generation and critical infrastructure, while becoming a leaner, more diversified business equipped to deliver profitable growth through the cycle. The divestiture of our industrial fabrication operations in Wisconsin in the third quarter represented an important step in optimizing our asset base and increasing our balance sheet optionality, which positions us to redeploy capital toward higher value opportunities. Our fourth quarter performance was in line with the preliminary results we issued in early February 2026. Fourth quarter results were impacted by a raw material supply disruption in our Heavy Fabrications business associated with an OEM customer's directed buy program, which reduced manufacturing throughput and operating efficiency during the period. The company has implemented corrective actions to address the issue, and expects operations to normalize during 2026. Demand conditions and customer activity were strong during the fourth quarter, supported by robust project activity across our Gearing and Industrial Solutions segments. Orders were led by 38% year-over-year growth in the Gearing and Industrial Solutions segments, partially offset by a 20% year-over-year decline in the Heavy Fabrication segment reflecting the divestiture of the Wisconsin operation. Gearing orders increased to nearly $9.7 million as we saw strength in power generation, along with some resurgence in oil and gas and the wind aftermarket. In March 2026, we received a $6.0 million follow-on order for precision machined gearing components used in midsized natural gas turbines which power data centers and other applications. This order represents the second half of the significant order we received in July. Within the Industrial Solutions business, we received orders of $11.1 million. In summary, the team and business continued to perform well as we sharpen our focus within adjacent higher margin precision manufacturing verticals. This past quarter, we quickly identified and addressed the supply disruption by working with our customer to bring on an alternative supplier, minimizing the overall impact to our business. Furthermore, recent strategic actions to divest our Wisconsin facility position us for increased balance sheet strength and flexibility, while improving capacity utilization at our Abilene facility and reducing overhead costs. Despite the volatile trade policy environment, our 100% domestic manufacturing base remains a key competitive advantage as we partner with tier one OEMs who value our deep technical expertise, commitment to quality, and on-time service. With that, I will turn the call over to Thomas A. Ciccone for a discussion of our fourth quarter financial performance. Thomas A. Ciccone: Thank you, Eric. Turning to Slide five for an overview of our fourth quarter performance. Fourth quarter consolidated revenues were $37.7 million, representing a 12% increase versus the prior-year period. The fourth quarter increase was driven primarily by strength within the Industrial Solutions segment, in which revenue was up 60% year-over-year. Furthermore, the fourth quarter revenue level within the Industrial Solutions segment represents a 40% increase versus the average over the past four quarters. We believe that this volume level will continue based on current customer indication. Outside of our Industrial Solutions segment, lower Gearing deliveries were more than offset by increased revenue within the Heavy Fabrication segment, which benefited from increased wind revenue versus the prior-year quarter. Adjusted EBITDA declined to $1.9 million versus the prior year of $2.1 million. Despite higher volume, adjusted EBITDA decreased due primarily to lower capacity utilization within our Gearing segment and operating inefficiencies associated with the directed-buy raw material supplier issue we referenced in our February 5 press release. Fourth quarter orders were strong, nearly $39.0 million. Orders increased within our Gearing and Industrial Solutions segments, driven by strength in the power generation, oil and gas, and natural gas turbine verticals. Orders decreased within our Heavy Fabrication segment, reflective of our exit of the Manitowoc facility late in 2025. Turning to Slide six for a discussion of our Heavy Fabrication segment. Fourth quarter orders were nearly $18.0 million, a 20% decrease versus the prior-year quarter. However, after backing out the $6.3 million in industrial fabrication product line orders received for the Manitowoc facility in the prior year, orders increased more than 10% on an adjusted basis due to meaningful tower orders being recognized in the current-year quarter. Fourth quarter revenues of $21.6 million are up 6% versus the prior-year quarter. Despite delays associated with the raw material supply issue we experienced, we were still able to recognize increased wind tower and repowering revenue in the fourth quarter. However, adjusted EBITDA was down versus the prior year due to manufacturing inefficiencies associated with the aforementioned raw material supply issue. Turning to Slide seven. Q4 Gearing orders remained strong at $9.7 million, an increase of 38% versus the prior-year fourth quarter. We ended 2025 with approximately $26.0 million in backlog, a level we have not reached since 2023. As we noted in the prior quarter, we continue to see strength in the power generation and oil and gas verticals, and that momentum continued into Q4. Additionally, as we announced via this morning's earnings release, we recently received just over $6.0 million in follow-on orders from a leading OEM in the natural gas turbine segment of the power generation end market. Including this order, we have already booked almost $11.0 million in Q1 orders. Segment revenue was $7.0 million, down almost 8% versus the prior-year quarter. We recognized an adjusted EBITDA loss of $0.3 million compared to $0.1 million of adjusted EBITDA in the prior-year period. Due to the lower revenue levels, earnings were adversely impacted by reduced capacity utilization. As volumes recover, expect operating leverage to improve in 2026. Turning to Slide eight. Industrial Solutions booked over $11.0 million of orders during the fourth quarter, a 38% increase versus the prior-year quarter. Orders remained at an elevated level; the resulting backlog again hit a new record level of over $38.0 million at the end of the fourth quarter, eclipsing the previous record of $36.0 million set at the end of Q3. This quarter represents the fifth straight quarter setting a record backlog level. Q4 segment revenue was $9.4 million, up both sequentially and versus the prior-year quarter, reflective of the elevated order levels received recently. Fourth quarter revenues represent a 60% increase over the prior-year quarter and is the highest revenue level ever recorded within the segment. We believe this business will operate at these elevated revenue levels throughout 2026. Adjusted EBITDA of $1.5 million, or almost 16% segment EBITDA margin, increased significantly over the $0.6 million, or 10% segment EBITDA margin, reported in the prior-year quarter, reflective of the increased revenue levels. Turning to Slide nine. We ended the fourth quarter with total cash and availability on our credit facility of nearly $25.0 million. This is down from the prior year, and we were carrying significantly lower working capital levels as we had received advance payments from our major customer late in 2024. Working capital levels were flat during the quarter and we expect them to remain relatively consistent moving forward. Finally, with respect to our financial guidance, today we are reaffirming our full-year 2026 guidance. We expect full-year 2026 revenue to be in the range of $140 to $150 million and adjusted EBITDA to be in the range of $8 to $10 million. That concludes my remarks. I will turn the call back over to Eric to continue our discussion. Eric B. Blashford: Thanks, Tom. Now allow me to provide some thoughts as we move into 2026. We continue to make a decisive shift toward increasingly stable, growing power generation markets with an emphasis on oil and gas, renewables, and potentially nuclear. Our strategic emphasis is on pursuing the highest growth and highest margin opportunities that leverage our precision manufacturing expertise. Our facilities in Abilene, Texas; Chicago; Pittsburgh; and Sanford, North Carolina, near Raleigh, have more than 600,000 square feet of manufacturing space ready to serve our customers. Quarter upon quarter of repeat wins within the Gearing and Industrial Solutions segments from power generation, specifically within distributed power, as well as growing opportunities in both small-frame utility-scale natural gas turbines, support our strategy to expand in this market. Quote activity continues to increase in both Gearing and Industrial Solutions, generated by our ability to solve the complex precision manufacturing and sourcing challenges faced by customers in this growing market. So we are expanding resources to meet this demand in both divisions. In our Gearing segment, we continue to execute our strategy to move beyond traditional gearing markets through opportunities in other precision machined products. We are pleased with the increasing level of customer activity we are seeing in various new infrastructure-related markets such as road maintenance, cement plants, and aggregate material processing, along with some early green shoots in defense. Recent sizable orders we received from the power generation sector are the beginning of a multiyear cycle for which we are prepared. The expansion of our capabilities to serve the high-speed gear segment, such as the dynamic balancing capabilities I mentioned earlier, allow us to bring more processes in-house, decreasing lead times while improving quality and profitability. In Industrial Solutions, continued growth in the natural gas turbine industry driven by the global demand for power is having a positive commercial impact on our business. New data center installations are driving increased demand for distributed power solutions, including those that provide redundancy, and many of our key customers are adding significant production capacity in order to meet both the current and foreseeable future demand from power generation. We are proud to have recently received the 2025 supplier quality and delivery award from our largest customer, in recognition of our quick response to their significant growth in demand, all while meeting their strict quality and delivery requirements. In our Heavy Fabrication segment, we believe that domestic onshore wind tower activity will continue at its present rate through 2026 and into 2027. We have good visibility for tower production into 2026 and good customer indications beyond that. We are seeing increased quoting activity for our PRS line of natural gas pressure reduction units and expect sales to increase proportionately. In summary, I am pleased with the order growth and strategic actions we have taken this year as we continue to demonstrate our strong execution of our strategic priorities. Our divisions are well positioned to support the nation's growing need for power generation and infrastructure improvement, which we see as long-term opportunities for us. Our quality, quick response, and ability to solve complex manufacturing challenges for our customers continue to help us win new opportunities. We have reduced our cost structure, are investing wisely, and are taking strategic actions to refocus our resources toward higher value and growing end markets. We value our people and are committed to keeping them safe, fulfilled, and productive. This year, we will be implementing an ISO 45001 occupational health and safety readiness program, with plans to add that certification to our existing ISO 9001 and AS 9100 certifications. Our 100% U.S.-based plants are expanding capabilities to take advantage of opportunities afforded by the pro-domestic manufacturing policy backdrop afforded by the current administration. We are encouraged that our order intake continues to grow, positioning us for improved utilization of our manufacturing footprint in 2026, as we strengthen our foundation for steady, profitable growth serving the power generation, critical infrastructure, and other key markets with high-quality precision components and proprietary products to capitalize on improved demand in the years ahead. With that said, I will turn the call back over to the moderator for the Q&A session. Operator: Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from Eric Stine with Craig-Hallum. Your line is now live. Eric Stine: Hi, Eric. Hi, Tom. Hi, Eric. Good morning. Good morning. So I know Gearing and Industrial Solutions backlog is up 2x or more year-over-year. You did mention your expectations for revenue for Industrial Solutions in 2026. I am curious if you could just talk about Gearing a little bit. I know that, I mean, obviously, the demand is there, but the quarter was limited by utilization. So just curious, maybe thoughts on that, steps you need to do to get through that, and what 2026 growth might look like in Gearing throughout the year? Thomas A. Ciccone: Sure. Yes. So as you mentioned, our backlog is about double from where we entered 2025. So we are expecting significant growth within that segment in terms of revenue. For sure, double-digit growth can be relied on there. We are entering with a much stronger backlog. So it is about execution versus commercial success this year. Eric Stine: I mean, on execution, can you talk about that a little bit? I mean, this is not limited by timing of when customers want these components. It is more about you driving higher throughput, or just any details about how the year ended and why 2026 may be different or may be limited at the start, or anything along those lines? Eric B. Blashford: Well, I can add a little bit. This is Eric. With the backlog that we have, we are working towards the customers' requested dates, which are spread out throughout the year. So I would say there is a ramp up going to happen in Q1 with steady revenue in Q3 and Q4. Again, much visibility for the full year. Some of our backlog is into 2027, but most of it is 2026. If that helps you. Eric Stine: Yeah. No. That is helpful. Okay. Maybe, after selling Manitowoc, the balance sheet is in solid shape. You talked about redeploying it to different areas. That includes bolt-ons and some new capabilities. Maybe it is hard to share, but if there is anything you can share about areas that you think need added to, whether organic or inorganic? Eric B. Blashford: Well, we are definitely focused on power generation and critical infrastructure in all of our divisions, and our M&A search is in those areas, especially with grid or power generation. I think we are entering a super cycle for power generation and grid both. It is going to last at least ten years. And that is where my focus is, my targets are, in M&A. Also for organic growth, in BIS, which is obviously power generation, and in Industrial Solutions, and in Gearing with power generation in these turbines that are, I would call, midrange, which are 100 megawatts and less. Eric Stine: Got it. And maybe, so these are not, I mean, I guess bolt-on certainly implies that these are not necessarily significant acquisitions, but more about adding capabilities, whether it is a new product line, new manufacturing footprint, that sort of thing? Eric B. Blashford: Yeah. So they would be bolt-on acquisitions to our existing platforms. Eric Stine: Okay. Alright. Thank you very much. Eric B. Blashford: Thank you, Eric. Operator: Our next question comes from Justin Clare with ROTH Capital Partners. Your line is now live. Justin Clare: Hey, good morning. Thanks for taking our questions here. I wanted to just start out on capacity outlook for Industrial Solutions. You mentioned that you are expanding the capacity there, I think, by 30% to accommodate future growth. So just wondering, with that added capacity, how much potential revenue might be supported for the Industrial Solutions segment when it is fully utilized? And then if you could speak to how you anticipate utilization increasing over time here. Eric B. Blashford: Sure. Just for clarification, our footprint is increasing 30%, but our capacity, we have already doubled it through staffing and equipment. So that floor space is just over and above that. So I think we can easily double our revenue, if not maybe 2.2 times more than 2025 revenue, in our existing facility before we end up having capacity constraints. We are right now only operating at one shift, so we can add another shift if necessary. So I think we could certainly get into the $70.0 million range, revenue within our existing facility. Justin Clare: Okay. And any sense for the timing in which you might be able to achieve that level of revenue, given the visibility you have into demand and the discussions that you are having with your customers? Eric B. Blashford: Well, the growth in the combined cycle natural gas utility-scale natural gas turbines, which we serve in that market, is really, really strong. Our primary customers, their primary customer, GE, says orders increased 77% in 2025 alone. So I expect that the demand will be there from our primary customer and others all the way through 2030. So with customer indications, I think we have got a real strong chance of hitting that revenue number over the next several years. Justin Clare: Got it. Okay. That is helpful. And then maybe shifting over to the Heavy Fab business here. The backlog was down in Q4, but that partly reflects the Manitowoc divestiture. Wondering if you could speak to the underlying demand trends that you are seeing, the visibility you have, and maybe the timing for backlog conversion? And what you are expecting in terms of the cadence in orders in terms of the timing of bookings relative to when revenue will be recognized. Eric B. Blashford: Sure. As has been the practice in the market for some time now, our customers tend to release orders about six months or so in advance of their production needs. We have got good visibility for towers and adapters into Q3 2026, and customers have indicated that level of volume should continue through the remainder of 2026 and into 2027. Thomas A. Ciccone: Yeah, just to add to that, Justin, you asked about converting backlog. We see this as a ratable conversion consistent through 2026. So we are not seeing any spikiness in terms of revenue. It should be pretty ratable over the period. Justin Clare: Okay. Got it. That is helpful. Thank you. Operator: Our next question comes from Amit Dayal with H.C. Wainwright. Your line is now live. Amit Dayal: Thank you. Good morning, everyone. Thanks for taking my questions. Eric, with respect to sort of the 20% roughly level of organic year-over-year revenue growth you are guiding for, with the kind of visibility you have right now, and some of the macro conditions, I mean, they look favorable. Do you think this is a level of growth you can maintain for the next few years, at a minimum? Eric B. Blashford: Well, the markets that we are growing into have CAGRs of about 6% year-over-year, but in the great demand cycle that we are in, the products that we are in, such as natural gas turbines in medium and high capacity, the growth is beyond that CAGR that I mentioned to you. So I think we can, in those two divisions, achieve that kind of growth rate going forward over the several years, really through 2030, which is as far as we can see out now. Amit Dayal: Okay. Understood. And then the $6.0 million follow-on order, is this with just one customer? And then adjacent to that, are there other opportunities similar to this that you may be pursuing that are in the pipeline but not in the backlog? Eric B. Blashford: Sure. Again, this is the power generation market, which we are really excited about. That is the market that we are attacking because we have the capital equipment in place. We have got the certifications in place. We have got the customer relationships in place now. That is one customer that we are talking to with regard to that particular order, but we are talking to several others in that space. Amit Dayal: Okay. And, you know, just given sort of the recent volatility around events taking place in the Middle East, your exposure to the oil and gas space, are you seeing a little bit more inquiries, etcetera, or activity from that segment right now? Eric B. Blashford: We are. Several of our customers, now the orders are not huge like they were several years ago, but they are, I would call them, substantive, and it is multiple customers. So I think what they are doing is hedging their bets, if you will, that there could be a disruption in their supply, which sometimes comes from overseas. But there is demand, because the price of oil is an indicator of demand in the U.S., and our customers are in the fracking and drilling U.S.-based space. Amit Dayal: Okay. Yeah. That is all I have, guys. I will take my other questions offline. Thank you. Eric B. Blashford: Thanks, Amit. Operator: We have reached the end of the question and answer session. I would now like to turn the call back over to Eric B. Blashford for closing comments. Eric B. Blashford: Yes. Thanks, everyone, for being on the call today and your interest in our company. We look forward to coming to you again at the end of Q1 to talk about our results. Operator: Thank you. This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.
Operator: Good afternoon. Thank you for attending today's TechTarget, Inc. fourth quarter 2025 financial results conference call and webcast. My name is Tamiya, and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press 1 on your telephone keypad. I would now like to pass the conference over to your host, Charles D. Rennick, General Counsel. You may proceed. Charles D. Rennick: Thank you, Tamiya, and good afternoon, everyone. The speakers joining us here today are Gary Nugent, our Chief Executive Officer, and Daniel T. Noreck, our Chief Financial Officer. Before turning the call over to Gary, we would like to remind you that in advance of this call, we posted our press release in the Investor Relations section of our website and furnished it on Form 8-Ks. You can also find these materials on the SEC's website at www.sec.gov. A replay of today's conference call will be made available on the Investor Relations section of our website. Following opening remarks from Gary and Dan, they will be available to answer questions. Any statements made today by TechTarget, Inc. that are not historical, including during the Q&A, may be considered forward-looking statements. These forward-looking statements, which are subject to risks and uncertainties, are based on assumptions and are not guarantees of future performance. Actual results may differ materially from our forecast and from these forward-looking statements. Forward-looking statements involve a number of risks and uncertainties, including those discussed in the Risk Factors section of our most recent periodic report filed on Form 10-K and the forward-looking statement disclaimer in our earnings release filed earlier today. These statements speak only as of the date of this call, and TechTarget, Inc. undertakes no obligation to revise or update any forward-looking statements in order to reflect events that may arise after this conference call, except as required by law. Finally, we may also refer to certain financial measures not prepared in accordance with GAAP. A reconciliation of certain of these non-GAAP financial measures to the most directly comparable GAAP measures, to the extent available without unreasonable efforts, accompanies our press release. And with that, I will turn the call over to Gary. Gary Nugent: Thank you, Charles D. Rennick, and good afternoon, everyone. As always, we appreciate you taking the time to join us today, and your interest and engagement mean a great deal to us. I am pleased to report that Q4 2025 marked another step forward in our journey to establish TechTarget, Inc. as the indispensable partner to the B2B technology industry. During 2025, we laid the groundwork to return the business to top-line revenue growth in 2026 and accelerate that growth in the years ahead. Today's agenda is slightly different from previous calls. I will begin with an overview of our strategic progress and some market positioning. And following that, Chief Financial Officer, Daniel T. Noreck, will provide an overview of our financial performance. And then afterwards, we will open the floor for your questions. Let me start by highlighting the significant strides we have made in combining and transforming our business to become a market leader in what is a large and dynamic addressable market—a $20 billion addressable market—where we currently only hold a 2.5% market share, and the opportunities for expansion and growth remain substantial. In 2025, we achieved full-year revenue of $486.8 million on a combined company basis, in line with our guidance of being broadly flat year over year. Importantly, we delivered a strong 10% growth in adjusted EBITDA to $87.3 million, exceeding our guidance of $85 million. I think this demonstrates our ability to drive meaningful margin expansion through strategic focus and operational excellence. Our combination plan has been the key driver of this progress as we seek to leverage the breadth and the scale that the combination affords us. We made significant progress in consolidating, integrating, automating, and leveraging AI technology to improve our processes and systems that underpin the business—making ourselves easier to do business with and easier to work for—improving quality and productivity. On our products, by unifying our intelligence and advisory operations under the Omnia brand, we have created a comprehensive market intelligence platform. Bringing together the expertise of Canalys, Wards, and ESG under the Omnia banner simplifies our market positioning while enhancing the cross-selling opportunities. I think that Omnia’s award in November as the Analyst Firm of the Year by the Institute of Influencers and Analyst Relations (the IIAR) is a true recognition of the strength of this approach. We also streamlined and integrated our portfolio of brand-to-demand products. Launching the TechTarget, Inc. portal in September, the platform was the first offering to leverage our combined audience dataset, providing our clients with expanded reach and enhanced intent signals—over a 40% increase year on year. It also offered seamless integration with industry-leading marketing automation, client relationship, and sales enablement platforms and a unified customer experience. Additionally, we repositioned Netlite to address the cost-conscious demand generation market. This move, in particular, delivered exceptional results in terms of revenue and bookings growth while expanding our addressable market coverage. Our product roadmap for 2026 is compelling, as we leverage AI technology to enhance existing and launch new capabilities. I will talk a little bit more about this slightly later on. On the subject of our go-to-market strategy, we focused on the largest customers and the most dynamic, highest-growth markets. Thus, we increased our investment and coverage, establishing dedicated sales and service teams to deepen our relationships and strengthen our position in the most influential technology companies in the industry. This approach resulted in revenues growing double digit year over year from this cohort. On audience and audience membership, a key differentiation of our company is the role that we play in informing, educating, and shaping the buy side—the buying journey. Our expert, original, trusted editorial content remains a vital investment, and I am proud to share that in addition to the 48 prestigious awards for the strength and the quality of our journalism in 2025, and despite the changing patterns in search traffic due to AI answer engines, we leveraged the breadth of our network and reoriented our editorial and our audience membership development focus. Today, less than 45% of our traffic is sourced from search. Crucially, in 2025, our audience membership grew and our members became more active on our network. We learned that our prowess in search is a transferable asset and skill in this new AI answer engine world. Notably, our citations from AI answer engines increased in volume over 235% year over year. As we have discussed before, we see that the conversion rates to permissioned audience members are two to three times that of traditional search. On the subject of AI, as I have said before, we firmly believe that generative and agentic AI will be a huge positive for our business. We have made significant progress in adopting and embedding AI across four strategic areas of the business. The first one we call conversational AI interfaces—making our proprietary market data and our permissioned audience data more easily accessible and actionable by our clients. In the first half of this year, we will launch the AI research assistant, a multilingual conversational AI interface that will unlock a wealth of value from our proprietary intelligence and market data. Starting in 2026, we will debut a suite of AI-powered go-to-market intelligence solutions. This suite introduces advanced AI skills—the equivalent of apps—that allow marketers to generate actionable insights by synthesizing TechTarget, Inc.’s permissioned audience data and coupling that with their own internal and external web assets. The key capabilities will be AI-driven problem identification: by analyzing the specific content being consumed across our network, our AI will identify the actual business problems that buyers are researching, allowing go-to-market teams to move beyond broad targeting and engage prospects with differentiated messaging tailored to their immediate and specific needs. And AI-driven content insight: performance-based recommendations that will pinpoint which content topics and brand investments are successfully addressing buyer pain points, ensuring the strongest ROI on their marketing spend. Whether utilizing our pre-built AI skills or deploying their own, our customers will be fueled by our AI-powered go-to-market intelligence, making TechTarget, Inc. an indispensable fixture of the modern martech stack. The second area that we are focusing on is personalized audience experiences—bringing the wealth of expert, original, and trusted content from across our network to our audiences, rather than us taking them to the content—creating personalized content experiences based upon a deep understanding of their company, their role, their business problem, and where they are in their buying journey. The third area is enhancing the efficacy of our go-to-market programs, both for ourselves and our clients, as we improve the precision of our targeting and content and campaign effectiveness. Finally, the fourth area is automating our operations—enabling our experts to deliver deeper insights more efficiently and enabling our operations and customer success teams to deliver our products and services to our customers with increased quality and effectiveness. Talking with our customers, particularly with our larger customers, a key takeaway is an increasing desire on their part for integrated solutions rather than point products. Our customers are looking for partners who can provide scale solutions to their scale problems—precisely what the new TechTarget, Inc. was built to deliver. Taking just one prime example, in 2025, a key customer of ours lamented that they had to engage with over 30 supplier companies of our ilk in order to service their scale needs. Following a strategic review and a decision to focus on fewer, larger relationships, they have consolidated those relationships down, and I am delighted to see that we were a natural partner to partner with. Further, those same technology companies are keenly aware that they must deliver a clear ROI from the substantial investment that they have made in R&D and AI. We are very well positioned to be an essential partner in providing a range of products and services to help them achieve that. Our ambition is to become the indispensable partner to the B2B and technology industry—informing, educating, shaping, and connecting buyers to sellers. In 2026, our objective is to return the business to top-line revenue growth for the full year, with adjusted EBITDA expanding to $95 million to $100 million. Our strategy is to continue to build our house on the land that we own, by which I mean producing original, trusted, authoritative content that informs, educates, and shapes the industry through our expert analyst and editorial capabilities, and in doing so, nurturing that proprietary market and our permissioned audience membership data asset. We are going to continue to leverage the breadth and scale of the product portfolio to deliver a unified and integrated customer experience. We are going to continue to focus our go-to-market efforts on the largest customers and the hottest markets where scale solutions solve scale problems. We are going to continue to make ourselves easier to do business with and easier to work for—adopting AI across all disciplines to improve quality, enhance productivity, and in particular, to amplify the expertise of the 1,900 colleagues that ply their trade at TechTarget, Inc. I am incredibly proud of the progress that we have made, and I want to express my gratitude to our dedicated colleagues and their teams for their hard work and commitment. It is their efforts that have positioned us to seize the opportunity that lies ahead. Thank you for your time. I look forward to updating you on continued progress in the quarters ahead. I will now turn the call over to Daniel T. Noreck to discuss our financial results in detail, and then we will be happy to take your questions. Daniel T. Noreck: Thanks, Gary, and good afternoon, everyone. I am pleased to be able to report on 2025 results that I think delivered in line with or ahead of our guidance and market expectations, which demonstrated both our operational discipline and strategic execution capabilities. We delivered full-year revenue of $486.8 million, which Gary mentioned earlier, was right in line with our guidance of being broadly flat compared to the $490.4 million we achieved in 2024 on a combined company basis. While revenues remained stable, our focus on operational excellence and strategic reorganization with accelerated delivery of cost synergies drove strong margin expansion. Our adjusted EBITDA reached $87.3 million, comfortably exceeding our guidance of $85 million, representing a healthy 10% increase from 2024’s $78.8 million on a combined company basis. This translated to an adjusted EBITDA margin of 17.9% in 2025, a meaningful improvement of 180 basis points from the prior year. Our fourth quarter performance was particularly strong with revenues of $140.7 million, representing a solid 3% year-over-year increase on a combined company basis. Q4 adjusted EBITDA of $41.6 million represented a 56% year-over-year increase, with our adjusted EBITDA margin expanding to around 30% compared to approximately 20% in the corresponding quarter of the prior year on a combined company basis. Our Q4 performance reflected some seasonality in the business but also benefited from our strategic initiatives that are gaining traction, which allowed us to accelerate the realization of cost savings, along with some favorable phasing impacts. Our quarterly progression throughout 2025 tells a story of building momentum. Following the seasonally slower first quarter, each of the remaining quarters of the year showed positive sequential revenue progression, a trend we expect to continue in 2026. From a year-over-year perspective—on the comparative combined company measure—revenue performance consistently improved from minus 6% in Q1, narrowing to minus 2% in Q2, getting back to growth in Q3 at plus 1% and plus 3% in Q4. Our balance sheet also reflects a strong financial foundation that supports our strategic initiatives while maintaining the flexibility to capitalize on growth opportunities that may arise. At the end of 2025, we had cash and cash equivalents on the balance sheet of around $41 million and had utilized around $107 million of our $250 million unsecured five-year revolving credit facility, resulting in net debt of approximately $66 million, not vastly different to the approximately $62 million at the end of 2024, despite significant cash expenditures in the year on acquisition, integration, and restructuring costs. Our free cash flow reflects the impact of our integration and restructuring investments in 2025. On an adjusted basis, we delivered meaningful cash flow, demonstrating the strong underlying cash-generation characteristics of our business model. Net debt at year-end relative to adjusted EBITDA for the year was just 0.8x and slightly lower than at the end of 2024, illustrating the strong cash-generating characteristics of our business. Now quickly turning to our guidance for 2026. Following the substantial progress made with our combination program in 2025, the priority for 2026 is to build on the foundations laid and to return to growth in 2026. Our assumption is that the market environment will remain similar to that in 2025. Nevertheless, we expect to grow our revenues in 2026. Coupled with our continued cost discipline, annualization of synergies, and operational leverage, we expect our adjusted EBITDA to grow further to a range of $95 million to $100 million, marking a further meaningful improvement in our adjusted EBITDA margin. Q1 2026 will reflect this trend. This guidance reflects our confidence in the progress we have made through our strategic initiatives and the strong foundation we have established for sustainable growth. In conclusion, our financial model is built to scale efficiently. Every additional dollar of revenue delivers substantial incremental margin, highlighting the strength of our unit economics. This structure enables us to grow profitability and free cash flow over time. With that, we are now happy to answer your questions. Operator, will you please open up the line for Q&A? Operator: Absolutely. We will now begin the question and answer session. If you would like to ask a question, please press star followed by 1 on your telephone keypad. If for any reason at all you would like to remove that question, please press star followed by 2. Again, to ask a question, please press star 1. The first question comes from Eric Martinuzzi with Lake Street. You may proceed. Eric Martinuzzi: I wanted to, first of all, congratulate you on the fourth quarter results and overachieving versus the adjusted EBITDA for the year. But I was particularly impressed with the go-to-market strategy results. Your comments in the press release talk about an approximate 10% growth in revenue from your largest customers. Was that a full-year basis, or is that a Q4 metric, Gary? Gary Nugent: Hi, Eric. Good to hear from you. That is a full-year basis, and on a combined company basis. Eric Martinuzzi: Okay. And then, you know, there was a time when the different tiers of customers—if I go back to, like, 2024—you talked about the 7,500 customers that the combined entity had and that there were 70 customers that were over $1 million a year in billing. Is that the tier of customers that we are talking about here, or are you stratifying the customer base differently? Gary Nugent: Oh, no. We are stratifying the customer base differently. It is not the same. If you recall, we have identified about $10 billion of our $20 billion addressable market sits with about 150 to 200 clients in the marketplace. We then further prioritize that down to a cohort of 30 portfolio customers and then a further 120 or so customers that are what we would call majors. The number that I am quoting for you is for that cohort of 30. Eric Martinuzzi: Okay. And then is there—you know, you have got so many different products that you are offering customers now. What was resonating with that largest cohort? First of all, did they contract in their use of any of the products? And then what was it that they expanded their use of? Gary Nugent: Well, you appreciate it is a bit of a mixed picture when you go down to the individual customer level. I would say, if there was a trend there, we saw really strong demand for demand—so there was strong demand for our demand products. That was encouraging to see, in particular as we consolidated and rationalized the demand portfolio and did a better job of the market positioning of that. Secondly, content. Content was generally a strong theme last year as customers were looking to really establish a distinctive voice in the marketplace, to stand out from the noise, and to leverage the expertise we have—our analyst and our editorial expertise—to really give them a bit of brand association. Eric Martinuzzi: Alright. And then, given the total revenue on a pro forma combined basis actually declined 1%, obviously the smaller customers contracted to sort of offset the success that you had with the higher tier—the, as you put it, the 30 portfolio customers. Was there any themes to recognize across the smaller customer base—either, you know, smaller enterprise or SMB themes? Gary Nugent: It is a good—what I suppose this email would talk to is much more about international markets for us. I think what we saw in particular was in the Asia Pacific region and the triangle between Singapore, China, and Korea—well, it is not tying up by the fourth point to square, is it? Add Tokyo to that. That was definitely a market that was challenged last year, in particular some of the macroeconomic situation with Asian technology companies looking to export their businesses internationally. That was probably the area where I would see the trend really was. I think then we just also saw in that small to medium end of the IT marketplace that that was a market where—I do not think that was the odd—but there was deal—there was customer churn in that market in the small to medium end. Eric Martinuzzi: Got it. Alright. And then, Dan, as we are doing our modeling here for 2026, obviously the top line—did not want to put too fine a point on it—but as I am looking at the growth that you had in the back half of 2025 on the pro forma combined, you were up 1% in Q3, you were up 3% in Q4. Is it a prudent starting point to kind of take the blend there and say, hey, if we are going to grow, let us maybe start with a 2% and just use that as a baseline, or is that too aggressive? Daniel T. Noreck: Eric, I think that the way you are laying it out makes sense. I think you could go maybe a little higher than that 2%, but I think the way you are thinking about modeling makes sense to me. Eric Martinuzzi: Okay. And then last question is around the source of the incremental adjusted EBITDA. Obviously, revenue is not going to be—revenue, we are planning on it to be a little bit higher in 2026, but, you know, let us just, for discussion’s sake, say we are talking about a flat revenue in 2026 versus 2025. In 2025, that adjusted EBITDA number was around the—what was it? Yeah, $87.3 million. And yet you are guiding to kind of a midpoint of $97.5 million. So just to keep it simple, call it $10 million of incremental adjusted EBITDA. What is it that is getting you there? Is this primarily going to be driven by further synergies on bringing the two entities together, or what is driving that? Daniel T. Noreck: Eric, if you think about where the synergies landed in 2025, they were really back-half loaded. So you are really going to start to see the impact of that throughout the full year, as opposed to just being contained to the second half of the year. Eric Martinuzzi: Got it. Okay. Thanks for taking my questions. Gary Nugent: Thank you. Thanks, Eric. Thank you. Operator: As a quick reminder, if you would like to ask a question, please press 1 on your telephone keypad. There are no more questions remaining at this time. This concludes today's conference call. Thank you for your participation. You may now disconnect your line.
Operator: Hello, everyone. Thank you for joining us, and welcome to the Stitch Fix, Inc. second quarter fiscal year 2026 earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. To withdraw your question, please press 1 again. I will now hand the call over to Cherryl Valenzuela, Head of Investor Relations. Please go ahead. Cherryl Valenzuela: Good afternoon, and thank you for joining us today for the Stitch Fix, Inc. second quarter fiscal 2026 earnings call. With me on the call are Matt Baer, Chief Executive Officer, and David Aufderhaar, Chief Financial Officer. We have posted complete second quarter 2026 financial results and a press release on the Quarterly Results section of our website, investors.stitchfix.com. We would like to remind everyone that we will be making forward-looking statements on this call which involve risks and uncertainties. Actual results could differ materially from those contemplated by our forward-looking statements. Reported results should not be considered as an indication of future performance. Please review our filings with the SEC for a discussion of the factors that could cause the results to differ, in particular, our press release issued and filed today, as well as our Annual Report on Form 10-K for fiscal 2025 and subsequent periodic reports filed with the SEC. Also note that the forward-looking statements on this call are based on information available to us as of today's date. We disclaim any obligation to update any forward-looking statements except as required by law. Please note that fiscal 2024 was a 53-week year due to an extra week in the fourth quarter. As such, references to consecutive quarters or year-over-year revenue growth rates on this call are based on an adjusted 52-week basis, removing the impact of the extra week to provide a comparison that we believe more accurately reflects our performance. During this call, we will discuss certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures are provided in the press release on our Investor Relations website. These non-GAAP measures are not intended to be a substitute for our GAAP results. Finally, this call in its entirety is being webcast on our Investor Relations website and a replay of the call will be available on the website shortly. And now let me turn the call over to Matt. Thanks, Cherryl. Matt Baer: Good afternoon, everyone. Q2 was another strong quarter marked by our fourth consecutive quarter of year-over-year revenue growth. We continue to successfully execute our transformation strategy and are seeing the cumulative impact of those efforts to both strengthen the foundation of our business and reimagine our client experience. The enhancements we have rolled out over the past 18 months, including greater flexibility, meaningful improvements we have made to the quality and breadth of our assortment, and new AI features, are driving increased client engagement and durable revenue growth. As a result, we are solidifying our position in the market and our role as our clients' retailer of choice for apparel, footwear, and accessories. Getting into the specific numbers, revenue exceeded our outlook and grew 9.4% year over year to $341,300,000, supported by broad-based demand that remained resilient across all income cohorts. Revenue per active client reached $577 in Q2, our highest revenue per active client as a public company. We achieved this growth while driving leverage in our business. Q2 was our eighth consecutive quarter with a contribution margin greater than 30%. Adjusted EBITDA also exceeded our outlook and was $15,900,000, or 4.7% of revenue. We also continued to gain market share and significantly outperform the broader U.S. apparel and accessories market during the quarter, highlighting the strength of our value proposition. Our 9.4% year-over-year revenue growth in Q2 contrasts with the 0.5% contraction the total U.S. apparel, footwear, and accessories market sustained in the same period, according to the latest Circana data. Our growth this quarter was anchored by the Fix channel. By leveraging our unique curation capabilities and expert stylists, we have leaned into head-to-toe outfitting and strategic category expansion. This high-touch approach is resonating deeply. Both our women's and men's Fix businesses grew double digits, contributing to a nearly 10% year-over-year increase in Fix average order value, our tenth consecutive quarter of growth. A key driver of this performance is the increased flexibility we have integrated into our service. Adoption of our larger Fixes, which offer up to eight items in a Fix versus the original five, continues to grow. We are also seeing high resonance with other newer formats, such as themed Fixes and Fixes built around a Freestyle item of a client's choosing. The average order value for these Fixes are, in aggregate, nearly double that of a traditional five-item Fix. We have also fundamentally improved the selection of items within each Fix. The growth in Fix average order value was driven by higher average unit retail, which grew 7.7% year over year, our sixth consecutive quarter of growth. The increase was largely fueled by a more compelling assortment and favorable mix. External pricing factors, including tariffs, were not a significant driver of the change. In Q2, we successfully captured seasonal winter demand for warm layers, with outerwear a top growth category in both our women's and men's businesses, up 26% combined. We also saw strong demand for denim, up 17%. In addition, activewear and athleisure were strong contributors to our performance in the quarter, growing 37% year over year combined. We also saw strong demand for special occasion and social events or night-out styles, which grew 46% this quarter. Of note, we have also been expanding our assortment in strategic categories where we are seeing increased demand, such as footwear and accessories. Footwear grew 33% year over year across our men's and women's businesses, with sneakers alone up 46%. Accessories grew 51% year over year across both lines of businesses. As we mentioned last quarter, we believe expanding our relevance in activewear, athleisure, footwear, and accessories can unlock a significant wallet share opportunity. We estimate our fair share within our existing client base in these categories represents approximately $1,000,000,000 in incremental revenue. We also continue to optimize our brand mix. We are pairing more of the brands clients already know and love with private brands that are purpose-built from our data to offer exceptional quality and value. Within our private brands, we saw strong performance from Market & Spruce, Montgomery Post, 41 Hawthorn, and WeWander, with revenue from each up more than 35% year over year. The work we have done to optimize our assortment and brand mix set the stage for a strong holiday performance. This achievement was fueled by a deeper selection of seasonally relevant merchandise and a strategic promotional cadence which delivered record Freestyle sales during the Black Friday/Cyber Monday period and sustained broader momentum through the end of the calendar year. Importantly, we achieved this growth while maintaining strict discipline within our Fix business, driven primarily by our enhanced Freestyle-exclusive promotional capabilities. We continue to be encouraged by our active client trends. This quarter marked our seventh consecutive quarter of improvement in year-over-year active client growth rates, reflecting the disciplined and methodical progress we are making to build a healthier client base. Of note, our men's business, after returning to sequential growth in active clients last quarter, returned to year-over-year growth in Q2. We are also excited by the early results we are seeing from Family Accounts, which enable a client to manage multiple accounts within a single household. This feature is emerging as a lower-cost way to grow family wallet share while unlocking new ways for clients to shop for others and supporting gifting behavior. Our holiday results reinforce our confidence in its potential as an efficient acquisition lever in future key gifting moments. Taking a broader view of our performance, we ended Q2 with active clients of 2,300,000, in line with our expectations. Here are a few highlights. New clients grew year over year for the second consecutive quarter. Three-month LTVs for new clients have now grown year over year for 10 consecutive quarters and remain at three-year highs. Reengaged clients also grew for the second consecutive quarter, and the number of clients on recurring shipments continued to grow year over year. And we also just completed a quarter in which we had the highest retention rate in nearly four years. We are encouraged by the early signals from Stylist Connect, our new platform for near real-time client-stylist collaboration. While still a recent addition, it is already helping us strengthen relationships between our clients and our stylists. Clients who engage in the feature are significantly more likely to request the same stylist for their next Fix. We believe these positive trends confirm the improved quality of our new and returning client cohorts, and will lead to greater client retention, higher revenue predictability, and improved profitability over the long term. We remain on track to deliver positive sequential net adds in Q3. A key driver of our performance is how we are leveraging technology and innovation, and AI specifically. Technology and innovation have been at the core of Stitch Fix, Inc.'s business since day one. Since our founding, Stitch Fix, Inc. has capitalized on the latest technology advancements as well as data science and proprietary algorithms to provide a superior retail experience. Our proprietary data and algorithms remain a competitive advantage. We know more about our clients, their fit, their budget, and their style preferences prior to them ever receiving a Fix. We also have a continuous loop of both direct and indirect data from our clients, as well as nuanced insight on our merchandise assortment and how specific items fit. We have billions of data points to leverage. Because we know our clients so well, we are able to leverage AI to deliver incomparable client experiences. One way we are putting this data to work is through our AI style assistant, which empowers our stylists by helping clients better articulate what they are looking for. This tool captures richer signals that enable our stylist to curate Fixes that better meet each client's specific needs. We are also leveraging AI to inspire clients and help them discover the styles they will love. A clear example is Stitch Fix Vision, our AI-powered styling platform that provides clients with personalized imagery of them in a wide array of shoppable head-to-toe outfit recommendations based on their own style profile and the latest fashion trends. Clients who have engaged with Vision use it on a consistent basis, with 75% returning to use it again in subsequent months, and that engagement has translated into increased sales. We saw an over 100% lift in Freestyle spend over a 90-day period for clients who used the feature. As we further execute our strategy, we are confident in our ability to maintain a balance between growth and profitability. Our unique data-driven model, which combines personalized styling expertise, AI-powered recommendations, and a compelling assortment across Fix and Freestyle, enables us to meet clients where they are while driving both engagement and spend. This integrated approach creates a powerful feedback loop between human insight and technology, strengthening client relationships and improving unit economics over time. The investments we are making in our client experience, AI capabilities, and merchandise mix are designed to drive durable revenue growth while preserving margin integrity. These strategic drivers are performing in line with our expectations, supporting our improved full-year revenue guidance, as we remain focused on finishing the year strong. As the business continues to scale, we believe we will be able to generate increasing leverage and deliver consistent, sustainable profitability over time. I want to thank our team for their focus and execution, and our clients, partners, and shareholders for their support. With that, I will turn it over to David to discuss our financial results and outlook in more detail. Thanks, Matt, and good afternoon, everyone. Our second quarter results reflect continued progress against our strategy and the momentum we are building across the business. David Aufderhaar: We delivered strong revenue growth and disciplined expense management, while continuing to invest in the client experience and innovation. These results underscore the benefits of our methodical approach to strengthening the business and positioning Stitch Fix, Inc. for consistent and sustainable performance over time. Now let's turn to the numbers. Revenue was $341,300,000, up 9.4% year over year, exceeding our outlook. Fix average order value rose 9.8%, driven by more items per Fix and higher AUR, reflecting strong demand for larger Fixes and our improved assortment. We ended Q2 with 2,300,000 active clients, in line with our expectations. Revenue per active client was $577, up 7.4% year over year, marking the eighth consecutive quarter of year-over-year growth and the highest RPAC we have reported as a public company. The growth in RPAC confirms that our strategy is effectively leading to increased client engagement and spend, ultimately driving a higher share of wallet from our clients. Gross margin was 43.6%, slightly above the midpoint of our FY26 range of 43% to 44%, with contribution margins remaining strong above 30% for the eighth straight quarter. Advertising was 8.5% of revenue in Q2, slightly below our expected range of 9% to 10%. As we have discussed, we are being deliberate in how we invest, prioritizing efficiency and long-term client quality over near-term volume. Q2 adjusted EBITDA came in at $900,000, or a 4.7% margin, outperforming expectations on strong revenue and disciplined expense management. We ended Q2 with $240,500,000 in cash and investments and no debt. Inventory was $122,100,000, up 11.4% year over year, reflecting investments in our client experience and increased demand. Turning to our outlook for Q3 and FY26. For full-year FY26, we expect total revenue to be between $1,330,000,000 and $1,350,000,000. We expect total adjusted EBITDA for the year to be between $42,000,000 and $50,000,000, and we continue to expect to be free cash flow positive for the full year. For Q3, we expect total revenue to be between $330,000,000 and $335,000,000. We expect Q3 adjusted EBITDA to be between $7,000,000 and $10,000,000. For the second half of the year, we are tightening our revenue guidance range, reflecting greater confidence in the underlying momentum we are seeing, while continuing to be thoughtful and realistic about the environment ahead. We expect growth rates to moderate as we lap a strong two-year AOV stack. We believe there remains opportunity to continue driving steady AOV improvement. Ongoing enhancements to our client experience, including a stronger, more relevant assortment, continued category expansion, increased Fix flexibility, and the use of AI to support more dynamic client engagement, provide a durable foundation for that progress. At the same time, we believe our methodical approach to rebuilding our active client base is working. We are encouraged by continued improvement in active client trends and remain confident that sequential net active client adds will be positive in Q3. Over time, as both AOV and active clients improve, we believe this positions the business for compounding growth. We continue to expect full-year gross margin to be approximately 43% to 44%, and full-year advertising costs to be between 9% and 10% of revenue. In closing, we are encouraged by the progress we are making across the business. Our focus on delivering a strong client experience, rebuilding our active client base with discipline, and maintaining financial rigor is driving improved performance and positioning us well for the remainder of the year. With that, Operator, we can open up the line for Q&A. Operator: We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press 1 on your telephone keypad. To withdraw your question, please press 1 again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please hold while we compile the Q&A roster. Your first question comes from the line of Dana Lauren Telsey from Telsey Advisory Group. Please go ahead. Dana Lauren Telsey: Hi, everyone. Nice to see the progress. I wanted to get some more color on what you are seeing from the current consumer. It sounds like the AURs are being well accepted. Is that existing brands, new brands? You have brought on new brands over the past couple months. How has that gone? And then we would love to know more about active client growth and, sequentially, how you are thinking about it going forward. Thank you. Matt Baer: Hey, Dana. It is Matt. I appreciate the comments on the progress that we have made. The team has done a phenomenal job driving this really continued outperformance from a revenue growth standpoint, so I appreciate that. I heard about three questions there: just a check-in in terms of how we are seeing the consumer and how that has impacted our AUR performance, the impact between private brands and national brands, and then an update on our active client count. I will answer the first two, and David can jump in with additional color as well as answer the third on that client count piece. In terms of the consumer, one of the things that gives us additional confidence in our ability to continue to perform and sustain this momentum is that we are seeing equally positive performance across all different income cohorts within our client base. We are seeing that strength across the board, and the increase in AUR that we have been able to deliver is really reflective of continuing to improve the quality of our assortment overall. Within our private brand portfolio, we have been investing to deliver an even higher-quality product while maintaining exceptional value for the end consumer, and our clients have really resonated with that. That is why we were excited to share the outsized growth that we are seeing within many of our private brands within our portfolio. We also continue to strategically add market and national brands in order to meet the needs of our clients and fill white space. In addition to the brand piece, something else that we have talked about on prior calls that is part of our merchandise-focused transformation is investing in newness and making sure that we stand for style and trend. In the second quarter, sales from new styles were up roughly 50% year over year. So that investment that we are making into new product is also resonating extremely well with our clients. As you know, having the best assortment is critical for delivering our AOV and revenue growth, so we really do feel good about the work that we have done there and the way that it is helping to drive that performance across the board. David Aufderhaar: And then, Dana, on active clients, first, the results we saw this quarter were definitely in line with our expectations. As a reminder, we have seasonality in our active clients where Q2 and Q4 tend to be a little bit seasonally softer quarters for us around active client growth, and we are certainly encouraged by being able to continue to commit to seeing sequential client growth in Q3, and we are confident we remain on track to do that. Size and shape, we are just returning to quarter-over-quarter growth, so we probably anticipate that Q3 client growth to be a little less than 1% quarter over quarter. But, again, encouraged with those results. And taking a step back, we continue to be encouraged with the overall trends that Matt called out earlier in his remarks around new client acquisition, reengaged clients, and client retention, and that really goes back to that methodical approach that we have been talking about the last few quarters where we are really focused on rebuilding a healthy client base, and that continues to be our focus. One of the metrics I know we have been calling out a lot lately is that 90-day LTV, and that was up 5% year over year. It was the tenth quarter in a row that we have seen year-over-year growth, and so just really confirming that we are bringing healthy clients into the mix. And from a go-forward perspective, we will provide more detail on specific numbers around Q4 next quarter, but our focus continues to be around sustainable, profitable client growth, and using that methodical approach, we absolutely expect year-over-year comps to continue to improve, and our goal is to return to year-over-year active client growth in FY27. So definitely encouraged with the results we are seeing. Matt Baer: Thank you. Operator: Thank you very much for your question. Your next question comes from the line of Dylan Douglas Carden from William Blair. Dylan, your line is now open. Dylan Douglas Carden: Thanks. The comments around revenue per decelerating as you lap harder comparisons. I mean, you already kind of started to lap some of those comparisons. So can you give a sense of what is behind that, or is that just general caution? I have some follow-ups. David Aufderhaar: Yeah, Dylan, are you talking about the back-half revenue comps? Dylan Douglas Carden: Correct. David Aufderhaar: Yeah, I got it. So, over the last couple quarters, I think we have consistently guided to a deceleration in the back half of the year, and, actually, this back-half guide is an improvement from last quarter's guide. But there are a couple factors that I would call out. First is what we have been discussing the last couple of quarters. There are just more challenging AOV comps in the back half of this year. We have had 10 consecutive quarters of AOV growth, and Q3 and Q4 last year had AOV growth of 10% and then 12%. And our guidance in the back half of this fiscal year still assumes healthy AOV growth, but it is probably in the 4% to 6% range. So that is the first factor. The second, when you think about Q2 to Q3, we had a really strong holiday season compared to last year in Q2, and that does not necessarily play forward into future quarters. One data point there: December was our highest revenue comp in the quarter at around 12% year-over-year growth, and the holiday period also created probably a little bit of pull-forward activity from Q3 into Q2. And then, lastly, considering the macro environment and current trends in consumer sentiment and some of the volatility we are seeing, we still think it is prudent to assume some headwinds in spending in the coming quarters. And so all of that is factored into our guide for the year, but again, we are really encouraged with what we are seeing, and we are really encouraged with the guide that we have been able to provide where we raised the low end of the full-year revenue guide. And after significantly increasing our full-year guide last quarter—if, as a reminder, you take the last two quarters and add them together—we raised the midpoint of our revenue guide by about $35,000,000 over those two quarters, and our EBITDA by almost $9,000,000. So still really encouraged with what we are seeing with those trends. Dylan Douglas Carden: Very good. Thank you. And then I am curious on the assortment, Matt, maybe. Do you kind of have it where you want it now, particularly as you start thinking about maybe the women's business with that influx? Matt Baer: Yeah. Hey, Dylan. I appreciate the question. Ensuring that we have best-in-class assortment is a perpetual area of focus for us. We are always going to challenge ourselves to make sure that we have the right brands, the right mix, the right breadth and depth within that, and we are always going to continue to drive an improvement there. We have talked about previously that the initial focus as part of our transformation was more heavily weighted towards our men's business. We feel really good about where we are there, and we also feel great about the progress that we have made across the board within our women's business. As I noted, our women's Fix business was up double digits from a revenue perspective last quarter, which is a really strong signal in terms of the strength there, but also recognition that we still have opportunity to improve the assortment even further, which gives us even greater confidence in our ability to sustain the gains that we are seeing across the board. In addition to that, I would just point us back to something that was in the prepared remarks and that we have talked about previously around this $1,000,000,000 wallet share opportunity that we have with our existing client base across footwear, accessories, activewear, and athleisure. We are delivering outsized growth in those categories, but because of the relatively smaller base that they started at, we still have an exceptional opportunity to continue to lean in there. And that is part of, again, what enables us to increase engagement with clients, deliver success with larger Fixes, increase our wallet share, and ultimately continue to deliver these outsized market share gains that we have delivered. Dylan Douglas Carden: Excellent. And then just last one on the repeat customers that are some of the higher that you have seen. Has that proven out to be greater wallet share across use cases? Is that just spending more on existing categories? How should we think about how people are coming to you more and more? Matt Baer: If I understand the question correctly, Dylan, the work that we do is to ensure that we are able to serve clients across a variety of use cases. And whatever use case that a client comes to us for—for example, if they are starting a new job and we need to update their wardrobe with the appropriate workwear—through that client-stylist relationship, we are also able to navigate them to other use cases. It is why we are excited to share in the prepared remarks the success that we have seen, for example, in social occasion dressing and in night-outs, and that is also why we are seeing that outsized growth in activewear and athleisure as well. Because we have such great assortment across the board for all of these different use cases, that expansion of use cases with our clients continues to be one of the drivers that is helping propel the revenue growth. We are going to continue to lean into that, as well as continue to lean into head-to-toe outfitting across footwear and accessories. Operator: Thank you very much for your question. Your next question comes from the line of Jessica Tian from Bernstein. Jessica, your line is now open. Jessica Tian: Hi, thank you for taking my question and congrats on the quarter. I had a two-part question on the guide. So first on the H2 guide, it looks like the Q2 beat on adjusted EBITDA did not fully flow through to the full-year outlook. Should we read that primarily as conservatism on your part, or is there anything in the underlying margin trend that caused you to hold back some of that upside? And then second, on the Q3 active client sequential inflection, with new clients growing year over year for the second consecutive quarter and five-year-low dormancies last quarter, can you talk about what is driving the expected sequential increase in the adds? Should we think about that improvement as coming more from reduced dormancy, or is it coming more from new clients? Thank you. David Aufderhaar: Yes. Thanks, Jessica. On the EBITDA guide, I think we are really encouraged with increasing the full-year guide. If you look at the full-year guide, I think we increased the low end of the guide by around $4,000,000 and the high end of the guide by $2,000,000. And so we definitely still feel like we have got a very healthy flow-through of EBITDA for the year. On the active clients, on the sequential, I think Matt might have called out in some of his prepared remarks as well, but we are really seeing strength across all three of those cohorts that we tend to call out. New acquisition was up year over year for the second quarter in a row. Reengaging clients was up for the second quarter as well from a year-over-year perspective. And client retention is definitely looking healthier than it has been in quite a long time. And I think that is a big part of our focus—the client retention side—and it almost comes back to that full loop of making sure that we are bringing in those high-LTV clients that engage with the service, and also, for our existing client base, all of the new client features and the improved assortment that Matt called out as well. All of those things just create stickier relationships from a client perspective as well. And so all three of those things are trending in the right direction, and that is why we have felt comfortable really calling out that sequential improvement and the sequential quarter-over-quarter increase in Q3. Operator: Thank you very much for your question. We will now move on to the next question from David Leonard Bellinger from Mizuho. David, your line is now open. David Leonard Bellinger: Hey, everyone. Thank you. I want to ask on the Q3 guidance. Revenue growth up something above 2% at the midpoint. And I think, if I am hearing you correctly, a lot of that deceleration from this quarter has to do with the lapping positive revenue growth last year, some of this AOV uptick. Is there anything else that explains the deceleration? Any other context around the external pressures that you have started to factor into the guidance? You have got gas prices moving up. Is any of that starting to show up in the business? Can you just remind us how gas prices moving higher has historically affected Stitch Fix, Inc.? David Aufderhaar: Yeah, David. I think, outside of the AOV comps we called out earlier—and that is certainly the bigger factor around the change quarter to quarter—I think the second callout was really the holiday period. And so I think that is a big part of the sequentials. We had a really strong holiday period this Q2. That is not necessarily something that plays forward. And then, on the macro side, definitely when you see the consumer sentiment where it is, the February jobs report, gas prices certainly going up—and gas prices, for us, that is not discretionary spend. And so if someone is having to spend more on gas, that just means less in their wallet for discretionary spend like apparel. And so certainly those things we have taken into account in that back-half guide. The other thing that you can see, though, is that because of the point in time where we are this year, you can sort of back into a Q4 guide as well, and we are really encouraged that between Q3 and Q4 you still see an acceleration in that revenue growth as well at the midpoint, where the midpoint in Q4 calculates to something closer to 4%. And so definitely really encouraged with that as we close out the year. Matt Baer: David, what I will add as well is, while not to minimize the impact of gas or challenges on the consumer in the broader macro environment, something that we have talked about previously is just how we are uniquely situated to perform really well if and when the overall wallet for our clients shrinks. Our clients and stylists have a very deep and enduring relationship that allows them to have a real conversation around how budget might be shifting month to month, week to week, quarter to quarter. We have the breadth and depth of assortment across all different price points, so we can meet our clients where they are at any given time. And we continue to see us perform relatively well in those periods where the consumer is potentially challenged. And that is what gives us so much confidence that, wherever the overall market goes, we will continue to be a market share gainer. David Leonard Bellinger: Very helpful. David Leonard Bellinger: My second question, I want to ask about GLP-1 usage. That seems to be a relatively new and positive customer driver. Can you help frame up any exposure to the business? Are these customers more sticky, more engaged? Can you simply get more of them as GLP-1 usage becomes increasingly popular? Thank you. Matt Baer: Yeah, David. I appreciate that question as well. Again, the uniqueness of our service and that superior level of service that we provide each of our clients positions us extremely well to serve clients going through a body transformation, and we have made it a real point of emphasis to market that capability of our service. So we are out in market and have been for a while explaining to consumers that are on a GLP-1 medication that as their body transforms, they have the ability to work with a personal stylist to help ensure that they have everything that they need so that they can dress in clothing that fits at each stage of that weight-loss journey that they are on. We have seen really positive results in terms of how that is helping them improve their confidence, how that is helping them improve their ability to get dressed and outfit themselves on a daily basis. And we have seen that also show up in our data as well. Client mentions of weight loss in their Fix request notes, as an example, have tripled over the last two years. It has actually surged 75% year over year just this past quarter. And what that tells me is that the work that we have been doing to improve the segmentation and targeting within our marketing capabilities is working extremely well, and that the quality and superiority of our service is really resonating with those clients. We will continue to lean in, and we will continue to serve that demographic at a really high level. Operator: Thank you. There are no further questions at this time. I will now turn the call back to Matt Baer, CEO, for closing remarks. Matt Baer: Thanks. To wrap up, as I said, we are incredibly pleased with the strong results we delivered this quarter and the improved guidance that we shared for the back half of the year. We believe we are uniquely positioned to lead in this moment of AI innovation, and that is because of just how seamlessly data science and AI are integrated into our business, how deeply and personally we know our clients, and how holistically we have integrated our expert stylists. Due to the significant improvements we have made to our experience and assortment through our transformation, we are capturing increased market share and outperforming the broader apparel retail market. We are also building a stronger client base, with seven consecutive quarters of improving year-over-year active client trends, and also, as we noted, the expected growth in active client count in the third quarter. We are confident the growth in our business will continue and that this growth will be sustainable. Important to note that since the start of our transformation, we have improved our contribution margins more than 500 basis points, and we have maintained contribution margins above 30% for the last two years. I appreciate everyone's interest in our business and look forward to sharing future updates with each of you in the future. Operator: This concludes today's call. Thank you for attending, and you may now disconnect.
Operator: Good morning, ladies and gentlemen, and welcome to the Target Hospitality Corp. Fourth Quarter and Full Year 2025 Earnings Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press 0 for the operator. This call is being recorded on Wednesday, 03/11/2026. I would now like to turn the conference over to Mark Schuck. Please go ahead. Thank you. Mark Schuck: Morning, everyone, and welcome to Target Hospitality Corp.'s Fourth Quarter and Full Year 2025 Earnings Call. The press release we issued this morning, outlining our fourth quarter and full year results, is available in the Investors section of our website. In addition, a replay of this call will be archived on our website for a limited time. Please note the cautionary language regarding forward-looking statements contained in this press release. This same language applies to statements made on today's conference call. This call will contain time-sensitive information as well as forward-looking statements, which are only accurate as of today, March 11, 2026. Target Hospitality Corp. expressly disclaims any obligation to update or amend the information contained in this conference call to reflect events or circumstances that may arise after today's date except as required by applicable law. For a complete list of risks and uncertainties that may affect future performance, please refer to Target Hospitality Corp.'s periodic filings with the SEC. We will discuss non-GAAP financial measures on today's call. Please refer to the tables in our earnings release, posted in the Investors section of our website, to find a reconciliation of non-GAAP financial measures referenced in today's call and their corresponding GAAP measures. Leading the call today will be Brad Archer, President and Chief Executive Officer, followed by Jason Paul Vlacich, Chief Financial Officer. After their prepared remarks, we will open the call for questions. I will now turn the call over to our Chief Executive Officer, Brad Archer. Brad Archer: Thanks, Mark. Good morning, everyone, and thank you for joining us on the call today. We entered 2025 with a clear mandate to advance our strategic growth priorities, diversifying our contract portfolio, and accelerating our transition into high-growth end markets. We made significant progress on these priorities, and our disciplined execution resulted in the most successful period of contract awards in Target Hospitality Corp.'s history. Since February 2025, we have secured more than $740 million in long-term contract awards across a broad range of end markets, including over $495 million supported by our expanding WHS segment. This strong momentum is driven by an unprecedented capital investment cycle across AI infrastructure, critical minerals, and power generation development. To capture this opportunity, we launched Target Hyperscale, demonstrating our ability to deliver highly customized solutions through a vertically integrated accommodations platform that scales with customer requirements. Our vertically integrated capabilities, unmatched across the U.S., combined with accelerating end market demand, have established a core strategic growth vertical for the company. We believe Target Hospitality Corp. is at an inflection point, supported by strong execution and an unprecedented pipeline of opportunities. Strengthening market fundamentals have laid the foundation for a robust and expanding pipeline of more than 20,000 beds, creating meaningful opportunities to continue advancing our strategic growth priorities. Turning to our segments and accelerating momentum on key strategic growth opportunities, our HFS segment continues to support our world-class customers by meeting their evolving labor allocation needs through premium service delivered across our extensive network. Target Hospitality Corp.'s vertically integrated operating model and network scale enable us to serve customers through all phases of the business cycle, reflected in customer renewal rates consistently above 90% and average customer relationships of more than five years. Moving to the rapidly expanding WHS segment, our WHS segment continues to benefit from accelerating demand across large-scale AI infrastructure, critical minerals, and power generation projects. Target Hospitality Corp.'s vertically integrated accommodations platform and scalable solutions are uniquely suited to support these increasingly remote infrastructure developments. These capabilities, supported by our differentiated service offerings including Target Hyperscale, position us to meet rising demand in this high-growth sector. Since February 2025, we have secured more than $495 million in multiyear WHS awards, driving the reactivation of nearly 3,000 beds across our asset base and demonstrating the value of modular and highly customizable offerings. Our ability to deliver speed-to-market solutions and scale with customer needs has supported multiple expansions at our data center community, which has grown 320% from its initial 250-bed footprint in just a matter of months. Additionally, today's announcements of the West Texas Power Community and Pecos Power Community further underscore our ability to rapidly deploy assets to meet this accelerating end market demand. Combined, these awards immediately reactivate more than 1,800 beds in Pecos, Texas, and represent over $150 million in multiyear contracts. Across our WHS segment, we have reactivated nearly 3,000 beds in less than a year, supported by long-term committed revenue contracts across a diverse customer base. A successful reactivation of existing assets has reduced our remaining available inventory to approximately 3,000 to 4,000 beds, depending on customer-specific requirements, and highlights the extraordinary momentum of the current AI-driven capital investment cycle. As data center and power generation projects extend into more remote areas, the need for high-quality workforce accommodation has intensified and become essential to their success. Target Hospitality Corp.'s scale and fully integrated solutions uniquely position us to help customers attract and retain skilled labor nationwide and has established Target Hospitality Corp. as a trusted partner. These dynamics have created the largest commercial pipeline in our history, with active discussions representing more than 20,000 beds. The WHS segment has become a core strategic growth platform and a key driver of our strategic growth initiatives. I will now hand the call over to Jason to discuss our financial results and 2026 outlook in more detail. Jason Paul Vlacich: Thank you, Brad. Fourth quarter total revenue was approximately $90 million, with adjusted EBITDA of approximately $7 million. A meaningful portion of quarterly revenue is generated by construction services tied to the workforce hub contract in our Workforce Hospitality Solutions, or WHS, segment. This lower-margin revenue stream, combined with elevated initial operating and mobilization costs associated with recent WHS segment contract wins, temporarily compressed margins. As the workforce hub contract transitions to higher-margin services-based revenue and our new WHS awards continue to scale through 2026, we expect consistent and sustained margin expansion. Our HFS South and All Other segments generated approximately $36 million in quarterly revenue. Target Hospitality Corp.'s customers in these segments continue to value our premium service offerings and extensive network scale, which provides consistent hospitality solutions aligned with their labor allocation demand. While we experienced some moderation in our HFS South segment, this network continues to provide strategic value and reliable cash flow. Its stability supports our long-standing customer base and provides consistent cash generation to advance our growth initiatives and further strengthen our balance sheet. Moving to the expanding WHS segment, this segment's fourth quarter results, which include our workforce hub contract and the data center community contract, generated approximately $40 million in revenue, primarily related to construction services activity associated with the workforce hub contract. As we announced today, the importance of the workforce hub contract led to additional modifications and scope expansion during the fourth quarter. The increased scope of the contract raises the total contract value to approximately $170 million, reflecting a 25% increase from the original contract value. With construction activity substantially complete, we anticipate the workforce hub contract will support margin expansion through 2026 as the contract shifts to higher-margin, services-focused revenue. Regarding the data center community contract, as we previously announced, the strong pace of customer development activity has supported two 400-bed expansions to this community. As a reminder, these expansions will be phased in 400-bed increments over 2026. The first 400-bed expansion is scheduled to be operational by April 2026, with the second 400-bed expansion scheduled to be operational in June 2026. Following the completion of both expansions, the community will be capable of supporting over 1,000 individuals. In total, the data center community contract is expected to generate approximately $134 million of committed minimum revenue over its initial term through May 2028. Additionally, as the data center community expansions are completed, we anticipate enhanced margin contribution from this contract as the community scale will allow us to capture greater efficiencies from our fully integrated operating model and strong unit economics. As we announced today, the accelerating industry activity across AI infrastructure and power generation development supported two new contract awards utilizing our existing West Texas assets. The West Texas Power Community contract is expected to generate approximately $129 million of minimum committed revenue over its 47-month term beginning March 2026, supporting a community of up to 1,400 individuals. And the Pecos Power Community contract is expected to support up to 400 individuals while generating over $23 million of minimum committed revenue over its 26-month term beginning April 2026. In total, these contracts support the reactivation of over 1,800 beds with more than $150 million of multiyear committed minimum revenue serving multiple customers in a project-dense region. While the Pecos and West Texas contracts are centered on fixed minimum revenue commitments, there is an opportunity to capture additional variable revenue from incremental customer demand above the committed minimum. Importantly, the Pecos and West Texas contract awards leverage our existing assets and community locations, enabling immediate customer use, with a combined capital investment of only $4 million to $8 million. These contracts are expected to be immediately margin accretive and demonstrate our ability to rapidly deploy existing assets to support customer demand. Our Government segment generated approximately $14 million of revenue during the quarter. The declines compared to the previous year were driven by the termination of the PCC contract, partially offset by the reactivation of our Dilley, Texas, assets. Corporate expenses were approximately $18 million for the quarter, which includes a true-up to the 2025 short-term incentive plan to reflect the significant progress made on executing Target Hospitality Corp.'s strategic growth initiatives, including multiple fourth quarter contract awards. Our 2026 outlook also accounts for potential incentive payments that may be implemented this year. Total capital spending for the quarter was approximately $16 million, focused on growth in our WHS segment, including the data center community expansions. Target Hospitality Corp.'s strong business fundamentals and durable operating model supported strong cash conversion, resulting in over $74 million of cash flows from operations and $66 million of discretionary cash flow for the year ended 12/31/2025. These fundamentals are reflected in the strength of our balance sheet and our ability to maintain significant financial flexibility through prudent capital management. During 2025, we executed the largest commercial pivot in our history while maintaining a strong balance sheet and capital flexibility. We ended the quarter with zero net debt and total available liquidity of approximately $183 million. Target Hospitality Corp. continues to advance its strategic growth initiatives focused on enhancing revenue visibility, consistent cash flow, and strengthening margin contribution. This momentum and positive operating environment support our 2026 outlook, which includes total revenue of between $320 million and $330 million and adjusted EBITDA of between $60 million and $70 million, with capital spending, excluding acquisitions, of between $65 million and $75 million. As recent contract awards and community expansions come online and scale through 2026, we expect revenue and adjusted EBITDA to build steadily throughout the year. The additional operating scale and improved unit economics should support continued margin expansion through 2026 and into 2027. Together, these factors are expected to position us to exit the year with an annualized revenue run rate of more than $360 million and adjusted EBITDA exceeding $90 million. This strong momentum is driven by significant growth in our WHS segment, which is projected to become our largest operating segment by 2026, contributing more than 40% of consolidated revenue based on the current contract portfolio. Target Hospitality Corp. is well positioned with a flexible operating model and an optimized balance sheet as we continue to evaluate a robust growth pipeline focused on continued expansion of our WHS segment, which we believe offers the greatest opportunity to accelerate value creation for our shareholders. As we pursue these opportunities, we will remain focused on maintaining the strong financial profile we have built while maximizing margin contribution through our efficient operating structure. With that, I will hand it back to Brad for closing remarks. Brad Archer: Thanks, Jason. We made significant progress executing on our strategy in 2025, positioning Target Hospitality Corp. to capitalize on powerful long-duration demand trends across AI infrastructure, power generation, and critical minerals. This strong execution drove more than $740 million in new multiyear contracts, including over $495 million within our rapidly expanding WHS segment. We are also engaged in advanced discussions on additional opportunities that reflect the accelerating development activity across AI and related power generation projects. These secular tailwinds are supported by a multi-trillion-dollar investment cycle to expand AI and data center infrastructure. Additionally, supporting this infrastructure development will require substantial growth in U.S. power generation capacity, with national energy consumption expected to double by 2030. Against this backdrop, we continue to evaluate the most active and robust growth pipeline in Target Hospitality Corp.'s history. With strengthening market fundamentals, we are actively pursuing opportunities representing more than 20,000 beds, highlighting the depth and durability of demand in this end market. Target Hospitality Corp.'s unique capabilities, combined with strong execution, position us as a trusted provider in this rapidly expanding marketplace. With a deep pipeline, strong balance sheet, and a scalable vertically integrated platform, we are well positioned to drive sustained growth and long-term value. We are excited about the opportunities ahead and believe they will play a central role in advancing our strategic initiatives and delivering continued value for our shareholders. Thank you for joining us on the call today. We will now open the call for questions. Thank you. Operator: Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press the star followed by the one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the two. If you are using a speakerphone, please lift the handset before pressing any of the keys. One moment please for your first question. Your first question comes from Scott Schneeberger with Oppenheimer. Scott, please go ahead. Daniel Erik Hultberg: Good morning. It is Daniel on for Scott. Thank you for taking our questions, and congratulations on the new contract wins. Starting off with the new contracts, could you please elaborate a little bit on the pipeline? I mean, you still have some assets in West Texas. Good to see some of it, but could you please discuss the pipeline, the potential to reactivate the remaining West Texas assets, and how we should think about the ripeness of that? Thank you. Brad Archer: Yeah, Daniel, this is Brad. Let me just give a high level on the pipeline. We have said this many times over the past few quarters, but it continues to grow, right? It is the strongest, most actionable pipeline we have ever seen. As we mentioned, a 20,000-plus bed opportunity. That is after we removed, you know, several thousand beds, and we have added back to that, right? And it continues to grow. We have been alluding to this fact for several quarters that our pipeline is getting stronger and more mature, right? This started over a year ago. We started planting seeds with the customers in these projects, having negotiations, and now we are beginning to harvest, right? It is in the way of executing contracts, which is what you have seen in our release. And it is just funny. Those happened both in one week. I do not expect that always to happen in the future like that. But what I would tell you is we do expect to keep stacking wins throughout 2026. We have mentioned we are in advanced late-stage negotiations with multiple customers. I am not going to get into details there, but it is a very healthy pipeline. If you look at available fleet, that is absolutely being quoted within those 20,000 beds, right? We expect that to be taken at some point. And then we would look to, you know, in the market, if there is available fleet to purchase, and we have secured line times at multiple factories as well, have a great relationship with the manufacturing base out there. So at some point, we would expect to have to reach into that as well, just by the supply and demand that is out there at this point. Daniel Erik Hultberg: Got it. Thank you. I think Jason mentioned earlier there is potential for variable revenue contribution. Could you please elaborate on that? Jason Paul Vlacich: Yeah, absolutely. So that is related to the two new contracts that we announced today. The over $150 million contract value is literally just the fixed minimum amount. Within that, there is a lease component, which is relatively straight line, and then there is a built-in fixed minimum bed committed amount that is attached to a manning curve, so it is not exactly straight line. And then on top of that, there is a variable component attached to those contracts. The all-in rate on those, the head-and-bed for those two new contracts, is right around $100 a night. So there is definitely potential for variable upside. None of that is built into our outlook. So our outlook is materially based on fixed minimum amounts. Daniel Erik Hultberg: Got it. Thank you. A final one for me. Any more color you can provide on how to think about the cadence as we move through this year and any unique modeling dynamics we should think about as it comes in the early? Jason Paul Vlacich: So with respect to our outlook and how that is going to trend, Q1 is going to be the low point as these contracts start to ramp up. Obviously, the two new ones that we announced are immediately accretive. One of those has already started. Another one is going to start in April. But, for example, the expanded data center community will ramp up kind of full force in Q3. Q2, in the power community contract in Nevada, will ramp up June, so you will see the full effects of that in Q3. I would say that is how you would pace it. Q1 is the low point, and then it will continue to ramp up in Q2, much further in Q3 and Q4, until you get to that run rate that we announced on the call for everything that has been contracted, right? None of that includes the variable upside related to the two new contracts. So that over $160 million of annual run rate revenue, over $90 million of adjusted EBITDA on an annual basis, is all based on fixed minimum revenue commitments for everything that has been contracted, and none of that obviously includes the upside related to the pipeline. Basically, you will see that come to fruition in Q4. Brad Archer: So, in short, the low point is Q1, and it builds from there. Jason Paul Vlacich: Yeah, totally different by the end of the year, right? And not taking into account, like I said, any new projects or the upside on anything that we have signed. Daniel Erik Hultberg: Got it. Okay. Thank you, guys, and congratulations. I will turn it over. Operator: Thank you. Your next question comes from Stephen David Gengaro with Stifel. Please go ahead. Stephen David Gengaro: Thank you. Good morning, everybody. Brad Archer: Good morning. Stephen David Gengaro: So a couple of things. The first, just to follow up on the point, when you talk about the run rate exiting 2026, is that just based on announced contracts to date? Jason Paul Vlacich: Absolutely. Yes. Stephen David Gengaro: And when you say run rate, do you mean December or fourth quarter? I mean, I do not want to get too granular, but is $22 million sort of the EBITDA guide for 4Q? Or is that— Jason Paul Vlacich: Yes. It is Q4. Stephen David Gengaro: Okay. Q4. Great. Thanks. The two other kind of higher-level questions: when you mentioned the capacity you have in inventory of 3,000 to 4,000 beds, and you have been talking to a lot of customers about opportunities, are you seeing urgency from the customers yet? Is there any feedback you get or implications from customers that they are getting concerned about available capacity, or is that still not a thing from their perspective yet? Brad Archer: Look, that is the fear, right? Not having the capacity, not having the amount of rooms. If you even just look at the contracts we just signed and you look at the 1,400 and the 400, those are existing beds, right? And they are paying to hold every one of those beds. Different when you are building it new. You have time to put in 250, then another 250, then another 250, very similar to our other project on the data center side. But the fear is there, and it is real, right? This pipeline we are talking about, this is not pie in the sky. It is an executable pipeline. Did we win it all? No. But they are real. They are funded. That is what is on this pipeline. So folks, especially when you look in these clusters where multiple data centers and multiple power plants—if you look at the Permian Basin area—there is already a lack of rooms, if you will. On top of that, you are starting to add new power plants and new data centers. It is fear, but it is warranted, right? The supply and demand, I would just say, in a lot of those areas are very much in our favor. Stephen David Gengaro: Okay. That is helpful. And then the other quick question, the HFS South business, the oilfield had a better-than-expected fourth quarter from kind of a completions perspective, but your numbers were down a little bit. Is that just seasonality and noise? I am sort of expecting that business to be kind of flattish 2026 versus 2025. Is that a reasonable starting point versus your guide? Jason Paul Vlacich: Yeah, that is absolutely right. Built into our guidance is HFS basically steady state year over year from 2025 to 2026, and the fluctuations you see there are just moderate seasonality, normal course, not fluctuating outside of our expected ranges. Stephen David Gengaro: Okay. Great. Thanks. I will get back in the queue. Thank you for the color. Jason Paul Vlacich: Thank you. Operator: Your next question comes from Gregory Thomas Gibas with Northern Securities. Please go ahead. Gregory Thomas Gibas: Great. Hey. Good morning. Brad, Jason, thanks for taking the questions. Congrats on the new contract wins. Jason Paul Vlacich: Thank you. Gregory Thomas Gibas: I guess, a follow-up on what was just discussed in terms of capacity in your remaining inventory. You mentioned 3,000 to 4,000 beds of remaining inventory. Wondering if you could maybe speak to rough plans on what you intend to acquire just given the 20,000 or so active pipeline? And I guess the pricing you are seeing around it. Once you put those 3,000 to 4,000 beds to use, how you would think about how you would work into future contracts the acquisition of new capacity. How would that be reflected in those contracts? Jason Paul Vlacich: Yeah. I will start off, and Brad can certainly chime in on this. In terms of incremental beds above and beyond our inventory, first of all, all of that is going to be built into the economics of the contract. Many of these contracts come with upfront capital requirements from the customer as well, and a lot of their projects do phase over time, so that allows us to be measured in our approach towards capital allocation to these growth projects. We also have multiple tools available. We have secondary market purchases that we have done in the past to secure more beds. Project-level structures, and contract terms that bake in a lot of that upfront capital to meet our minimum return thresholds. That is how we would approach it, and that is how we have approached it in the past. We have already had advanced discussions with those suppliers, as Brad mentioned earlier. Brad Archer: Yeah. We have a very good relationship with suppliers across the U.S., right? So capacity wise for us, I do not believe will be an issue. I would take you back to the data center project that we started last year, the way it built up over time that Jason was talking about. We also got money down from the customer. So on financing, that helps a lot. All those beds are not put in at one time, even though that was quicker than what was anticipated. It still worked out. For the phases, we got some money down, and then we were able to bring in the buildings and set those up and get them performing for the customer, right? We are still in that mode of constructing that site and increasing the capacity. On true capacity from manufacturing or buying within the market, we feel pretty good about where we sit at this point. Gregory Thomas Gibas: That is great. Appreciate the color. And, if I could just maybe more strategically, as I am following developments on Camp East Montana at Fort Bliss and nearby government facility, just given the strong demand you are seeing within the private sector, I wanted to get a sense of whether you are even interested in pursuing those government-related opportunities at this point and how you are thinking about that. Brad Archer: Yeah. To be blunt, we are focused on growing the WHS segment, which we believe offers the greatest value creation opportunities. Much more commercial when we are dealing with that. It is projects that are ready. It is much more predictable at this point, and that is where our focus is. Jason Paul Vlacich: And I would just add to that, really still on contract structures and committed counterparty risk breakdown. Gregory Thomas Gibas: Yep. Makes complete sense. I appreciate that. Lastly, as it relates to the pipeline, I appreciate the color you provided there. If you could characterize it further, I wanted to get a sense—because I know that the previous data center contract, nice to see the expansion there where it started at 250 beds and is now over 1,000 and the ability to get up to 1,500. As it relates to that 20,000 pipeline or so, would you say that is maybe how things would be structured going forward with additional contracts, in that it starts small with continued expansion? Or would it perhaps be more like we just saw, the 1,400 with the power community? Could you speak to the relative size of those opportunities in that pipeline? Jason Paul Vlacich: Yeah. I think size-wise, they range from smaller than 1,000 to much greater than 1,000. We are seeing some really large projects for long duration. The range is big. As far as how they build up, when they get bigger, it just takes longer to put them in. They want this first initial wave, and then it builds up over time, very similar to what we have already shown the market. I think it would probably be a little bit longer than that on the buildup. You have time to get them done. You just cannot build everything that they are wanting all at once, nor can they hire 3,000, 4,000, 5,000 people all at once. But remember, they are not the only company doing the hiring. They are in these clusters. We are looking at five and six of these data centers around a two-hour radius, if you will, on a drive. They could be literally in the same twelve-month to eighteen-month period hiring 30,000 to 35,000 craftsmen in that area. If there is one doing a workforce hub, the others are doing a workforce hub. It takes time to get their own folks hired, and it takes time for us to build out the project. So it starts, if you will, very similar to what we have shown, and then it continues to build up. However, the start could be bigger, and the buildup could be longer as well, because, again, we are seeing much bigger projects than 1,000 beds. On the 1,400, that was a reactivation, so obviously we were able to move really quickly on that because we did not have to move any beds. It was strategically located for the customer, etc. It was literally signed and started billing a few days later. That is what was great about reactivations—they are always going to be faster. Gregory Thomas Gibas: Yep. Makes sense. That is helpful. Thanks very much, guys. Operator: We now have a question from Raj Sharma with Texas Capital Bank. Please go ahead. Raj Sharma: Yeah. Thank you for taking my questions. Congratulations on the solid new wins. I wanted to understand the 20,000 beds, the pipeline exceeding. Could you give how much of this pipeline is, in the next couple of years you think achievable versus the next five years? Can you give some color on the cadence? And then I have some follow-on questions. Jason Paul Vlacich: Yeah. So the cadence here would be within the next twelve to twenty-four months, all of that 20,000. Are we talking to some that is longer out? Yes. But it does not make the pipeline at this point. They have not been FID. They might not have the land. They might not have the power. What we are talking about here is actionable within the next twelve to twenty-four months, some much sooner than that. I would say one to twenty-four months is how I would look at it. Brad Archer: Yeah. These are advanced-stage projects. Raj Sharma: Got it. And then as the hyperscale, the data center, and the power generation sort of accelerates, are you seeing situations—I know there was an earlier question on this—where workforce housing is becoming a bottleneck? If so, is that giving you pricing power or longer durations when you negotiate these contracts? Jason Paul Vlacich: Yeah. We are definitely seeing workforce housing becoming a critical component to getting their project done. They are using it as a competitive tool to attract the workforce, keep the workforce, retain the workforce, and get more productive. So that is definitely working in our favor. When I talk supply and demand, it absolutely helps on maximizing your price. Raj Sharma: Got it. And then on the CapEx requirements, you have given a guide for this year. Is that to be assumed—is that $65 million to $75 million, if I sound correct? Jason Paul Vlacich: Yeah. That is right. It is $65 million to $75 million, and much of that is growth CapEx tied to contracts that we have already executed. Incidentally, that range is materially aligned with what we spent last year. Raj Sharma: Got it. And do you expect that to continue for the next year as well, given your pipeline? Also, could you talk about the cadence through the year and the financing of this CapEx? Jason Paul Vlacich: Yeah. So the CapEx range that we gave does not require any real incremental financing above and beyond our current liquidity. We are well positioned on that. Obviously, any incremental capital that would go above and beyond that would be related to pipeline wins, and those would be built into the economics of those contracts. We have multiple avenues to fund, including growing cash flows from operations. We have the strongest balance sheet that we have ever had as a public company—the first year as a public company that we have exited the year with no debt—and lots of capacity. That being said, the contract structures will be built such that the economics will help fund our minimum return thresholds for sure in the CapEx requirement. There could be incremental CapEx for incremental wins, but certainly nothing we anticipate for the stuff that we have already executed on. Raj Sharma: Thank you. Then, just lastly, on the Pecos facility, I wanted to clarify the 8,000 idle beds. Any news on reactivating or contracting to the government on those? Jason Paul Vlacich: Yeah. I would say a lot of those West Texas assets are very fungible, and we could use them for multiple customers, and a lot of them have been leased out on the new contract wins. At this point, we are really focused on growth in the WHS segment and the pipeline around that, and that is where we see the most value added and the most accretive opportunities for our shareholder base. Brad Archer: Yeah. Let me just put something in there as well. We have already talked about almost 3,000 beds out of that 8,000, right? So there are 3,000 to 4,000 left, just to get a map, right? To your question, I would tell you, just to be more direct, as we look throughout 2026, I would expect those beds to be put in use under WHS. That is where the growth is at. That is where we are focused. That is where the capital is going to go. I am pretty confident that is where they go. Raj Sharma: Oh, fantastic. Thank you for the color and the clarification. I will take it offline. Again, congratulations on the wins. Appreciate it. Thank you, guys. Jason Paul Vlacich: Thank you. Operator: As a reminder, if you wish to ask a question, please press 1. You have another question from Stephen David Gengaro with Stifel. Please go ahead. Stephen David Gengaro: Thanks, and thanks for taking the follow-up. You have the 3,000 to 4,000 idle beds. When you think—when you listen to the contracts you are involved with right now—when you exit 2026, would you be disappointed if the bulk of those beds were not under contract? Brad Archer: 1,100%. Let me give you a little thought on how we look at these beds. Again, when you look at supply and demand—and it is in our industry’s favor at this point—we are sitting with what we believe are some valuable assets. We strategically want to place not all of them on one prime, but we think we have the ability and the pipeline to be strategic here. As we said, these projects build up over time. The thought is, can you use 500 to help win a project? Can you use 750 to help win a project? Can you use 1,000, where you do not drop them all in one, and get multiple contracts out of it versus one? Strategically, that is how we are looking at it. But we would absolutely be upset if we did not have these out in 2026, based on our pipeline. We have been in this market now going over a year, planting the seeds, as I said. Things are starting to grow, and we are starting to harvest. We like where we sit in the market. Stephen David Gengaro: Based on the network approach you take in that business, is there any idle capacity in HFS South that could be mobilized? Jason Paul Vlacich: Yeah. There is a little bit. I would tell you we think we are pretty optimized in that area, especially West Texas. I would also tell you we have a great customer base there with some really long-term, twenty-plus-year customers we are going to make sure we take care of. There is a lot of work in the Permian. We think we can take that business in other ways besides continuing to deplete the HFS side of it. But we will take every opportunity to high-grade those rates and high-grade those beds as needed while we still take care of the right customers that we have had for many, many years. It is a great question. Stephen David Gengaro: Cool. Thank you for all the details. Operator: There are no further questions at this time. I will now turn the call over to Brad Archer for closing remarks. Please continue. Brad Archer: Thank you. In closing, I want to reiterate again that Target Hospitality Corp. is at an inflection point. The hyperscalers are making trillion-dollar investments in remote America. They need us to make those investments work. There is no one else who does what we do at this scale in these locations. We are not an amenity. We are not a nice-to-have. These projects are remote, and timelines are nonnegotiable. Workforce housing is as critical as the fiber in the ground. We also did not stumble into $740 million in contracts. We built the platform, proved the model, and the market needs us. The build-out on AI infrastructure, data centers, and power generation across this country is one of the most consequential investment cycles in American history that I have ever seen, that most have ever seen. The problems we have solved and are solving now are helping transform that infrastructure, and in doing so, it is fundamentally transforming Target Hospitality Corp. With that, I want to thank all of you who have joined us on our call today and for your continued support of Target Hospitality Corp. Operator, that concludes our call for today. Operator: Ladies and gentlemen, this concludes the conference call. Thank you for your participation. You may now disconnect.
Operator: Greetings, and welcome to UiPath's Fourth Quarter and Full Year 2026 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Allise Furlani Head of Investor Relations. Thank you. You may begin. Allise Furlani: Good afternoon, and thank you for joining us today to review UIPath's fourth quarter and full year fiscal 2026 financial results which we announced in our earnings press release issued after the market closed today. On the call with me are Daniel Dines, Founder and Chief Executive Officer; and Ashim Gupta, Chief Operating and Financial Officer, to deliver our prepared comments and answer questions. Our earnings press release and financial supplemental materials are posted on the UiPath Investor Relations website. These materials include GAAP to non-GAAP reconciliations. We will be discussing non-GAAP metrics on today's call. This afternoon's call includes forward-looking statements regarding our financial guidance for the first quarter and full year fiscal 2027 and our ability to drive and accelerate future growth and operational efficiency and grow our platform, product offerings and market opportunity. Actual results may differ materially from those expressed in the forward-looking statements due to many factors, and therefore, investors should not place undue reliance on these statements. For a discussion of the material risks and uncertainties that could affect actual results, please refer to our annual report on Form 10-K for the year ended January 31, 2025 and our subsequent reports filed with the SEC, including our annual report on Form 10-K for the year ended January 31, 2026, to be filed with the SEC. Forward-looking statements made on this call reflect our views as of today. We undertake no obligation to update them. I would like to highlight that this webcast is being accompanied by slides. We will post the slides and a copy of our prepared remarks to our Investor Relations website immediately following the conclusion of this call. In addition, please note that all comparisons are year-over-year unless otherwise indicated. Now I would like to hand the call over to Daniel. Daniel Dines: Thank you, Allise. Good afternoon, everyone, and thanks for joining us. I want to start by thanking the people who made this year possible. Our employees, we executed with discipline and purpose. Our customers who trust us with their most critical workflows and our partners who have made a genuine bet on our platform. This is a team effort, and I feel that every day. We delivered another strong quarter, beating the high end of our guidance across all metrics and closing out a year of disciplined execution. Fourth quarter ARR reached $1.853 billion, up 11% year-over-year, driven by $70 million of net new ARR and the revenue of $481 million, up 14% year-over-year. Alongside that growth, we've achieved full year GAAP profitability for the first time in our company's history. We grew fourth quarter non-GAAP operating income to $150 million, a 31% margin, a reflection of the operational progress we made throughout the year driving meaningful efficiency while continuing to invest in growth. And in Q4, we posted our strongest sequential net additions of customers with $1 million or more in ARR in 2 years with deals over $1 million, up over 50% year-over-year, a reflection of both improved sales execution and deepening enterprise platform adoption. I have never been more energized. What we are seeing now goes beyond a single quarter, we are at an inflection point in how software is built. Advances in AI are dramatically reducing the time and cost required to create software. And that has led to understandable questions in the market about how value will be created going forward. Historically, moments like this don't eliminate software, they shift where value is captured. Enterprises don't simply pay for code they pay for trust, for operability and for government, the ability to run complex systems reliably, securely and with full accountability. As the cost of building software falls, the value of platform that can safely govern, orchestrate and scale that software rises. And there is a second dynamic that I find even more exciting. When building becomes cheaper, more gets built, more processes get automated, more edge cases get addressed and more systems become autonomous. That expansion does not shrink the need for enterprise orchestration, it increases it. And this is precisely the environment UiPath is designed to operate in. , We entered this new agentic era with 4 advantages. First, a unified platform combining deterministic automation, agentic automation and enterprise-grade orchestration with governance, security and scalability built in. This is the full stack, it is what wins new logos and drives expansion across our base; second, a powerful installed-based flywheel, thousands of enterprises run mission-critical workflows on UiPath today. And within those workflows, there are opportunities for agents to be deployed and the overall process to be orchestrated. Third, 2 decades of enterprise trust and governance, deployment experience that AI plus automation is expected to deliver accountability, auditability, observability and reliability at scale; and fourth, deep vertical expertise with enterprise-wide reach, regulatory depth in the industries where the stakes are highest paired with the horizontal ability to orchestrate across the entire enterprise. Let me spend a few minutes on each. Driver one. Our agentic -- our unified Agentic automation platform. As AI makes intelligence more accessible, what matters is execution. Enterprises are getting answers to complex questions faster than ever before, and yet they still struggle to reliably execute complex cross-system processes with accountability and compliance built in. The goal now is to pair the insight they are getting with the actions and execution that our platform enables, financial reporting, claims processing, regulatory compliance. This cannot be improvised. They must be institutionalized. Enterprise automation requires 2 modes, deterministic for precision audibility and agentic for reasoning and adaptability. Most vendors offer 1 or the other, UiPath id purpose-built to integrate both under a single control play, allowing enterprises to move from experimentation to scale production grade deployment. Most people think orchestration means agent to agent coordination. Real enterprise orchestration brings together agentic automation, deterministic automation and humans because that is how work actually gets done. We offer that and the full execution layer underneath it, governing how our transaction moves from start to finish and ensuring that it completes reliably every single time. This is what Maestro is built to do at enterprise scale. What makes Maestro uniquely powerful is its architecture. It is built on Temporal, the most modern workflow technology featuring durable execution and trusted by the most demanding technology companies in the world. Workflows are defined in a way, AI agents can generate and modify it directly while remaining fully transparent to business stakeholders and auditors in a world where AI agents are increasingly the ones creating and maintaining workflows that distinction matters enormously. The customer results make this concrete, a U.S.-based semiconductor company fail to deploy an agentic workflow with another vendor after more than a year of trying with UiPath, they were successful in under 2 weeks leading to a 7-figure expansion across Agent Builder, Maestro and Test Cloud. Today, they run over 3,000 automations and have sales more than 2 million hours and, One New Zealand who went from proof of concept to production grade pilot in 5 weeks reduce 4- to 5-day order-to-cash process to 10 minutes, and they are now scaling this across their B2B sales operations. With UiPath, they expect roughly $20 million in cost savings this year as they plan to further leverage the platform to support their broader transformation programs. Driver two: the flywheel inside our installed base. The most important story this quarter is the economic shift underway inside our installed base. Customers are not experimenting with AI, they are expanding their operating model on our platform. AI product ARR, which includes agentic, IDP and Maestro, reached nearly $200 million this quarter, with strong growth fueled by agentic. But the number I keep coming back to is this, the number of customers above $100,000 in ARR who have bought AI products grew 25% year-over-year and they spend nearly 3x as much as those who have not. Additionally, 16 of our top 20 deals this quarter included AI products. All of this is clear evidence that agentic automation is becoming central to our largest customers' roadmaps. Importantly, this AI growth is layering on top of a core unattended automation business that continues to grow. We are not seeing AI agents replacing deterministic unattended automation in production we are seeing customers extending their processes with AI. A major U.S. airline illustrates this well. Building on their deterministic foundation, they are now deploying Agent Builder, Communications Mining, and Maestro to automate Procure-to-Pay and Supplier workflows, a blueprint for how customers move from task automation to end-to-end process orchestration, and how that journey drives platform-wide expansion. This is the flywheel. Every workflow automated creates new surface area for agents. Every agent deployed drives more automation, deeper integration, and broader platform adoption. Testing is another area where we see a significant and underappreciated expansion opportunity. As agentic workflows and applications sprawl, traditional QA simply cannot keep up. Forrester named UiPath a Leader in The Forrester Wave for Autonomous Testing Platforms in Q4 2025 with Test Cloud receiving the highest possible scores in 7 criteria including vision, roadmap, and automation creation, orchestration, and execution. A global technology company is a strong example, standardizing their entire automation program on UiPath, expanding into Test Cloud, and planning to implement UiPath Agents and Maestro to automate supply chain workflows. Turning to driver 3, Governance. Building an agent is becoming easier. Making it enterprise-grade is not. Enterprise-grade agents require deterministic execution with traceability, exception handling, and audit trails that satisfy external regulators. We see this play out in how customers choose us. An American credit union selected UiPath as we were one of the only solutions to meet their strict banking security and governance requirements. And a European automobile manufacturer chose UiPath as the foundation of their agentic AI strategy, selecting Maestro because we could deliver Enterprise-grade governance, error handling, and human-in-the-loop safeguards at the level their compliance standards demand. In both cases, governance was not a consideration, it was the deciding factor. And that brings us to driver 4, vertical depth. It's not just about governance, it's about knowing the domain deeply enough to manage and operate it at scale for real Impact. That is why vertical depth matters more in the agentic era, not less. As building becomes easier, differentiation shifts to domain-specific workflow intelligence, especially in industries where the cost of getting it wrong is existential. At Vive in February, we launched agentic AI solutions purpose-built for healthcare, targeting revenue cycle management, medical records summarization, claim denial resolution, and prior authorization. In line with that strategy, we acquired WorkFusion in February. Bringing purpose-built agents for financial crime compliance, with deep anti-money laundering and know-your-customer expertise directly into our platform, extending our reach into the highest stakes compliance workflows inside global banks. Healthcare and financial services are 2 examples of a broader strategy. We pair vertical depth with the horizontal reach to orchestrate across every function of a global enterprise, a combination that neither horizontal or vertical platforms alone can match. And great platforms don't scale alone. Our partners are building practices, joint solutions, and go-to-market motions around our platform. Our expanded partnership with Deloitte is a strong example. Together, we launched Agentic ERP, embedding AI agents into mission-critical finance and operations workflows. A Fortune 20 oil and gas company that is migrating to SAP S/4HANA is already scaling through the partnership, expanding Test Cloud coverage from 10% to roughly 50% of their SAP environment while building new agentic use cases across the migration. Accenture tells a similar story. Together we deployed a global agentic sales order entry solution for a strategic life sciences customer, reducing processing time by 1/3 unlocking automation for orders previously too complex to handle, and orchestrating autonomous agents transforming the orders while navigating 150,000 exceptions. Before I close, I want to give you a preview of what's coming next on our product roadmap. Over the last few months, the world has changed. The boundaries of what is possible have shifted faster than most people expected. We have spent years building a unified platform for exactly this moment. And what it can now unlock with the next generation of coding agents, it's something I'm genuinely excited about. Our platform is evolving into 1 where coding agents can participate across the entire automation life cycle. Agents will work with subject matter experts to discover processes and identify exceptions. They will work with business analysts to generate process definitions. Since developers in building automation, deploy those automations into production and help manage them at runtime. The first capability of that vision ships in the next couple of months and it targets a problem I hear in nearly every customer conversation. Their automation backlog is growing faster than their ability to build. The ROI exists. The executive sponsorship exists. The constraints have been the time, cost and specialized skills required to build and maintain production-grade automations. AI coding agents will generate and maintain production-grade unattended UiPath automations in hours instead of weeks. AI accelerates how automations are built. It does not change the platform they need to run on. For example, every one of those automations still needs our platform, Maestro for orchestration, process intelligence and observability, governance for control and auditability, granular access control and credential vaults for security. As we look ahead, we expect to cross $2 billion in ARR this fiscal year, a milestone that reflects the durability of what we have built and the expanding role we play in how enterprises operate. Finally, we invite you to join our annual Agentic AI Summit on March 25, which will be live streamed on our website. Please reach out to our Investor Relations team for details. With that, I'll turn the call over to Ashim. Ashim Gupta: Thank you, Daniel, and good afternoon, everyone. Before turning to the financials, I'd like to provide a quick operational update. Over the past year, we strengthened our operating model, tightening coordination across teams and driving greater consistency and efficiency in how we go to market and serve customers. The result is more predictable execution, tighter alignment across sales, customer success and product and greater operating rigor across the business. We've built a more disciplined and scalable global sales cadence. The entire company has been enabled and is focused on pushing our AI capabilities into every deal, customer conversation and across our internal operations. As we move to fiscal 2027, our priorities are focused on translating these structural advantages into durable growth. First, accelerating growth across our customer base, expanding penetration inside our installed base, scaling AI adoption on top of deterministic automation and deepening our vertical solution strategy in regulated and mission-critical industries where our platform is most differentiated. Second, driving faster time to value. Selling software is only part of the journey. Our forward-deployed engineers, services organization, post-sales team and partner ecosystem continue to improve their coordination to ensure customers realize value quickly and at scale. Third, scaling operating leverage, including internal adoption of our own agentic capabilities and continued focus on cost discipline. Across engineering, support and internal operations, we are deploying UiPath agents to streamline workflows, reduce manual work and accelerate execution, and we are already seeing productivity gains from these deployments. We expect this to become an additional source of operating leverage as adoption deepens. These initiatives reinforce the scalability of our model and give us confidence in the next phase of margin expansion. We reached an important milestone on profitability this year. When we first introduced our long-term model, we targeted non-GAAP operating margins of approximately 20%. In fiscal 2026, we surpassed that, delivering a 23% non-GAAP operating margin while continuing to invest for growth. Given the strength and scalability of our model, we are updating our long-term non-GAAP operating margin target to 30%. We are equally focused on GAAP profitability. Over the past several years, we have driven meaningful improvement in GAAP expenses as a percentage of revenue, including stock-based compensation, which declined to 18% of revenue from 25% last year, and we expect that trend to continue. We expect to be meaningfully GAAP profitable in fiscal 2027 and are committed to expanding GAAP profitability over time. Turning to the quarter. Unless otherwise indicated, I will be discussing results on a non-GAAP basis, and all growth rates are year-over-year. I also want to note that since we price and sell in local currency, fluctuations in FX rates impact results. Fourth quarter revenue grew to $481 million, an increase of 14%. Normalizing for the year-over-year FX tailwind of approximately $16 million, revenue grew 10%. Total revenue for fiscal year 2026 was $1.611 billion, an increase of 13% year-over-year. Normalizing for the year-over-year FX tailwind of approximately $30 million, revenue grew 11%. ARR totaled $1.853 billion, an increase of 11%. Net new ARR was $70 million. This included a $14 million year-over-year FX tailwind. As organizations adopt an AI-first operating model, they are accelerating cloud migration to deploy, orchestrate and scale automation seamlessly. We ended the year with over $1.2 billion in cloud ARR, which includes both hybrid and SaaS, up over 20% year-over-year. I want to highlight one data point that speaks directly to where the platform is headed. Among customers with more than $1 million in ARR, 90% are using our AI products. When we look at customers with more than $100,000 in ARR, approximately 60% are using our AI products. That level of attachment is a retention and expansion flywheel, and it gives us high confidence in the durability of the customers we are focused on the most. Across our broader base, 42% of customers with over $30,000 in ARR use our AI products, which provides a significant runway for expansion. We ended the quarter with approximately 10,750 customers. We continue to be successful in signing new enterprise logos that align with our strategy of targeting long-term customers with a propensity to invest, including new logos like Enterprise Products Partners, Helix Electric, [ Veonet ] Vision and a U.S. construction company consolidating on UiPath. They chose us to replace multiple point solutions with a single platform and plan to expand beyond deterministic automation, deploying agentic capabilities across loan originations and mortgage operations. As with prior quarters, the vast majority of customer attrition continues to be at the lower end. To provide a bit more color, when we take a closer look into our total logo count, for full year 2026, customers that spent over $30,000 in ARR increased 7% year-over-year. Customers with $100,000 or more in ARR increased to 2,565, while customers in $1 million or more in ARR increased to 357. Dollar-based gross retention was best-in-class at 97%, and our dollar-based net retention rate remained at 107%. Adjusting for FX, dollar-based net retention was 106%. Remaining performance obligations increased to $1.475 billion, up 19%. Normalizing for the FX tailwind, which was approximately $64 million, RPO grew 14%. Current RPO increased to $913 million, up 13%. Turning to expenses. We delivered fourth quarter overall gross margin of 86% and software gross margin was 92%. Fourth quarter operating expenses were $263 million. We ended the year with 3,981 total employees. I want to reiterate a significant milestone. For the first time in company history, UiPath delivered a full year of GAAP profitability. For the full year, GAAP operating income was $57 million, and we delivered our second consecutive quarter of GAAP operating income at $80 million in the fourth quarter. Fourth quarter non-GAAP operating income was $150 million, representing a 31% margin. Full year non-GAAP operating income was $370 million, a 23% margin and over 600 basis points of margin expansion year-over-year. Fourth quarter GAAP net income was $104 million. Full year GAAP net income was $282 million. Fourth quarter adjusted free cash flow was $182 million, bringing full year adjusted free cash flow to $372 million. We ended the quarter with $1.7 billion in cash, cash equivalents and marketable securities and no debt. During the fourth quarter, we repurchased 780,000 shares at an average price of $12.83. For the full fiscal year, we returned approximately $337 million to stockholders, repurchasing 30.9 million shares at an average price of $10.92. Since January 31, under our 10b5-1 plan, we have repurchased an additional 14 million shares at an average price of $12.11 through March 10, 2026, completing our $1 billion stock repurchase program. Following the completion of the program, our Board has authorized an additional $500 million in repurchase capacity. This reflects our confidence in the durability of our cash flows and our commitment to disciplined capital allocation. Now turning to guidance. Our guidance philosophy remains unchanged. We base our guidance on what we see in the pipeline and apply prudent assumptions, particularly as the federal and macroeconomic environment remains variable. Our guidance reflects continued momentum across the business and includes WorkFusion's contribution aligned to our ARR definition. WorkFusion strengthens our position in financial services automation through its advanced agentic technology, an area where the demand for compliant auditable agentic workflows is accelerating. Also included our current foreign exchange rates, including a modest headwind from the yen and a modest tailwind from the euro, which in aggregate have an immaterial impact. Turning to the specifics of our guide. For the first fiscal quarter 2027, we expect revenue in the range of $395 million to $400 million, ARR in the range of $1.894 billion to $1.899 billion, non-GAAP operating income of approximately $80 million. And we expect first quarter basic share count to be approximately 525 million shares. For the full fiscal year 2027, we expect revenue in the range of $1.754 billion to $1.759 billion, ARR in the range of $2.051 billion to $2.056 billion, non-GAAP operating income of approximately $415 million. Before I close, I want to leave you with a few final modeling points, including the following: first half revenue to be approximately $795 million, second half revenue to reflect similar seasonal patterns as fiscal 2026, with approximately 30% of total revenue in the fourth quarter. First half net new ARR to be approximately $73 million and second half net new ARR to reflect similar seasonality as fiscal year 2026 with the fourth quarter being our strongest quarter. We are encouraged by the momentum we're seeing as customers accelerate their shift of workloads to the cloud. While this is an overall positive, we anticipate that growth in our SaaS offerings will create approximately a 1% headwind to total revenue growth for the full year. Fiscal year non-GAAP gross margin to be approximately 84% as we scale our cloud offerings; non-GAAP operating income to reflect similar seasonality to our top line metrics. Fiscal year 2027 non-GAAP adjusted free cash flow of approximately $425 million, also to follow normal seasonal patterns. Lastly, we are committed to managing stock-based compensation and for full fiscal year 2027, we expect dilution to be between 2% to 3% year-over-year, excluding any buyback. Thank you for joining us today, and we look forward to speaking with many of you during the quarter. With that, I will now turn the call over to the operator. Operator, please poll for questions. Operator: Hello, and thank you for your patience. I will now hand the call over to Daniel Dines. Daniel Dines: Hello, everyone. Thank you for coming back after our outage with the service provider for our Investor Relations conference calls. We are ready to take questions. I hope that you guys get the chance to listen to the end of our reading. And also, we have published online the entire transcript of the -- of our earnings calls. So thank you again and apologize for the delay. We are ready to take questions. Operator: [Operator Instructions] And our first question comes from the line of Bryan Bergin with TD Cowen. Bryan Bergin: First one I have is just as it relates to net new ARR. And as you build the 2027 outlook, just how are you thinking about net new ARR expansion potential here on an FX-neutral basis? Sorry if I missed what you said on FX contribution assumptions as it relates to 1Q and the full year. But just trying to unpack that looking ahead. And then my follow-up is going to be on margins. So on op income margin, I appreciate the update on the 30% target. Just want to dig in on how you're thinking about the potential kind of the moving parts of that as it relates to gross margin and OpEx components moving forward? Ashim Gupta: Yes. So Brian, great to hear from you. When you think about the IRR contribution, I think our guidance kind of says that, there's really no significant or material FX contribution from that versus our prior guidance. So as you look at it, really, FX is a minimal impact from where our previous estimates were. The second piece of it is, from a margin standpoint, you look at the moving pieces and definitely across the board, there is opportunity to agentify and to use the technology advances across every function. That includes engineering, G&A as well as sales and marketing, which gives us really the ability to continue to reinvest in growth as needed. But we're going to look at it in a balanced way in terms of what makes sense for the company. And you can see our commitment to operating margin expansion over the last 2 years. And then just back to the IRR, I want to just give a little bit of color. When you look at our base, we have a sizable Japan business. So we have headwind from the yen, and tailwind to the euro, and they basically net out to be an immaterial impact for the full year. So we're really pleased with the progress. As Daniel commented and I did in the script, we really feel positive about the expansion that we're seeing within our customers and our ability to stabilize our net new ARR, and that's kind of reflected in both our performance as well as our guidance. Operator: And our next question comes from the line of Sanjit Singh with Morgan Stanley. Sanjit Singh: Daniel, thank you for the disclosure on the ARR traction -- I'm sorry, the AI traction with respect to ARR, of the $200 million, that was great to see. In terms of the composition of that, could you give us any details on sort of the split between IDP and what you're seeing on the agent side. And to the extent you can sort of disclose that, I'd just love to hear about the underlying momentum with the agentic side of the house, including Maestro as you go into next year? Daniel Dines: Sanjit, we have really a great momentum on diffusion of the AI within our platform. We have not provided clear ratios between different components of what we put into the AI. And I will let Ashim to comment further. Ashim Gupta: Yes, so like when you look at the way we price, we actually allow pretty good fungibility between our AI and Agentic products actually, both in some of our old pricing as well as our new pricing. So we don't really materially split it out. Of course, IDP hasn't been in the market for a longer period of time, for like the last 2.5 to 3 years. So IDP definitely has a good portion of the IRR. But agentic is a significant portion, and we see that in the platform. If you can see that in the deals and the commentary that we're giving and selling as a part -- that we talk about in our script. So from that standpoint, we can't really split it apart but we also see them as complementary because remember, IDP also includes IXP, which is not like simple document processing. It really uses advanced technology to be able to parse different documents using different models and that is part and parcel of the way we price. Sanjit Singh: Yes, that's great. That's great context. And then just a follow-up on the guide, Ashim, on 2 aspects. One, in terms of WorkFusion, how should I think about that contribution when I sort of calculate what the guidance implies from a net new ARR basis? I think there are some reports out there that they are around $25 million ARR toward the end of last year. So I just want to sort of stand to check that. And then from this time last year, there was some concerns around build as you guys are pretty cautious on the federal business. Just your sort of underlying assumptions about Fed going into next year, maybe the first half of this year given some of the headwinds you saw this time last year? Ashim Gupta: Yes. So the first thing is the $25 million is not accurate. That's the first thing I can say categorically. The second piece is, they also had a different method of ARR -- of accounting. So when we brought it back, even the numbers that have been out there also do not account for it. We -- It is actually below our materiality threshold, Sanjit. So that gives you an indication. We really look at this like a tuck-in acquisition in terms of where it is. And from that standpoint, you can also just see kind of the strength overall within our guidance, and we've been transparent that, that includes the WorkFusion contribution, but it is immaterial, and we don't break it out. Sanjit Singh: And then just on the Fed piece? Ashim Gupta: Yes, sorry. On the federal government, we're actually seeing a really good traction there. I would say just like the environment, I would say the federal government is a dynamic economy. But I would say our team has done an incredible job connected at really high levels within the organization. And I'll let Daniel comment on some of his discussions and his views of it. But within certain agencies, we feel very well strong position. And then there are some agencies, of course, that are going through their changes. But overall, we're actually very bullish about the way our teams are executing and the opportunity that exists there. Daniel Dines: Yes. And we are seeing an increased appetite for more long-term projects, strategic projects, especially in the department of war. Operator: And our next question comes from the line of Michael Turrin with Wells Fargo Securities. Michael Turrin: Just to start, maybe a higher level one. You had some commentary, but just in terms of budgets and what you're seeing around categories like automation and AI, it would be great to get just a top-down view there and also how you're positioned to capture that in the market where there's just an increasing number of vendors also positioning agentic solutions, which may be newer to market, but might also insert some noise into those conversations. Daniel Dines: Look, I think we are really well positioned to help customers with the diffusions of AI within their enterprise workflows. We are -- we have -- we built Maestro, which is essentially a process orchestration technologies that -- and at its core, is a new powerful workflow engines. That's -- that gives us a very interesting advantage in the market right now. So we all know about the impact of the coding agents. I would say that this will translate for us. And I'm extremely bullish about it into a much faster adoption curve for our customers. We aim to use coding agents to enable our platform for coding agents that will accelerate dramatically the time to value for our customers. And that, of course, includes creation of AI agents, deployment of agents in the context of enterprise workflows. I would like also to stress how important is the combination between deterministic automation and agentic automation into the context of the same platform that can orchestrate both what I would say, humans, agentic, and deterministic automation. Michael Turrin: Ashim, just you gave some texture. I know the commentary and the guidance on the call was pretty similar to entering fiscal '27 as '26, but it sounded like in some of the prior answer that maybe public sector is trending a bit better. So just any more context you'd give us around how you're characterizing the current environment, the visibility you have into the model for the forward year at this point and just how you're thinking about the contribution from the AI product portfolio as that scales in fiscal '27? Ashim Gupta: Yes. I mean we really continue to characterize it as variable. And I'll double-click just again for anybody who's new in terms of what we mean by that. I think we do see pockets of strength and we see pockets of pressure or fluctuations that happen from a macroeconomic standpoint. And at the same time, those tend to move around quite a bit. Like right now, our bullishness in terms of public sector feels really good. Last time on this year, if you remember, we kind of awful -- felt a lot of uncertainty in that area. We're seeing strength in areas like financial services and health care, international markets like Australia. And then there's -- obviously, the Middle East conflict is there, so there's uncertainty there. So we really characterize it as variable. As I commented in the script, we continue to kind of maintain a very consistent guidance philosophy. We look at our pipeline. We have really deep inspection. We get a lot of signal from the field. Daniel has spent a lot of time with customers over the last 3 months, 4 months. We have -- we've been very in touch with kind of the field in terms of hearing. And then the other piece is, we obviously have a very strong now statistical and forecasting models between our finance and our ops team, and we triangulate the 3 of them. So we talked about kind of putting the appropriate prudence in the -- in for guidance, accounting for the variability in macroeconomic environment, and we've done so. And at the same time, when you look at our guidance, I do think it also reflects kind of stabilization of net new ARR and what the potential is yielding in terms of the traction our teams are making in the agentic market and how we're positioned. So that's how I would characterize our guidance. Operator: And our next question comes from the line of Kirk Materne with Evercore ISI. Chirag Ved: This is Chirag on for Kirk. You highlighted multiple industry partnerships, right, Veeva -- like with Veeva and certain vertical solutions like health care and financial crime, would you highlight health care and finance as the 2 verticals that are showing the strongest willingness to spend right now on agentic AI initiatives? Or are there others that you would flag? And when you think about agentic automation at scale, what does success look like in terms of repeatable playbook and sales cycle impact here? Daniel Dines: I think you got it very right. It's the health care. And I think we nominate it within the health care in particularly, I would say, parts of revenue cycle management, denials, prior authorization. It's a very important type of processes for us. Financial industry has been since the beginning of the company, our stronghold, and we strengthened it with the acquisition of WorkFusion with our big foray into financial crimes. And I would add also the public sector as an important vertical for us that we are eyeing. Operator: And our next question comes from the line of Terry Tillman with Truth Securities. Terrell Tillman: I have two. So first on Maestro, it is my impression, it's vendor agnostic from an agentic standpoint. Are you all seeing situations where it's involved in managing agents from system of record companies or AI-native businesses? Or is it mostly like a control plane for your own agents? And then I have a follow-up. Daniel Dines: Yes. I think Maestro, it's kind of agnostic in terms of what kind of agents it can manage. Of course, for our own agents, that are built with Agent Builder, we have very tight integrations. But we have also brought agents built with open source frameworks like the LangGraph type of agencies, first-class citizens in our platforms. And in terms of using -- utilizing agents built on system of record applications. Of course, we are -- we facilitate using them in our platform. I would not say we manage them. It's more or less like you can call an API that is provided by that platform. But I want to be specific, the all agents that are built with open source framework can be deployed and executed in the context of the security and governance that our platform provides. Terrell Tillman: Yes. That's a good clarification on the API side. Thank you, Daniel. And I guess, Ashim, the SaaS shift, that was an important call-out, 1% impact to growth as we look into FY '27. I'm also curious though, is there also starting to be this impact of timing dynamic or around consumption or scaling volumes related to the actual agentic solutions that we need to kind of appreciate that's not going to show up in revenue yet. Ashim Gupta: No. I mean, remember, we do -- we still price on kind of a bundle, meaning on a subscription, consumable-type hybrid model, meaning we sell kind of use it or lose it units that are there. So we're not on a consumption basis of accounting, so to speak. We're still on an ARR basis of accounting. So I would say there's -- it's not about any trailing or any delayed impact that you would see there. At the same time, I think our agentic solutions are scaling and our customers are adopting more and more as we talked about in the script and sales are moving very well for us. And that obviously is what's contributing a little bit to our SaaS side of it. Operator: And our next question comes from the line of Radi Sultan with UBS. Radi Sultan: Daniel, in your prepared remarks, you mentioned this growing backlog of automations you're seeing at customers. I just wanted to double click on that, like how big is that tailwind of AI unlocking more automatable workflows. And you mentioned the AI product ARRl, but just how material is that sort of pull through to the core automation business as well? I just love to get your thoughts there. Daniel Dines: Yes, that's an acute observation. Because of the huge interest in AI, it's actually driving renewed interest in automation. I think in most cases that we are seeing, people expect that the use of AI will result in some sort of automation. And it's becoming more clear that AI and Agentic AI and deterministic automation are very complementary. So basically, any AI initiatives surfaces more opportunities for deterministic automation, especially in our case for unattended deterministic automations. Radi Sultan: Got it. And then just a follow-up for Ashim. Just as you think about the ARR and revenue guide for the year and we think about sort of what the biggest drivers are, you guys really extended the product portfolio over the past 12 to 18 months. And just as we think about AI product, test cloud vertical solutions, sort of core RPA. Like how should we think about sort of what the biggest drivers are of that sort of growth next year as you kind of think about the guide? Ashim Gupta: Yes. I think if you just look at some of the metrics that we disclosed, right, 90% of our $1 million-plus customers haven't incorporated AI products, right? I think that is a great -- to me, kind of a great tell of the success of the AI products and the ability for us to expand. And we've also talked about the number of customers that still have room to adopt those AI products that are there. So from our standpoint, AI and agentic is going to lead the way. But at the same time, as Daniel talks about, they're not a separate stream. They actually are very synergistic. As people pull forward AI and agentic products from us, it actually also pulls through the rest of the platform, whether that is IDP, IXP, unattended robots, et cetera. And we see that. We are very purposeful in discussing that we are seeing growth rate within kind of the core RPA business and we look at that as very synergistic as we go forward. The other thing to highlight is we're super excited about our test automation business. And that is still in its infancy, but we really see that having good traction in the market, and that can also be -- that is also a growth driver for us as we enter this year. Operator: Our next question comes from the line of Scott Berg with Needham & Company. Scott Berg: I've got 2. Daniel, we've been doing some work with partners here. It's become very evident and clear that your partner strategy seems to be resonating really well right now across several different -- or your vertical strategy, excuse me, is working well across several verticals. But my question is, as you look into '27, are you able to lean into that strategy even more so given the success you're having there lately? Or do you feel like you're already at kind of a maximum effort. Daniel Dines: On the contrary, I think we are at the beginning of our vertical strategy. We are doubling down our focus on investments into this year. So if I can summarize our product strategy, I think there are 3 major pillars that we are seeing right now. So we focus on adopting coding agents all across our platform. So every single artifact is building on our platform will be built primarily by coding agents. Second its process orchestration that really drives everything Agentic AI and deterministic workflows. And third, it's vertical solutions. And we have seen clearly more of a move into customers that have a higher demand of kind of an outcome-based vision by use case-based type of solutions that they want to adopt. Scott Berg: Got it. Very helpful there. And then Ashim, I was hoping you can drill down in the quarter a little bit I know there's a $14 million tailwind around FX for ARR. But what was your assumption of that number going in the quarter? I get a lot of questions, to try to kind of back into the math in terms of how much incremental impact it might have been versus your expectations 90 days ago? Ashim Gupta: Yes, it was honestly right. It was just right in line with that. As I talked about, like I think the yen you could see has an inverse correlation to the euro and the net for both of those tended to be 0. We see that both as we look into the current year as we've seen FX rates move as well as the current assumption that we see there. So from both our guidance standpoint and our results, we really see an immaterial impact to that. The driver for our beat in the quarter was really just sales execution. And we're -- we feel very strong about the customer response as we've seen about the traction that we're getting within our AI products. FX did not have a material impact versus our guidance. Operator: And our next question comes from Kingsley Crane with Canaccord Genuity. William Kingsley Crane: I think the idea of AI on top of deterministic automations, is really resonating. Just on this idea of Agentic really being about pulling through to the whole platform. Just trying to get a sense of how that ends up playing out from a deal timing perspective? Like -- is the customer typically renewing at a much higher rate? Is it happening where they'll adopt AI and then through the life cycle of their contract, they'll realize that they need more automation? Just trying to get more color on that. Ashim Gupta: I think it's all of the above. Honestly, like we've seen the customers renew just at renewal, expand into AI products. We have very good examples of that, both within -- across every vertical and every geography. There's also areas that they're still working through their POCs, but it's bolstered their renewal and their confidence given our road map. And the POCs are moving well, so they would expand just a little bit as they continue to kind of dip their toe in the water. So from our standpoint, it's not one single motion. It really depends on the customer or the circumstance. But what is encouraging to us is the success that our proof of concepts the feedback that we're getting from customers that as Daniel talked about governance matters and the full extent of our platform is a difference maker for us. William Kingsley Crane: Great. And then just a quick follow-up. That #1 OSWorld ranking for Screen Agent definitely impressive, and that's still holding up. Just curious like how specifically Screen Agent is driving more automation growth within customers. And just a reminder on the unit economics that's affected by running Opus versus running high-q, things like that. Daniel Dines: Yes. I think we are still in the early innings of deployment of the screenplay agent. We are seeing really good use cases from our customers. They -- the powerful use of this screenplay agent is that it is used in the context of autonomous workflows. So basically, the best we combine like using deterministic UI automation technologies. And in the places where it's extremely difficult to define in rules how to use the screen when the screens are -- have a high degree of variability. Our customers are using the screenplay agent. So that basically extended our platform in a few use cases that we couldn't basically touch before. But again, I think it's still early to comment on how does it help with the platform adoption. Operator: And our next question comes from the line of Arsenije Matovic with Wolfe Research. Arsenije Matovic: I just kind of wanted to go back and expand kind of on the ARR guidance methodology in terms of that conservatism. Like what does that mean? And I understand we're not going to be talking about inorganic from WorkFusion, $20 million, whatever it is. Even if you strip out that number growing at the 65% rate the CEO talked about. Is there a way that it still looks a little bit less conservative in that guide? And if there is a little bit less conservative [indiscernible] dynamic where it's just, hey, larger renewal cohorts and also more confidence in that execution tailwind that you started to see exiting the year? Ashim Gupta: Yes. So one is I just want to correct, Like, I don't think we should -- the metrics that we talked about, as I said, we bring it on at a different ARR methodology. So I really want to caution everybody to use kind of those -- those assumptions. It's immaterial for a reason as we've done that test. The second piece is, while the business was growing at 65%, remember, we also have overlapping customers, et cetera. We really view this as a technology tuck-in that can drive utilization and stickiness across our Agentic and AI platform. And of course, we do see potential there for the upsell, but we also have to go through an integration period with the company. And that is all baked into our guidance from that standpoint. We look at it as our core business continues to be very strong, and we are stabilizing net new ARR. And with AI and Agentic, we do feel bullishness about the overall business. But given the macroeconomic environment continuing to be variable, we do layer the appropriate prudence that is there. Arsenije Matovic: Got it. And then just in response to an earlier question, I didn't really kind of get the in line with the constant currency guide. Can we just clarify what was the constant currency ARR growth rate implied in the guide for revenue and for ARR growth because the communications throughout the year on tailwinds and incremental headwinds has kind of laid up a weird kind of analysis to figure out what the actual core constant currency growth was? Ashim Gupta: Yes. From our standpoint, we gave the $14 million, which we assumed -- which we -- for the guidance that was there, but the growth rate remains 11% for us. It is largely a material year-over-year. Operator: And our next question comes from the line of Siti Panigrahi with Mizuho Securities. Phil Winslow: This is Phil on for Siti. So you guys raised the long-term non-GAAP operating margin target to 30%, which is a meaningful step up. Can you walk us through what gives you confidence in that number? And what is the time frame of achieving that target? Ashim Gupta: Yes. So right now, we're in and around 23% north of that. We've shown really good progress and scalability over the last couple of years, in particular. The first thing is we just continue to operate with really good discipline. And so we constantly are moving investments to higher return areas. And so when you're able to do that, it obviously creates a scalability of expansion. The second is we believe in the productivity that is being unlocked right now with agentic and that agentification within our own business is something that is very exciting for us and our teams to unlock further steps of productivity. And that includes all areas within the company. We can be more productive, expand and support our broader road map, really with similar technology spend just because of the advances that are there or R&D spend. The same goes with our G&A function as well as our sales and marketing function. So we're really seeing that scalability just even with the technology advances as well. In terms of time frame, it's a long-term margin target. We -- as it implies, that's kind of within a 3-year time frame from our standpoint in and around it. And at the same time, like we don't take -- we're not waiting for 3 years. We're going to continue to execute and drive productivity as we see fit. Operator: And our next question comes from the line of Koji Ikeda with Bank of America. Koji Ikeda: I'm going to ask one on dollar-based net revenue retention. So it's down 1 point to 106% when adjusting for FX. And so looking into fiscal '27, what are the main drivers we should be thinking about, whether that's product, geography, vertical or maybe something else in there that can drive expansion in that metric? And how should we be thinking about the dollar-based net revenue retention assumptions that are embedded in the guide? Is that flat, up or down from the 106%? Ashim Gupta: Yes. I think when you look at overall net new ARR stabilizing, like we don't really see a difference in the mix shift between net new logos as well as expansion. We see them both as areas that will continue. We've kind of operated in this 80-20, 70-30 split. So that gives you, I think, enough data to be able to see that net new ARR stabilizes over this period of time from where we are. In terms of what gives us confidence or kind of how we see that expansion, again, as we spoke about earlier, it is really around our AI and Agentic products. And then with that, really pulling through the overall platform, including deterministic automation, continuing to expand across our customer base. Operator: Our next question comes from the line of James Kisner with Water Tower Research. James Kisner: I guess first, just -- from the foundational model perspective, I mean has the Anthropic supply chain risk designation, have you seen any kind of ripples from that at all? Is there any kind of exposure at all any change in behaviors out there? And then just on the WorkFusion acquisition, does that portend potentially future acquisitions and other verticals for agentic capabilities? Daniel Dines: Yes. In relation to Anthropic, our strategy was from the beginning to be model agnostic. And we -- 1 of the features that many of our customers have requested this to give them the capabilities of choosing what model and even bring their own model to be used by our platform. So we do offer Anthropic models but they are optional and not mandatory. And from this perspective, there is zero impact on our working relationship with public agencies in the U.S. About WorkFusion, Yes, it's -- we are always looking into the market, especially for tuck-in acquisition that gives us the talent, technology, and expertise in a particular vertical. Operator: And with that, ladies and gentlemen, that does conclude the question-and-answer session. I would now like to turn the floor back to management for any closing remarks. Daniel Dines: Well, thank you so much for listening to this call. And once again, I would like to apologize for the outage that we experienced, and I'm looking forward to meeting many of you in the coming days. Thank you. Operator: Thank you. And with that, ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation, and you may now disconnect at this time, and have a wonderful rest of your day.
Operator: Okay. Hello, everyone, and welcome to Viant Technology Inc.’s fourth quarter 2025 earnings conference call. My name is David, and I will be your operator today. Before I hand the call over to the Viant Technology Inc. leadership team, I would like to go over a few housekeeping notes for the program. As a reminder, this call is being recorded. After the speakers’ remarks, there will be a question-and-answer session. If you plan to ask a question, please ensure you have set your Zoom name to display your full name and firm. If you would like to ask a question during the call, please use the raise hand function located at the bottom of your screen. Thank you for your attendance today. I am now happy to turn the call over to Nicholas Todd Zangler, SVP of Investor Relations for Viant Technology Inc. Nicholas Todd Zangler: Thank you. Good afternoon, and welcome to Viant Technology Inc.’s fourth quarter 2025 earnings conference call. On the call today are Tim Vanderhook, Co-Founder and Chief Executive Officer; Chris Vanderhook, Co-Founder and Chief Operating Officer; and Lawrence J. Madden, Chief Financial Officer. I would like to remind you that we will make forward-looking statements on our call today, including, but not limited to, statements regarding our guidance for Q1 2026 and other future financial results, our strategy, our platform development initiatives, including Viant AI, our pipeline and potential partnership opportunities, growth of our total addressable market, our share repurchase program, and industry trends that are based on assumptions and subject to future events, risks, and uncertainties that could cause actual results to differ materially from those projected. These forward-looking statements speak only as of today and we undertake no obligation to update or revise these statements except as required by law. For more information about factors that may cause actual results to differ materially from forward-looking statements, and our entire Safe Harbor statement, please refer to the news release issued today as well as the risks and uncertainties described in our Annual Report on Form 10-K for the year ended December 31, 2025, under the heading “Risk Factors,” and in our other filings with the SEC. During today’s call, we will also present both GAAP and non-GAAP financial measures. Additional disclosures regarding these non-GAAP measures, including a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures, are included in the news release issued today and in our earnings presentation, which have been posted on the Investor Relations page of the company’s website and in our filings with the SEC. I will now turn the call over to Tim Vanderhook, Chief Executive Officer of Viant Technology Inc. Tim? Tim Vanderhook: Thanks, Nick. And thank you all for joining us today. We delivered strong fourth quarter performance achieving new company records across all key metrics. Revenue increased 22% year-over-year, and contribution ex-TAC increased 19% year-over-year, both above the high point of our quarterly guidance range. When excluding political advertising, revenue and contribution ex-TAC increased 28% and 24% in the quarter, respectively, and more accurately reflects the true strength of our business. Growth was broad-based across verticals, driven by accelerating CTV demand, strong digital out-of-home and mobile demand, increased utilization and further adoption of Viant Technology Inc.’s addressability solutions, and expanded use of the Viant AI product suite. Adjusted EBITDA increased 45% year-over-year to $24,700,000 for the quarter and exceeded the high end of our guidance range. Our fourth quarter performance completes a solid year for Viant Technology Inc. In 2025, revenue increased 19% to $344,000,000. Contribution ex-TAC increased 18% to $209,000,000, and adjusted EBITDA increased 29% to $57,000,000. While these are standout results as reported, our underlying performance was far stronger than these results indicate. Our contribution ex-TAC rose nearly 20% in 2025 while absorbing the effects of tariff-related pressure, cycling a difficult political comparison, and navigating the migration of a material client off platform due to a corporate merger. We were also able to increase adjusted EBITDA nearly 30% while absorbing incremental operating expenses associated with our strategic acquisitions of IRIS.TV and Locker. As we shift our focus to 2026, we foresee a year of accelerating performance attributable to a number of catalysts worth noting. First, we see a healthy ad environment, evidenced by strengthening customer demand trends observed through this point in the quarter. Our new flagship customer Molson Coors is live and actively deploying ad spend in the first quarter, with plans to ramp throughout the year and in the years to come. Joining Molson Coors are several major U.S. advertisers who have recently launched ad campaigns with Viant Technology Inc., including WHOOP, the human performance company behind world-class wearable technology. Other notable wins include a leading CTV streaming service, a national charitable foundation, and a national convenience store chain. We expect these advertisers to significantly ramp ad spend in the coming quarters, and we look forward to securing additional major U.S. advertiser wins throughout the year. We also expect major tentpole viewership events to drive incremental ad spend to the CTV channel this year. In February, the most-watched Winter Olympics since 2014 averaged 23,500,000 U.S. viewers, and the 2026 World Cup is projected to exceed a prior record of 26,000,000 U.S. viewers later this year. Both marquee events are hosted by providers within our Direct Access Premium Publisher program—Peacock for the Winter Olympics and Fox, Peacock, and various virtual MVPDs for the World Cup. Furthermore, we anticipate strong contribution from political advertisers in the second half of the year, fueled by midterm elections and the ongoing shift of political budgets from linear TV to CTV. Within our addressability suite, we expect to benefit from ramping adoption and increased utilization of IRIS ID, our industry-leading content identifier. And finally, I could not be more excited about the recent launch of Outcomes, our new branded AI decisioning solution powered by our AI Lattice Brain and intelligence layer, which is aimed at winning performance budgets across advertisers of all sizes. Chris and I are going to spend the bulk of our time today highlighting the capabilities, features, and use cases associated with the launch of Outcomes. But I do want to provide an update on recent performance and progress across all three of our key strategic priorities: CTV, addressability, and Viant AI. The migration of advertising dollars from linear television to CTV continues to accelerate, and our platform is strategically positioned to serve advertisers capitalizing on this shift. Reflecting this market dynamic, our customers increasingly directed their purchasing decisions towards CTV, with total CTV spend on our platform reaching a new all-time high in the quarter and representing 46% of total advertiser spend. For the second consecutive year, CTV contribution ex-TAC increased by more than 40%, over two-and-a-half times the broader industry growth rate. This outsized adoption reflects Viant Technology Inc.’s strategic investments in CTV infrastructure, publisher relationships, and addressability solutions, which collectively position Viant Technology Inc. as the platform of choice for CTV campaign deployment across the open internet. Contributing to our outsized CTV growth is the continued expansion of our Direct Access Premium Publisher program. Direct Access offers advertisers an efficient, targetable, and measurable path to purchase CTV ad inventory. By facilitating transactions directly with publishers, we can bypass bidstream resellers, allowing advertisers’ spend to be allocated to working media, not middlemen, driving better returns for our clients. For the full year 2025, nearly 50% of CTV ad spend on our platform was transacted through our Direct Access Premium Publisher program, which includes CTV streaming services from leading providers like Disney, Paramount, Peacock, and many more. Our addressability suite is the bedrock of our buying platform. It includes the industry’s leading audience identifier, Household ID, and the industry’s leading content identifier, IRIS ID. Viant Technology Inc.’s Household ID, our patented deterministic audience targeting and measurement solution, continues to see strong utilization amongst advertisers and was a meaningful contributor to top-line growth in the quarter. Household ID delivers superior addressability for advertisers looking to leverage their first-party data to reach specific audiences and measure campaign performance. Our Household ID is truly ubiquitous, embedded in over 80% of all programmatic bid requests and over 90% of all CTV requests. And with 95% of all household addresses mapped to our ID graph, we can match advertisers to addressable audiences at a massive scale, with Household ID offering approximately four times the coverage of competing audience identifiers. IRIS ID, our proprietary content targeting and measurement solution, continues to proliferate amongst publishers, enabling advertisers to deploy contextual campaigns at greater scale. In just over a year since its acquisition, the presence of IRIS ID within the CTV bidstream has grown fivefold, reaching nearly 50% of incoming CTV bid requests during the first quarter. IRIS ID empowers advertisers to target CTV inventory at the show level, going beyond the app, making it possible for advertisers to bid on unique contextual signals like emotional sentiment, tone, and brand suitability. This is made possible through direct integrations with the publishers’ own content management systems, providing Viant Technology Inc. with a meaningfully higher resolution of contextual intelligence. Looking across our client base, financial institutions use IRIS ID for brand-safe ad placement, targeting categories like fine art and family, and content that conveys inspiration and reflection. Outdoor fashion retailers deploy IRIS ID for brand relevance, targeting categories such as nature and travel, and content that exudes reliability and ruggedness. Given the enhancement in performance, we have seen several advertisers and agencies mandate the use of IRIS ID across their entire CTV budgets, which is quite the endorsement and one that is likely to incentivize further adoption across CTV publishers. In the quarter, revenue attached to IRIS ID utilization increased 90% sequentially. Moving on to Viant AI. In early January, we announced the launch of the fourth phase of Viant AI, our AI decisioning functionality. AI decisioning introduces a new standard of autonomous optimization. It moves beyond initial ad campaign setup, providing for real-time campaign refinement and the technological agility to continuously react to fluid market conditions, with the goal of delivering optimal campaign outcomes. The launch of AI decisioning was accompanied by the introduction of a new branded solution appropriately named Outcomes, which we have built to service performance advertisers. At the surface level—the user interface level—Outcomes asks for just four basic inputs: the name of the advertiser or the advertiser’s product or service, the budget, the flight dates, and the goal, be it incremental revenue, return on ad spend, or per action. Once submitted, the advertiser’s work is done, and Viant AI does the rest. Beneath the surface is a decisioning architecture purpose-built for autonomous campaign operation, which we call the AI Lattice Brain. Based on the advertiser inputs, the Lattice Brain constructs the most optimal media plan by leveraging differentiated and proprietary signals unique to Viant Technology Inc. from within our intelligence layer. Signals that support a multitude of functions: for identity resolution, Lattice Brain utilizes signals like Household ID and our custom identity graph to build and execute sophisticated audience targeting strategies, frequency capping, and sequential messaging capabilities. For supply quality evaluation, Lattice Brain leverages our unique integrations with Direct Access Premium Publishers and our custom supply scoring models. These models rank supply paths based on impression quality, brand safety, fraudulence, bot activity, and more, providing critical intelligence that informs channel and publisher mix modeling and price discovery. For performance enhancement, Lattice Brain taps our high-fidelity signals like IRIS ID, along with attention and creative placement scoring models to maximize campaigns for viewability, engagement, and overall impact, aligning media delivery directly to advertiser-defined outcomes. Our AI Lattice Brain operates against a signal set that no competing DSP or standalone AI tool can replicate, because it is dependent on proprietary identifiers, unique supply integrations, and optimized intelligence that accumulates only through our integrated stack. Importantly, Lattice Brain launches with this intelligence already in place, activating against the mature, high-fidelity signal foundation from day one. As campaigns execute, our platform continuously incorporates incremental performance data—data further sharpening precision and efficiency. We believe this flywheel to decide, execute, measure, and refine, operating against the highest-fidelity proprietary signals, is capable of delivering newfound levels of ad efficiency and performance that compounds over time. Historically, advertisers and agencies have been burdened with the responsibility of manually constructing and executing ad campaigns. They have had little choice but to navigate a highly complex and fluid bidstream, which operates at the staggering speed of up to 15,000,000 bid requests per second. Independently, this is a difficult task, even with the use of our proprietary data signals at their disposal. But with the launch of Outcomes, the onus shifts to AI, and performance optimization becomes autonomous. Outcomes assumes the role of media planner, trader, and data scientist, autonomously optimizing every decision in service of the advertiser’s defined performance objective. As the culmination of all four phases of Viant AI, Outcomes is a complete autonomous performance solution. Governed by our Lattice Brain decisioning architecture, it leverages proprietary data signals within our intelligence layer to deliver measurable performance outcomes in a way that has not been done before. We have built the open internet’s first fully autonomous AI-powered ad product, designed to compete for performance budgets against the walled gardens. In a moment, Chris will discuss our go-to-market strategy and run through a few early case studies that demonstrate the effectiveness of our new Outcomes solution. Before concluding, I want to briefly address the broader industry discussion around AI and its impact on software platforms, including companies like Viant Technology Inc. We believe AI strengthens businesses built on proprietary data and domain-specific infrastructure. In our case, AI amplifies the structural advantages already embedded in our platform. There is an insurmountable gap between the theoretical ability to assemble a DSP interface using AI tools versus operating a scaled, enterprise-grade, programmatic platform supported by irreplicable infrastructure. While an LLM may generate generic bidding logic against commodity signals, our AI operates against deterministic household-level identity, proprietary content-level signals, exclusive direct access supply paths, and years of accumulated optimization intelligence. LLMs cannot replicate a Household ID covering over 115,000,000 U.S. households, selectively embed IRIS ID across more than 1,400 publisher content management systems, or recreate direct publisher integrations representing over 75% of addressable CTV through prompt engineering alone. While AI may transform user interfaces across categories such as CRMs and analytics dashboards, at Viant Technology Inc., AI is not an overlay. It is fused with proprietary data and programmatic infrastructure. That fusion defines our platform architecture and reinforces our competitive positioning. In summary, we delivered on our commitment to reaccelerate top and bottom-line growth in the fourth quarter, anchored by our three strategic priorities: CTV, addressability, and Viant AI. Our business is strategically aligned to capitalize on the industry’s largest and most transformative growth opportunities, where we continue to lead and innovate. We believe this positioning uniquely equips Viant Technology Inc. to capture the next wave of brand and performance budget growth in 2026 and beyond. With that, I will pass it over to Chris. Chris Vanderhook: Thanks, Tim. I will provide an update on our customer go-to-market strategy, particularly as it pertains to the launch of Outcomes. But first, let us take a step back and survey the broader advertising landscape. This year in the U.S., total advertising dollars are expected to reach nearly $450,000,000,000. Of this, 30% will be allocated to brand budgets, while 70% will be allocated to performance budgets. Today, performance budgets have largely been dominated by search and social walled gardens, including Google, Meta, and Amazon. With the launch of Outcomes, we intend to compete directly for performance budgets, aiming to divert spend to the open internet by leveraging a complete end-to-end view of attribution across the entire customer journey, connecting initial CTV exposure to final conversion. Our go-to-market approach starts with our existing customers, where we see an opportunity to drive significant organic growth as we increasingly service their performance budgets, in addition to their existing brand budgets. Virtually all of our customers allocate spend to search and social walled gardens as part of a well-rounded holistic marketing strategy. We intend to leverage our existing relationships to showcase the effectiveness of Outcomes and win new performance budgets from our existing customers. This initiative is well underway, and I would like to highlight a few examples of our Outcomes product at work. Over 20 existing customers have extensively tested Outcomes, with a number of them implementing Outcomes on an ongoing basis, one of which is MacKenzie-Childs, a luxury home décor brand and prominent seller of tableware, kitchenware, and decorative home furnishings. In our initial tests, we ran two separate ad campaigns for MacKenzie-Childs, each identical in scope, with both campaigns seeking to maximize sales conversions over the same time period with the same budget. The only difference was that one campaign was planned, executed, and optimized by a human expert, which served as our control group, while the other campaign was planned, executed, and optimized by our new fully autonomous Outcomes solution. We even handicapped Outcomes by restricting the use of retargeting strategies, which would have further enhanced performance, and yet still, the campaign utilizing Outcomes delivered a 58% lower cost per conversion compared to the control group. Let me clearly articulate this result. For this test, the human expert campaign was able to generate a $135 sale for every $33 spent on advertising, while Outcomes was able to generate a $160 sale for every $14 spent on advertising, a 58% reduction in cost per outcome. So for the same budget, Outcomes generated over 180% total sales versus the control campaign. There are two primary reasons behind Outcomes’ superior performance. First, at any given moment amongst trillions of potential campaign configurations, by definition, there must exist one ideal campaign that best allocates spend across the right channels, publishers, audiences, and content, and does so at the right price to yield the most optimal outcome. In the pursuit of this optimal outcome, we believe our AI Lattice Brain is simply far better at digesting and interpreting all of our proprietary data signals—inputs utilized to create the most ideal campaign. And second, in a fluid marketplace, the ideal campaign configuration is always changing. Lattice Brain is uniquely capable of iterating and redesigning campaigns in real time in response to fluid market conditions at a speed that is simply impossible for humans to replicate, and therefore, it is far better equipped to continuously reconfigure for the most ideal campaign configuration, which results in driving superior business outcomes for the customer. In another client test, UMass Global, a private university with over 19,000 students, pitted Outcomes against human experts with a goal of driving high-intent student inquiries. Even with a short training period, Outcomes achieved an 82% lower cost per outcome compared to the control group. Kampgrounds of America, one of the nation’s largest campgrounds franchise businesses, tested Outcomes during a recent holiday season with a goal of driving confirmed purchase events. Outcomes delivered a 76% reduction in cost per purchase event compared to the control group. Tire Discounters, one of the largest tires and automotive service retailers in the U.S., recently tested Outcomes seeking high-intent lead events. Outcomes delivered a 43% reduction in cost per lead compared to the control group. Uqora, a biotech healthcare company, saw a 95% reduction in cost per outcome, while the Alzheimer’s Association saw a 68% reduction in cost per outcome. And the list goes on. Based on these results, we believe Outcomes is clearly capable of driving a meaningful inflection in return on ad spend for advertisers. As utilization scales amongst our existing customer base, we see an immediate opportunity to accelerate organic growth. We believe that over time, clients will move toward autonomous platforms that deliver increased performance and greater reliability in achieving outcomes. Beyond our existing customers, Outcomes enables Viant Technology Inc. to aggressively pursue performance budgets across the more than 10,000,000 advertisers currently spending with search and social walled gardens. And because virtually all of these prospective advertisers are yet to utilize the highly effective CTV channel, we simply need to prove that their first dollar allocated to CTV via Outcomes will outperform their next dollar allocated to search and social walled gardens, where we believe they are already overinvested and seeing diminishing returns. We are also seeing strong enterprise adoption with major U.S. brands, including Molson Coors, as they partner with Viant Technology Inc. across a broad range of industry verticals. We recently announced a partnership with WHOOP, the performance company behind world-class wearable technology, where Viant Technology Inc. was designated as their DSP of record. WHOOP chose Viant Technology Inc. because they recognize CTV as the most digital channel for growth and value our capacity to deliver measurable incremental results via proprietary, high-fidelity data signals. With aggressive growth ambitions, WHOOP plans to deploy a sizable ad budget over the next two years through Viant Technology Inc.’s buying platform. We believe major U.S. advertisers are increasingly partnering with Viant Technology Inc. because of our unique value proposition—rooted in independence, CTV leadership, proprietary data and addressability solutions, and AI capabilities. To capitalize on recent momentum, we have expanded our enterprise sales team, appointing tenured executive sales leaders across key industry verticals, including healthcare, CPG, QSR, retail, and travel and tourism. These seasoned leaders bring deep, long-standing relationships with major U.S. advertisers and are tasked with securing new flagship accounts. And to best serve the diverse needs of major U.S. advertisers who manage both large brand budgets and large performance budgets, our buying platform remains flexible in use. Advertisers may choose to run campaigns manually as they have traditionally done, or they can choose to leverage various individual components of our AI suite, including AI bidding, AI planning, and AI measurement and analysis, or they could choose to go all in on autonomous advertising, delegating the entire construction and execution process to our Outcomes solution, powered by our Lattice Brain AI decisioning architecture and intelligence layer. In closing, I want to reiterate that our long-standing vision has always been to deliver autonomous advertising to the open internet. After years of dedicated investment, focus, and persistence, we are thrilled to be in market with a fully autonomous buying platform, uniquely equipped with proprietary, high-fidelity data signals. With this new asset, we see an unprecedented opportunity to expand our total addressable market and accelerate growth throughout 2026 and beyond, winning incremental spend from our existing customers, performance advertisers, and major U.S. brands. And with that, I will turn it over to Lawrence to provide more detail on our financial performance. Lawrence? Lawrence J. Madden: Thanks, Chris. Before I begin, I would like to remind everyone that we have posted a presentation on our Investor Relations website that includes supplemental financial information to accompany today’s call. We concluded 2025 with a strong fourth quarter, executing against the key strategic priorities Tim outlined—CTV, addressability, and AI—and translating that momentum into record financial performance. Before diving into our detailed fourth quarter results, I will provide a high-level summary of our full-year performance. For the full year of 2025, we achieved record results across all key metrics. Revenue totaled $344,200,000, increasing 19% year-over-year. Contribution ex-TAC totaled $208,700,000, increasing 18% year-over-year. Adjusted EBITDA totaled $57,400,000, increasing 29% year-over-year, and adjusted EBITDA margin expanded by approximately 250 basis points year-over-year to reach 28%. Finally, non-GAAP net income totaled $41,100,000 in 2025, increasing 19% year-over-year. I will now move on to our results for the fourth quarter. Revenue for Q4 was $110,100,000, up 22% year-over-year and 5% above the high end of our guidance range. On a sequential basis, revenue increased 29% from Q3. Contribution ex-TAC for Q4 totaled $64,600,000, up 19% year-over-year and 1% above the high end of our guidance range. On a sequential basis, contribution ex-TAC increased 22% from Q3. Both revenue and contribution ex-TAC represent record results for a quarterly period. It is important to note, as Tim mentioned, our underlying business is performing stronger than our reported results indicate, primarily attributable to the difficult comparison brought about by last year’s high political ad spend contribution. When excluding political ad spend contribution from the prior-year election cycle, which weighed on revenue growth by approximately 600 basis points and contribution ex-TAC growth by approximately 500 basis points in the quarter, revenue increased 28% year-over-year and contribution ex-TAC increased 24% year-over-year on a pro forma basis. New customer momentum also remains strong, as evidenced by the recent announcement of a new multi-form, multiyear partnership with WHOOP, alongside a number of recently established wins with other major U.S. advertisers, including Molson Coors. We believe these trends reinforce our strong competitive positioning and support our ability to continue outperforming the broader programmatic market over the long term. We delivered strong performance across most customer verticals in Q4, with financial services, public services, and CPG leading the way. Advertisers continue to select Viant Technology Inc. for access to emerging digital channels, with CTV adoption reflecting the broader industry shift toward premium addressable video. In Q4, customer-directed CTV purchasing accounted for a record high of 46% of total platform spend, with nearly half running through our Direct Access Premium Publishers. CTV spend reached an all-time high in the quarter, as advertisers increasingly prioritize CTV to drive performance outcomes. Advertisers industry-wide continue to shift their media mix towards emerging digital channels such as CTV, streaming audio, and digital out-of-home. Reflecting this secular trend, customer-directed purchasing on our platform across these channels collectively represented approximately 54% of total platform spend for the year, up from 51% in 2024 and 43% in 2023. Viant Technology Inc. remains well positioned as a leading partner for advertisers moving beyond traditional display to capitalize on next-generation media formats. Reflecting advertiser preference for high-impact, measurable formats, customer-directed video spend, inclusive of CTV, reached a record high and represented 63% of total spend in the quarter, underscoring Viant Technology Inc.’s strong positioning to serve this demand. Non-GAAP operating expenses totaled $39,800,000 in the fourth quarter, representing a 7% year-over-year increase and an 8% sequential increase. Notably, operating expenses include strategic investments related to the acquisitions of IRIS.TV, which closed in November 2024, and Locker, which closed in February 2025, both of which expand our long-term product capabilities and are intended to support long-term growth. Excluding these acquisitions, organic non-GAAP operating expenses increased a modest 5% year-over-year and increased 8% sequentially, reflecting continued operating leverage and disciplined expense management. Importantly, we remain focused on scaling efficiently. Even as we continue to invest in innovation across Viant AI and our broader technology stack, we are delivering measurable gains in productivity, increasing trailing-twelve-month contribution ex-TAC per employee by over 8% year-over-year, marking 10 straight quarterly increases—a clear signal of improving operational efficiency. Adjusted EBITDA for Q4 was $24,700,000, exceeding the high point of our guidance by 5% and growing 45% year-over-year and 54% sequentially. Adjusted EBITDA as a percentage of contribution ex-TAC was 38% for the quarter, above our guidance range and representing nearly 700 basis points of improvement over the prior-year period. Non-GAAP net income, which excludes stock-based comp and other adjustments, totaled $19,000,000 for the quarter, up 37% from $13,800,000 in the prior year. Non-GAAP basic earnings per Class A share outstanding was $0.23 in the fourth quarter compared to $0.17 in the prior year. In terms of share count, we ended the quarter with 63,300,000 total shares outstanding, consisting of 17,600,000 Class A shares and 45,700,000 Class B shares. We ended the quarter with a strong balance sheet, including $191,200,000 in cash and cash equivalents, $219,200,000 in positive working capital, no debt, and full access to our $75,000,000 credit facility. During the quarter, we generated $33,100,000 of cash flow from operations and $28,200,000 of free cash flow, up 101% and 132%, respectively, year-over-year. We also remain disciplined in our capital allocations. Since launching our share repurchase program in May 2024, we have returned $59,600,000 to shareholders. As of March 9, approximately $40,400,000 remains available under our current authorization. We intend to continue executing this program with a focus on maximizing value for long-term shareholders, particularly during periods when our stock is undervalued. We believe our strong financial foundation, combined with consistent execution and a balanced capital allocation strategy, positions us well to capture growth opportunities and drive shareholder value in the quarters ahead. Turning now to our Q1 outlook. For 2026, we expect revenue of $83,000,000 to $86,000,000, up 20% over the prior-year period at the midpoint; contribution ex-TAC of $49,000,000 to $51,000,000, reflecting 17% year-over-year growth at the midpoint; non-GAAP operating expenses of $40,500,000 to $41,500,000, up 10% year-over-year at the midpoint; and adjusted EBITDA of $8,500,000 to $9,500,000, representing a 67% year-over-year increase at the midpoint. Finally, we expect an adjusted EBITDA margin as a percentage of contribution ex-TAC of 18% at the midpoint, representing over 500 basis points of improvement over the prior-year period. The midpoint of our guide assumes record Q1 performance across revenue, contribution ex-TAC, and adjusted EBITDA. I would also like to make a couple of general observations about our outlook for 2026. In 2026, we expect contribution ex-TAC growth to continue outpacing the broader U.S. programmatic market, which is projected to grow approximately 13%, driving further market share gains. We expect year-over-year growth rates in revenue and contribution ex-TAC to accelerate sequentially as we move through 2026, primarily driven by new client onboarding, ramping organic growth, and political contribution in the back half of the year. We also expect revenue and contribution ex-TAC to continue growing faster than non-GAAP operating expenses, leading to continued adjusted EBITDA margin expansion in 2026. In closing, we delivered another record quarter, executing against our strategic priorities and advancing innovation across our platform. We believe we are well positioned for sustainable long-term growth given our strategic alignment with secular growth trends, including CTV, addressability, and Viant AI. I will now turn the call back over to the operator for questions. Operator? Operator: Thank you, Lawrence. We will now proceed to the Q&A session. If you would like to ask a question, please use the raise hand feature in your controls located at the bottom of your Zoom window. Our first question comes from Jason Michael Kreyer with Craig-Hallum. Jason? Jason Michael Kreyer: Alright. Thanks, guys. I appreciate that. Maybe I will start off just where you ended that, Larry. You talked several times about the opportunity for accelerating growth through 2026. Maybe frame expectations for the year relative to the guide for Q1. Kind of what drives that upward swing as 2026 progresses. I want to step back and maybe talk about the late-stage deal pipeline that you guys had talked about a couple of quarters ago. Just want to get an update on how you feel that has progressed the last few months. How you feel about win rates in deals that have closed, and then just maybe what has been your ability to add or to replenish that pipeline of additional late-stage opportunities? Lawrence J. Madden: Yeah, certainly. Thanks, Jason. Well, if you break down—we have talked a lot about the tailwinds we are having right now—and if you break them down relative to our Q1 guide, which can kind of speak to what we see in the future quarters, first of all, in Q1, we had limited contribution from Molson Coors and WHOOP. Both of those advertisers onboarded during the quarter and only have spent modestly. We expect that for both of them to significantly ramp beginning in Q2. Similarly, with Outcomes, really a lot of early stages of testing, very little contribution in Q1, and as we move through the quarters, we expect that to obviously contribute nicely. We have talked about other customer wins that we have not announced—we talked about them a bit generically—many of those are also ramping up in the second and third quarters, so we expect to get a lift from that. And relative to Q1, you know Q1 is historically our lowest quarter, and I think this year, based on our mix of clients, maybe we are over-indexed a little bit towards customers that have the most negative seasonality in Q1, which impacted Q1 guide a little bit, certainly relative to Q4. But we see a nice ramp up as we move through based on the new clients we are winning, Outcomes coming through and starting to build up, that it will build nicely. We are very confident that it will build nicely as the quarters progress in terms of growth. Tim Vanderhook: I would just—I will start with that. One of the big areas of investment around operating expenses is building out the enterprise sales team, and so I think we have done a great job of putting leaders in place that are from high-quality places. We have pulled leaders in vertical categories from Yahoo and many other very high-quality companies. So that investment is going to continue to replenish that sales pipeline. It is not just the win rate, I would say. We are beating much larger competitors at late stage in the game. We are always up against a very large competitor, and typically you are seeing the advertisers select Viant Technology Inc. for the innovation that we are pumping out. So that pipeline continues to grow. We talked to most investors—we mentioned last year around $250,000,000 of pipeline. We have closed very big wins in that. Some of those have been delayed to this year. A lot of times when we do not win a customer, they have chosen not to make a change until a future period because it is a fairly big lift to change platform providers, and so I think some of those will get kicked into the back half of this year as that determination of when to switch. You want to add anything? I would just say, though, in these pitches, it is becoming very apparent of our advantage around our proprietary data—both around Household ID, the continued scaling of IRIS ID, our supply quality models that do not get enough attention but clients find incredibly valuable, our Direct Access program of being able to be directly connected to the largest content owners in the world. All of that is really opening a lot of eyes with a lot of these large brands. And really these large brands, I think they all have a commonality: they have to drive higher growth. And they have—many of them are looking at their playbook that they have run for the last four or five years, giving the largest platforms in the world most of their money. While those companies have outsized growth, the largest platforms in the world, their business suffers. And I think we are a great counterpunch to that, and a lot of marketers are really taking a look at the proprietary data that we have and saying that is a way for them to deliver more growth in the future years. Jason Michael Kreyer: Perfect. Thanks, guys. Appreciate it. Tim Vanderhook: Thanks, Jason. Operator: Our next question comes from Laura Anne Martin with Needham. Laura? Laura Anne Martin: Somebody just has to tell you that because—and I am going to ask about your growth in the quarter. So when we look at DV360, their third-party was down 2%, The Trade Desk up 13% in net revenue, you guys up 19% in net revenue. Really big size difference—like, you guys are tiny compared to those two. My question is, are you taking share from these—you just said you were taking share from these bigger companies. How much of this is sustainable over time? Because I sort of feel like Wall Street thinks globally scaled large footprints have competitive advantage over smaller companies. Right now, you are disproving that, but convince me that small can win at these much higher revenue growth numbers than Google and Trade Desk, who are your sort of globally scaled competitors in your direct business, because these numbers are amazing. And then I wanted to drill down on IRIS ID. I remember at CES a year ago, we were talking—you had just bought IRIS. Maybe it was two years ago, I am sort of forgetting. You said it was up five times year-over-year, and you are now at percent of the incoming CTV bidstream had IRIS IDs. What is the gating factor there? Would you expect that to get to 75%, 100%? What is stopping more usage, or do you expect that kind of up 5x to continue over in 2026 and 2027? Tim Vanderhook: Why do you not take IRIS? Chris Vanderhook: Yeah. So with IRIS, we have seen incredible adoption of the IRIS ID. What that means is that we need content owners to carry it, and we have made announcements with some of the largest content owners, the largest television networks. We have had the IRIS technology in and of itself to be able to run computer vision, to contextualize video, pull out emotional sentiments, check for brand suitability. This is checking a lot of boxes for marketers. Most marketers, I will say, are completely unaware of the fact that when they buy CTV, they are only able to buy at the app level through other platforms. So you can only buy the app. A lot of these large apps have 20,000 to 30,000 titles of content, so a brand may not be the right fit for half of those content titles. And most brands are unaware of that, and when you give them that problem statement, IRIS completely answers that. That is number one. Number two, marketers have been testing it. As we said, revenue grew 90% from Q3 to Q4. So huge growth. Why? Because they see the performance improvement. When they see the performance improvement, they bid higher for those IRIS IDs that are relevant for that brand. It is driving, on average, we have said, a 466% increase in conversion rate. Forget upper-funnel metrics—brand awareness and consideration—just straight up conversion rate and sales. So marketers bid up for it, content owners get more money for it, that increases the amount of content owners that will then carry the IRIS ID. So we are at approximately 50% now. We believe we are going to continue to scale that. We think it is reasonable that we would get to 70% penetration this year, and so the future looks really bright for IRIS, and it is also really bright for our customers because they are taking advantage of that and they are driving greater returns. Again, being a buy-side player, we only care about what drives our customers’ business. If we drive their business and their growth, they are going to spend more money on our platform. Tim Vanderhook: So, your first question—can the smaller company beat the larger companies? I think we are proving it now, and we really believe it is sustainable over the long run due to proprietary data. When you can only target at the app level and not deliver the performance, that is really a big gating item. The second concept here is that the large platforms have been self-reporting their own success back to these brands. Meanwhile, the total sales of the brand are actually down. So these things are not correlating, and they have had now half a decade or a decade of working with these larger companies where this is just a continual output year after year. So they have really lost faith in the reported metrics that the platforms are using. I think they are looking for an independent buy-side platform to help them understand what is driving success for their business. So what drives our success? It is proprietary data and Viant AI, which is the automation and the autonomy where they can get way more productive with their media dollars at work. And I would add to that Direct Access. By pulling out all the middlemen, the same dollar has more working media. They are getting more ad impressions per dollar than they were prior to Direct Access being there. It is really the combination of all of this that is driving better efficiency when you work with Viant Technology Inc. relative to—you mentioned Google, The Trade Desk, and Amazon. Amazon has a different type of perspective where they are really good at subsidizing businesses in the near term—you are seeing that with their 1% fees that they have been out in the marketplace—or bundling of the products of AWS plus subsidization. But in the end, Google and Amazon—the two very large platforms that we compete with—those platforms sell media. We help the buyers of that media allocate their budgets appropriately across. We are only on their side of the table. We are not on the other side of the table. And I think that is another thing that the Fortune 500 or large advertiser set has come to grips with—is like, actually, I cannot believe these numbers because I have a decade’s worth of data that says it does not correlate to overall business results. And I need a partner just on my side with proprietary data and the automation of the workflows to actually improve efficiency of their business. So I firmly believe that it is sustainable. When it comes to WHOOP, we beat The Trade Desk. When it comes to others, we beat Google. You are seeing with down on third-party. So we have proven it many times. And although Amazon has had a banner 2025 year in the space, that I do not believe is sustainable over the long run as marketers are smarter and smarter to not trust a platform whose selling them media—or ads is a better way to say it. You cannot trust the metrics that you are looking at. Laura Anne Martin: Thank you very much. Great numbers. Tim Vanderhook: Thank you. Thank you. Operator: Our next question comes from Tom White with D.A. Davidson. Tom? Tom White: Great. Thanks for taking my questions. Nice end to the year, guys. Maybe just with regards to your commentary about the expansion of your addressable market, you know, if I think back, it seems like a lot of the recent product innovation that you have launched were initially conceived around going towards the smaller end of the market, right—those search and social advertisers. But over the last several quarters and thus far this year, it seems like you are getting traction with the bigger boys with some of this innovation or at least getting their attention. When you look out to 2026, 2027, 2028, what is the bigger opportunity, do you think, for you? And then just if you could quickly comment on IRIS ID as a competitive moat. Obviously, you guys have a head start there, and the numbers look great, but what is stopping any of the other big platforms from going out and trying to convince content owners to start embedding this ID or coming up with something similar? Thanks. Chris Vanderhook: Yes. I will answer the first one on the expanding TAM. You have to have what we see as a commonality—you think in big brands, they have brand-based budgets where they are looking to raise awareness and consideration for their products and services that might pay in a future period, but they also have performance-based budgets where they have to get sales now. And really what you have to do is create ad products that address both of those, and that is really what we have aimed to do. And if I look at these DTC brands, many of them start only in performance. But they quickly realize that they tap out in Meta or Google’s Performance Max or Demand Gen or Search—they tap out there because they cannot drive growth after a certain period. So then they realize, oh, we have to invest in our brand to raise our baseline sales. And so what we are seeing is that when we go down market to these direct-to-consumer e-commerce companies, we are seeing that what they need is they need to tap into CTV. That is really going to drive growth for them. But they need tools; they need a level of workflow that they are used to in some of these platforms like Meta’s Advantage Plus or Google’s PMAX. So we deliver that with Outcomes. But they are tapping into a really high-growth channel that not only drives brand awareness but also is capable, as I said, with solutions like IRIS ID, they can drive the lower-funnel performance for sales now as well. So, what is bigger? Look, the down-market DTC and e-commerce companies are small businesses. Meta and Google—they have an audience of 10,000,000 businesses that buy advertising from them. If you look at the open internet, I do not know, 10,000 to 20,000 companies buy advertising in the open internet. And how many companies buy television? Maybe 1,000 to 2,000, something like that. So we are looking at addressing—we want to, again, all marketers of all sizes have similar challenges. You have to create products for both. But we see them both equally as appealing. Tim Vanderhook: On the IRIS ID question on why someone could not just copy it, it really is the network effect of IRIS ID, and it is why we hit it so hard last year in scaling that ID. Network effects of tying the ecosystem around this identifier, and that is why getting to critical mass was so important for us in 2025 in scaling that. How do we do it? We have done over 1,400 integrations with content management platforms—all various content management platforms. Even a big content owner, they will have many content platforms underneath it. So we have done all these integrations—again, over 1,400. That takes time, resource, and effort to actually get done. Or you could just adopt the IRIS ID. And every big platform would have to go do the similar types of integrations to replicate what the IRIS ID brings. The second area of network effect is just the OpenRTB protocol that we operate in. There is only one spot for a content object in the OpenRTB protocol, and IRIS ID is implemented nearly 50% of the time in that spot. So the content owner is really not incentivized to bring a second one in because you cannot even get it through the RTB protocol with IRIS ID installed. So there are a number of factors there. I would just ladder it up in total to network effects of this content identifier that we captured in 2025. Tom White: Thank you. Very interesting, helpful color. I appreciate it. Tim Vanderhook: Thanks, Tom. Maria Ripps: Great. Thanks so much, and congrats on the quarter. First, I wanted to ask about Outcomes. You mentioned that you ran pilots in Q4 with a number of clients implementing Outcomes. Anything you can share maybe on the initial conversion rate and where you see that over time? And then how should we think about incremental uplift to monetization as you roll out this functionality across your broad advertiser base? And then would love to hear your thoughts on The Trade Desk–OpenAI partnership and what that means for the programmatic space more broadly and then for your platform more specifically. And what are your thoughts on being involved in some of those emerging AI services? Tim Vanderhook: I do not have the exact numbers on conversion rate, but there are just a number of factors. Obviously, the cost efficiency relative to the sales that Chris touched on in our prepared remarks—really, really good compared to what anybody has seen from an autonomous platform. So I think overall conversion rate is hard to give you an exact answer to that other than we are beating what the current status quo is, which is manual optimization or some level of automated optimization that is out there today. Chris Vanderhook: And I would just say, you know, the real through line here about the performance improvements is the fact that we have proprietary data signals that are extremely valuable. But when you couple that with an autonomous workflow, the speed of that is what is driving the improved campaign results or the performance improvements. And it is doing it at a level of reliability for marketers that is way greater than that of human-based, stressed-out workflows. When I think of the jobs of traders—the gun that they are under, so to speak—they have to come up with the optimization strategies and the tactics that they are going to pull, and they do that on a day-to-day basis. And it is an absolute grind, and that leads to an instability in the reliability of the metrics. And really the autonomous workflows that we have put out here are really driving tremendous value, and it is what we think marketers over time are going to continue to adopt. Tim Vanderhook: Yeah. Obviously, the number of users using bots is really exciting when you look at it as a brand new channel. It is kind of like social when it started to originally emerge and users flocked to it. So there is a ton of real estate available there for advertising. I think OpenAI’s strategy in partnering with third-party DSPs is kind of like Facebook’s early strategy. They were a part of RTB; everyone was involved, and then they pulled it all back and went with their current go-to-market. So we are always a little slower in going to work with organizations like this because we are mindful that they may change strategy overnight, like you saw with agentic checkout with commerce transactions—that has already been abandoned. So I would caution investors about putting any level of excitement until you really see what is the ad format, how does it actually work, and what level of data would be shared. I think the announcement around The Trade Desk—it does not really fit with the RTB protocol as we do. You would have to have sensitive user-level data be sent across. Usually, big platforms do not pass that level of granular information due to consumer privacy reasons. So the truth is we do not know what OpenAI is thinking here at Viant Technology Inc. We are watching, but there is a huge amount of users, a huge amount of real estate and time spent, and certainly a whole bunch of interesting insights that OpenAI knows no one else knows—kind of like search data is unique. But when I chat with an application, I am very rarely ready to buy right now. I am usually middle of the funnel doing some research and information. So although very interesting and exciting—so exciting around future opportunity—I do not think that is a 2026 revenue generator in a large scaled way. Of course, these guys are innovating at incredible rates, and so I may eat my words in the back half of the year, but we are watching, we are paying attention to it, and it appears to be chatbots appear to be a brand-new channel that is opening up tons of available inventory for advertisers. So as we learn more and go throughout the year, we will certainly participate where it makes sense. Relative to The Trade Desk, I think Criteo—who has actually been announced; I do want to say The Trade Desk was a rumor, and interesting timing there. But Criteo has been announced—that makes more sense around product listing or shopping-based ads that they could provide given Criteo’s customer base. So Criteo feels more like a natural fit. I would say The Trade Desk and Viant Technology Inc. seems a little bit different. Maria Ripps: That is very helpful. Thank you. Chris Vanderhook: Thanks, Maria. Operator: Our next question comes from Matthew Dorrian Condon with Citizens. Matt? Matthew Dorrian Condon: Thank you so much for taking my questions. My first one, just to follow up on some earlier comments about Amazon. They have announced new partnerships with Netflix and their integration with Roku. It seems that they are obviously pushing more and more into the ability to service third-party inventory. Can you just talk about how you would expect—I mean, obviously, today, a lot of spend is going through Prime Video and into Amazon’s own platforms—but they are clearly more aggressively going after that third-party inventory. Just how do you see that shaping up in 2026 and 2027? Why are they not as big a threat as maybe the media seems to portray them? And then just a follow up on—I believe when you landed Molson, they talked about findability being the key metric that was the reason why they went with you guys. For WHOOP, was there a similar metric that they found? What was the product that really got them over the goal line to go with Viant Technology Inc.? Thanks, guys. Tim Vanderhook: Well, I do not want to say they are not a threat. They are a threat. They are subsidizing their products. They are doing the bundling strategy that Google executed. So it definitely is a threat, and at Viant Technology Inc., we are paying a lot of attention to Amazon. So I do not want to discount Amazon as a competitor in the space like some others have. I think we do focus on Amazon. But what Amazon knows—they know a lot about customers of Amazon. They know very little in all the other retailers like Walmart, CVS, all these other products. And so if you are a QSR, is Amazon DSP a good fit for you? Likely not based on the proprietary data that they have. If you are a product that is sold through Amazon, Amazon DSP makes a lot of sense to actually partner with to track the sales and reach consumers on Netflix or some of the other platforms. I caution the other big content owners out there because if Amazon runs the same playbook as Google, what they do is they say Prime Video outperforms every other app on the buy. And it is all about—by doing that integration—we bought the ad, but hey, the Roku app was not as good as Prime Video. I can basically write what the report is going to say, as long as they follow that same strategy—and they have been. So I think they have a major trust issue when it comes to what they are reporting in the platform if the transaction does not happen on Amazon.com. That being said, a lot of products and services are sold on Amazon, and I think it makes sense for those customers to use the Amazon DSP in that way. But if your product is also sold in 50 other retailers, the Amazon DSP really is not a good fit for you. Chris Vanderhook: Yeah. So they had a huge focus on CTV. This is a growth brand. They are very focused—they are a fast-growing company. They are very focused on continuing to grow their brand. And in CTV, what do you want? You want addressability—both in terms of “I want to reach the right households, the right people,” and then “I also want to know what type of content they are consuming so I can make my ad relevant to that content.” That drives performance. So, yeah, heavily looked at our addressability solutions. A lot of clients kick the tires hard on that right now, and they see our scale relative to other players is—ours is dramatically larger. And one of the big reasons is we have been at this—this is not a two- or three-year effort. We have been at this for over ten years. We are a leader in this space. So I expect many more brands to continue to focus around addressability. A lot of people think addressability is just for targeting. The largest advantage of addressability is measurement—for you to truly see, “I showed a CTV ad, did I get a sale?” But it is not just that. It is what else did they do in the journey? “Oh, we showed a CTV ad. They then went to Google, searched, later were exposed to a social ad, and then purchased.” That level of visibility that you can give to a marketer and help them properly allocate their money accordingly is incredible. Without an addressability solution for measurement that we offer, they will continually just put money to whoever showed the last ad—which marketers are increasingly not falling for anymore. Tim Vanderhook: I just want to add to that too, not about WHOOP, but about Molson around the addressability solutions of IRIS. If you are a regulated industry like alcohol, you cannot show ads in children’s content, and so IRIS becomes a critical content identifier as well for you to actually deploy money with confidence that you are not going to get a fine for showing ads in children’s content. And it is the combination of these two proprietary data signals that we have that is really pulling the large enterprise customers our way. Operator: Okay. Our final question will come from Barton Evans Crockett with Rosenblatt. Barton? Barton Evans Crockett: Okay. Thanks for squeezing me in. So I was wanting to ask two questions, really. First is, just looking at the growth rates that you are talking about, contribution ex-TAC ex-political up 24% in the fourth quarter, but slowing to the high teens in the first quarter. Do you see the ex-TAC revenue number at some point returning to what you were doing in the fourth quarter? And I know there were some seasonal factors in the first quarter, but that is kind of a notable slowdown. So I was wondering if you could address that first. And then the things I was just wondering about in terms of the LLM debate—you mentioned that it might be easy for an LLM to code an interface, but the value is really elsewhere, kind of the data and presumably the execution. Would it make sense for someone like a Viant Technology Inc. to perhaps use an LLM, though, as an interface, as a way to perhaps penetrate clients that are now wedded to The Trade Desk interface at the agency level—essentially to be an MCP where the execution is through you, but maybe the front end is Claude? Is that conceivable? Could that be an opportunity over time? Or is that something that is just not on the table because of the risk of them getting too much leverage or scraping your data? Tim Vanderhook: Yeah. First is it is just the mix shift of our advertisers in the way that they spend their money. It is better to look at it on an annualized basis. So if you look at our contribution ex-TAC on an annualized basis of 2025, we are going to, hopefully, outperform that in 2026 given the customer wins. And as we mentioned, WHOOP, Molson Coors—some of the large advertisers were, I do not want to say de minimis in Q1, but slowly coming on, learning, understanding how things go. So those ad spends will kick in in the later quarters. And so I think the biggest thing to take away from our call is we are going to grow these numbers sequentially throughout the year. And as you look at the second half, political really kicks in—about half the money is spent in Q3 and about half the money is spent in Q4, roughly, is the way that it goes all the way up until that election cycle. So I would really caution everyone to look rather than quarter-to-quarter—when you look at advertising-based businesses, there is some seasonality. There is a mix shift of the various advertisers on our platform that is really driving the Q1 number that you are seeing. But I can tell you the pipeline is strong, the growth of our business is very strong, and we think we will deliver just like we did last year. No. Look, the Viant AI interface is an LLM interface today. The users of that interface are not with the traditional self-service user interface. So I think we have already delivered on that. It is getting users comfortable with that. I hate to say old habits die hard, but people like to click buttons. It is just a lot of work, and they want to know, is there a hallucination in the data? So a lot of this is test and learn and users getting comfortable with this new interface. That is a big one. As far as an MCP, it is certainly going to be a big factor in the future. We are thinking it each and every day. But again, the market is moving so fast quarter to quarter. You kind of have to project out, and so I think if the interface is your moat, you are in serious trouble in 2026 this year and in the outer years. So I think we have a lead there. We delivered it, I think, eighteen months ago or so. We delivered that interface to customers for them to initially test and learn on, and people love it because there is no training, there is no certification. You do not need to go to Trade Desk Academy for two weeks, and still make mistakes after that. So I think overall, interfaces are dead. Dashboards are dead. You really want an LLM to deliver the info. And I would just say, Chris Vanderhook: what we are doing today—if you look at digital advertising and programmatic—these are human workflows. There are entire organizations that are built around these human workflows. When Tim is saying old habits die hard, although there is an incredible amount of innovation, and I believe that we are leading in that. We are the ones who are bringing from human-based workflows to autonomous workflows—autonomous being the key word. Where is all of tech going? It is going autonomous. So we are leading there. However, if I rolled out and said all brands today, “If you want to interact with me, you must build your own agent that then plugs into my MCP,” we are so far away from that today. I know that there are early—I would say—kind of the green shoots that are out there that we are looking at, and I think those are going to be in the DTC e-commerce space that we are first going to see that. We are very focused on that market. So as we think about our own go-to-market as going after these DTC and e-commerce brands, we think that is a really good solution there. But over time, it does make a lot of sense that an agent will come to the infrastructure that provides all of this and will want to go to infrastructure with incredible proprietary data, which we also have. So, we do look to enable that in the future. And let me just add, we believe Tim Vanderhook: that the LLM is the commodity. It is the proprietary data on top of that LLM which is unique, or the application layer tied to the RTB infrastructure that we actually have. And I think, getting to Chris’s point here around humans—right now you have humans in a five-step process. The human is in the middle of it all. We have taken the human out of the middle and put it at the very front of the line. You set the guardrails, you set the goals, and then you let autonomy actually happen. And so that is really the big difference that I see. The LLM—most of their moat is with consumers. ChatGPT has 650,000,000 consumers spending tons of time per day on that. That is not commoditized—that is very valuable as a media seller. But for us, from an enterprise perspective, the LLMs are commoditized. I could swap out Gemini with OpenAI. I could swap out OpenAI with DeepSeek. It does not really provide noticeable levels of difference in the output sets there or noticeable levels of difference in quality. So to me, from an enterprise perspective, the LLM is the commodity. Proprietary data is the moat. And I think the commodity piece—the reason why many of them give you back the same answer—is that they are all trained off of the same data. They are all trained off of scraping the web, all of them. Certainly, you could argue some of them have proprietary data assets—certainly. That is very—I think that is becoming understood that that is the piece that is commoditized. But that said, to your core question, will we enable third-party agents to be able to interface through an MCP into our infrastructure? Yes. Barton Evans Crockett: Okay. That is interesting. Thank you. Tim Vanderhook: Thanks, Barton. Operator: —concludes the Q&A portion of the call. Thank you. Chris Vanderhook: Thank you, everybody. Operator: Have a good evening.
Operator: Good afternoon, ladies and gentlemen, and welcome to the Fossil Group, Inc. Fourth Quarter and Full Year 2025 Earnings Call. At this time, all parties are in listen-only mode. This conference call is being recorded and may not be reproduced in whole or in part without written permission from the company. I will now turn the call over to Christine Greany of the Blueshirt Group to begin. Christine Greany: Hello, everyone, and thank you for joining us. With me on the call today are Franco Fogliato, Chief Executive Officer, and Randy Greben, Chief Financial Officer. Before we begin, I would like to remind you that information made available during this conference call contains forward-looking information, and actual results could differ materially from those discussed during this call. Fossil Group, Inc.’s policy on forward-looking statements and additional information concerning a number of factors that could cause actual results to differ materially from such statements is readily available in the company’s Form 8-K, 10-Q, and 10-K reports filed with the SEC. In addition, Fossil Group, Inc. assumes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. During today’s call, we will refer to constant currency results as well as certain non-GAAP financial measures. Please note that you can find a reconciliation of actual results to constant currency results and other information regarding non-GAAP measures discussed on this call in Fossil Group, Inc.’s earnings release, which was filed today on Form 8-K and is available in the Investors section on fossilgroup.com. I will now turn the call over to Franco to begin. Franco Fogliato: Hello, everyone, and thank you for joining us. 2025 was a transformative year for the company, defined by operational excellence and financial performance that exceeded our expectations. We took bold steps to advance our turnaround plan, delivering strong execution against the three pillars we laid out just one year ago. Those include refocusing on our core, rightsizing our cost structure, and strengthening our balance sheet. We built a brand-led, consumer-focused operating model, assembled an exceptional management team, and established a culture of accountability. We recently appointed a new Chief People Officer, who will be a valuable part of our efforts to continue strengthening our organizational capabilities, culture, and customer-first mindset. I am incredibly proud of our teams and want to thank everyone across the organization for their energy, passion, and hard work, and for upholding our commitment to keep the consumer at the center of everything we do. Our turnaround efforts gained traction quickly, enabling us to end the year ahead of our initial plan. We delivered full-year performance above the updated guidance we provided halfway through the year. Net sales totaled $1.0 billion, gross margin expanded 380 basis points to 55.9%, and we reduced SG&A by over $100,000,000. This drove a positive adjusted operating income of $11,000,000, a year-over-year improvement of $48,000,000. Now I will turn to the operating highlights and key accomplishments of 2025. First and foremost, we created a positive brand platform for the future. We accomplished this by improving the customer journey and delivering a robust pipeline of product innovation, all supported by powerful heritage brand storytelling. At the same time, we successfully established a full-price selling model by radically transforming our promotional cadence across channels. This enabled us to return the business to healthy gross margin in the mid-50s and improve the profitability in both our wholesale and direct-to-consumer channels. Importantly, this has strengthened our wholesale partner relationships, creating a powerful flywheel effect that is delivering benefits across all channels. Next, we reenergized our core licensed brands Michael Kors, Emporio Armani, Armani Exchange, and Diesel. Most notably, strategic investment in point of sale and a renewed focus on specialty watch retail enabled us to improve our in-store presentation and performance in the wholesale channel. We also drove momentum in our traditional watch business by prioritizing our most scalable markets in the wholesale channel, including the U.S. and India. This resulted in wholesale traditional watch growth in our core brands of 2% globally for the full year in 2025. At the same time, we took clear action to rightsize our cost structure and instituted a culture of strict cost control. Lastly, and as importantly, we transformed our balance sheet. We now have the runway and flexibility to support the next phase of our turnaround, build a sustainable, profitable business model, and deliver long-term value creation. We have entered 2026 well positioned to leverage our foundational assets, including our 40-plus-year heritage, iconic brand, innovative design, global reach, and talented teams. Also notable, the industry is experiencing strong momentum across markets and demographics. At the same time, our comeback is capturing increasing attention from consumers, partners, and the press. Just last month, I was at the Inhorgenta watch and jewelry show in Munich, where many of our brands were center stage. In 2026, we will be making more bold moves on our journey to reinvent Fossil Group, Inc. and lead the industry. It is an exciting time for the company, as we continue to foster a collaborative, creative, and energetic culture, accountability, and a stronger commitment to win. We are turning the page to a new chapter and evolving our three strategic pillars as follows: returning to profitable growth, optimizing our operating model, and building shareholder value. Over the next three years, this evolution of our turnaround is expected to generate a return to top-line growth, high single-digit adjusted operating margin, and positive free cash flow. More on our financial outlook shortly. But first, let us talk about the initiatives we will be executing against to further advance our turnaround. Within our first pillar, returning to profitable growth, our teams will be focusing on defined initiatives across the positive brand platform to fuel innovation, deepen consumer engagement, grow the traditional watch business, and reinvigorate our jewelry and leather categories. In 2026, we will be fueling innovation through design, technology, and storytelling. This includes reigniting key icons, continuing to delight our customers with culturally relevant collaborations, reviving one of Fossil’s most sought-after Y2K innovations, and introducing a selective group of premium products. Let me take you through the roadmap. Starting with our watch icons, which make up a significant portion of our business, we will be innovating and expanding upon key collections including our Everett, Arlo, Machine, and Raquel platforms and our watch rings. Additionally, we will be doubling down on our Minis collection across all of our top women’s platforms. Following the success of 2025 collaborations such as Fantastic Four, Galactus, Minecraft, Xiaobai, and Superman, we will continue activating culturally relevant partnerships with both new and returning properties in 2026. These collaborations deliver highly engaged audiences, customer acquisition at scale, and meaningful earned media. Importantly, as we anniversary successful 2025 partnerships, we are focusing on converting collaboration shoppers into long-term Fossil customers, improving retention and lifetime value. One of our most significant introductions this year is the return of Fossil BigTick, a bold animated movement that combines analog craft with digital innovation. Originally introduced in the late 1990s, BigTick is one of Fossil’s most recognizable and emotionally resonant designs. The designs are geared towards the millennial watch consumer nostalgic for Y2K, Gen Z consumers seeking an analog-forward accessory, and the male watch enthusiast looking for a big, bold watch to match his style. Earlier this month, we launched a nostalgic, limited-edition Y2K capsule, quickly followed by a reinvention of BigTick Machine. Initial response from consumers and acclaim from the press have been tremendous thus far. Our BigTick marketing campaign reflects the evolution of our creative strategy, featuring a dynamic animated concept built around the idea that everything BigTick touches becomes larger than life. Its bold storytelling reinforces product distinctiveness while driving momentum in real events. We have a lot more exciting BigTick innovation coming and anticipate the momentum will continue to build as we roll out additional collections throughout the year. Another significant innovation coming later this year is the introduction of Signature, Fossil’s first premium platform in more than a decade. Rooted in craftsmanship and timeless design, the collection represents an important evolution for the brand and is designed to resonate with watch enthusiasts and collectors alike. Signature will also introduce a new level of technical sophistication and assembly that reflects Fossil’s continued commitment to quality and innovation. We look forward to sharing more details in the coming quarters. While we are first and foremost a watchmaker, our jewelry and leather offerings expand our expression as an accessories brand. Our strategy for this category focuses on staying true to our brand DNA of quality, value, and timelessness. We are positioning the business with modern designs, including jewelry introductions inspired by our most important watch collections, and increased personalization through engravable offerings. We will be supporting all of this product innovation with a focused, high-impact marketing roadmap. In 2025, we concentrated our investments in priority markets, and the results validated that disciplined, brand-led investment drives stronger engagement and return. This year, we will continue scaling this approach, deploying our resources to opportunities where we can build further brand equity and accelerate growth. Our 2026 storytelling is designed to celebrate Fossil heritage, reinforce our quality and design credentials, and elevate cultural relevance. A great example of this is our exciting partnership with brand ambassador Nick Jonas. Nick has proven to be an authentic and highly engaged partner, currently anchoring campaigns across Nick Jonas Collection, Machine, and BigTick. Moving now to our omnichannel initiatives, which are designed to modernize our brand expression in wholesale, improve our e-commerce business, and optimize our Fossil store portfolio. In the wholesale channel, we are focusing on our top customers in must-win markets, including the U.S., France, Germany, and India. For example, in the U.S., the strength of the Fossil brand, our robust product pipeline, and engaging campaigns are driving growth with key partners. Additionally, we are expanding distribution to specialty and energy retailers that can help build brand awareness and create excitement among the younger demographic. In the e-commerce channel, we have reshaped our business through two major actions over the past eighteen months. First, we dramatically reduced our discount posture by more than 50%, establishing a full-price selling model. Next, we implemented a comprehensive redesign of the Fossil site, featuring richer storytelling and a more seamless customer journey. The result is a smaller but more profitable sales channel with higher AUR across the entire marketplace. As we pursue long-term growth, we will continue to deliver consistent price and promotion while investing in personalization, inspiration, and more cohesive brand representation to drive customer engagement and strengthen brand perception. In the retail channel, we are optimizing our store portfolio and deploying our Store of the Future strategy in the U.S. and EMEA. We are very pleased with the initial results from our Store of the Future concept, which blends lifestyle selling, data-led decision-making, and a purpose-driven strategy. Importantly, it is shifting our selling culture to proactive clienteling and outreach, personalized service, and community focus. This has resulted in improvement across key performance indicators, including AUR and conversion. Turning to our core licensed brands, we are focusing on initiatives to return the brands to sustained sales growth. We believe there is a significant opportunity to unlock potential in Michael Kors jewelry and men’s watches. Our strategy for Kors jewelry is centered on modern, wearable design while leaning into one of our strongest assets, the MK logo. We have recalibrated our pricing architecture to improve accessibility and enhance our competitive position. In men’s watches, we are returning to proven Michael Kors design codes and investing behind hero platforms that have historically driven scale. We will do this by focusing on bold, confident styling, recognizable attributes, and strong perceived value within key price tiers. For the Emporio Armani brand, we are pursuing opportunities in select markets outside of China, where there is strong local demand for premium products and additional runway in the wholesale channel to broaden assortment and leverage long-standing partnerships. We are also continuing to drive the Armani Exchange brand, which is experiencing strong momentum across major markets, including the U.S. and India. Key initiatives include elevating our retail presence, expanding distribution, building on the success of our icons, and delivering localized product offerings. Turning now to the final area of focus under our growth pillar, we see a significant opportunity in India, which has been the fastest-growing large economy in the world for the past four years. It is an important strategic market where our brands have category leadership, strong momentum, and secular tailwinds. I was in India last month with other members of our executive team as part of our focus on unlocking the full potential of this geography, where we are experiencing growth across all channels and brands. In 2026, we will be building further brand heat across our portfolio by broadening our assortment, entering premium price points, and introducing limited editions, all supported by dynamic storytelling. We will also be increasing our footprint to expand distribution, opening additional wholesale doors with both new and existing partners, and opening new Fossil retail stores. We have a highly seasoned team in India who is committed to driving continued growth and rapidly scaling the business. Moving now to our second turnaround pillar, optimizing our operating model. We made significant progress toward rightsizing our expense structure in 2025. With this improved baseline and an emphasis on stricter cost control, we are well positioned to continue to drive optimization across the organization. We will be focused on initiatives to strengthen our omnichannel strategy and go-to-market execution while prioritizing operational investment and infrastructure improvements. Key areas of focus include sharpening our go-to-market execution to elevate point-of-sale engagement, reducing complexity and improving business agility, enhancing our digital and technology infrastructure, delivering best-in-class supply chain performance, and prioritizing high-impact projects and key performance indicators. I will now turn to our third and final pillar, building shareholder value. The rapid progress we made in year one of the turnaround, our accelerating profit profile, and our strengthening balance sheet give us the conditions to create lasting value for all of our stakeholders. We expect to continue improving profitability, affording us the optionality to strategically invest for growth and value creation. Building on the strong execution and financial performance we delivered in 2025, we are pleased to be raising the financial targets we introduced one year ago. As a reminder, we previously communicated a 2027 sales target of at least $800,000,000. We now expect to surpass that benchmark one year earlier than planned. In 2026, we expect sales in the range of $945,000,000 to $965,000,000, highlighted by a return to top-line growth in the fourth quarter. Additionally, we expect positive adjusted operating margin of 3% to 5% and breakeven free cash flow. Our commitment to operational excellence and returning the business to profitable growth is grounded in a focus on disciplined accountability and performance. I am grateful to our teams, partners, and shareholders for their continuing support of Fossil Group, Inc. and look forward to reporting to you on our progress throughout the year. Before I turn the call to Randy, I would like to acknowledge the current geopolitical climate. As a global company, we are disheartened by the events occurring in the Middle East, and we are closely monitoring the safety and well-being of our employees and partners in the region. Now I will turn the call to Randy to discuss the financials. Randy Greben: Thank you, Franco. 2025 was a year of tremendous progress on multiple fronts. I am pleased that we gained strong traction on our turnaround initiatives, delivered financial results ahead of our expectations, and transformed our balance sheet. Our 2025 performance reflects the strength of our brands, strategies, and teams, and demonstrates that we have the right building blocks in place to drive long-term growth and profitability. Now I will turn to the specifics of our fourth quarter and full-year performance. Net sales for Q4 totaled $274,000,000, reflecting a decline of 20%, including four points of impact from store closures. For the full year 2025, net sales were $1,000,000,000, including 330 basis points of impact from store closures and 80 basis points of impact from the exit of connected watches. Fourth quarter gross margin came in at 57.4%. That is up 350 basis points from last year and reflects the ongoing strength of product margins as well as our focus on full-price selling, which allowed us to drive structurally higher margins over the past 12 to 18 months. Indeed, full-year gross margin for 2025 was 55.9%, representing 380 basis points of expansion versus 2024, even with the continued and compounded headwind of minimum royalty guarantee shortfalls, which, as previously shared, are expected to be materially abated in full-year 2026. In 2025, we executed against several initiatives that drove a meaningful improvement in gross margin. Specifically, we substantially lowered our discount rate, strengthened our supply chain, negotiated better terms with key suppliers, retooled our open-to-buy processes, and implemented targeted price increases. I am pleased to note that all of these actions not only improved our underlying gross margin profile but also enabled us to largely mitigate tariff headwinds throughout the year. The fact that we were able to absorb the impact of tariffs in 2025 while delivering a return to healthy gross margins demonstrates the agility of our supply chain and is a testament to our teams around the globe. Looking at 2026, we expect to continue to offset the current rate structure through our mitigation strategies and have not embedded material rate changes or any tariff refunds into our forward-looking guidance. Moving now to operating expenses. Strict cost control enabled us to lower SG&A expenses by 16% versus prior year. The improvement is attributable to 49 fewer stores in operation versus a year ago, as well as lower compensation and administrative expenses. During Q4, we closed six additional stores, ending the year with 199 locations globally. All 49 closures in 2025 occurred at natural lease expiration with minimal closing costs. Given the improving performance of our fleet, we expect to reduce our number of store closures down to approximately 15 locations this year. As we continue to focus on improving our cost structure, our teams are acting with financial discipline and rigor. I am pleased to note that on a full-year basis, we slightly over-delivered on our full-year SG&A savings target of $100,000,000. Zooming out, the successful delivery of 2025’s SG&A savings target was a key follow-on to work that began in 2023. In total, the company’s SG&A levels have been rightsized by more than $250,000,000 over the last 36 months. And while the lion’s share of this work is behind us, we are never done. As Franco mentioned, in 2026, we expect to further optimize our operating model by capturing efficiencies throughout the organization. We will be directing resources toward go-to-market execution, operational investments, and infrastructure improvements. Looking now at our bottom-line performance in Q4, strong gross margins north of 57% and exceptional expense management translated to a profitable quarter, with adjusted operating income totaling $11,000,000. We also achieved positive adjusted operating income for the full year, also at $11,000,000. This is notable after two consecutive years of losses on the bottom line and is another very tangible demonstration of our turnaround taking root. Turning to the balance sheet. We ended the year with $96,000,000 in cash and cash equivalents, $67,000,000 of availability under our asset-based revolver, and no utilization of our ATM program. Year-end inventory was $152,000,000, down 15% from last year, consistent with sales and in line with our expectations. It is worth noting that we have brought inventory levels down by more than $200,000,000 over the last three years. The reduction in inventory, particularly in the last year, has not only seen us become more appropriately balanced in terms of weeks of supply and churn, but, as importantly, it occurred as we rebalanced our overall inventory position to include far more full-margin products. Strengthening the balance sheet was a key pillar under the first phase of our turnaround, and we delivered on that in spades. We are pleased to have entered 2026 in a healthy position with the right combination of liquidity and debt maturity horizon. Now let us take a look at our outlook for 2026 and beyond. We are incredibly proud of the work our teams are doing and believe we are poised for another year of strong execution as we embark on the next evolution of our turnaround plan that Franco just laid out. Provided there is no significant disruption in the macroeconomic environment, we expect our turnaround pillars to deliver the following outcomes for full-year 2026: worldwide net sales of $945,000,000 to $965,000,000, including approximately $21,000,000 of impact related to retail store closures. That is down 4% to 6% and represents a significant improvement in the rate of decline versus last year. For added context, the impact of store closures and the extra week in 2025 is worth about 360 basis points. And it is worth reiterating the point that Franco made a few minutes ago. Based on the guidance we are providing today, we now see 2026 as the sales low point under our turnaround, one year earlier than previously planned, and materially higher than the approximately $800,000,000 in revenue we indicated for 2027 one year ago. As we look at the cadence of the year, we anticipate that 2026 will be second-half weighted, with year-over-year declines slowing through the year and an expected return to top-line growth in the fourth quarter. This is in line with seasonal trends but, more importantly, reflects the compounding benefits of our turnaround initiatives. This includes the lapping of last year’s store closures and selected further closures this year, the sunsetting of some noncore small licensed brands, and our watchstations.com website, and the comping of last year’s inventory reset as we shifted our focus to full-price selling. Importantly, we anticipate that gross margins will remain healthy in the mid to upper 50s. Further, we expect that the intra-quarter volatility we have experienced, particularly in Q3 of previous years, should be largely abated with the benefit of our minimum guaranteed royalty relief. Additionally, expense control is expected to drive another year of meaningful SG&A reduction and enable us to achieve SG&A leverage. While we will be investing in marketing to support the robust pipeline of innovation that Franco spoke about, total marketing dollars are expected to be down slightly versus 2025. We are positioned to achieve improved profitability in 2026 and expect adjusted operating margins to be in the range of 3% to 5% on a full-year basis. Additionally, our focus on improving cash conversion is expected to result in breakeven free cash flow as we drive the business to be cash-generating in 2027 and beyond. With innovative product offerings, favorable watch industry dynamics, and talented teams, we are looking forward to building upon the foundation and track record we established in year one of our turnaround. To that end, we are rolling forward our previously communicated three-year outlook by one year. In 2028, we expect our turnaround plan to be driving mid-single-digit sales growth, high single-digit adjusted operating margins, and positive free cash flow. Looking further ahead, we believe our brand-led, consumer-focused, and increasingly optimized operating model will deliver benefits well into the future. Now I will ask the operator to open the call to Q&A. We will now open for questions. Operator: We will now begin the question and answer session. Our first question comes from the line of Tom Forte with Maxim Group. Tom, please go ahead. Tom Forte: Great, thanks. Franco and Randy, congrats on the strong quarter and year. I have three questions. I will go one at a time. I apologize to the extent that you may have commented on these during the prepared remarks. Question number one, what were the drivers of gross margin in the quarter, and what gives you confidence the improvements are sustainable? Franco Fogliato: Hi, Tom. Thank you. We are excited. Look, we made significant progress. I think you remember, we always said that the fourth quarter last year was the beginning of the new strategy toward the end of the fourth quarter. We wanted to build a smaller company, more profitable. We wanted to change the model from very promotional into a full-price selling model. And we are continuing with this strategy. We are very excited. I am thankful for the work the teams have done globally to drive this strategy, and the strategy is paying very much shareholder value. Not only have we seen a better gross margin with our DTC, but we have seen incredible AUR increases across the marketplace as we become less promotional through the marketplace. We are excited. We are a product and marketing company. We built greater relationships with our partners. And I have just got back from the trade show, as I mentioned in my earlier remarks. There is great momentum. We have seen customers that we have not done business with for years. They are coming back to us now because we are leading by example. So very, very encouraged. Randy Greben: Thank you, Franco. And, Tom, wonderful to hear from you. The only thing that I would add is, while Franco likes to say 2025 is in the past and we are now living in 2026, if you look at 2025, our gross margin performance was actually quite sustainable and consistent, other than the dip that we took in the third quarter, which, as we have spoken about, was related to royalty shortfalls. As we have successfully renegotiated our minimum guarantees for 2026, that third-quarter divot should not be in place, and you should see that continued sustained performance. So, really, the past is a very positive indication. We have already locked in the improvement that we were seeking for 2026. Tom Forte: Alright, wonderful, and I appreciate both of you answering all my questions. Alright, so question number two. It looks like you are guiding to an inflection point in sales and a return to growth in 2026. What gives you confidence you will be able to achieve that goal? Franco Fogliato: Yeah, look. The last eighteen months have been a transformation of the company. We are in the middle of the journey. We see the light at the end of the tunnel, a smaller company returning to growth. And we are excited about the opportunities. I keep saying I am excited about what we have done, but that is history. I am excited about what we are delivering to the market now in terms of innovation. But I guarantee you, we are more excited about what is coming next. You know, the pipeline takes eighteen months to get there. We are so excited about the opportunities. We think as we are driving a smaller DTC, we have seen a very good return from our wholesale channel, beyond our expectations in 2025. Consumers are very resilient. They love our portfolio of brands. Customers have a long-term relationship with the company. We are driving the company to get back into growth because the company has incredible assets and incredible brands. Tom Forte: Alright, excellent. Alright, so third and final question for me. It seems like you have already made a number of adjustments to manage expenses. In the next evolution of your turnaround plan, you talk about further improving the cost structure. What more can you do that you have not already done? Franco Fogliato: Yeah, it is a great question. Let me take the lead, and then I will have Randy jump in, and he is driving that. Look, as an organization, we are driving continuous improvement that we are really anchoring into the discipline of managing the company. We will constantly evaluate what we do and constantly find a better way to do that. It is all about the innovation, the way we bring the product to market, the focus on driving the business. We are so pleased because, honestly, since we refinanced the business in November, this is a different company. Everything we do is about how we grow and become more efficient. We are very, very pleased. I think there are plenty of opportunities still there. We are looking at store performance, market performance, channel performance. This is really part of what we want to drive—accountability and focus on driving shareholder value. Randy Greben: So a few things that I would like to add, if I could. If you think about the work that we have done to manage expenses, it has been very broad, and we are quite proud of the breadth and depth of where we have made adjustments to our business. One of the things that is important as we look into the future is the continued optimization of the business. And if you think about ways that that may play out, we have lots of opportunity as it relates to the simplification of our technology stack, places in which we can leverage automation or AI. And then, as you move forward into the more medium-term horizon of our turnaround, that is when we start to play a little bit of offense as well, and we get the benefit of sales leverage as we return to growth. Tom Forte: Thank you for taking my questions. Franco Fogliato: Thank you very much. Operator: Your next question comes from the line of Owen Rickert with Northland Capital Markets. Owen, please go ahead. Owen Rickert: Hey, guys. Congrats on a great quarter, and the outlook is pretty solid here. I have about four questions for you. I guess, firstly, you know, deepening consumer engagement is cited as a key growth driver going forward. Can you just maybe elaborate on what that means tactically? Is that more marketing spend in the first half of the year? And, I guess, how are you measuring an engagement improvement? Franco Fogliato: Yeah, great. Hi, Owen. Thanks again. Look, we are excited that we are a product and marketing company. Part of the strategy in the turnaround plan was to refocus the company on the fundamentals. When I joined the company and we assembled a world-class management team, we clearly said product takes time. And we saw some of that coming through fall 2025. Really, spring 2026 is very exciting. You have seen we launched BigTick with Fossil. It is an incredible success, and we are just at the beginning. So we think innovation in product and the way we bring storytelling to the market will be the key differentiator. Think about the animation we just launched with BigTick. This is, to us, just the beginning. When I think about our core licensed brands, which is really the second pillar of returning to growth—think about Michael Kors, Armani, Diesel—those are world-class brands that consumers are shopping every day. We see good momentum. We are investing in jewelry. We are investing in traditional watches. We see great momentum there. And the third pillar we are really, probably to some extent, proud of is really our Indian market that has been overperforming the company. India is the fourth-largest economy in the world and has been one of the fastest growing in the last few years. It is an industry that is growing. We are very well positioned there. We have seen strong growth, and we think that market will continue to grow for us. So very excited. It is early days. Look, we are here for the long run. We think that as we get the company back to the fundamentals, the opportunity is there, and we are really focused on driving these performances going forward. Randy Greben: The only thing that I would add is, Owen, you suggested in your question that we would be spending more on marketing. Our anticipation is actually that we will be spending slightly less on marketing in 2026. We will certainly be spending the marketing dollars that we do spend better. We will be more optimized in terms of the way we deploy our funds—smarter media mix modeling, smarter use of ambassadors. We have got a robust pipeline of initiatives that we expect to really drive efficiency as we work through this year and into the next. Owen Rickert: Got it. Thanks, guys. Next for me, you mentioned those three pillars of the next evolution—profitable growth, optimizing the operating model, and building that shareholder value. I guess, how do you think about sequencing those? Is profitable growth the prerequisite for everything else, or are the three pillars running in parallel? Franco Fogliato: Look. Let me take this, and then I will leave Randy to dig in and give you more visibility. Look, we always said that returning the company to growth is a priority. We think the reason why we have done everything we have done so far is because we believe the company has an opportunity to return to growth. We also see the industry coming back, which is very encouraging. And it is very pleasing to see younger generations coming back into traditional watches. All of this is very exciting. The first eighteen months for me with the company have been simply fantastic. They have been exciting. And I look every day at all the opportunities, and I think, we are doing the right work to focus on what matters, which is really profitable sales. And once we are really driving this and we see our DTC stabilizing because we are less promotional and we continue to invest in our wholesale channel, there is no reason why the company should not grow given the strong assets we have here. Randy Greben: Owen, I do not necessarily view them as sequential. There really should be a flywheel effect. If you think about the third pillar, building shareholder value, that should be borne through an improvement in profitability, our ability to grow and then strategically invest for growth, and, of course, to generate cash, all borne through efficiencies in the operating model and growing the top line. So much less about sequencing, more about getting all three to fuel each other. Owen Rickert: Got it. Got it. Super helpful, guys. And then we are seeing some pretty nice tailwinds with consumer adoption. I guess, as you think about the consumer you are trying to target, has your view of that target consumer for, I guess, the Fossil brand and licensed brands evolved through this transformation process or this turnaround process at all? Franco Fogliato: Owen, thanks for the question. This is probably the most impressive thing I have seen in my career: the resilience of our consumer. Literally, we moved from a model that was highly dependent on promotional sales into a model highly dependent on full-price sales. And we have seen no slowdown. We have seen consumers coming back, buying our product. We saw that we lost some consumers in our Fossil brand, and, to be honest, I am not even sure we wanted them because they were looking for deals. And we got back some of the consumers we lost because we were very promotional. And there is only one way of defining that: the resilience of our brand. So we are very pleased with this. So thanks for asking the question because every time we discuss internally, that is probably the biggest and best surprise we had. I would have thought we would have been impacted more, but it did not happen. The consumer came back, and they were, “We love what you guys are doing for Fossil.” And the BigTick response is just a phenomenon, as we are capturing not only the cohort of consumers that saw BigTick in the 1990s, but we are catching this new generation that wants a real brand. So very exciting. Thanks for asking. Owen Rickert: Great. Great. And then last for me, guys. When you talk to your wholesale partners today versus, let us say, a year ago, how has that conversation been evolving? Are they leaning in more, asking for more products, more marketing support? What is the qualitative feel of those relationships right now? Franco Fogliato: It is a great question. Look, we are on the phone with them, obviously, weekly. Some of them are decades-long relationships. They are impressed. They are impressed with the speed of change we have driven with the company. They love the consistency. And I recall—I think I said this in the previous call—the first time I met with them, in October or November 2024, they said, “We love your story, but we have heard the story before.” When I met them again in Q1 2025, they said, “Well, you have been consistent. Keep going this way.” And now they recognize we are walking the talk. And they love it. And, to be honest, the results are paying. They are seeing more sales support for our brands. They are seeing more margin because they are less promotional. And suddenly, from being probably not very inspiring, we went to leading by example. And we have great relationships. I was in Munich, in Germany, for the trade show—jewelry and watch trade show—and, literally, a year ago, they were happy we were back, but this year was really surprising. They are coming, and we literally had customers that had not done business with us for years. They are back and want to deal with Fossil Group, Inc. You know, this company has got a great reputation, and it was one of the reasons I thought this company had an opportunity to have a much stronger future. And I think the first indications from our partners are very encouraging. Owen Rickert: Great. Thanks for taking my questions, guys. Franco Fogliato: Thank you, Owen. Thank you so much. Operator: That concludes our question and answer session. I will now turn the call back over to Franco for any closing remarks. Franco? Franco Fogliato: Thank you, everyone, for listening to today’s call. We are excited about where we are headed and look forward to talking with you after the Q1 results. Operator: That concludes today’s conference call. You may now disconnect.
Operator: Good morning, and welcome to Campbell Soup Company’s second quarter 2026 Question and Answer Session. After the introductory remarks, we will open the lines for questions. As a reminder, this conference is being recorded. I will now turn the call over to Rebecca Gardy, Chief Investor Relations Officer. Ms. Gardy, you may begin. Rebecca Gardy: Good morning, and thank you for joining the Campbell Soup Company second quarter 2026 Earnings Question and Answer Session. Earlier this morning, we released our earnings press release, earnings slide presentation, and management’s prerecorded remarks, including both the transcript and the audio of the remarks. All of the Q2 earnings materials are available on our website. At the conclusion of today’s live Q&A session, we will post the transcript and an audio replay of this call. During today’s call, we may make forward-looking statements, which reflect our current expectations about future plans and performance. These statements rely on assumptions and estimates, which could be inaccurate and are subject to risk. Please refer to slide 3 of our earnings presentation or our SEC filings for a list of factors that could cause our actual results to vary materially from those anticipated in the forward-looking statements. Because we use non-GAAP measures that we believe provide useful information for investors, we have provided a reconciliation of each of these measures to the most directly comparable GAAP measure in the appendix of our earnings presentation. Non-GAAP measures are not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Joining me today are Mick Beekhuizen, Chief Executive Officer, and Todd Comfer, our Chief Financial Officer. We will now open for questions. Operator? Operator: Thank you. Our first question today comes from Andrew Lazar from Barclays. Andrew Lazar: Maybe focusing in on Snacks to start with. From a top-line standpoint, what are you seeing in the key areas here of Goldfish, Fresh, and Salty? And so what is the plan for progress in the back half? And I guess for Salty specifically, you called out heightened competitive intensity, around which there has been plenty of discussion lately in the category. I am trying to get a sense of what the solution is. Is it lower everyday prices, higher promotional spend, bonus packs, etc.? And what sort of magnitude are we talking about? And then just on the margin side, the 7% snack segment margin was a bit of a shock. Given the investments that need to be made, is that the sort of level we should be thinking about for the next few quarters? I know it is a lot. I was hoping we could dig into that a little. Mick Beekhuizen: Thank you for the questions. We will take them one by one. So Snacks’ top line, Salty, I will comment on, and then Todd, if you can take the margin. And I will give the broader lead-in around the margin. If you look at the Snacks top line, three key focus areas: first, Goldfish; second, Fresh Bakery; and then Salty. Let us go through each of these pieces. With regard to Goldfish, we need to make sure that we maintain the Goldfish momentum. We had momentum, as you saw in our prepared remarks, going throughout the first half. We need to see that sequential progress throughout the second half of the fiscal year, and that is really with regard to in-market consumption. Then when I go to Fresh Bakery execution, we ran into execution challenges as we described. When I look at the remainder of the year, I expect that in Q3 we will likely see some continued headwinds, and that is partially self-inflicted as we reduce some market promotional activity in order to make sure that on-shelf availability and service levels are improving, and then by the fourth quarter we are working towards back to more normalized levels. When I get to Salty, we need to improve our overall competitiveness within that part of our Snacks portfolio, and it is predicated upon three key focus areas: first, making sure that we improve our competitiveness from a pricing perspective; second, focusing on the daily blocking and tackling, or the in-market execution, which is absolutely critical; and third, evolving our portfolio with innovation, which is primarily focused on premium, better-for-you, as well as flavor exploration. All that being said, within Salty, we expect we are going to make some progress throughout the second half, but it will take some time. With regard to your specific question around Salty pricing—and my comments really come back to the chips side of the business—Salty for us consists of two key pieces: first, pretzels; and second, chips. That is really where we are seeing more of that competitive pricing dynamic playing out, and you have heard that also from some of the other players in the space. What are we doing there? It is really focused on promotional activity. It is going to be very surgical, and we are going to make sure that we are competitive in the areas that matter during the times it also really matters—so again, just making sure that we are competitive in key moments. There is always a continued opportunity around some of the price pack architecture; however, that is going to take a little bit longer. From a margin perspective, obviously, poor performance, down 390 basis points in the quarter. Todd Comfer: As we mentioned in the script, about a quarter of that was the bakery performance that Mick just mentioned, and three quarters of it, quite frankly, is just when net sales were down 6%, there is a very large deleverage both in our plant network and also as we continue to invest in marketing and SG&A. When you are down 6%, that math on margin is challenging. For the second half, we will do a bit better on Snacks margin in Q3. We are still in the process of stabilizing bakery. We are still going to have a fair amount of spending, particularly in marketing, in Q3. So we will see some margin improvement in Q3, nothing dramatic. I think we will see a lot better performance in Q4, because we feel very strongly we will have the bakery performance stabilized much more greatly at that point. We will have lower marketing year over year, and then we have a lot of activity on Goldfish in the quarter, which is by far our highest margin product line in the Snacks portfolio, so that should help margin as well. Operator: Our next question comes from Tom Palmer from JPMorgan. Tom Palmer: Maybe to start off, I wanted to get a little more detail on the Fresh Bakery challenges. The remarks to Andrew and in the prepared remarks indicate that they emerged before the winter storms. It seems like they are related to execution challenges. I am just trying to understand where you are seeing this. Is this a production issue? Is it a challenge with route to market in terms of servicing customers? And then just how you are addressing it in terms of resolving it here over the next couple of quarters? Thanks. Mick Beekhuizen: Let me address it. With regard to Fresh Bakery, I mentioned this in my prepared remarks as well. It is really focused on both the manufacturing as well as distribution disruptions, and it was exacerbated by the January winter storm. But you are right, we already started to see that throughout the quarter. It is really coming back to making sure that we have products available on the shelf. That comes back to service as well as the in-market execution piece. We deployed a cross-functional team and we are already seeing measurable improvements across the board. At the same time, I am also very conscious that we need to make sure that we are making sustainable improvements. As a result, we are investing in the business so that the changes that we are making are sticking, so that we can service this business better going forward. As I mentioned, we already started to see progress over the past, call it, four weeks. We have to continue to work through that in the third quarter, and then we are working towards normalization in the fourth quarter. Tom Palmer: And then on capital allocation priorities, you noted the plans to focus more on debt reduction versus share repo. There is the dividend, which equates to a little over two-thirds of EPS at guidance this year, and then you have the La Regina acquisition soon to close. It seems like there also might be some investments needed to support the business. Maybe just an update on how you see this all balancing out? Todd Comfer: I will take that one. Cash flow obviously has become extremely imperative for us just given the debt leverage we are currently at and the takedown in the earnings. We will continue to invest in our business. We will reallocate some of our marketing money, as we have mentioned, into promotional activity to get sharper price points, but the net effect of that will be that is part of the reason why it is impacting our earnings. We are going to have to get really tight on capex. As you know, we already took it down $50 million for the year. Working capital is going to have to be really tight. We are going to have no more share buybacks; even anti-dilutive share buybacks we will not do. The dividend is extremely important to us, but we will not be increasing that dividend anytime soon. We mentioned a $100 million cost reduction in overhead that is going to take place over the next couple of years, and that is in place to help cash flow as well. The La Regina acquisition in the near term is not going to be significant from a cash flow perspective. We will make one payment of roughly $140–$150 million before the close of the year. If you remember, that second payment, we have the option of issuing equity. That second payment comes a year from now, so if we need to issue equity instead of cash, we have that ability, and then the second half of buying up the 51% is probably a few years off. But rest assured, cash flow preservation is heightened for us right now, and getting that leverage down closer to three than to four is imperative for us. Operator: Our next question comes from Peter Galbo from Bank of America. Please go ahead. Your line is open. Peter Galbo: I actually wanted to go back on the Salty Snacks points, Mick, that you were making. I think I heard you correctly: the focus is really to be more promotional within chips versus maybe moving the everyday. Obviously, your largest competitor is making it more of an everyday shift. Why is promotional the right route or tactic for that within chips when you have, I guess, the 800-pound gorilla that is doing a more permanent shift on the price side? Mick Beekhuizen: Let me give you a little bit more context around it. As I mentioned, we are going to take a surgical approach. That is important, and the other aspect of it is we are going to make sure that we continue to be competitive with our brands. If we look at the brands that we have with Cape and Kettle that both play more in the kettle subcategory, we believe that with the brand positioning itself, we have a right to win with these brands. That is important to recognize, and accordingly we need to make sure that we continue to lean into that brand’s right to win. Back to your point around value: values are absolutely critical. We have been pretty diligent in the past about making sure that we continue to maintain a competitive position. We are going to continue to look at key channels, and if I look at what the competition is doing, making sure that we stay competitive within those channels. What we are seeing right now, most of the time, can be resolved with our overall promotional strategy. There could be instances where we have to reset some of the pricing more permanently, and if so, then we will do that. I do not want you to take away that we are just going to solve this with pure promotional activity. I think it is going to be that surgical approach that I led in with. Peter Galbo: Thanks for the additional context there. And, Todd, I think you gave some color around the EPS cadence for the back half, but just wanted to clarify that. I believe Q3 looks similar to Q2, and then you would see a normal step down in Q4 just to hit the $0.90 you need to deliver in the back half at midpoint. Do I have that math right? Mick Beekhuizen: You have it correct. Peter Galbo: Perfect. Thanks very much, guys. Operator: Our next question comes from Megan Clap from Morgan Stanley. Please go ahead. Your line is open. Megan Clap: Hi, good morning. Maybe we could just pick up there on the Q3 to Q4 cadence, and, Todd, maybe follow up on some of the margin commentary you gave Andrew in the first question. So if Q3 operating EBIT growth performance looks similar to Q2, obviously an improvement expected in the fourth quarter. As you think about the margin profile, it would imply improvement in margins as we get into the fourth quarter. I think typically Q4 is a lower margin quarter for you. Can you, whether by segment or on a consolidated basis, unpack the expectations as we go sequentially from Q3 to Q4 that would imply that step-up in margin? Thank you. Todd Comfer: Absolutely. A couple of factors give us more confidence that Q4’s profile will be better than in Q2 and Q3. One, if you remember, the Sovos ERP conversion that brought volume into Q3 last year out of Q4—we will lap that, so we will get a benefit organically. We will get a benefit from that volume coming back into Q4 this year. We do anticipate Snacks stabilization—not going to be all the way to right—but we believe the Snacks margin will improve sequentially as we get into Q4. Tariffs—we will start to lap some of the tariffs in Q4 of last year. That year-over-year hurt will not be as great in Q4 as it has been in the first part of the year. And we will have lower advertising spend in Q4. It will be up in Q3; it will be down year over year in Q4, and that will help the margins. Megan Clap: Okay, great. And maybe just one follow-up while you said on the stabilization in Snacks. From an organic sales perspective, Q3 to Q4, can you help us understand what you are expecting now for Snacks for the year? I know the compare does ease in both segments in the fourth quarter on the top-line perspective, but should we still be thinking about Snacks declining in the fourth quarter? Todd Comfer: It is going to take a while. We have a lot of good activity going on, but Snacks will probably be down about 4% in the second half. That is going to be fairly balanced between Q3 and Q4, probably a little bit better in Q4 than Q3. But we are not anticipating a big sequential increase benefit on the net sales line. We do think we will stabilize margins. They will get better. They will not be all the way upright, but we do think the margin profile will get better as we end the year. Megan Clap: Okay. Great. Thank you so much. Operator: Our next question comes from Michael Lavery from Piper Sandler. Michael Lavery: Just wanted to understand a little bit better—you said that some of the marketing spending will shift to promo spend. I get the need for some of the pricing adjustments or stepped-up promo spending, but it seems like the ideal is to walk and chew gum. Why not both? Is it just maybe being handcuffed given where you are on the leverage, or is there a way to get both? Do you have the right marketing spending level, and how do you think about balancing the need for that versus the pricing? Todd Comfer: To be clear, our anticipation is marketing spend year over year will be up. As we started the year, we were hoping it was going to be up a bit more than we are now forecasting, but it will be up year over year. I would love to be spending more marketing money versus trade if the market would allow it right now, but we just think it is prudent to be competitive in certain areas where we have price gaps in the marketplace, whether it is on broth or on chips. We are not talking about dramatic changes in our trade philosophy or spend. We will spend more. Some of that will get funded by marketing. There will be an incremental hit to the P&L, as we have mentioned. The anticipation is marketing will still be up, but we are going to lean in a little bit more heavily into price. Mick Beekhuizen: And I think, Michael, to add to that as we go through the year, we are taking a very balanced approach. I want to make sure that we reiterate that, because on core brands we are going to continue to make sure that we build them. If there is one brand that we are continuing to support—and we will continue to support—it is RAO’S on the Meals & Beverages side, and you see the positive effect from that in the results. Another brand on the Snacks side that we must continue to support with marketing is Goldfish. So we are being very selective in how we are allocating our dollars and our support between trade and marketing. Michael Lavery: That is helpful. And just to follow up on the pricing approach. You touched on the promo increases, but then you have also talked about sharpening value architecture and some of the price pack architecture. You also touched on at least considering some list price adjustments. Can you give a sense of phasing and where you are in that process? Would I have heard it correctly that any list price adjustments are not decided but just under consideration? And on the price pack architecture, how much is underway versus under consideration? Mick Beekhuizen: Let me unpack it. Some of the price pack architecture is going to take longer if it requires changing some of our package formats. But it might also mean—around, for instance, Goldfish—that we lean into an area that we see is actually working and is providing value to the consumer, such as multipacks within Goldfish. That has been working, and we need to make sure that we continue to lean into that space because we have a moment here with that particular pack. That is also what I mean when I mention price pack architecture. Then there might be some of the larger pack sizes that we have within Goldfish where we are leaning a little bit more into promotional activity in order to make sure that we hit a good price point that is providing that value for the consumer. Obviously, the promotional activity, as I mentioned, is a bit more of the focus right now—again, very surgical. I can see, for instance, on chips—if we are finding ourselves where certain list price gaps are just too large—we might selectively adjust. But the latter I expect to be smaller than the trade component. Todd Comfer: Michael, this work is underway. We will do some things in the shorter term, but some of the activity that we are doing will take a little bit of time. As we look at some of the price slopes, particularly in our Snacks business, some of them are just out of whack. We have price per ounce in some sizes that are below where they should be and, conversely, some that are above. We need to get those aligned. It is going to take a little bit of time, but if we can execute that really well, there is some margin to be had. Michael Lavery: Okay. Great. Thanks so much. Operator: Our next question comes from Max Gumford from BNP Paribas. Max Gumford: Another one on Snacks for me. Really just on this recovery. It has been ongoing for some time now. We have not seen the volume grow in a couple of years. At what point do you stop talking about a recovery to what you view as a normalized level of growth, and maybe reset your expectation for what normalized growth is? Asked differently, what is giving you the confidence that this is still a segment where there is a reasonable chance of growing sales organically at the levels you have at the past Investor Day? Thanks very much. Mick Beekhuizen: Let me unpack that. With regard to Goldfish, based on the brand that we have, we have a right to win, and we believe that we have an opportunity to grow that business. We are seeing sequential improvement. We are obviously not all the way back to right yet, but I feel pretty confident around that, also because of the differentiated positioning of the brand. It has good better-for-you credentials, and we need to make sure that we amplify those. It is a brand that fits well with what consumers are generally looking for. We need to make sure that we tell that story and provide the value in the marketplace, and net-net we can, as a result, grow that business. I feel pretty good about the Goldfish side of things. If I look at Bakery as a whole, people continue to focus on moments of indulgence, and that comes back with cookies. We have been able to grow our cookies business now for four quarters in a row with the Milano innovation, and we have some incremental innovation that recently came out with Chessmen. I feel pretty good about our overall cookies business. The cookies category has not been growing, so we need to make sure that we continue to differentiate our cookies business, and that, as a result, fuels the growth. With regard to Fresh Bakery, as I described earlier, we need to make sure that we get the execution right, and at that point I believe we should be able to get that back to, call it, at least a flattish top line. That is with regard to Bakery. When I get to Salty, if I look at the two pieces of our business, we are playing in subcategories that are growing. Within pretzels, the pretzel subcategory has been growing, and we have two great brands with Snack Factory as well as Snyder’s of Hanover. Snack Factory has been growing. We have made some sequential progress on Snyder’s of Hanover. We have more work to do on it in order to get that back to growth, but because we are participating within a growing subcategory, I feel if we gain our fair share, we should be able to grow that business. On the chips side, that is obviously a more competitive space, as we have been discussing. Although the subcategories that we are in—kettle chips with Cape Cod as well as Kettle Brand—are well positioned within the kettle chips subcategory, which is the growing part of chips, the competition has increased over the past 12 to 24 months. As a result, we have more pressure and we are losing share there. That is why we need to do the work that I described earlier to make sure that we get a fair share of that growing subcategory. Finally, you have Late July. Late July’s positioning is exactly what consumers are looking for. It is growing. It is a little wonky between different quarters because of some promotional activity, but overall I feel very good about that brand. Hopefully that gives you some context to unpack our overall Snacks portfolio. Around why we believe we should be able to grow it, it is because the brands that we have and the subcategories that we are in are well positioned with what the evolving consumer is looking for. The consumer is looking for that premium, better-for-you, and flavor exploration experience, and our brands can provide that. Max Gumford: Great. Thank you. And then on Goldfish, back in 2023 you announced you were investing about $100 million in the Richmond manufacturing facility to expand Goldfish capacity. Since then, at least based on what we are seeing in tracked channel data, volumes have been in decline. Can you talk about any capacity utilization impacts you have seen as a result of that expansion and your view on your ability to fill that capacity going forward? Thanks very much. Todd Comfer: What you just described, unfortunately, is part of the reason why we have a 7% margin in Q2. One of the issues—not everything—but one of the issues is deleverage in the P&L. We invested, particularly in Goldfish but in other areas coming out of the pandemic, where we thought volume would continue to grow. It obviously has not. When you have higher fixed costs and your business is in decline a bit, that is really bad for margins, and that is what you are seeing. Our job as a management team is to make sure we can get that volume back, and the P&L really starts to improve if we can do that. It is as simple as that. We have to get Goldfish volume going in the right direction, or we will continue to have these margin hurts. Max Gumford: Great. Thanks very much. Appreciate it. Operator: Our next question comes from Robert Moskow from TD Cowen. Please go ahead. Your line is open. Robert Moskow: Hey, thanks for the question. Just a couple more add-ons. I wanted to ask about distribution for your Snacks business. Your competitors talked about double-digit gains, and I wanted to know if you have seen distribution losses as a result of that. And then secondly, Todd, oil is jumping all over the place. It is going to have an impact on diesel, and I wanted to know if you could talk about how that may impact the cost structure of the DSD network. These are independent routes, so it is a little complicated. Wanted to know if you could help us. Thanks. Yeah, great, thank you. Mick Beekhuizen: Todd, why do you not take the second one, and then I will come back on the first one. Todd Comfer: Absolutely. Obviously, an incredibly fluid situation. Oil is bouncing all over the place right now, and I do not think anyone knows how this is going to play out in the next few weeks and, more importantly, months and years. The good news is right now, we are about 85% hedged on all commodities, including things like diesel for freight, and resins, and other plastics and aluminum that could get impacted by what is going on in the Middle East right now. There could be some impact to this year. It is not going to be significant. If this continues for several months—if oil remains where it is as we start the fiscal year—obviously things are different. This will start to have an impact on our business and everyone’s business if oil remains elevated, not just on freight but on other products that leverage oil in their products as well. More to come on that. Hopefully this will get resolved. As I mentioned in prepared remarks, we have no incremental cost embedded in our forecast from it. There is a little bit of risk there, but nothing substantial. If we are sitting here three or four months from now and oil is still elevated, we are going to have to address it, either through pricing or really sharpening our pencils on getting more cost out of the system. Mick Beekhuizen: When I look at overall distribution, Rob, with the strength of our brands, you continue to see distribution opportunities, and we are also gaining some of that distribution. It is more profound in areas like Goldfish where we have a right to win. It is a well-positioned brand, and we continue to work with our retail partners in growing that brand. In some of the more competitive areas, such as chips, I see a mix of some gains and losses and, as a result, a little bit more net neutral around the distribution side. When I think about what we are doing about areas like that, if we have great innovation, we find that our retail partners are excited about making sure that we gain that incremental distribution, and you see that, for instance, in cookies. Cookies have done really well with the Milano as well as the Chessmen innovation, and as a result, we have seen continued distribution gains in those areas. Hey, Rob, one impact you mentioned—the independent DSD—just so we are clear: they are independent operators. They are responsible for their fuel costs and other operating costs. So there is no direct impact to us. But, obviously, if they do not have a competitive route where they can make money, ultimately at some point in time it impacts our ability to grow these businesses as well. We will have to be cognizant of that, but they are responsible for their fuel costs. Robert Moskow: Thanks for that. Operator: Our next question comes from David Palmer from Evercore ISI. Please go ahead. Your line is open. David Palmer: Thanks. I am wondering if there is a bigger long-term comment to be made about the Snacks business. Sometimes when you have a margin of a segment get down towards what looks like maybe 10% this fiscal year, the implied valuation of it is compressed. There is something perhaps liberating about that in terms of how you are thinking about it. You have Mohit—he is joining from a company that spun out DSD and sold cookies; in other words, they rethought that business more completely. I am just wondering if you think that this is maybe a time when you can really think about the complexity of the business, what you own in it, so you can put the resources you want against the good stuff within it. I know there is limited detail that you could share, but maybe you can make a comment on that and I have a quick follow-up. Mick Beekhuizen: We have spoken about this in the past. We are obviously operating the portfolio that we currently have. We are big believers in the brands that we have. We will always continue to make sure if there are alternatives that create better shareholder value that we take those into consideration. When I look at our current Snacks portfolio, another way of looking at some of what we are talking about—particularly with regard to the margin—is that there is a lot of opportunity here. You see that, hopefully, throughout our commentary—the action orientation and making sure that we go after these different areas. Making sure, as Todd mentioned, that we are stabilizing our top line is absolutely critical. Growing areas like Goldfish, which will help from an overall mix perspective, and making sure we get that Fresh Bakery execution right are all going to help margins. We are not going to stop with those initiatives. Continued focus on that elevated productivity level is really important—that is both within the plants as well as within our logistics network. Finally, Todd already mentioned the cost savings, whether they are with regard to a network or within our SG&A. We are going to continue to work on those areas, although some of them might take a little bit longer. We will always continue to look at all the different alternatives, but we are focused on the portfolio that we have and making sure that we work that as hard as we possibly can. David Palmer: Thanks. Just a quick one on the other side of the business. I think a lot of your comments in your prepared remarks are really true about the cooking behaviors of the younger generation, and you are leaning in on that with this new condensed sauces business. I wonder about how incremental you think that can be. On the other side, how much should we be worried about ongoing market share slippage on the broth side? Your broth business has flattened out lately. I am wondering how you are thinking about perhaps reviving growth there, or at least forestalling whatever progress is being made by private label getting back on shelf. Thanks. Mick Beekhuizen: Thank you for asking the question. We did not talk as much about the Meals & Beverages side of the business, but the in-market growth that we generated during the second quarter and the strong performance of RAO’S are obviously something that we are very excited about. The other thing that is really working within the M&B portfolio, as you are describing, is the overall focus on cooking occasions, and our portfolio is catering very well to that. Also, products within the soup aisle—broth on the one hand, and on the other, our condensed portfolio—have actually been doing relatively well because of the parts of the business that are focused on cooking and are being used as an ingredient. A little over half of the condensed portfolio in the second quarter has been the growing part of the portfolio. On the flip side, the eating side has been declining, so net-net, condensed has been relatively flat during the quarter. We are seeing that differentiated proposition that we can provide with our condensed cooking soups—which are being used as an ingredient, like cream of mushroom and cream of chicken—and we are now expanding that into Campbell’s condensed sauces, and we believe we have a right to win with that. What does that do? It allows us to start transforming more and more of the soup aisle into an ingredient that we are providing. It provides convenience and comfort at a very attractive value proposition. I am very excited about the Campbell’s condensed sauces. We are going to introduce that in June. I think it will be incremental to what we are currently providing, and I think we are going to learn a lot with that introduction. It is a great complement to our condensed cooking soups as well as broth. With regard to broth, broth has been a growing category. The two great brands we have within that category—Pacific as well as Swanson—both continued to grow during this past quarter, albeit, as you are pointing out, with a little bit of share pressure, which we anticipated because of private label recovery. We are going to continue to make sure that we stay competitive within the space and also focus on how we can grow that business, as it is a very attractive value proposition that fits right within that cooking behavior. Pacific has been growing double digits. The pressure has probably been a little bit more on Swanson. Todd also mentioned earlier that we are watching very closely the price gaps to some of the private label participants and making sure that, as a result, we stay competitive during key drive periods like the holiday period. Operator: Our last question comes from Jim Salera from Stephens. Please go ahead. Your line is open. Jim Salera: Yes, good morning. Thanks for taking our question. Mick, I wanted to build on David’s question there and ask if you could give us some details around Meals & Beverages in the back half of the year—particularly what we should expect on pricing given some of the competitive dynamics you just highlighted. Is there still opportunity for modest net price realization in the back half of the year? And embedded in your updated guidance, do you have incremental at-home consumption given some of the pressures on the consumer? Typically that benefits that portion of the business. Any detail on that would be helpful. Todd Comfer: I will take pricing first. We will still have positive net price realization in the second half. It will not be as great as it has been, just because of some of the investments we have made in broth. We are actually making a little bit in RAO’S as well, but we still will have positive price. Mick Beekhuizen: From a consumption perspective, you are probably going to see a little bit of pressure in the second half. You saw that in Q2 we did really well from an in-market consumption perspective, driven by the holiday period. Our products typically do very well during that period, and that was also very evident again during this holiday period. On top of it, as you saw, we had very healthy growth with regard to RAO’S. RAO’S grew in-market consumption 14.5% during the second quarter. As I mentioned in the past, we expect for the full year high single digits, and that is still what I am expecting—so a little bit of that disproportionate growth during the second quarter. Overall, I expect continued growth with the RAO’S brand. However, that leads to a little bit lower overall consumption growth in Meals & Beverages in the second half of this fiscal year. I think you are hovering probably around minus 1% to 0%. That is probably what you are going to see in the second half. Operator: And we are out of time for questions today. This will conclude today’s conference call. Thank you for your participation. You may now disconnect.
Operator: Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press 0, and a member of our team will be happy to help you. Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press 0, and a member of our team will be happy to help you. Good morning, and welcome to OppFi Inc.'s Fourth Quarter and Fiscal Year 2025 Earnings Conference Call. All participants are in a listen-only mode. As a reminder, this conference call is being recorded. Following management's presentation will be a question-and-answer session. For those listening by dial-in, you will be prompted to enter the queue after the prepared remarks. I am pleased to introduce your host, Mike Gallentine, Head of Investor Relations. You may begin. Mike Gallentine: Thank you, Operator. Good morning, and welcome to OppFi Inc.'s Fourth Quarter 2025 Earnings Call. Today, our Executive Chairman and CEO, Todd G. Schwartz, and CFO, Pamela D. Johnson, will present our financial results followed by a question-and-answer session. You can access the earnings presentation on our website at investors.opfi.com. During this call, OppFi Inc. may discuss certain forward-looking information. The company's filings with the SEC describe essential factors that could cause actual results, developments, and business decisions to differ materially from forward-looking statements. Please refer to Slide 2 of the earnings presentation and press release for our disclaimer statement covering forward-looking statements and references to information about non-GAAP financial measures which will be discussed throughout today's call. Reconciliations of those measures to GAAP can be found in the appendix to our earnings presentation and press release. With that, I would like to turn the call over to Todd. Todd G. Schwartz: Thanks, Mike, and good morning, everyone. Thank you for joining us today. I am looking forward to discussing another year of record-breaking performance at OppFi Inc. For 2025, total revenue increased 13.5% year over year and adjusted net income increased 69% year over year while keeping our industry-leading 78 Net Promoter Score. We continue to find benefits from Underwriting Model 6 which is designed to identify riskier borrowers and properly price risk across segments. Despite higher delinquencies on our summer vintages, OppFi Inc. maintained strong unit economics and adjusted in real time to support continued growth into the fourth quarter. The auto-approval rate in the fourth quarter was 79%, which allowed more customers to be approved without human interaction and helped increase originations 48% year over year. In conjunction with our lending partners, we plan to release Model 6.1 in 2026, which we anticipate will boost originations and reduce risk. We believe Model 6.1 better weights attributes in the model and enables more accurate segmentation of risk when identifying borrowers. The credit team is actively working on Model 7.0 with our bank partners and early indicators are promising on both origination and risk fronts. We plan to launch Model 7.0 in Q3 of this year. We are encouraged to see improving vintage metrics in December and January coupled with strong recovery metrics in Q4, which we believe will enable us to grow the top and bottom line in the double digits in 2026. OppFi Inc. continues to make great progress on building LOLA, the origination and servicing system of the future. LOLA is designed with a clean architecture to leverage rapidly evolving AI tools across origination, servicing, and corporate operation. The build and test phase is complete, and we are actively finishing up the QA phase of the project. We plan to substantially migrate to our new software system in Q3 2026. Early indicators give us confidence that LOLA will help continue to improve funnel metrics, increase automated approvals, enhance efficiency in servicing and recoveries, better integrate major systems, deliver reduced cycle times, and provide greater throughput for our product, tech, and risk teams. We believe our LOLA system and architecture will allow us to rapidly deploy and build new products to respond to our customers' needs and market dynamics. To that end, we are excited to announce a new line of credit product. We expect this product to launch with our bank partners in 2026. We believe this exciting product will not only serve as another high-quality credit access option for customers in the states where we operate, but also enable us to serve new geographies. This product is designed to have fair, transparent features that the OppLoans installment product has provided to millions of customers. 2025 was a great year for OppFi Inc. as we executed on our vision of being the leading technology-enabled platform that facilitates essential credit access and community services to everyday American businesses. We believe the strong foundation of performance sets OppFi Inc. up for another year of potentially double-digit revenue and earnings growth. With that, I will turn the call over to Pam. Pamela D. Johnson: Thanks, Todd, and good morning, everyone. As Todd noted, we achieved another record year, and we finished with a strong fourth quarter generating revenues of $159,000,000, an impressive 17% increase over Q4 2024. Model 6 has been a significant contributor to this growth. Its enhanced predictive power has enabled us to better manage our loan economics through risk-based pricing and to underwrite larger loan amounts for creditworthy individuals, helping fuel record originations and receivables balances. In the fourth quarter, originations increased by 8% to $230,000,000 compared to the prior-year quarter. Factoring in loan repayments, origination growth increased our ending receivables by 16% to $493,000,000 for the quarter. The growth in revenue was fueled by these originations and receivables growth, generating a stable revenue yield of 130%. As Todd noted, for the loans originated in the summer, we continued to see higher default rates. However, one of the benefits of short-duration loans is that loans work through the system relatively quickly. That means that by first quarter 2026, the majority of the higher default rate loans should be reflected in our earnings. As a result of the higher defaults, net charge-offs as a percentage of revenue increased to 45% for the quarter, up from 42% in the prior-year quarter, and net charge-offs as a percentage of receivables increased to 59%, up from 54% in the prior-year quarter. It is important to note we believe that much of the higher risk associated with these loans was appropriately priced into them through higher interest rates. Our scale and focus on cost discipline contributed to our strong financial performance in the quarter. Continued operational improvements drove notably lower total expenses before interest expense, which declined to 28% of revenue in the fourth quarter, a substantial improvement compared to 33% in the same quarter last year. Additionally, by paying down our corporate debt and successfully upsizing one of our main credit facilities at more attractive interest rates earlier in the year, we reduced interest expense to 6% of total revenue, down from 8% in the prior year. As a result of strong revenue growth and improvements in our operating expense structure, adjusted net income increased 27% to a fourth-quarter record of $26,000,000, an increase from $20,000,000 last year, and adjusted earnings per share grew 28% to $0.30 from $0.23 last year. On a GAAP basis, net income increased by 175% to $38,000,000, reflecting our higher revenues, lower expenses, and a $12,000,000 non-cash gain related to the change in the fair value of our outstanding warrants. Because our Class A common stock price decreased during the quarter, the estimated value of the warrants issued when we went public decreased, driving this non-cash income. However, as we have consistently stated, this is a non-cash item and does not affect the company's underlying profitability. Looking at the balance sheet, we continue to maintain a robust financial position, ending the quarter with $93,000,000 in cash, cash equivalents, and restricted cash, alongside $321,000,000 in total debt and $309,000,000 in total stockholders' equity. Our total funding capacity stood at a strong $618,000,000 at quarter's end, including $204,000,000 in unused debt capacity. During the fourth quarter, OppFi Inc. strategically repurchased 515,000 shares of Class A common stock for $5,000,000. Now looking at the full-year results, total revenue increased to $597,000,000, up 14% compared with 2024. Driving this strong growth was a 12% increase in originations to $899,000,000 in 2025, which contributed to a 16% increase in ending receivables to $493,000,000. This also translates to an average yield of 133%, up from 131% in 2024. As we discussed, we experienced growth in originations, ending receivables, and yield from the improvements from Model 6, but we also saw a decrease in net charge-offs as a percentage of total revenue, down to 37% from 39%, and a decrease in net charge-offs as a percentage of average receivables to 49%, down from 51% in 2024, respectively. While OppFi Inc. generated record revenues, the company maintained tight control over expenses excluding interest, driving a sharp decrease in expenses as a percentage of revenue to 29% from 35% in 2024. As a result of the record revenues, coupled with the decreases in expenses, GAAP net income increased significantly to $146,000,000, up from $84,000,000 in 2024, and diluted EPS for the full year was $0.99, up significantly compared with $0.36 in 2024. Adjusted net income increased to $140,000,000 compared with $83,000,000 in 2024. Adjusted EPS was $1.59, also up significantly compared with $0.95 in 2024. The company delivered strong full-year results, exceeding guidance and Street estimates, driven by the successful implementation of numerous strategic initiatives and operational improvements throughout the year. These efforts enhanced efficiency, expanded market opportunities, and strengthened financial performance, underscoring the company's ability to execute its long-term strategy and deliver stockholder value. Given our strong operating performance driven by growth in net originations, revenue, and adjusted net income, we are pleased to provide the following 2026 full-year guidance. For total revenues, we expect $650,000,000 to $675,000,000, an increase of 9% to 13% over 2025. Adjusted net income is expected to be $153,000,000 to $160,000,000, an increase of 9% to 14% over 2025. Based on an anticipated diluted weighted average share count of 87,000,000 shares, adjusted earnings per share are expected to be $1.76 to $1.84, an increase of 11% to 16% from 2025. With that, I would now like to turn the call over to the Operator for Q&A. Operator? Operator: Thank you. We will now open for questions. We will take our first question from David Michael Scharf with Citizens Capital Markets. Your line is open. David Michael Scharf: Great. Thanks for taking my questions. Good morning. Todd, maybe to start more on the macro side, and given the events going on right now geopolitically, can you remind us, since these are such short-duration loans, how quickly loss emergence—like, in weeks or months—typically occurs, and specifically whether it is far too early to be talking about the impact of gas prices on some of your borrowers? Todd G. Schwartz: Yes. David, thank you for the question. We see early indicators very early within the month of when they are originated, looking at first payments 28 days, 42 days out. So we get earlier indicators. And, in the summer, what was interesting was we saw consumer sentiment index take a nosedive during the summer, and what followed was some lower repayments, I should say, and we course corrected pretty quickly. Also, the business is structured with risk-based pricing now, which better prices risk for customers throughout the risk segments, and that helps unit economics tremendously. So, we were still able to grow into the fourth quarter, and the good news is we have definitely seen some improvement on those in December and in January on those early indicators, and it is giving us confidence to allow for double-digit growth on top and bottom line for 2026. Yes, sorry about the cost again. Yes, there is no doubt. Inflation is a tax on our customers. It hits their discretionary income and ability to repay, something we are watching closely. We are hoping it is temporary, but anytime prices of major items like gas go up rapidly like it just has over the last week, it is something that we are going to watch. We are also going to continue to watch the customer sentiment index and just make sure that the customer is in a good place. It is definitely going to be top of mind here in 2026. David Michael Scharf: Got it. Understood. And maybe just staying on credit. I know you do not provide specific loss guidance for 2026, and as you mentioned, obviously risk-based pricing has to be factored in for total returns, but is there anything we should think about in terms of the cadence of losses coming out of—type thing—in the second half? Todd G. Schwartz: Yes. I mean, there was some tightening that was done in response to some of the summer vintages. However, it is stable, and we were starting to feel more confident. Obviously, it is a wait and see here through the first quarter, but we think there are also some strategic initiatives that we are working on in the business that are going to unlock some more growth. We are very bullish on our model refit 6.1, which factors in more recent data to allow us to give us confidence to grow. And then I will point to we are getting more yield. We are getting more yield to price the risk properly across the segments. So back in 2022 when there were some credit spikes due to rapid inflation, we did not have risk-based pricing. So it was not a lever in our toolkit to be able to properly price risk across the segment. So we feel like with our model, with our new product line of credit, and with some of the risk-based pricing initiatives, we are well positioned to continue to grow profitably and keep strong unit economics. David Michael Scharf: Got it. Maybe just one more follow-up, and then I will get back in queue. You noted in your presentation that your bank partners had increased the percentage of their retention. I am assuming it was notable enough for it to be included in the deck. Can you give us some color on both order of magnitude, but more importantly, is this something that usually cycles up and down that maybe we had not paid attention to, or if there is anything else that we should take away from that? Todd G. Schwartz: Yes. It is really just in some states. Every state is a little bit different because we abide by all federal and state laws. Banks do take higher percentages in some states of originations, and so, obviously, our gross to net comes down a little. But I think what gives us comfort is the banks are very comfortable with our servicing and underwriting capabilities and are willing to put their equity into the originations, which is our interest alignment and builds confidence for us. And so we view it as a good thing long term and think that it shows the confidence that the banks have in us. David Michael Scharf: Got it. Great. Thank you. Operator: We will move next to Michael John Grondahl with Northland Securities. Your line is open. Michael John Grondahl: I wanted to ask on those early summer vintages. If you look back, what are the learnings from that? Was there any region to call out, type of loan, or a risk tier to call out? Just curious what you learned from some of those higher losses. Todd G. Schwartz: Yes. That is a great question. We did look at—we have extensive data: banking data, cash flow data, in addition to a lot of customer-level data to look at—and the repayment, the actual repayment. So you cannot get better data than that. There is nothing that stood out to us as being the sole reason as to why we started to see some strain and some lower repayment rates. One thing that is and has been is customer sentiment index—has been something that we have started to look at as being a way to, not obviously decision on credit, but as an early indicator of how the customer is, how the customer is feeling. And there is some ability to see that when the customer is not feeling financially secure, or they do not feel like the direction of their financial path is upward, that you see some lower repayments. But there is nothing to decision on. We looked across the spectrum at a lot of different data points. There was nothing that stood out as, “Oh, that is the reason for this happening.” But that is why we monitor this on a daily basis, and it is something that we have really good reporting to be able to read and react. In this world, it is not set-and-forget anymore on credit. That is why we are doing the refit. That is why we are building Model 7. The pace of model building and change is rapid now, and I think we are well positioned to respond to it and make course corrections along the way. Michael John Grondahl: Got it. And then just to clarify, is it Model 6.1 goes live in 2026? Todd G. Schwartz: Model 6.1 is going to go first half. We are going to be launching—it is a refit, so it is taking Model 6 and improving on it—and we do see early indicators are boosting originations and better credit performance across the board. It really has a benefit on the origination side too, which we are excited about. We have been testing it all throughout the fourth quarter and into the first quarter, so our confidence level is getting higher. And then we are also already starting to work on building Model 7, which is a brand-new model, which will take in a lot of the data from last year and the most current data and be able to build our strongest model ever. Michael John Grondahl: Got it. And if there is one or two things to call out in 6.1, which you are relaunching now, what advantages or what benefits—is it a certain data cohort, or what would you say you are getting an edge from there? Todd G. Schwartz: Yes. It is looking at repayment data and reweighting our variables to have the model be more predictive. That is really what it is. We look at a lot of different data points throughout the application process to determine creditworthiness, and when you actually have repayment data to support it, it becomes extremely powerful. So it is a reweighting. We have really good tools. Our credit team does a great job at constantly back testing and finding areas for improvement. Once they go to work and they start to run the regression analysis, we found some things where we could better weight different variables and produce a more accurate score. Michael John Grondahl: Got it. Then, lastly, 2024 had $95,000,000 of free cash flow, 2025 had $94,000,000—low to mid-nineties each year. I would assume 2026 is going to be in a similar ballpark, maybe adjusted for a little bit of growth. How are you thinking about capital allocation? Do you have a chunk of buyback ability to buy in 2026? I am trying to think about uses for another large year for free cash flow. Todd G. Schwartz: In the fourth quarter, we did buy back some shares. We thought that the long-term value of our stock price and the record performance that we have had and the consistency of that was not being valued properly. So we did buy back some shares with some of our capital. I am happy to support the stock at those prices for sure. I kind of always say this, but it is a menu of options. We like to be well capitalized to read and react to the broader markets and see what is going on. We are still active in the M&A space looking at stuff. We are exploring different strategic initiatives that would need capital. We have been investing in our tech systems. We believe that LOLA, when launched, will be the most cutting-edge tech-enabled lending system out there, and it will allow us to plug into AI tools. So we are investing in that. There is a menu of options. In the past, we have done a special dividend as well. We do anticipate free cash flow to continue to increase this year. We are paying down debt, as you can see, and getting the benefit there as well. We are using our cash wisely and strategically and like to be well capitalized to take advantage of situations that come up and continue to build the business. Michael John Grondahl: Got it. Thank you. Operator: We will move next to David Joseph Storms with Stonegate. Your line is open. David Joseph Storms: Morning, and thanks for taking my questions. I wanted to start by maybe pivoting back to the macro question from earlier. You mentioned that in the summer you guys course corrected pretty quickly. You would expect to do the same thing again should gas prices run. I was hoping you could illuminate a little more about what the playbook would be here. Is that targeting higher-quality segments? Is that adjusting your pricing a little more aggressively? What does that look like? Todd G. Schwartz: Yes, absolutely. That is something that we have successfully been able to do: targeting lower-risk customers and even adjusting pricing to accommodate more growth in the lower-risk segments. We have been launching that in the fourth quarter and will continue that throughout the year. The lower-risk segments are more predictable on payback and repayment rates. We are not seeing as much degradation in those segments, and we will continue to market and target. We think that the line of credit product that we are building, when we launch, will potentially open up some new geographies for us with our bank partners. We are excited about that. It will give us some new geographies to provide credit access for customers. Inflation is something we are watching, and seeing gas shooting up that quickly is concerning, but we are ready to respond if needed, and right now it appears to be a temporary surge. Hopefully, it will come back down in line and will not impact our customer repayment rates. David Joseph Storms: Very helpful. Thank you. Turning to the new model we will also have this year, maybe could you spend a little time talking about what has changed between—not maybe the models themselves—but the process of putting a model together? I have to imagine you have a lot of tools at your disposal to create better, faster, stronger models with the advent of AI and such. Are we going to see that turn into faster model rollouts, or should we expect a step change in the quality of the model? Todd G. Schwartz: First of all, you are absolutely right. The AI tools and the tools that we are now able to deploy—the pace of change, the cycle times of developing refits and developing new models—has significantly reduced, which is a huge benefit to read and react. But the world is also changing at a much faster pace. I do not remember a time where gas went from $80 a barrel to $120 in one week. You have to— that is table stakes now—be able to read and react and be out in front of any macro noise that may affect repayment rates and be ready to make changes as needed. You will continue to see more rapid model development, reduced cycle times, and better, more predictive data as we continue to operate. David Joseph Storms: That is great. And one more for me if I can sneak it in. Just looking at your guidance, anything here that is baked in that we should be aware of? Do we expect pretty simple seasonality on the year based on what you can see? Anything there would be very helpful. Todd G. Schwartz: We are encouraged by some of the early vintage metrics of December and January. We are seeing a normal to strong tax refund season. It was well documented from the IRS that the average return would increase this year, which is also very beneficial for us from a credit perspective. We see growth. We feel like we have some good growth initiatives and feel good throughout the year that we can achieve double-digit revenue and profit growth. Operator: It does appear that there are no further questions at this time. This does conclude the Q&A portion of today's call, and this also concludes today's meeting. We appreciate your time, and you may now disconnect.
Operator: Good day, and welcome to the Velocity Financial, Inc. Fourth Quarter 2025 Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note today's event is being recorded. I would now like to turn the conference over to Christopher J. Oltmann, Treasurer. Please go ahead. Christopher J. Oltmann: Thanks, Rocco. Hello, everyone, and thank you for joining us today for discussion of Velocity Financial, Inc.'s fourth quarter and full year results. Joining me today are Christopher D. Farrar, Velocity Financial, Inc.'s President and Chief Executive Officer, and Mark R. Szczepaniak, Velocity Financial, Inc.'s Chief Financial Officer. Earlier this afternoon, we released our results, and you can find the press release and accompanying presentation that we will refer to during this call on our Investor Relations website at www.bellfinance.com. I would like to remind everyone that today's call may include forward-looking statements, which are uncertain and outside of the company's control, and actual results may differ materially. For a discussion of some of the risks and other factors that could affect results, please see the risk factors and other cautionary statements made in our communications with shareholders, including the risk factors disclosed in our filings with the Securities and Exchange Commission. Please also note that the content of this conference call contains time-sensitive information that is accurate only as of today, and we do not undertake any duty to update forward-looking statements. We may also refer to certain non-GAAP measures on this call. For reconciliations of these non-GAAP measures, you should refer to the earnings materials on our Investor Relations website. And finally, today's call is being recorded and will be available on the company's website later today. I will now turn the call over to Christopher D. Farrar. Christopher D. Farrar: Thanks, Chris, and I would like to welcome everyone. I appreciate you joining our 2025 year-end earnings call. Pleased to report another incredible year of performance and very proud of what our team accomplished. Through hard work and dedication to our vision, we recognized record levels in originations, portfolio growth, new securitizations, book value, pretax ROE, and earnings. Credit belongs to my amazing team members who are talented and passionate about our mission. I believe they are our greatest asset. From a macro perspective, we see healthy activity in the fixed income markets as our deals are oversubscribed and spreads are tight. Our pipeline is growing, our end real estate markets are healthy, and we are optimistic about our prospects going forward. In terms of our specific results, core net income increased by 52% to $111,000,000, which also drove a new record level of pretax ROE of 26%. Importantly, we achieved this growth while maintaining our margins and credit discipline. With respect to originations, we increased volume by 49% to a record $2,700,000,000, driven by increases in productivity from our account executives. Increased volume also set a record for our capital markets team with nine new securitizations and $2,600,000,000 in new issuance. On a net basis, the portfolio grew by 28% versus the prior year, and our asset management team successfully resolved $331,000,000 in NPLs with net recoveries of $30,000,000. At year-end, we entered into a transformative partnership whereby we sold $129,000,000 of NPLs and retained the servicing rights for the entire pool of loans. This transaction drove significant earnings in Q4 but also freed up approximately $50,000,000 in working capital and will drive future earnings from the servicing fees earned. All in all, a great transaction as this team continues to impress and drive meaningful results to the bottom line. From a liquidity perspective, we have never been stronger, as we issued our first rated unsecured debt offering for $500,000,000 in January, which gives us greater flexibility and makes us less reliant on short-term warehouse lines. This new capital will help us execute our long-term plan of growing book value and maximizing shareholder returns. Looking forward, we have great momentum and are well positioned to continue our growth. That concludes my prepared remarks, and we will turn over to Page three in the earnings presentation. 2025 was really just a fantastic year for us. You can see growth across the board, 26% pretax ROE, grew book value by 21%, and maintained a very healthy NIM at 3.6%. Turning to Page four, digging into the fourth quarter, you can see core net income of $36,300,000, or $0.93 a share, up from $0.60 a share from Q4 2024. I mentioned that the NIM was very healthy and stable at 3.59%. In terms of production, dollars were $634,000,000 for the quarter, up 12.5% from the prior year. I mentioned the activity in both the portfolio and NPLs. As a result of that NPL sale, NPLs were down to 8.5% at the end of the year. Again, hitting on the asset management team, they continue to do a great job of realizing net gains, and we have expanded our disclosures in this year's 10-Ks and in these earnings materials. We are reflecting total revenue that we recognize from the NPLs, and that really just shows we have always made those fees and made that income, but it has been difficult to suss out in the financials. So we broke that out and showed the activity from regular accrued interest as well. As you can see for the quarter, that was a total of $7,600,000. So that team continues to do a great job for us. In terms of financing and capital, I mentioned that we have done a number of securitizations in the year. We did do our second private securitization where we had one investor taking down the entire transaction, and we like that execution and think it is a great diversification as we move forward. I mentioned the strong liquidity position, $92,000,000 in unrestricted cash and plenty of warehouse capacity. As I mentioned in my opening remarks, we are really proud of the NPL transaction we were able to close in the fourth quarter, recognizing $13,400,000 of net income as a result of that sale and releasing about $50,000,000 of working capital to fund future production. With that, I will turn it over to Mark for Page five. Mark R. Szczepaniak: Thanks, Chris. Hi, everyone. Another year is in the books for Velocity Financial, Inc., and as Chris had mentioned, Velocity Financial, Inc. is really ending the year strong. If we go to Page five and look at our loan production, total loan production for the fourth quarter was just under $635,000,000 in UPB. As Chris mentioned, that is a 12.6% year-over-year increase from about $563,000,000 in Q4 2024. The strong production growth in 2025 included the weighted average coupon on new Q4 held-for-investment originations continuing to come in strong at just a little over 10%. Originations in Q4 also continued at tight credit levels, resulting in a weighted average loan-to-value for the quarter just under 63%. 2025 total year loan production is $2,700,000,000 in UPB. That was almost a 47.5% year-over-year increase over the $1,900,000,000 in production for 2024. Over 6,600 loans were originated during 2025. The strong 2025 production was a result of continued organic growth of our borrower base and strong demand for our product. As a result of the continued strong growth in production, if you look at Page six, it shows the year-over-year growth in our overall loan portfolio. The total loan portfolio as of the end of the year for 2025 was $6,500,000,000 in UPB, which is a 28.4% increase over the $5,100,000,000 as of 12/31/2024. The weighted average coupon on our total portfolio at the end of the year was 9.7%, as Chris mentioned, a 21 basis point year-over-year increase. The total portfolio weighted average loan-to-value remained consistently low at 65% as of 12/31/2025, and the average loan balance remained consistent at about $390,000. On Page seven, it shows our recent quarterly portfolio net interest margin. You can see 2024 and 2025 have very, very consistent net interest margins. It is not on the slide, but on an annual basis, our portfolio-related net interest margin was 3.61%, about a 1.4% increase over our 2024 net interest margin of 3.56%. For the year, our portfolio yield increased 39 basis points year over year, while our portfolio cost of funds increased year over year by only 18 basis points. The portfolio yield increase is mainly driven by strong loan production during the year and higher loan coupons, and the increase in the portfolio cost of funds is mainly due to an increase in the securitization market yields. On Page eight, our nonperforming loan rate at the end of 2025 was 8.5% compared to 10.7% at the end of 2024, and the decrease, as Chris mentioned, was a combination of the sale of $129,000,000 in UPB of NPL loans sold during Q4 as well as a combination of continued strong resolutions during the entire year by our special servicing department. The table to the right of the page shows our loans held-for-investment portfolio, including both our amortized cost and fair value loans, and shows the total year-over-year net nonperforming loan valuation allowance we have for our nonperforming loans. As of 12/31/2025, the amortized cost loan portfolio had a $4,500,000 CECL reserve and the fair value portfolio had a $48,300,000 valuation adjustment allowance for a combined valuation allowance on the entire loans held-for-investment portfolio of about 81 basis points. Both of these valuation adjustments are required under U.S. GAAP. The unrealized valuation adjustment on our nonperforming fair value loans represents the value for which the loans, under U.S. GAAP, could be sold out in the secondary market. However, we do not plan on selling NPL loans since our in-house special servicing department has a history of producing net gains and very successful resolutions on these loans. Turning to Page nine, it shows our CECL loan loss reserve, which we said was at $4,500,000 for the end of the year, or 22 basis points of our outstanding amortized cost held-for-investment portfolio, and the CECL loan loss reserve does not include the loans being carried at fair value. For 2025, our net gain/loss from loan charge-offs and REO-related activities at the bottom of that table is a net loss of $3,700,000, mainly as a result of a couple of large legacy loan charge-offs. These were smaller loans; we wanted to clean those up. We do not have those types of loans in our portfolio anymore, so that loss is well above our historical loss experience. We do not foresee these types of losses going forward because of the continued favorable resolutions of our nonperforming loans and that significant loss allowance adjustment that you saw on the previous page for the fair value loans. Page 10 presents the enhanced disclosure that Chris was mentioning on our nonperforming loan resolution activity. So the first set of four columns there is what we have always shown in the past. We go up to the net gain or loss on NPL loan resolution, which brings in the amount of default interest and prepayment fee income over and above contractual principal and interest. But what we had not really shown was what is the contractual interest that we go back and pull in. Under GAAP, you have to reverse that out when a loan goes nonperforming. Once we resolve the loan, we are collecting all of that contractual interest in cash. We wanted to bring that in to show the total amount of revenue that we bring in when we resolve these loans. So in this table, we have added columns for net accrued interest and total recovered on the far right. We felt it was important to add the amount of contractual interest, net of any advance write-offs, that is also collected on resolutions for the efforts of our special servicing team. For 2025 Q4, NPL resolution total dollars recovered, including net contractual interest, was $7,600,000, or 9.8% over the UPB, compared to $7,500,000, or 10.8% over UPB, for 2024. Now if you look at the full year 2025 on this table, the total amount recovered on the resolutions of NPL loans was $30,000,000, or 9% of UPB, compared to $22,300,000 total recovered in 2024, or 8.8% over UPB. Page 11 shows our durable funding and liquidity position at the end of the year. Total liquidity as of December 31 was just under $117,000,000, comprised of about $92,000,000 in cash and cash equivalents and another $25,000,000 in available liquidity in unfinanced collateral. In addition, our available warehouse line capacity at December 31 was just under $600,000,000, with a maximum line capacity of $935,000,000. So there is plenty of capacity and available capacity on the warehouse lines. In Q4, we issued two securitizations, 2025-P2 and 2025-5, with a total of $646,300,000 in securities issued. As Chris mentioned, in January 2026, we completed a public rating process for Velocity Financial, Inc.—it is our first time getting a corporate rating. We were rated by both Fitch and Moody's, and we issued $500,000,000 in unsecured debt. That is a five-year term debt, fixed rate at 9.38% interest, due in 2031. The proceeds of the $500,000,000 debt were used to pay off $215,000,000 of corporate securitized debt that was set to mature in 2027, so we paid that off, and the balance of it was to pay down, as Chris mentioned, our shorter-term warehouse lines. And then in February, we issued the first 2026 debt, 2026-1, with $355,000,000 in securities issued. That concludes my 2025 financial recap. Chris, I would like to now give the presentation back to you for an overview of Velocity Financial, Inc.'s 2026 outlook and key business drivers. Christopher D. Farrar: Thanks, Mark. On Page 12, our markets are very healthy. We like the backdrop there. Credit is stable. We are not reaching to hit our targets or our volumes; we are remaining disciplined there. Capital markets are great. The securitization market in particular is very robust, and we have a deep bench of investors supporting us there. Then I think from an earnings perspective, we think NIMs should remain where they are, and we think we can continue growing the portfolios. We are very positive about the future in 2026. So with that, we will conclude our presentation and open it up for questions. Operator: Thank you. We will now begin the question and answer session. Today's first question comes from Steven Cole Delaney at Citizens Capital Markets. Please go ahead. Steven Cole Delaney: Good afternoon, everyone, and congratulations on an excellent year. We do appreciate Mark's comments on Page nine about the REO, and we may want to follow up with you on that. But, obviously, an outstanding performance. Chris, I am curious, looking ahead, one of the things, if you think about the broader financial markets—and let us talk about the rates market—God, I do not know how many times you turn on CNBC and they were talking the Fed and yada yada. We do not know what the Fed will do. But the futures market, as of a week ago when we updated our internal rate forecast, is showing somewhere between two and three 25 basis point cuts in 2026. Now who knows what we get? And more importantly, the ten-year is really being kind of cranky at 4.20%, and that is, what, 50, 60 basis points off the recent twelve-month lows. I guess what I am trying to say is you have performed the way you did in terms of origination volume, and your clients are obviously finding deals, and they can afford the current rates. Let us just say if we get some short-term rate relief, and if the ten-year were to come down 50 basis points or whatever, how impactful is that to the demand from your borrowing universe for additional loans? I am just curious what the mindset is. And I am curious if you have any material floating-rate loan concentration in your portfolio where, if we did get a break in the five- to ten-year range, is there the possibility of showing somebody some kind of a mini-perm type of a loan structure vis-à-vis just a SOFR-type floater? Thank you for commenting on that, if you would.
Operator: Thank you for standing by, and welcome to Wealthfront Corporation's fourth quarter and fiscal year 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press *11 on your telephone. To remove yourself from the queue, you may press *11 again. I would now like to hand the call over to Matthew Moon, Investor Relations. Please go ahead. Matthew Moon: Good afternoon, everyone, and thank you for joining us. Today to discuss Wealthfront Corporation's fourth quarter and full year fiscal 2026 financial results, reflecting the periods ending January 31, 2026. On the line are David Fortunato, our Chief Executive Officer and President, and Alan Imberman, our Chief Financial Officer and Treasurer. After prepared remarks, we will open the line for Q&A. During the course of today's call, we may make forward-looking statements as defined under applicable securities laws. Forward-looking statements are subject to risks and uncertainties, and the company can give no assurance that they will prove to be correct. To better understand the risks and uncertainties that could cause actual results to differ, we refer you to the documents that Wealthfront Corporation files with the Securities and Exchange Commission, including our most recent Form 10-Q. Our discussion today will include certain non-GAAP financial measures. These non-GAAP financial measures should be considered in addition to, not as a substitute for, or in isolation from GAAP measures. Reconciliations of non-GAAP financial measures to comparable GAAP measures can be found in our press release accompanying this call, which is posted to our Investor Relations website at ir.wealthfront.com. I will now turn the call over to David Fortunato. David Fortunato: Thank you, and good afternoon, everyone. Fiscal 2026 was another successful year in which Wealthfront Corporation continued to deliver on its long-term objective of becoming the leading tech-driven platform for digital natives to turn their savings into wealth. We believe we make the best practices of personal finance accessible at low fees through technology and intuitive and convenient through user-friendly design and automation. At scale, this drives high margins, allowing us to share savings with clients, creating and engendering trust, driving asset retention and low-cost word-of-mouth growth, which once again drives high margins. This flywheel enables us to offer feature enhancements such as our recent ongoing cash APY increases that I will describe in more detail later on, and more broadly, helps our clients save more on every paycheck, earn higher returns on their savings, and borrow at lower rates. We remain grounded in our belief that the best way to build deep, long-term client relationships is to continue to delight clients by offering them more value than anyone else and focusing on their long-term financial outcomes. This informs our product development strategy and keeps us focused on our roadmap regardless of short-term market conditions. At fiscal year-end, total platform assets grew 17% year over year to a record $94.1 billion, with investment advisory assets of $48.7 billion, up 29% year over year, and cash management assets of $45.4 billion, up 7% year over year. Funded clients ended the year at roughly 1,420,000, up 17% year over year, and funded accounts of roughly 1,840,000, up 16% year over year, reflecting 1.3 funded accounts per funded client. Total net deposits in the year ended January 31, 2026 were $6.7 billion, including $400 million in net outflows in the fourth quarter. Fourth quarter figures reflected a cash-to-invest transition environment that resulted in the second-best quarter of total investment advisory cross-product flows, including a second consecutive record quarter of net cross-account transfers from cash to invest. This helped drive annualized organic investment advisory growth to 11% in the quarter, the highest since the market enthusiasm post U.S. election in the quarter ended January 2025, with monthly annualized organic growth accelerating throughout the quarter, ending at 15% in January. Recall, annualized organic growth is calculated as total net deposits in a given period multiplied by an annualization factor based on actual day counts in that period, divided by prior period ending assets. As we will discuss further, cash management net flows began to normalize in mid-January, roughly four weeks after reducing the client rate on December 19 and prior to the five basis point increase to the client APY on January 30. Net outflows from cash management were $145 million in February, a significant improvement from the $840 million in net outflows in January. Since February 16, cumulative cash management net deposits have been positive. However, we expect withdrawals due to tax time seasonality to begin later this month and continue up until the April 15 federal tax deadline. On the product development side, we continue to accelerate our product velocity. For example, in the fourth quarter, we bolstered both our cash management and investment advisory offerings, enhanced interoperability between both, and began to offer early access to Wealthfront home lending. For cash management, we introduced automated dividend sweeps from investment advisory accounts to cash management accounts and increased daily withdrawal limits up to $1,000,000 for qualified clients. In December, we began a measured rollout of our proprietary Wealthfront Treasury Money Market Fund, or WLTX X. It offers an attractive after-tax yield alternative for clients and their cash, particularly for clients living in states with high income taxes, given the state tax exemption on U.S. Treasury interest income. As of February, prior to general availability, the money market fund had just over $85 million in AUM. For investment advisory, we expanded availability of fractional shares into automated investing accounts and automated bond portfolios, helping to reduce cash drag and tracking error relative to our target portfolios. We also introduced dividend reinvestment plans as well as a broader list of stocks and ETFs that can be traded in the stock investing account. We continue to see strong uptake, particularly among younger clients, in this investment account. In November, we launched early access to home lending starting in Colorado, and have since expanded to Texas and California, with a full rollout to these states as well as early access in additional states expected to come later this year. We believe we can use technology to deliver a better digital experience and a lower rate, and we are deliberately scaling at a measured pace in order to maximize learnings to optimize our long-term outcomes. We aim to provide our clients home mortgage rates at least 50 basis points better than the national average. While we are in early days, we are proud to have delivered on this objective on average in the states in which we operate today. Beyond new product initiatives, we have increased the base APY on all cash management accounts by five basis points to 3.3% on January 30. Over the course of the past several months, the effective federal funds rate gradually stabilized higher within its target range, allowing us to pass more savings along to our clients. We could have simply taken this benefit for ourselves, but consistent with our business model, we are constantly looking for ways to give back to our clients, deliver better financial outcomes, and build trust. Our focus for Wealthfront Cash is to offer the best cash account experience for young professional savers. In this vein, we launched an incentive in early March in which clients that direct deposit at least $1,000 per month who also have a funded investment account will receive an ongoing 25 basis point boost to their cash APY. We expect this incentive to deepen existing client relationships as well as drive cross-product adoption for those clients using one of the cash management or investment advisory accounts today. We also anticipate new clients to diversify into both of these account types more quickly. Closing with current trends, today we published February metrics. As discussed earlier, when looking at intramonth trends, cash management net outflows peaked in mid-January prior to our five basis point increase to the client base APY. Cash management net outflows significantly improved to only $145 million in February versus $840 million in January. Investment advisory net deposits were $416 million, implying an annualized organic growth rate of 11%. Total net deposits were therefore $271 million in February and, along with market appreciation, led us to another month-end record of total platform assets of $95.2 billion. In turbulent times like these, the time-tested performance of a low-cost diversified index portfolio with the added benefit of automated tax-loss harvesting becomes more apparent. Aggregate investment account returns, most notably our automated investment account, benefited in January and February from the relative outperformance of international equities, contributing to a 2.8% month-over-month growth in January, and 1.7% month-over-month growth in February. Crucially, this performance stands in stark contrast to the returns of speculative asset classes that often falter when market conditions tighten. While others chase fads, our automated investing account is engineered to mitigate volatility and maximize after-tax outcomes. We believe the value of this product is even greater when you consider the strong year-to-date tax losses we have harvested for our clients. February tax-loss harvesting dollars were the highest since the widespread market volatility realized immediately before, during, and after Liberation Day last year. With that, I will now turn the call over to Alan Imberman to go over the financials. Alan Imberman: Thanks, David. Starting with the income statement and a high-level overview for the year. Revenue for fiscal 2026 reached a record $365 million, up 18% year over year. Adjusted EBITDA for fiscal 2026 also hit a new record of $170.7 million, up 20% year over year, reflecting an adjusted EBITDA margin of 47%, up one percentage point year over year. Moving now to the fourth quarter, revenue came in at a quarterly record of $96.1 million, up 16% year over year. Cash management revenue was $69.7 million, up 12% year over year due to both higher average cash management balances measured as the average of beginning and end of quarter figures and a higher annualized fee rate. The average cash management balance in the fourth quarter was $46.2 billion, up 10% year over year, and the annualized cash management fee rate was 60 basis points, up one basis point year over year. When the Fed reduces the Fed funds target rate, we typically wait until the Friday of the following week to reduce the APY we offer our clients. This creates temporary fee compression because the interest rate we receive from banks reprices lower immediately while the interest rate we pay to clients remains constant for a one-week grace period. Additionally, in a declining rate environment, the fee rate is negatively impacted by the inherent mathematical impact of converting annual percentage rates (APR) to annual percentage yields (APY). The inverse of this is true in an increasing rate environment. As David noted, we launched a new incentive in early March in which clients who direct deposit at least $1,000 per month and also have a funded investment account will receive an ongoing cash yield increase of 25 basis points. As a result of both the direct deposit incentive and the five basis points passed along to clients at the end of January, we now expect our first quarter annualized cash management fee rate to be in the range of 57 to 58 basis points. Because April is tax season and our clients are net cash taxpayers, we anticipate significant seasonal cash management net outflows to begin in March and continue up until the April 15 federal tax filing deadline. For context, net cash management outflows in April 2025 were $537 million, and we would expect this figure to be larger this year given the increase in total cash management assets. It may seem counterintuitive, but we are delighted to see tax-related outflows because it reflects the highly attractive financial profile of our clients and also means our clients are comfortable using the cash account to meet near-term liquidity needs, indicating use of the account as a primary operating account that generally gets replenished over time and are typically stickier over the long run. Investment advisory revenue was $25.8 million, up 31% year over year, and surpassed $100 million in annualized revenue for the first time, due primarily to a 30% year over year increase in average investment advisory balances to $47.3 billion. Our annualized investment advisory fee rate was roughly flat at 22 basis points versus the same period last year. Asset growth was driven by both strong markets and net deposits over the trailing twelve months, with organic net deposit growth accelerating throughout the quarter, ending at 15% annualized growth in January. Net cross-account transfer from cash to invest in the quarter set a new record for the second consecutive quarter, reflecting the compelling combination of a broad suite of investment products, overarching platform incentives, and targeted lifecycle marketing campaigns currently in place. Gross profit came in at a quarterly record of $86.6 million, up 17% year over year, reflecting a gross profit margin of 90%. Total GAAP expenses of $310.7 million included $248.3 million in stock-based compensation expense, of which $239 million reflected dual-trigger equity award expense recognized in connection with our IPO. GAAP expenses also included $5.3 million in employer taxes related to these dual-trigger equity awards. Adjusted operating expenses, that is, expenses excluding share-based compensation and employer taxes due to IPO-related equity awards, were $57.1 million, up 15% year over year due primarily to higher product development and general and administrative expense, partially offset by lower marketing expense. Adjusted EBITDA of $44.2 million was up 22% year over year and reflected an adjusted EBITDA margin of 46%, up two percentage points year over year. As we continue to invest in incentives and scale home lending, we expect adjusted EBITDA margins to decline sequentially but remain above 40% for the first fiscal quarter 2027. We continue to demonstrate significant operational and financial discipline, delivering a Rule of 40 metric of 62 for the fourth quarter. This is our fourteenth consecutive quarter, or more than three years, exceeding the Rule of 40 and underscores a business model that has successfully and consistently balanced robust top-line growth with the structural efficiencies of our automated platform. GAAP diluted net income was negative $134.8 million and GAAP diluted earnings per share was negative $1.31, both of which include the one-time impact of dual-trigger equity awards in connection with our IPO of $239 million. We believe that our adjusted EBITDA is a strong proxy for cash flow. For the fourth quarter, net cash provided by operating activities was $33.3 million and free cash flow was $33 million. This results in a free cash flow conversion ratio, that is free cash flow as a percentage of adjusted EBITDA, of 75%. January, however, is a seasonally lower free cash flow period as we pay out the majority of our accrued annual cash bonuses to our employees in that period. For the fiscal year, net cash provided by operating activities was $152.2 million and free cash flow was $151.1 million. This resulted in an annual free cash flow conversion ratio of 88%. Note, both quarterly and annual free cash flow figures are not adjusted for IPO-related expenses; therefore, conversion ratios are lower than they otherwise would have been had the IPO not occurred. Driven primarily by this robust free cash flow generation over the course of the year and over $130 million in net cash proceeds raised in our IPO in December, we continued to strengthen our debt-free balance sheet, ending the period with cash and cash equivalents of $440.8 million. At quarter end, we had roughly 186.5 million diluted shares outstanding. In March, we received board authorization to implement $100 million in share repurchases. We believe repurchasing our stock is attractive at current levels given our robust free cash flow generation, our debt-free capital structure, as well as the multi-decade opportunity to compound wealth with new and existing clients. Over the long term, our excess capital priorities are: invest in organic growth, including infrastructure and automation while also comfortably exceeding minimum capital requirements; evaluate opportunities to repurchase shares; and assess M&A with a preference to build versus buy. Any remaining capital would be added to our surplus reserves in order to bolster resilience and durability. Regarding February metrics, total platform assets ended at another month-end record of $95.2 billion, consisting of $50.0 billion in investment advisory assets, and $45.2 billion in cash management assets. Total net deposits were $271 million, and recall, February only has 28 days in the month. Investment advisory net deposits were $416 million, reflecting organic growth of 11% annualized. We continue to successfully drive cash-to-invest flows, bringing asset-weighted cross-product adoption, that is, assets held by clients with both cash management and investment advisory accounts, to roughly 61.5% at February, up over one percentage point since December. Cash management net flows began to normalize in mid-January, four weeks after reducing the client rate on December 19, and prior to the five basis point increase to the client APY on January 30. Net outflows from cash management were $145 million in February, a significant improvement from the $840 million in net outflows in January. Since February 16, cumulative cash management net deposits have been positive. However, we expect withdrawals due to tax time seasonality to begin later this month and to continue up until the April 15 federal tax deadline. In closing, our business is designed to be aligned with the interest of our clients. Simply put, we succeed only when they do. We believe that as long as we continue to deliver products that truly delight our clients, they will engage more broadly with us, entrust us with more of their wealth, and recommend our platform to their friends, family, and coworkers. We are deeply committed to this long-term journey alongside them. With that, we will now open for questions. Operator: Thank you. To ask a question, you will need to press *11 on your telephone. To remove yourself from the queue, you may press *11 again. You will be limited to one question and one follow-up to allow everyone the opportunity to participate. Our first question comes from the line of Ken Worthington of JPMorgan. Your question please, Ken. Ken Worthington: Hi. Good afternoon, and thanks for taking my question. I want to dig further into the rollout of mortgages and see how that is going. So what kind of reception are you getting from your customers in Colorado, where that offering is more seasoned? And can you see, based on the transfer of assets to title companies, how your penetration of eligible customers is looking thus far? David Fortunato: Hey, Ken. How is it going? Yeah. So we are progressing, I think, well. The thing that we are optimizing for—we talked a little bit in the prepared remarks—is less about directly trying to capture all of the volume that we reasonably can in Colorado and really maximizing the learning that we have both with our infrastructure and with the client experience. So as we have launched first in Colorado with the early access period and then in Texas and California, we are really focused on making sure that the experience that we are delivering to clients is good. There are things that we have to improve and we are working on. We have already rolled out a bunch of improvements with more to come. On the rate basis, we feel very good about underpromising and overdelivering on the quality of rate we are giving folks. We are still seeing significant home volume across the country. I think the stat that I saw was more than $400 million of wires to escrow and title companies in our Q4 went off the platform, which obviously is a significant chunk of the outflows that we saw. We have a bunch of things that we need to improve on the digital experience. We are making quick progress, but it is a huge area of focus for us. As we continue to expand the early access period, the real constraint that we have is that the experience that we are offering to clients is one that we feel good about, and we feel the clients will feel good about for the long term. We are not trying to build a transactional mortgage experience. We are trying to build a long-term relationship with clients, of which mortgages is just one step. Ken Worthington: Perfect. And then maybe to follow up, same topic. How do you see the ramp and the rollout to other states and the further penetration in existing states? How does that look as you move through the rest of the year? Is this really kind of an experimental year where you would not expect things to really ramp; it is just sort of getting the infrastructure? Or do you expect things to really ramp as we move throughout the year and as you get more comfortable with the offering? David Fortunato: So we certainly expect to go general availability in Colorado first. That will happen sometime this year. I would expect that we go general availability in Texas and California at some point this year. And I would expect that we launch early access periods in additional states. Exactly what percentage of our client base will be covered by general availability, I am less sure of. Our ability to roll out automation features and balance scaling headcount versus scaling through technology is the kind of core dance that we are doing, where we are trying to really scale with technology and limit headcount growth where needed, except where we are very confident in the volumes that we are seeing, and that is a credible strategy to be able to build sustainable volume over time. Alan Imberman: Thank you. Operator: Our next question comes from the line of Ryan Tomasello of KBW. Your question, please, Ryan. Ryan Tomasello: Hi, everyone. Thanks for taking the questions. Regarding the cash management fee rate guide for 1Q, I believe you said 57 to 58 bps. Is that a reasonable baseline for the remainder of the year, or how should we think about the potential for additional compression there to the extent these incentives you are offering continue to see strong uptake? David Fortunato: Hey, Ryan. Thanks. Yeah. The one thing I would say is the competitive environment has certainly evolved a bit over the last six months. And what we have seen is after the five basis point change and the direct deposit incentive, I think we feel much better about where we are in the competitive environment, and we are seeing that with the transition in cash net flows. As for how we think about the fee rate going forward, I will let Alan take that. Alan Imberman: Yeah, Ryan. So I would say the 57 to 58 is just the first quarter guide. It will really depend on the uptake as to how the rest of the year goes. The thing we like about incentives such as the direct deposit incentive is that we will only have to pay the extra rate when people give us more money or take on this additional incentive by performing the action of direct deposit and funding an investment account. And so as more people adopt it, we do expect to see potentially further degradation in the fee rate, but that would also signal that we have more clients building deeper relationships across the platform with us. And so that is the balance we are looking for there. Ryan Tomasello: Okay. Appreciate that. And then on the account growth, is it possible to isolate the specific trends within the investment advisory side of the business? Obviously, the trends on net deposit organic growth have been quite positive, but I would assume that there are also underlying positive trends on just the actual account growth side within investment advisory. Any color you can provide there? David Fortunato: Yeah. I mean, the investment account growth, as cash-only clients add investment accounts, is a key focus for us in any transition environment. And it has been probably the most significant focus inside of the company over the past three or four months. We focus on the flows because that is what ultimately leads to asset growth and, therefore, revenue growth because of our monetization strategy. But the way that we achieve that flow growth is both growing with clients over the long term and getting more clients to adopt investment products. It is too early to know exactly what the impact will be from the direct deposit incentive that we are trying. I think we are looking forward to being able to talk more about that as we get additional data in, but we have been pleased with the early response. Obviously, direct deposit takes some time to come through. There is a little bit of a lag. So we have not had a direct deposit cycle since that incentive launched. But the past incentives that we have run around investment account adoption, along with the macro environment in January and February being more conducive to investment, have helped our focus on investment cross-product adoption and new client investment growth as well. Operator: Our next question comes from the line of Devin Ryan of Citizens Bank. Please go ahead, Devin. Devin Ryan: Thank you. Hi, David. Hi, Alan. How are you? David Fortunato: Doing well. Thank you. Devin Ryan: Good. Question, another one just kind of cash account. And just some of the outflows kind of late last year, early this year, do you have a sense of whether that money was going toward other online banks paying higher rates, or was it going to brokerages or maybe just, you know, bill pay without kind of gross flows? I would love to get a sense of that. And then do you have a sense of the remaining balances that are maybe more pure rate chasers? And how much of that is remaining? I appreciate that is probably difficult to quantify, but would love to just get some thoughts on that and some of the behavior that you did see kind of late last year into early this year. David Fortunato: Sure. I am happy to give a high-level answer, and then if Alan has anything he wants to add, he can chime in. So what we saw, I think, is broadly consistent with what we had discussed previously, and that is that as rate cuts occur, the larger number of rate cuts that occur in consecutive succession leads to more folks evaluating what they are doing with their cash. So we had three cuts in a row. It takes several weeks for cash net flow activity to normalize post Fed rate cut, which I think we had talked about before. We normally have a really good idea sort of four to six weeks after a rate cut has gone through. One of the interesting things that we saw in January was both: January is a seasonal high period for investing, which I think amplified some of our desire to drive additional cash-to-invest adoption, because January is a great period for folks to reevaluate their finances and think about opening investment accounts. And so we did lean into that in January, and I think some of what you see in the January numbers is that. The other thing I would point out is that the gross versus net distinction in cash flows, especially because of the liquidity features that we offer—free wires, free instant transfers, the ability to send money to escrow and title companies to buy a home—we do a lot of gross flows for cash management. We did a calculation where we look at the recapture rate of those gross flows by client in the quarter, and we are recapturing a majority of the gross withdrawals. That is consistent with what we have seen in prior periods, that we saw from clients in our Q4, and we think it shows the value of the cash management account really sustaining even as clients reach goals. Maybe they are purchasing a house or putting a down payment down. Maybe they are buying a car. They come back to the account, and we do recapture a significant chunk of those assets. I think the sort of high-level question that you asked about what are folks doing with their money is: there are folks that are doing some of all of the things that you described with their money. It is our job to be the best place for our clients to invest for the long term, the best place to save for the long term. We want to deliver the best mortgage experience that they can get anywhere as well. It will take us time to do some of those things, especially the mortgage, but that is really what the focus of the business is—leading with product and delivering the best product and the best value to our clients across their broad financial needs. Devin Ryan: Okay. Great detail. Thank you so much. I guess a follow-up here on the repurchase authorization, $100 million buyback. Can you talk a little bit about expectations, pacing, and intent there? I think it is a strong signal. Obviously, the company has a lot of liquidity here, so in theory, even potentially more behind that. So just love to get a sense of how much is signal versus intent to actually step in and buy shares here down from the IPO price? Alan Imberman: Yeah. Hey, Devin. It is Alan. What I would say is that we think the shares are extremely attractive at the current price. We are in a position, as you mentioned, to have a very strong balance sheet and free cash flow generation such that we can make this investment, and we will compare our ability and our willingness to repurchase against, obviously, other opportunities that we have to invest in. But we do think that we will be purchasers of our shares, especially at the current levels. Operator: Thank you. Our next question comes from the line of Daniel Perlin of RBC Capital Markets. Your question please, Dan. Daniel Perlin: Thanks. Good evening, everyone. I guess I just wanted to kind of circle back a little bit on the home lending side. And I guess the broader context is, I heard everything you said in your prepared remarks, but how do you think that rollout, product reception, and expectations as you think about the ensuing year are going relative to when you kind of addressed investors around the IPO? I mean, it sounds pretty consistent, but it also sounds like there are some nuanced differences maybe. So I just want to make sure I understand that. Thank you. David Fortunato: Sure. So I think we know a lot more about the areas that we need to improve to deliver the best digital experience that we can to clients. And we are putting in focused work on those areas and gradually expanding as we go. We understand a lot more about the operational challenges and where we need to invest to drive operational efficiency so that we can do so as efficiently as possible with as digital a back-end experience as we can. The result of those things is we want to build, like we have with cash and like we have with investments, a sustained low-cost advantage in being able to deliver the products so that we are able to share the savings with clients and get them the best financial outcome. So there is a lot more that we understand with the volume of loans that we have done so far. We will continue to learn and prioritize both the operational efficiency and digital experience wins as we move along, continuing to let people off the early access list and go general availability in Colorado first. I think our understanding and our learnings are generally consistent with what we have communicated in the past. We obviously have a lot more detail now from operating in the space, operating in more states, and doing more loans than we have in the past. Daniel Perlin: Yep. That is great. Just a quick follow-up. So it was really good to see the net deposits turned positive in February. And this pivot, as you guys had telegraphed from cash management to investment advisory, was kind of taking place. I think the question that I have is, you have this weird dynamic right now where the environment may or may not produce lower rates in the near term. It might be sustained for longer. I am just wondering how you guys think about positioning yourselves maybe more in the near term in an environment where that might be the case. It might be an unfair question because it is impossible to answer, but it does feel like there is a lot more volatility around expectations for rates. So just how you are posturing maybe as we go through the next, I guess, couple of quarters. Thank you so much. David Fortunato: Yep. So I think we feel good about our competitive positioning after the five basis point change and the 25 basis point direct deposit incentive. Obviously, we do not know what the market is going to do in the future. We do not know what rates are going to do in the future. We do think that we are well positioned from the investment side because of our focus on global diversification. That has put us in a good position over the last few months, and what we have really seen resonating with clients is in uncertain environments, investing with global diversification is a real selling point. We sort of do not think about positioning ourselves based on what is going to happen over the next few months, but we feel good about our position because of the investments we have made over the last few years in cash, investment, and home lending also, that if rates come down, we feel like we are in a good position to help clients continue to invest or invest more. We feel like we are in a good position to be able to help them buy homes that have become more affordable at lower interest rates while also helping them continue to save for the long term and get access to liquidity as needed using tax-advantaged tools like the Wealthfront money market fund. As we have continued to build out our offering, our goal is really to help clients across the broadest range of financial situations be able to put their savings and investments to work. And that has been the focus, and we feel good about the position because of the diversity. We cannot predict the future, but we can prepare for it, and that is what we have done. Operator: Thank you. Our next question comes from the line of James Jarrow of Goldman Sachs. Your question please, James. James Jarrow: Good afternoon, and thanks for taking the question. Could you just update us on the success of the match programs in the invest business so far? How much has this been driving the flows in that side of the business? And perhaps if you could just also comment on the ROIs there and how you structure that to ensure strong ROIs. David Fortunato: Hey, James. So I would say we are constantly experimenting with incentives. The most successful incentives that we have done for cash-to-invest adoption have actually not been the deposit matches. It has been other types of incentives that we have run to encourage cash-to-invest adoption. We are happy with the initial response to the direct deposit incentive having driven a fair amount of investment account opening. It is still early, and so we will have to see how that evolves over time. We will have to see how that evolves with new clients and if the cross-product adoption rate early in the client tenure improves as we expect it to. I think, generally, our incentives have been successful with the second-best quarter in our history at cross-product flows of cash to invest and a second record quarter of net cross-account transfers from cash to invest. But I do not think that we have overly focused on match as the driver of those. We have looked at a variety of incentives and are pursuing the ones that we feel deliver the best overall outcome to the company and to our clients. James Jarrow: Okay. Thank you so much. That is super helpful. I just wanted to ask a bigger-picture one. So let us say we get to a terminal Fed funds of roughly 3%, which obviously there is uncertainty as to whether we will get there. But how would you think about the right way to model the mix of your client assets across cash versus investment advisory? In other words, what percentage of client assets would you expect to be cash versus investment advisory? Alan Imberman: Hey, James. It is Alan here. Yeah. I think it is a difficult question in the sense that there is more going on than just the level of rates. Clients are accumulating more wealth, and as we have shown in our prospectus, as clients obtain a certain level of cash, they start putting incremental dollars to work and investing, and so you start to see the investment account, which grows faster as well, really continue to grow. And that is what we have seen over the past few quarters. And did not discuss this last time, but investment advisory assets have now overtaken cash assets pretty clearly. And so when we are modeling it, I think it depends on, as well as younger clients coming in who start with cash because they are early in the journey in savings. So I think you have to have more variables than just the level of rates. I think you have to have variables around clients that are coming in and then our existing clients and their behavior. And, again, we have control over that in some of the incentives that we offer. And so that is probably how I would think about it. James Jarrow: Okay. Thanks a lot. Alan Imberman: Thank you. Operator: Our next question comes from the line of Alexander Markgraff of KBW, KBCM. Your question, Alex. Alexander Markgraff: Thanks. Hey, David, Alan, Matt. Thanks for the question. A couple here. I guess just first, David, from a product standpoint, if I look at the releases in 2025, pretty busy. Just sort of curious how you think about calendar 2026 or fiscal 2027 using the sort of digestion year versus carry-forward of velocity framework? And then, Alan, just as a follow-on to that, maybe just some comments on spend priorities in the context of David's comments would be helpful. Thank you. David Fortunato: Hey, Alex. I guess our focus as a product development and technical organization is to be able to build automated products so that we can continue to focus most of our technical talent on delivering new products to clients and improving our existing products. We have a lot left to build. I would say that one of the things that we have seen over the past couple of years is that our roadmap only ever gets longer of things that we want to focus on and we want to get out to our clients. As we continue to build a deeper understanding of our clients' financial situations through both the qualitative and quantitative research that we do into their financial lives, we continue to have new ideas and be excited about those ideas. And so the focus that we have really is on prioritizing and focusing on the things that we think will make the biggest impact to our clients' financial outcomes and have the biggest impact on our business, but we really want to continue to accelerate product velocity, if anything, to continue to get products out to clients and improve the existing product experience so that Wealthfront Corporation is delivering the best value of any provider in the space. Alan Imberman: Yeah. What I would say to add to that in terms of the spend, as I mentioned in the prepared remarks, the investment in home lending as well as our incentives are really where we are putting a lot of resources. We continue to work on incentives and really strengthening the core as well while we invest in home lending. And so that has not changed. We continually look at our business model flywheel and kind of prioritize around that. And so we are continually trying to figure out ways to automate to generate savings, share those savings with clients to help their financial outcomes, build that trust, get them to refer us, and grow with word-of-mouth. And some of that is used through incentives. And so we will continue to use that as our framework for how we invest. Alexander Markgraff: Awesome. I appreciate that. And then, Alan, maybe just a quick follow-up, more sort of model mechanics question on the money market fund. Understanding there are a lot of factors that determine the ramp of that, but just as we see that sort of mix into the model, just a reminder on how that sort of affects the revenue lines would be helpful. Alan Imberman: Yeah. So it will be inside of cash management. We are in a fee waiver period right now. I think starting March 1, the fee is a quarter of a percent on the management fee. And then in terms of, as David mentioned, it offers a really good after-tax yield for folks in states with high income tax. And so we will have to see in terms of the growth once we roll it out to general availability. But that is where it will fit, and that is the monetization on the product. Alexander Markgraff: Awesome. Thank you both. Appreciate it. Operator: Please press *11 on your telephone to ask a question. And as there are no further questions in queue, I would now like to turn the conference back to David Fortunato for closing remarks. Sir? David Fortunato: Thank you. I want to thank everyone for joining the call and for your continued interest in Wealthfront Corporation. We look forward to staying in touch and updating you on our progress in the months ahead. Thanks all. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect. Matthew Moon: Everyone else has left the call.
Chris Merkel: Hi, everyone. Welcome to Exodus Movement, Inc.'s fourth quarter 2025 earnings call. I am your host, Chris Merkel, and with us today are Exodus Movement, Inc.'s Co-Founder and CEO, JP Richardson, and CFO, James Gernetzke. During today's call, we may make forward-looking statements. The company cautions investors that any forward-looking statement involves risks and uncertainties and is not a guarantee of future performance. Actual results may vary materially from those expressed or implied in the forward-looking statements due to a variety of factors. These factors are described in forward-looking statements in our earnings press release and our most recent Form 10-K filed with the Securities and Exchange Commission, available on the investor relations portion of our website. We do not undertake any obligation to update forward-looking statements. As always, feel free to visit our social media accounts on X or Reddit to submit questions for our investor relations team after our call. I will now turn the call over to JP to discuss Exodus Movement, Inc.'s fourth quarter and full year 2025. JP Richardson: Thank you everyone for joining. We want to try something a little different today. I have been told multiple times that my opening on earnings calls just does not sound like me, and I think that is a fair criticism, so we are going to keep this more conversational, a lot like how I speak publicly on interviews or even internally in company all-hands calls. So often, I love to tell stories, and today is going to be no different. A couple weeks ago, I took my kids skiing for the first time. My little boy, he is seven years old. And so we are on the bunny slope, where they teach the young kids, and he could barely stand up. He kept falling over and over again. And I am sure many of you with kids can relate to this. But he kept getting up over and over again. Ultimately, he asked about going up on a lift on the mountain to actually go down. His mom looked at him and she goes, son, you are not ready yet, and your dad does not think that you are ready yet. He said to her, he is like, I am going to show him. Meaning me, of course. So me admiring his determination I said, okay. Well, let us go. Go to the top of the mountain. Let us check it out. So we all went up, and he is going up and he went down, and, yeah, he fell a couple times, but he made it down without any issue. It was actually really impressive. Thinking about this moment with my kids and heading into this call today, it is kind of a lot like what 2025 felt like for this company. The market kind of knocked us around. Stock price and Bitcoin price just tested everyone's patience, and every single time the team just kept building. Even when we get knocked down, we just kept building. Focused. We are building the infrastructure that makes us less dependent on market conditions, these very market conditions in the first place. We will walk you through what we built and where we are headed. Let us do a brief look back into 2025. 2025 was the most consequential year in the history of Exodus Movement, Inc. This is because of what we built while the market has been pulling back. As you remember, early 2025, it seems like an eternity now, we rang the bell on the New York Stock Exchange. Ultimately, being on the New York Stock Exchange opened the door for more investors that could not touch us in the OTC markets. We announced Exodus Pay, one of the most important products in the company's history. In November, we closed the Grateful acquisition, and this gave us a live payment sandbox in Latin America, where every lesson in Grateful is making its way back into Exodus Pay. In the same month, we signed the W3C acquisition—I am going to come back to that in a moment. We expanded ExoSwap to more signed partnerships—I am going to talk about that even later. We expanded our tokenized equity to Solana through Superstate's Opening Bell platform. For full-year revenue, we grew 5% to $121.6 million. That growth came from improved monetization and B2B expansion, even as retail activity softened all the way toward the end of the year. Now for ten years, Exodus Movement, Inc. was built on speculation. When crypto is up, we thrive. When crypto pulls back, we feel it, much like what we are seeing in the markets today. As a public company, the stock reflects this reality directly. This model has served us well for a decade, but it is not enough anymore. Everything we did in 2025 was in service of one goal, and that is creating more revenue streams—revenue streams that do not depend on where crypto trades tomorrow. We are becoming a payments company—one that serves people whether Bitcoin is at $30,000 or $130,000. One that earns revenue from the daily financial lives of real people, not just trading activity. The product at the center of the shift is Exodus Pay. Most people use at least three financial apps—I am guessing many of you on this call are going to be very familiar with this. No doubt you have a banking app. You have a payments app like Venmo or Cash App. And you probably have a brokerage app like Robinhood or Fidelity. Exodus Pay makes it one. We are building the product that lets people send, spend, invest, and earn from a single interface. No seed phrases, no blockchain jargon, no L1, L2—which, later on, nobody cares about that stuff. No complexity. Self-custody should feel as easy as tap to pay. And at its core, Exodus Pay is built on stablecoins. Stablecoins are the dollars that move at Internet speed. You may have heard of them. We are making stablecoins usable for everyday payments—groceries, rideshare, restaurants, anywhere Visa or Mastercard is accepted. Again, from speculation-driven swap fees to revenue built on daily utility. What is going to power Exodus Pay is the product of W3C. So let us talk about the W3C acquisition. It remains the centerpiece of our vertical integration strategy. Let me remind everyone why this deal matters in the first place. The first reason this deal matters: we get to own the full payment stack from self-custodial wallet to the spend card at the terminal. No other wallet owns end-to-end payment rails. The second reason is revenue diversification. Our revenue today is heavily tied to swap volume. The third reason is the B2B2C infrastructure for partners. W3C already powers MetaMask, Ledger, OKX, and Kraken in their cards. Owning this infrastructure means Exodus Movement, Inc. can provide card programs and payment rails to other wallets and apps. This means more revenue from partners without acquiring those end users directly. We remain confident in the ability to close in 2026 and are working diligently toward closing. Switching to what seems these days like everybody's favorite topic, AI, because it is reshaping both how we build and what we build. Let us first talk about how we build. I actually write code every single day using Claude Code. Tasks that used to take me months now take me just hours. It is that wild how good these tools are these days. What is true for me here is true for our entire engineering organization. We are pushing hard toward a model where AI ultimately writes all of our code. We are not there yet, but the productivity gains we are seeing so far have already been quite significant. Now with what we build—how we think about the future here—is that we think AI agents represent an entirely new class of customer for Exodus Movement, Inc. These agents are going to need wallet infrastructure. They are going to need to send money, check balances, and make purchases. It is easy, when you think of payments apps like Exodus Pay, to think of the total addressable market as just 8 billion people of the entire world, right? But with AI agents, it will potentially be in the trillions because each one of these agents is going to need a wallet. Exodus Movement, Inc. aims to be the default wallet layer for this world. Let us hit on ExoSwap. ExoSwap continues to be a meaningful volume driver. In Q4, we signed—or in total, have—18 signed partnerships, 11 that are producing, $416 million in Q4 volume, 26% of our quarterly total. This strength shows that our infrastructure is trusted by other major platforms like Ledger and MetaMask. MetaMask just went live in December with Solana. Following the close of W3C, we are going to be able to offer card issuance as well to a lot of these partnerships that are using ExoSwap, especially a lot of the new ones. I want to leave you with this. Our revenue today does not yet reflect the magnitude of what we have built. We have invested significant resources—capital, talent, time—into infrastructure, acquisitions, and product development that have not yet hit the top line. I understand this. I understand the patience it requires from you, our shareholders. I want you to understand what is on the other side. We are shifting from a company built on speculation to a company built on payments—on daily utility, on infrastructure that earns revenue every time someone taps a card, invests into their future, saves for a rainy day, or buys their groceries. That is the company we are building. 2025 laid the foundation, and 2026 is where it starts to come to life. With that, I am going to hand it over to James to walk through our financial results. James, thank you. Let us start with Q4 and full-year revenue and swap volumes. James Gernetzke: Full-year revenue was $121.6 million. That is up 5% from 2024. Q4 revenue was $29.5 million, which represents a 3% decrease from Q3 and a 34% decline from the record Q4 we had a year ago. To put that year-over-year comparison in context, Q4 2024 was our highest revenue quarter in company history, in a quarter where we saw major industry catalysts like the U.S. election and Bitcoin topping $100,000 for the very first time. As a recent industry backdrop, digital asset prices were also in decline for most of Q4 2025 after briefly enjoying early October highs. Full-year swap volume was $6.89 billion, which is a 21% increase from 2024. This is a meaningful increase that demonstrates the underlying growth in the platform, even as digital asset prices declined. Q4 swap volume of $1.59 billion was down 9% sequentially and down 32% year over year, tracking the broader market pullback. ExoSwap, our B2B swaps platform, continued to be a significant volume driver for Exodus Movement, Inc. at $416 million of volume in Q4, or 26% of our total quarterly volume. Our growing B2B swap volume demonstrates that Exodus Movement, Inc. is increasingly a critical piece of infrastructure for the broader ecosystem. With regard to staking and other non-exchange revenue, full-year revenue from staking reached over $4 million for the year, nearly doubling 2024's total. Our improvements to Solana staking in particular drove this acceleration. This is recurring revenue that can be compounded for as long as the assets remain under stake. Fiat onboarding also saw a 28% increase in revenue versus 2024. Quarterly funded users—users who have actually put their money into Exodus Movement, Inc.—finished the year at 1.7 million. That is down 6% from last quarter and 11% from a year ago, reflecting the broader retail environment. Monthly active users at the end of Q4 were 1.5 million, down 35% from the previous year and unchanged sequentially. While monthly active users declined year over year in line with broader retail activity, our funded user base remained resilient, demonstrating the stickiness of our wallet. To pursue ownership of a full payment stack, during 2025, we funded $80 million of debt related to the W3C acquisition. While we initially used the Galaxy credit facility, we made the decision to pay off that debt prior to the end of the year. This resulted in the first reduction of our Bitcoin treasury in quite some time, and during 2026, we have continued to sell digital assets as we prepare for the next disbursement related to the W3C acquisition. As we have stated in the past, we believe that our treasury, including our Bitcoin treasury, is available to fund M&A and other growth initiatives, ultimately growing our Bitcoin treasury. On a related note, we continue to evaluate ways to demonstrate the power of tokenized equity. However, we are pausing our Bitcoin dividend plans as we are prioritizing M&A and other growth initiatives at this time. We remain committed to exploring opportunities afforded to us and our shareholders through tokenized equities as their use continues to grow. Finally, expanding on JP's earlier note regarding ExoSwap, MetaMask is a notable name that we signed towards the end of last year. Their wallet launched support in the final days of 2025 for Bitcoin. Initial results are slowly ramping up as MetaMask users gain familiarity with the new multichain functionality. Chris, with that, let us get back over to you for questions. Chris Merkel: Thank you, James. We will now open for questions. It is time for our analyst questions, and I see we have Andrew James Harte from BTIG. Go ahead, Andrew. Andrew James Harte: Hi. Can you hear me okay? Chris Merkel: Yes. Andrew James Harte: Great. Thanks for taking the question. JP, I thought your comments about agentic payments were really interesting. I think the idea was that agents are going to need the wallet infrastructure to operate out of. I guess, can you just expand on the steps needed to go from where we are today, both in terms of capabilities or potential partnerships or integrations, to make that a reality? That would be very helpful. Thank you. JP Richardson: Yeah. Great question. Ultimately, when you want to enable agents to be able to transact with wallets and send stablecoins, what you want to be able to do is have a world where the company or individuals that are using or leveraging these agents can maintain control over their wallets. I mean, I suppose what you could do, you could just set up an OpenClaude on your Mac mini, right, and have it go hog wild with Exodus Movement, Inc., then that would work today or should work today, right? But, again, what you want is to be able to say, okay, I have this mass amount of agents. Maybe I am a company in the travel industry, right? I am going to have an AI agent doing travel on behalf of consumers. Well, I need to be able to basically either give the consumer the ability to give access to, say, Exodus Movement, Inc. in that AI agent or, as a business, be able to give an AI agent access to a number of wallets that I have full control over and can control the keys as well. Effectively, what that means is that from the consumer perspective—again, I am just going to step into the shoes of an Exodus Pay customer—that means having Exodus Pay or Exodus connect directly to, like, a ChatGPT or a Claude. Actually, that is something that behind the scenes we have had working for a while, but we just want to make sure the user experience works really well. When it comes to the business side—again, that travel agent example—what that ultimately means is that we would have to produce back-end software for these agents to be able to, again, view all these separate wallets. There are a number of angles that we are looking at here. The one that we are most interested in in the short term is empowering consumers that have, again, just Exodus Movement, Inc. on their phone and are able to connect to, again, like, ChatGPT or even, in some cases, maybe even an OpenClaude as these agents become more commercialized and say, go ahead. Spend up to $500. I want you to go look for a flight, the best flight to, I do not know, Florida, right? Whatever it is. That is going to be critical, and to make all that work well and to make sure that the limits and restrictions are in, because, again, you do not—like, the worst-case scenario is if you say, okay, AI agent, you have full access to my wallet, be good with it, and then you find out it went and speculated and bought a bunch of Dogecoin from your entire wallet. You would be pretty upset about that. So there are a lot of security controls that have to come in place as well. Chris Merkel: Alright. Ed Engel from Compass Point is next up. Go ahead, Ed. Ed Engel: Hi. Thanks for taking my question. I just wanted to ask some questions about the cost structure here. Do you mind going through the costs or some of the one-time expenses we might have had in the fourth quarter related to M&A or anything else to call out? And then would it be fair to assume that might continue into the first quarter or maybe into the second quarter until the transaction closes? James Gernetzke: Yes. Obviously, we had the legal costs. There is the interest associated with the Galaxy loan. The interest, obviously, since we paid it off, is not going to continue. There are some legal costs as we go through the regulatory process. There are certainly going to be some legal costs, but my assumption would be that it would be slightly less as we go through that process. But there still will be some for sure. Ed Engel: Let us see. And sorry. And then you said some other one-time costs— James Gernetzke: Yes. And then we have our standard, similar one-time costs that we have seen for non-M&A items from previous quarters. So yes, to answer the question, the M&A continues. We are still out there looking for other businesses and other opportunities. Obviously, we do not have anything to report at this time, and we are very focused on getting W3C closed and integrated. But that does not mean that we are not still working on a pipeline. I would say that in general, I would expect over the next quarter or so that the costs should be slightly lower than previous quarters, but not zero. Chris Merkel: Alright. We have Gareth Gaceta up next. Hi, Gareth. Gareth Gaceta: Hi, guys. Can you hear me alright? Chris Merkel: Yes. Gareth Gaceta: Awesome. I was wondering if you could provide some detail on the drivers to the improved monetization in the ExoSwap in the quarter. Do you guys think that there might be future opportunities for similar expansion, or was it maybe more of a one-time event? James Gernetzke: Yeah. Let me start. I would say that in terms of ExoSwap, we have grown the book of business in terms of the number of partners that we are working with. As we grow that book, you will see different areas, different cost structures, etc., that come with it. Over time, as that product matures, we will start to get to a steady state. We do expect changes in the short term as the book continues to grow. We are pleased with the amount of new deals that have been signed and the work that is going on in that area. Now there are some—because this is a B2B2C, we are relying on the partners, and there is one partner that looks like it is probably going to stop operations over time. You will have those pluses and minuses, but I would say that we are definitely pleased with the direction and the amount of new contracts that have been signed and new partners that have come on. JP Richardson: Alright. Thank you, James. Chris Merkel: We have Michael John Grondahl from Northland. Go ahead, Mike. Michael John Grondahl: Thank you. So sort of two questions, guys. One, I think you mentioned 18 signed ExoSwap partners and 11 operating. When do you think the next, I do not know, the next wave, the next seven, are going to ramp up, and any significant partners in that next wave? And then secondly, I would like to understand better kind of the go-to-market with Exodus Pay. Is that only going to be within sort of ExoSwap and the trading customers, or help us understand how we are going to see that Exodus Pay offering in the real world. James Gernetzke: Let me start with the 11 and the 18. I think that we are seeing steady growth, and it is steady growth right now. In terms of significant names, we are pleased with the mix and the size of different clients that we are getting. Unfortunately, it is a B2B product. We need the client's consent to share the names, and I do not have any larger names that have shared consent to offer you, unfortunately, right now. But I could definitely say—again, just to reiterate—we are pleased at the growth that we have seen in that, and we are looking forward to that continuing for the rest of the year. So JP, on Exodus Pay— JP Richardson: Yeah. Let me hit a little bit more about the partners with ExoSwap here. Even though we cannot announce the names yet, the reality is that yes, we have signed other big partners, and we will be able to announce that in the future, which is going to be great. In addition to that, I think James had mentioned something that is really important: with the ExoSwap partnerships, we have to rely upon the partner's timeline. Often what you see is that the partner in some scenarios might just enable, say, one asset, so you can swap from one pair to the other, and it does not have support for other assets and other blockchains. As we march forward and they get one going—like, oh, wow, this thing is working really well—now let us enable it for these other blockchains and make it work really well there and keep that train going. We are going to see more and more of that, and we already have seen that, with timeframes that we will be able to announce in the future. I anticipate that will be the pattern moving forward: we will sign the partners, then there is the time to integrate, they go live on one blockchain, and then they expand out on additional blockchains. As we mentioned, we have some very big names in the industry that we have been working with for quite some time, and that becomes quite a strong testimonial as we start working with other partnerships. I think that is really important to call out. Now related to the question of—so you referred to it as ExoPay. I am assuming you were talking about Exodus Pay. So ExoPay—now, this is getting confusing—ExoPay is our fiat on-ramp, off-ramp. We have recently renamed that to ExoRamp to separate the confusion. To be very clear here: think of ExoSwap as allowing people to swap from crypto to crypto. ExoRamp allows people to onboard into crypto via a bank account or a debit card, or off-ramp in time. So it is basically fiat on-ramp/off-ramp. Exodus Pay, again, is our initiative to, as earlier in this conversation I had mentioned, bring the world of all these disparate financial apps into one single app, right? The biggest is banking, a payments app like Venmo or Cash App, and then a brokerage app—Robinhood or Fidelity, E*TRADE, whatever you use—all into one application with no crypto complexity whatsoever. Now, when you ask about go-to-market, we had a very early test group that we experimented with, and we had conversations with people at events at ETHDenver. Initial feedback was really good. We are marching forward. In fact, you are going to see something this week that is going to come out about another event that Exodus Pay is going to be a part of. Again, it is about mainstream payments, allowing people to easily use assets like stablecoins anywhere in the world that Visa or Mastercard is accepted, right? That is really important. The big aspect of go-to-market and how we think about Exodus Pay is that we want to align to big cultural moments. I am going to say that again. We want to align with big cultural moments. I wish some of you were not thinking, like, oh, does that mean he is going to go out and pull the trigger on a Super Bowl ad or something like that? We do not have any plans for that, but you never know. No, but we have no plans for that whatsoever. But who knows? When it comes to big cultural moments, there are things that you will see this year that will answer that question. It is about being a part of mainstream conversations, mainstream payment experiences. There is a lot more that we will be able to unpack in future conversations. It is going to be great. Chris Merkel: Alright. Kevin Dede from HC Wainwright. Hi, Kevin. How are you? JP Richardson: Kevin, we cannot hear you if you are speaking. Chris Merkel: Okay. Nope. Still cannot hear. Still cannot hear. Still cannot hear, Kevin. Kevin Darryl Dede: Can you hear me at all now? Chris Merkel: Okay. JP Richardson: Hi, Kevin. Sorry about that. It is tough being a tech analyst and keeping your tech working. Kevin Darryl Dede: So, JP, sort of a two-parter. I am going to think I am going to ask Mike's question in a different way. The progress you are making with ExoSwap clearly indicates that you are embedding yourselves with complementary businesses, right? It is proving the B2B model that you have developed at Exodus Movement, Inc. But with Exodus Pay, it seems to me that—I mean, I hear what you say about leveraging big cultural moments. I get that. But you are taking on a sizable amount of risk in spending versus trying to build a consumer-facing app. I am wondering how you are going to approach that risk, how you plan to allocate capital to it, and how you expect it to roll out. And then I would also like to hear about the roadblocks you have to seeing W3C complete, and the timeframe to that. You did not offer much detail there. JP Richardson: Kevin, can you just unpack the risk bit a bit more? I just want to make sure I really capture your question clearly. Kevin Darryl Dede: Well, in my mind, there is a little bit of controversy over Exodus Movement, Inc.'s development in the B2B world versus a consumer-facing app. And Exodus Pay, I think, is the culmination of your consumer-facing initiatives, and that is clear through today's call. What is not clear is the resources you will dedicate to building a consumer-facing business—arguably the most difficult thing to do in business. So I am just wondering how you are assessing the risk and allocating capital, and developing that capability. JP Richardson: Got it. Okay. You are probably going to hate this answer, but I am going to say it anyway. Exodus Pay is the evolution of what Exodus Movement, Inc. is today. We were born—and the way that we thought about Exodus Movement, Inc. from the early days—was all about empowering consumers to control their wealth. That was the piece of it. From 2015, there was actually—I had a conversation with our cofounder, Daniel, just recently, and he was like, JP, do you remember in the early days when we put our phone number inside the software? I am like, yeah, I do. Is that not crazy? People would call. I am eating dinner with my family, and my kid has got spaghetti pouring out of his mouth, and then the phone is ringing nonstop. I am trying—I am like, oh my gosh. I am eating? I share these stories because Exodus Movement, Inc. was always a company focused on consumer needs. Always. At that moment in time, the technology was not quite where we needed it to be. Regulations were not quite where we needed them to be. Mastercard and Visa were not quite where we needed them to be. The technology has now caught up where you do not have to think about the complexities of secret phrases and which layer you are on. You do not have to care about any of those things. The regulations have now started to catch up, especially with the Genius Act, in embracing stablecoins, right? That is really key and critical. Visa and Mastercard see what is happening, and that is why with W3C—which will be a good segue to talk about W3C in just a moment, per your other question—they see what is happening. That is why there is starting to be the rise of these crypto cards that allow you to connect the card directly to your wallet, your self-custodial wallet, so you have full control and you can go and you can tap to pay anywhere. Again, Exodus Movement, Inc. was always a company built on the consumer experience. I think it is really important to highlight and call out. Now related to W3C, as mentioned in the opening statements, we are very committed to getting this done. Anybody that has been through acquisitions knows there are all sorts of complexities that come with it. With this acquisition, there are a number of subsidiaries that blend into what we are buying as a company, and each one of these subsidiaries has different levels of complexity that we have to ultimately address. James, I am sure you can—you have been a big part of this as well along with me—you can probably add some additional color to this. James Gernetzke: Yeah. I think on the W3C front, we are in front of the regulators right now, and we are progressing toward it on the timeline that we brought up when we signed the deal. In terms of capital allocation, to put a finer point on JP's comments, because Exodus Pay is the evolution of Exodus Movement, Inc., that capital allocation, you should expect it to follow a similar path and the things that we said about our consumer business going forward in different fronts. Obviously, we have allocated a lot of capital to W3C and the B2B side. We still maintain that Amazon AWS playbook, even with the W3C acquisition. JP Richardson: It might be important to mention too that per capital allocation, one aspect that is going to be important here is that because Exodus Movement, Inc., even though we were focused as a consumer app early on, it was more about those in crypto. You are going to allocate capital and think, oh, we are going to target crypto people. Uh-oh, there is a bear market. Better pull back and not think about how to reach the mainstream. That was historically the thought process. But now shifting closer to the mainstream, bear or bull market, it does not matter, right? Because Joe Plumber does not think about the price of Bitcoin. Joe Plumber does not actually even care about the price of Bitcoin. Actually, Joe Plumber may not be our ideal target use case; it is going to be maybe a younger demographic. Let us say some 19-year-old watching college basketball on a Saturday or whatever it is, right? They may not really care about the price of Bitcoin, but they definitely care about how they spend money and how they think about the future. We still have to be thoughtful but yet bold when it comes to capital allocation when reaching that demographic. Chris Merkel: Thank you. There are no more questions. Thanks, JP, James, and all of our analysts for submitting your questions. Please visit our social channels on X and Reddit to submit your questions for management. Our investor relations team is standing by. Thanks for joining us today, and we will see you next quarter.
Operator: Greetings, and welcome to the CuriosityStream Inc. Fourth Quarter and Year End 2025 Results Conference Call. At this time, 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 call, it is now my pleasure to introduce your host, Tia Cudahy, Chief Operating Officer. Thank you. You may begin. Tia Cudahy: Thank you, and welcome to CuriosityStream Inc.'s discussion of its fourth quarter and full year 2025 financial results. Leading the discussion today are Clint Stinchcomb, CuriosityStream Inc.'s Chief Executive Officer, and Phillip Brady Hayden, CuriosityStream Inc.'s Chief Financial Officer. Following management's prepared remarks, we will be happy to take your questions. But first, I will review the safe harbor statement. During this call, we may make statements related to our business that are forward-looking statements under the federal securities laws. These statements are not guarantees of future performance, but rather are subject to a variety of risks, uncertainties, and assumptions. Our actual results could differ materially from expectations reflected in any forward-looking statements. Please be aware that any forward-looking statements reflect management's current views only, and the company undertakes no obligation to revise or update these statements, nor to make additional forward-looking statements in the future. For a discussion of the material risks and other important factors that could affect our actual results, please refer to our SEC filings available on the SEC website and on our Investor Relations website, as well as the risks and factors discussed in today's press release. Additional information will also be set forth in our annual report on Form 10-Ks for the fiscal year ended December 31, 2025, when filed. In addition, reference will be made to non-GAAP financial measures. A reconciliation of these non-GAAP measures to comparable GAAP measures can be found on our website at investors.curiositystream.com. Unless otherwise stated, all comparisons will be against our results for the comparable 2024 period. I will now turn the call over to Clint. Clint Stinchcomb: Thank you, Tia, and good evening, everyone. CuriosityStream Inc. was built on one timeless idea. Curiosity changes the world. That every breakthrough begins with a question. A thousand years ago, Leif Erikson sailed west into the unknown and discovered a new world. Nearly a millennium later, Neil Armstrong stepped onto the lunar surface carrying the same enduring message across time. Discovery belongs to the bold, and curiosity is our compass. From ocean waves to moondust, that spirit propels us forward today. In that same spirit of bold exploration, we delivered strong full year 2025 results. Revenue grew 40% to $71,700,000 from $51,100,000 in 2024. Adjusted free cash flow increased 46% to $13,900,000 from 2024. Q4 revenue rose 36% year over year to $19,200,000 from $14,100,000, and adjusted free cash flow climbed 33% to $4,300,000. These gains reflect the strength of our complementary revenue pillars: licensing, driven by high volume and heavily structured video fulfillments for AI model training; subscription sturdiness through operational execution and new partnerships; amplified by cost discipline that expanded gross margins to 60% in Q4 from 52% a year ago, and reduced nondiscretionary G&A expenses by 33% year over year. In 2026, we believe our annual licensing revenue will exceed our overall subscription revenue. We believe we will grow our subscription revenue by low to mid single-digit percentages because of three key drivers: new pricing, which we began rolling out March 1; new wholesale and retail partnerships; inorganic growth from existing partnerships. The recurring, reliable, and predictable revenue from subscription services cements our foundation. Why do we believe we will see licensing revenue eclipse subscription revenue in 2026? Why do we believe licensing will be robust and durable for the foreseeable future? What is the impact to top line, bottom line, and margin expansion? Well, we have covered some of this before. Many investors, analysts, and commercial partners tell us it bears repeating. CuriosityStream Inc.'s licensing business is durable because it is built on assets that are durable, that are scarce, rights-aware, difficult to replicate, and increasingly valuable across multiple end markets. We are not talking about a single opportunistic window. We are talking about a monetization model anchored in premium, unscripted, and scripted media, enriched structured metadata, flexible rights, and growing demand from AI developers and traditional media companies. CuriosityStream Inc. has built a large differentiated content library of rights to nearly 3,000,000 hours of premium factual content plus sports, plus news, plus general entertainment, animation, and film, finished and raw, supported by more than 200 content and data partners and flexible licensing rights. This is not commodity inventory. It is scaled, unscrapable, curated, a corpus that took years of capital, relationships, editorial focus, and dense work to assemble. Enduring revenue streams are almost always rooted in assets that are hard to replace and expensive to rebuild. Demand is broadening, not narrowing. Beyond repeat business from existing customers, we expect our overall roster of partners to more than double in 2026, and potentially increase five to six times in 2027 as the fine-tuning of open-source and certain proprietary models opens opportunities for hundreds of companies. Historically, licensing meant selling finished programs or package rights to broadcasters, streamers, and pay TV partners. That business remains alive and healthy. And in 2025, we announced new license agreements with linear broadcasters, educational platforms, digital-first outlets, global streaming services, and, of course, next-generation AI training developers. This diversification makes licensing more durable and cycle-resilient. Traditional media licensing is healthy and not going away, but AI licensing is accelerating much faster and driving the bulk of our growth here. Over the next five years, AI model development, model refresh cycles, geographic expansion, enterprise fine-tuning, education applications, systems, and multimodal search should all support continued appetite for premium licensed corpus. For AI licensed partners, as their model sophistication grows, so does the need for more video inputs. Developers require large volumes of high integrity, rights-aware training inputs. Premium broadcast video, clean audio, scripts, captions, study guides, metadata, and derivative assets have utility well beyond entertainment viewing. They help train, tune, evaluate, ground, and improve multimodal systems. The more advanced models become, the more they need high-quality, structured, legally licensable data rather than undifferentiated scraped material. So key to note that rights-cleared, structured media will become more valuable over time, not less. There is plenty of media on the open web, but much of it is noisy, duplicative, poorly labeled, low quality, or legally ambiguous. By contrast, CuriosityStream Inc.'s corpus is assembled, curated, and increasingly productized for commercial use cases. The premium quality of our video also helps us stand out, as we have video captured with top-tier equipment like RED cameras, HDR formats, and Blackmagic workflows, delivering cinematic excellence with real-world visual depth. This means sharp, high-resolution footage that captures subtle details from the textures of ancient ruins in history to the fluid motions in wildlife sequences. For AI training, this translates to superior data for tasks like object recognition, scene understanding, and generative video. Said plainly, we generate competitive escape velocity through our expanded data structuring and metadata capabilities that are designed to meet partner volume requirements and bespoke specifications. We are not merely selling files. We are not merely selling clips. We are selling usable datasets. That distinction is critical. In AI, a rights-cleared file has value. A rights-cleared file with strong metadata, taxonomy, provenance, segmentation, and packaging has much more value. That creates pricing power and maintenance. Further, our licensing model benefits from operating leverage and the fact that the standard industry licensing practice in the AI space is one of nonexclusivity. I cannot emphasize enough the value of this dynamic. As our critical-mass corpus is now assembled and the infrastructure is largely in place, each new partnership carries attractive incremental economics, as our hard costs to create or license in content are largely de minimis. We will continue to increase our volume through rev-share constructs that minimize cost and risk. We can now monetize the same video multiple times in multiple forms across multiple geographies and buyer classes. Of course, durability does not mean inevitability. We have to execute. We have to move the ball forward every day. We need to continue acquiring and negotiating sufficient scopes of rights, enriching metadata, segmenting our corpus intelligently, protecting quality, and packaging assets in ways that map directly to buyer workflows. We need to stay disciplined on pricing and avoid treating the library like an undifferentiated commodity supply. We also need to manage legal and policy developments thoughtfully. But all of these are execution challenges. These are not reasons to doubt the model. In fact, a market that increasingly values provenance, trust, and rights discipline should favor CuriosityStream Inc., not hurt it. Our view is informed. Our view is straightforward. CuriosityStream Inc.'s licensing of video, audio, images, scripts, and related data products is durable because it rests on scarce assets, diversified demand, strong reuse economics, and a market shift toward high-quality licensable content. It can continue to grow significantly because we are still early in the monetization curve. It will be lumpy over three- and six-month tranches. But as Warren Buffett often said, we would rather have a lumpy 15% than a smooth 12%. Traditional licensing is meaningful. AI licensing is scaling rapidly. And the strategic value of curated, rights-aware, metadata-rich premium media compounds over time. This is why we believe licensing will remain a critical and durable growth engine for the long-term, foreseeable future. In summary, we believe that we will continue double-digit growth in both revenue and cash flow driven by subscriptions and licensing expansion. We intend to pay 2026 dividends from cash generated by operations as we did in 2024. Our balance sheet remains strong with over $27,000,000 in liquidity and no debt, which we believe gives us financial flexibility. I will now hand the call over to our CFO, Phillip Brady Hayden, who I am sure will emphasize that, among other attributes, at today's share price, we are a growth company that also offers a dividend yield of 10%. Thank you, Clint, and good evening, everyone. Our full financial results are presented in the back of the press release that we just issued a few minutes ago as well as the 10-Ks that we will file in the next few days. But let me quickly go through some of the results that we want to highlight for the fourth quarter as well as full year 2025. In the fourth quarter, we reported revenue of $19,200,000 at the high end of our guidance and a 36% increase compared to $14,100,000 a year ago. For the full year, revenue was $71,700,000, a 40% increase from last year. Likewise, we reported another quarter of positive adjusted EBITDA, which came in at $1,100,000. This was an improvement of $3,100,000 from a year ago, and also our fourth sequential quarter of positive adjusted EBITDA. For the full year, adjusted EBITDA was $8,200,000, a $14,300,000 improvement from 2024. Adjusted free cash flow exceeded our guidance in the fourth quarter at $4,300,000, which is also our eighth consecutive quarter of positive operating cash. For the full year, adjusted free cash flow was $13,900,000, a 46% increase from $9,500,000 in 2024. Licensing revenue was $9,800,000 in the fourth quarter, an increase of $6,100,000 from last year, while subscription revenue came in at $9,100,000. For the full year, subscriptions were $37,000,000, while licensing came in at $33,200,000. This was an increase of over $25,000,000 from 2024 and driven by continued growth in AI training fulfillments. Fourth quarter and full year gross margins were 60% and 57%, respectively, each of these improving from last year. Within cost of revenue, storage and delivery costs increased during the year in light of the high volume of video we put into AI licensing agreements. For the full year, combined costs for advertising and marketing plus G&A were higher by 24% compared to last year, although this increase was the result of noncash charges for stock-based compensation of $14,400,000, or about $0.24 on a per-share basis. G&A also included an adjustment to payroll costs for incentive compensation, as well as a number of one-time expenses associated with our August secondary stock offering. Were it not for the noncash SBC, the incentive comp adjustment, and the common stock sale, G&A would have declined by over $1,000,000 in 2025. For the full year, net loss was $6,400,000 compared to a net loss of $12,900,000 in 2024, representing an improvement of over 50% in net loss. While our revenue was up materially from last year, the 2025 net loss was driven by the one-time charges, incentive comp adjustment, and noncash SBC. Were it not for these specific charges, we would have posted positive earnings for the year. And as we said earlier, adjusted EBITDA was $1,100,000 in the fourth quarter compared to a loss of $1,900,000 a year ago. And for the full year, adjusted EBITDA was $8,200,000 compared to an adjusted EBITDA loss of $6,000,000 in 2024. For the full year, adjusted free cash flow was $13,900,000, a 46% increase from $9,500,000 in 2024. This totals well over $20,000,000 in operating cash that we have generated over the last two years. On October 14, 6,700,000 of our warrants expired unexercised. While these warrants have been trading well out of the money for some time, this expiration of all of the company's outstanding warrants reduces potential dilution and should eliminate any lingering share overhang associated with these instruments. In December, we paid $4,700,000 for our fourth quarter dividend. Including our $0.10 special dividend paid in June, this brings our total dividends paid to $22,000,000 for all of 2025. We ended the year with total cash and securities of $27,300,000 and no outstanding debt, and we believe our balance sheet remains in great shape. Based on yesterday's share price, CuriosityStream Inc. is generating an adjusted free cash flow yield of over 8% and a current dividend yield of over 10%. Given where our shares have recently been trading, we just announced that our Board has increased our share repurchase authorization to $6,000,000, and we plan to selectively resume our repurchase activity in the coming weeks and months. Moving to guidance. For 2026, we expect revenue in the range of $38,000,000 to $42,000,000 and adjusted free cash flow in the range of $6,000,000 to $9,000,000. For the full year, we continue to believe we will achieve double-digit growth in both revenue and cash flow in 2026, and that a full year of positive GAAP earnings is achievable. With that, we can hand it back to the operator and open the call to questions. Operator: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press 1 on your telephone keypad. 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, it may be necessary to pick up the handset before pressing the star keys. One moment while we poll for questions. This is Brent. We are ready to take questions. Go ahead. We are experiencing some technical difficulties. Thank you for continuing to hold. We will be with you as soon as we can. Again, appreciate you continuing to hold. Thank you again for your patience. This is the CuriosityStream Inc. year end 2025 earnings call. We are still having technical difficulties. If you are in the question queue right now, would you please email your questions in reply to the email that you are about to receive, and we will take questions over email shortly. Thank you so much, and thank you for continuing to hold. Thank you for holding. This is the CuriosityStream Inc. 2025 year end earnings report. Our first question today comes from Dan Medina from Needham. Dan Medina: Could you please update us on whether LLM licensors are renewing their deals with you and how the nature of second contracts is different from the earliest LLM contracts you licensed? Clint Stinchcomb: Thank you, Dan, for that question. Really appreciate it. The answer is yes. Virtually everyone has renewed or will renew. And the beauty of the second agreement is it is always easier because you have the paper in place. Same thing with the third agreement. Same thing with the fourth fulfillment. So without a doubt, we are seeing repeat business. At the same time, we are seeing a lot of new potential partners express interest and express either very high volume and specific requirements that we are working aggressively to fulfill right now. Thank you, Dan. Dan Medina: Any change in the pace of adding other companies' libraries to your ability to license hours to the LLMs? Clint Stinchcomb: We are like the Golden Gate Bridge there, Dan. We are constantly in acquisition mode. We have built and amassed, I think, an extraordinary library. We have been told just this week by the most valuable by market cap companies in the world that we have the best video corpus for AI training. So we have video in place. We have paper in place with the world's biggest companies. We have enhanced our human talent. We have done the necessary things to ensure the sturdiness of our subscription services, and feel really, really good about the year, Dan. Dan Medina: Can you give us some cases of how LLMs are using the information you licensed to them in the market to make money, tools, and apps? Clint Stinchcomb: I think it is a great question, and I think that if you look at the evolution of what our technology partners are looking for and are working toward, if you start with 2020 with large language models, there was a lot of text that started there. And that was designed to help teach the models to read, to help create document summarizers, knowledge Q&A, support bots, act as coding copilots. We transitioned up the scale to kind of multimodal AI, which is text, which is images, which is audio, which is video, and that led to video summarization, camera assistance, text-to-image, text-to-video, and agentic AI. Obviously, that is part of the spectrum now, and that is where systems plan, use tools, and act autonomously. And the use cases there are research agents, travel booking assistants, code agents, data ops agents, CRM bots. There is almost an infinite number of use cases. And then I think certainly an exciting stage that we are in the early stages of right now is physical AI where the content is being used to embed AI into robots, into cars, into drones, into devices. And similarly, I think, an infinite number of use cases here with warehouse robots, self-driving cars, home robots, delivery drones, factory arms, all kinds of things. So extraordinarily exciting, difficult to stay up with all of the use cases, but the good news is we have such a variety, such a strong scope of video and data, that we are able to fulfill a large scope and scale of requirements. Jason Kreyer: Clint, you called out 2026 as the greatest year in company history. Can you unpack that from a metrics standpoint, perhaps with some more clarity on your goals for the base streaming business and then the licensing opportunity? Clint Stinchcomb: Thank you for that question, Jason. So we made a lot of progress in 2025. We talked about the increases in cash flow and top line revenue, in the size of our library, and the quality of our library. And so as it relates to our subscription business, and that includes wholesale and retail subscriptions, we are confident that we are going to grow that at low to mid single digits, and we are really confident in that because we have new partnerships coming on every month with channel stores around the world for CuriosityStream Inc. for CuriosityStream Inc. You, and even for CuriosityStream Inc. Catholic Stream. We have new wholesale relationships that are rolling out over the next several months, and even now. And we took a price increase March 1. That is going to take a while to roll through our financials. But with those three things and with the marketing money that we are spending, we are very confident that we will grow our subscription business in the low to mid single digits. And so, based on what Phillip shared, that is off a base of $3,637,000,000 a year. On the subscription side, we are confident that, or I am sorry, on the licensing side, we are confident that we are going to eclipse our subscription revenue because of the work that we have done to date. We are experiencing and anticipating a lot of repeat business from existing partners and customers. And at the same time, I think that our new Chief Commercial Officer, John Belaid, has brought an extraordinary amount of velocity to our efforts right now. And so in working with our key people here, our ops team, we are going way beyond the obvious top six to eight companies that are in the space and anticipate expanding our roster really significantly this year. Now, again, that will be choppy, but the opportunities are big. I am glad that I lived to work through this period of time because we have the goods. We have really unique advantages. We need to execute, but I have never in my career been so close to so many big opportunities at the same time. Thanks, Jason. David Marsh: On the subscription front, how many new platforms are you expecting to launch during FY26? And how many new countries do you think you could launch with existing partners? Clint Stinchcomb: Great question, Dave. Thank you. Well, I think just this year alone, we have already launched with Apple in Canada as one of many examples. And we anticipate that over the course of this year, probably 12 to 20 new platforms. Some of these are not all created equal. Some are larger than others. Some deliver more opportunity than others, but certainly 12 to 20 over the course of this year. And the beauty of all of that is the partners that we are working with are good at growing subscribers. So I feel really confident about our ability to grow that side of the business, and it is sturdy. David Marsh: If I heard you correctly, it sounded like SG&A would have been down $1,000,000 year over year without the nonrecurring charges. So would mid $20 millions be a good expected run rate for fiscal year 2026? Phillip Brady Hayden: Good question, Dave. We do not provide guidance on the expense side, but I think those are fair numbers. Obviously, with stock-based comp, that is a little bit of a wild card because of the way we award our grants and the way the accounting treatment is applied to those. It can be somewhat difficult to predict. But I think if you take out stock-based comp, we are actually looking at G&A other than SBC below $20,000,000. I think your range is certainly fair. David Marsh: Any M&A opportunities you might consider? Clint Stinchcomb: Thanks for that question, Dave. We will always do what is in the best interest of our shareholders. I think that the M&A environment will be exciting this year, will be ripe. If you look at some of the deals that have been done most recently with the big companies, those are a lot more around synergies. But we believe that if we continue to execute, continue to post good increases, continue to show the value of our subscription business and our licensing business, that we will have the opportunity to consider whatever combinations are in the best interest of our shareholders. Patrick Sholl: Could you provide any additional color on the market for content to license for AI training and how your partnership with Versus Video Training Library supports these efforts? Clint Stinchcomb: So Versus is a really good company. They are a technology partner of ours. We have worked with them for a long time. They help us to organize our content, for the most part, help to clip our content, and they help us manage an increasingly large volume of content as we are organizing fulfillments there. Now, we did a lot of licensing agreements before we started working with Versus, but I think they are helping us by handling some of the work on the organization side, helping us to do even more. As far as the content that we offer today, a lot of people rightly think of CuriosityStream Inc. as a company focused in the factual media space. And certainly, we are. And certainly, we have a whole variety of content there. We have a corpus today that is a collection of content from not just ourselves, but from over 200 partners. And so in addition to the full range of factual content—crime, heist, historical crime, espionage, travel, food, culture, home—we also have a good corpus of scripted content, which is really hard to acquire for a variety of reasons—dramas, comedies, westerns, action films, adventure films, mystery, family faith films, etc. And we also have a broad collection of sports—American football, soccer, surfing, tennis, basketball, billiards, boxing, drifting, lots of combat sports. So we have a full corpus there. That is something that gives us a unique advantage and enables us to engage with virtually everybody on the planet who has video licensing needs for training and other purposes. Patrick Sholl: With the price increase implemented March 1, what is the timing of it being fully implemented and expectations on churn? Clint Stinchcomb: It will take a year to fully implement just because we have so many people on annual subscriptions. I think what you will see in the first month is probably 3% to 4% of all of our customers, 5% maybe, who become part of that, and so that will roll out over time. With our pure direct customers, obviously, it will not roll out fully until everyone has renewed their agreement. On the partner side, most of those subscribers are monthly, and it takes some of them a little bit longer to roll out the pricing increase, but we anticipate that over the next handful of months, everybody will. So we will get significant benefit this year, and we will continue to get benefit through February next year. Patrick Sholl: Any additional commentary on the cadence of guidance and expectations on the full year? Clint Stinchcomb: I will speak to that for a minute, and then I will hand over to Phillip for his point of view as well. We got into the half year because many of the partnerships that we are working on are large and have the potential to be very large, and they are a little bit lumpy. The benefit to working with the biggest companies in the world is you know you are going to get paid. You are not chasing people to get paid. However, sometimes the payment schedules can be a little different than certain other companies. So the cash revenue can be a little bit lumpy in light of these big licensing opportunities. And so we are extremely confident in the year that we are going to have this year. Without giving specific year-end guidance, like we said, our intent is to pay our dividend from cash from operations. And our belief is that our licensing revenue will exceed our subscription revenue. So we feel good about where we are going to end up. We have said double-digit increases in both cash flow and top line revenue, and that is what we are working toward every day and are confident that we will achieve. Phillip Brady Hayden: The only thing I will add is the revenue cycle for these deals, and we have talked about this before, but it is generally between four and six months. We are delivering content. We are then recognizing the revenue. We go through an acceptance process. We are not issuing our POs until we are actually getting paid under most of the contracts that we are doing. So the entire cycle can last as long as six months, and it has just become very difficult for us to predict with much precision exactly when the numbers are going to hit. I will say, as we get closer to midyear, I think there is a good chance we will narrow our guidance and revise it into Q2. We know it is a little bit broad, having the $38,000,000 to $42,000,000 and $6,000,000 to $9,000,000 on the cash flow side. But our plan would be to narrow that to the extent that we can here during the second quarter. Clint Stinchcomb: And I know that it is March 11, and people are probably wondering what we are going to do in the first quarter. And what I will say is the good news about much of what we are doing today is it is not seasonal. Our intent is to do the best deals that we can, and obviously for the company, but for our partners, because we believe that those will lead to additional opportunities. We said double-digit increases in cash flow and top line revenue for the year. That may seem a little conservative to people or a little lukewarm in light of the fact that we did 40% to 46%, but our intention as we give guidance is to beat that guidance. And that is the approach that we are taking, and we believe that over the year, that will yield the best results for us. Thank you for that question, Patrick. Tia Cudahy: Clint, Phillip, thank you. This is the end of the CuriosityStream Inc. Q4 and year end 2025 earnings call. Thank you again to all of the participants on the line staying with us through the technical difficulties. Have a nice evening.
Operator: Good day, and welcome to the biote Corp. 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. Please note this event is being recorded. I would now like to turn the conference over to Szymon Serowiecki, Investor Relations. Please go ahead. Szymon Serowiecki: Thank you for joining us today. This afternoon, biote Corp. published financial results for the fourth quarter and full year ended December 31, 2025. This news release is available in the Investor Relations section of the company's website. Hosting today's call are Bret Christensen, Chief Executive Officer, and Bob Peterson, Chief Financial Officer. Before we get started, I would like to remind everyone that management statements during this call include forward-looking statements regarding, among other things, the company's financial results, future performance and growth opportunities, business outlook, strategic plans, anticipated benefits, goals, research and development, manufacturing and commercialization activities, its competitive position, regulatory process operations, benefits of its solutions, anticipated impact of macroeconomic conditions on the business, results of operations and financial conditions, and other matters that do not relate to historical facts. These statements are not guarantees of future performance. They are subject to a variety of risks and uncertainties, some of which are beyond the company's control. Actual results could differ materially from expectations reflected in any forward-looking. These statements are subject to risks, uncertainties, and assumptions that are based on management's current expectations as of today. biote Corp. undertakes no obligation to update them in the future. Therefore, statements should not be relied upon as representing the company's views as of any subsequent date. For discussion of risks and other important facts that could affect their actual results, please refer to our SEC filings available on the SEC's website and in the Investor Relations section of our website as well as risks and other important factors discussed in the earnings release. Management also refers to EBITDA and adjusted EBITDA margin, which are non-GAAP financial measures to provide additional information to investors. A reconciliation of the non-GAAP to GAAP measures is provided in our earnings release with the primary differences being stock-based compensation, fair value adjustments, certain liabilities, and other non-operating expenses. Please refer to our fourth quarter 2025 earnings release for a reconciliation of these non-GAAP measures to the most comparable GAAP measures. I will now turn the call over to Bret Christensen. Bret Christensen: Thank you, Szymon. Thank you all for joining us. I will provide a summary of our key strategic and operational accomplishments in 2025 and discuss our priorities in 2026. Bob will then review our fourth quarter financial results and provide our 2026 financial outlook. After our comments, we will open the call for your questions. 2025 was a pivotal and productive year for biote Corp., marked by important changes to the biote Corp. team, our processes, and our culture. Through our decisive actions, we achieved progress against our strategic plan, and I believe we became a more resilient, more disciplined, more effective organization. These qualities position biote Corp. to drive increased and sustainable growth in the large and underserved market of hormone replacement and therapeutic wellness. As you recall, our top three strategic objectives were, one, prioritizing and accelerating new clinic growth; two, maximizing value from existing top-tier clinics; and three, strengthening accountability and discipline throughout the company. I will begin with our progress on new clinics, which are fundamental to generating consistent revenue and earnings growth over the long term. To accomplish this goal, we rebuilt a significant portion of our commercial team and recruited new leadership and talent who bring fresh energy and a high-performance mindset to our business. To help ensure their success, we have empowered our sales team with upgraded tools and training and designed a new incentive compensation framework that aligns with our high-growth objectives. We also completed the restructuring of our commercial team by geographic region and by sales role. This new structure has two key advantages. One, it enables us to provide a higher level of service to our existing accounts; and two, it allows for us to remain laser-focused on driving new clinic growth and optimizing new practitioner success. We ended 2025 with over 90 salespeople, up from approximately 60 at the time of our sales reorganization last May. I am pleased to report that our new team members are stabilizing clinic attrition and maximizing new clinic starts in the fourth quarter. In addition, from mid-November to present, we have seen an acceleration in the number of practitioners attending our trainings, with all of our training sessions at full capacity. This reflects our recent success in recruiting new practitioners and broadening our training options for them. Because the number of new biote Corp. certified practitioners is typically a leading indicator of procedure growth in the future, we plan to build on this momentum by continuing to invest in our commercial organization in 2026. Our second strategic objective was to maximize value from our top-tier clinics. To accomplish this, we deepened our relationships with existing practitioners, which reinforced our role as an essential partner that is committed to their success. Second, we continue to introduce innovative, science-based solutions that promote patient health span and vitality and advance the standard of care. And third, to minimize unanticipated clinic attrition, we leveraged data analytics to evaluate and refine contract and incentive models that strengthen the longer-term value equation of our top practitioners. Turning now to our third strategic objective. We emphasized accountability and discipline in our pursuit of operational excellence. Most importantly, we have strengthened and refined the internal processes and systems that underpin our operating model. These enhancements improved our data analytics and productivity, enabling more consistent execution. Having strengthened our core capabilities, I am cautiously optimistic we will reaccelerate procedure revenue growth and scale the business with greater efficiency. I would now like to comment on our strategic plans for 2026. Over the past year, we have laid the groundwork for a more efficient and more disciplined operating model, one that positions us to deliver stronger and more consistent financial performance in the years ahead. In 2026, we will focus on advancing the progress we achieved in 2025. For example, we will be making a sizable and necessary investment in our sales and technology capabilities. Specifically, we intend to expand our sales personnel from over 90 at the end of 2025 to approximately 120. Concurrent with this investment in our commercial team, we will be investing in our leading-edge technology platform in 2026. This investment is designed to facilitate a more efficient and seamless practitioner journey from initial training and certification to driving a successful biote Corp. clinic over the long term. We also anticipate that this investment will enhance long-term practitioner retention while expanding sales of our biote Corp. branded dietary supplements and other healthy aging solutions. I am confident now is the right time to make these investments, which we believe are essential to accelerate growth, expand our market opportunity, and further enhance engagement with existing practitioners. While this step-up in expenses will impact our adjusted EBITDA in 2026, we believe these planned investments position our team to reach our long-term strategic, operational, and financial objectives. I will now turn the call over to Bob Peterson to review our fourth quarter results and provide our financial guidance for 2026. Bob Peterson: Thank you, Bret, and good afternoon, everyone. Unless otherwise noted, all quarterly financial comparisons in my prepared remarks are made against the 2024 fourth quarter. Fourth quarter revenue was $46,400,000, a decrease of 6.9%. Procedure revenue declined 13% to $31,800,000, while dietary supplement revenue grew 16% to $11,700,000. Similar to recent quarters, procedure revenue was primarily impacted by a lower number of net new clinic additions and lower procedure volume during 2025. As Bret noted, in 2026, we anticipate increasing our investment in our sales capabilities to capture a larger share of our available market opportunity. Dietary supplement revenue increased 16% to $11,700,000, primarily driven by the continued growth of our e-commerce channel. Dietary supplements represent an important and complementary market growth opportunity, strengthening patient engagement with biote Corp. by meeting their evolving needs for safe and effective healthy aging solutions. Looking forward, we forecast our dietary supplements revenue will grow at a mid to high single-digit rate in 2026. Gross profit margin was 68% compared to 71.8%. The decrease was due to a $1,300,000 charge to inventory during 2025 as a result of the impact of a voluntary recall of specific lots of hormone pellets shipped by Asteria Health. We could see a potential near-term impact to gross margin if our product mix includes more third-party manufacturing. Our long-term goal is to meet customer needs through our Asteria site. Excluding this charge, gross margin reflected the benefit of efficiencies gained from vertical integration of our 503B manufacturing facility and effective cost management. Selling, general, and administrative expenses decreased 25.1% to $24,700,000. The decrease reflected lower legal expense and a temporary decrease in headcount. Net income was $2,600,000. Diluted earnings per share attributed to biote Corp. stockholders was $0.06, compared to net income of $3,500,000 and diluted earnings per share attributed to biote Corp. stockholders of $0.10. Net income for 2025 included a gain of $1,200,000 due to changes in the fair value of the earn-out liabilities. Net income for 2024 included a loss of $800,000 due to changes in the fair value of the earn-out liabilities. Adjusted EBITDA decreased to $11,700,000, with an adjusted EBITDA margin of 25.2%. This compares to adjusted EBITDA of $15,100,000 and adjusted EBITDA margin of 30.3%. Both adjusted EBITDA and adjusted EBITDA margin decreased due to lower sales and reduced gross profit, partially offset by lower operating expenses as a result of our sales reorganization. For the 2025 year, cash flow from operations was $35,200,000. As of 12/31/2025, cash and cash equivalents were $24,100,000. Now turning to our financial outlook for 2026. As previously mentioned, we anticipate investing to advance our sales and technology capabilities. While this planned investment will cause a step-up in operating expenses in the near term, we expect the benefit will be evidenced by an improvement in our procedure revenue expected to start in 2026. With respect to our 2026 revenue guidance, year-on-year procedure revenue is expected to decrease at a mid to high single-digit percentage rate in 2026, which includes a potential revenue and profit impact related to the recall. We anticipate an expected return to year-on-year procedure growth in 2026. Dietary supplement revenue is expected to grow at a mid to high single-digit rate from 2025. Overall, we forecast 2026 revenues above $190,000,000 and adjusted EBITDA of greater than $38,000,000. I will now turn the call back to Bret for his closing remarks. Bret Christensen: Thanks, Bob. I am pleased with the progress the entire biote Corp. team has achieved in the past year. We laid much of the foundational groundwork that I believe will enable us to drive a higher and more consistent level of financial performance. Our planned investments in 2026 represent a key inflection point for biote Corp. that I believe are essential to effectively address our large market opportunity and build long-term, sustainable shareholder value. Operator, let's now open the call for questions. Operator: Thank you. We will now begin the question and answer session. The first question will come from Leszek Sulewski with Truist Securities. Please go ahead. Jeevan: Hey, this is Jeevan on for Les. Thanks for taking our questions. What is your take on the FDA's removal of black box warnings for certain HRTs and maybe how this could potentially impact demand? And then also for the voluntary recall, can you elaborate on any feedback and whether you see this event changing the regulatory bar or competitive dynamics in the space? Bret Christensen: Yeah. Hi, this is Bret. Thanks for the. First, on the black box warning that was removed now really almost just a little less than a year ago, that along with the entire talk track of the FDA seems to be a positive tailwind for us and others. It is a good sign that finally hormone optimization is getting recognized as a great option. It has always been a good option for men and women are getting the attention that they deserve as there are still no FDA-approved options for women for testosterone therapy. So all in all, it is a great thing for us. It reinforces what we have known, that there is no harm that comes from testosterone and a tremendous amount of benefit that patients can get through different modalities of HRT. So it is a good thing. We look for continued support from clinicians and patients alike for awareness. As far as the recall goes, as you know, we, at January, we announced a partial recall, a voluntary recall that we are doing just out of an abundance of caution, working hand in hand with the FDA. So the feedback has been good. We are working hand in hand with the FDA on almost everything that we do. So communication to our customers, taking the product back, refilling those orders, all of that has been done in planning with the FDA. So we are in lockstep with their guidance in this entire recall. Our customers have been responsive, and we are happy with where we are at so far. Operator: The next question will come from Kaitlyn Joan Korich with Jefferies. Please go ahead. Kaitlyn Joan Korich: Hi, everyone. Good evening. Thanks for taking my question. I just wanted to drill into the procedure revenue growth in the first half, and is it purely the number of procedures that will be down while the number of practitioners are ticking higher, or is there also some element of promos or discounting that we should be considering? Any color there, and also, if anything has changed in the competitive environment would be helpful. Thank you. Bret Christensen: Yeah. Hi, Kaitlyn. This is Bret. I will start with that, and then Bob can add some specifics. Throughout last year, we highlighted an increase in attrition. And for us, when we talk about attrition, we are talking about practitioner and clinic attrition. And so while that has been stable for us for years at around 5%, last year, we highlighted that accelerated to high single digits. And so that is where we have exited the year in 2024. The lower volume that we are highlighting in 2026 in the first half until we return to growth in the second half really is just that same attrition that we have experienced at a higher rate in the past. Remember, with an annuity model, we live with that attrition for 12 months. So attrition was higher last year, and mostly that was clinic attrition, which does mean lower volumes. So that is where we exited the year. We anticipate that will change this year. We will return to growth in the second half through volume growth. But the majority of that lower procedure revenue was volume. Bob Peterson: That is right. And I think the only other thing to add there is, as Bret mentioned, we are in the process now of watching some of those new customers that are coming in the door. And wanting to see, he highlighted in the remarks that trainings were full. We will need to continue to watch those individuals to make sure that they are productive and start quickly. I cannot stress enough, we are in the, you know, we are about a month, month and a half into the recall, and we just want to continue to monitor the impact there also. I think that gives a little bit of additional color. Kaitlyn Joan Korich: Got it. Thank you.
Operator: Thank you for standing by, and welcome to Netskope, Inc. Fourth Quarter and Full Year Fiscal 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' remarks, there will be a question-and-answer session. I would now like to hand the call over to Michelle Spolver, Chief Communications and Investor Relations Officer. You may begin. Michelle Spolver: Good afternoon, and thank you for joining us today. With me on the call are Netskope, Inc. CEO and Co-Founder Sanjay Beri and CFO, Andrew Del Matto. The press release announcing our financial results for the fourth quarter and full year fiscal 2026 was issued earlier today and is posted to our Investor Relations website at investors.netskope.com along with a supplemental presentation. Before we begin, let me remind everyone that some of the statements we make on today's call are forward-looking, including statements related to our guidance for the first quarter and full 2027 fiscal year, growth opportunities, competitive position, and the impact of AI adoption. These forward-looking statements are subject to known and unknown risks and uncertainties, which could cause actual results to differ materially from those anticipated by these statements. Additionally, these statements apply only as of today, and we undertake no obligation to update them in the future. For a detailed description of risks and uncertainties, please refer to our SEC filings as well as our earnings press release. Finally, unless otherwise noted, all financial metrics we discuss on this call other than revenue will be on an adjusted non-GAAP basis. We have provided reconciliations of these non-GAAP financial measures against the most directly comparable GAAP financial measures in our earnings press release. Now let me turn the call over to Sanjay to discuss our business and high-level Q4 financial performance. Thanks, Michelle. Sanjay Beri: Welcome, everybody, and thank you for joining us to discuss Netskope, Inc.'s fourth quarter and fiscal year 2026 results. We ended the year on a high note with results that exceeded our guidance across all key metrics. Our focus on delivering a market-leading platform for networking, security, and analytics for the modern world of cloud and AI is resonating well with customers and driving both new and expansion business. Strong global execution resulted in robust fourth quarter results, highlighted by record net new ARR of $57 million and ending ARR of $811 million, representing true organic growth of 31% year over year. Revenue in Q4 grew 32% year over year to $196 million, and revenue for the full fiscal year 2026 also grew 32% to $709 million. We continue to leverage the investments we have made in our Netskope One platform and NewEdge Global Private Cloud network to drive efficient growth, which is reflected in the five percentage point improvement in operating margin in Q4 and an 18 percentage point improvement for the full fiscal year 2026. We are also very pleased to generate $12 million in free cash flow for fiscal year 2026, marking a notable milestone of Netskope, Inc.'s first ever year of positive free cash flow. We also saw a strong mix of both new logo growth and customer expansion across key verticals and geographies. The average number of products per customer increased to 4.4. Customers are solving key use cases through the adoption of our Netskope One platform of 25 security, networking, analytics, and AI products. This is reflected in our net retention rate of 116% and 22% growth in customers with over $100,000 in ARR year over year. Andrew will give more color on our Q4 and full year fiscal 2026 financials in a few minutes. We have had many innovations, go-to-market, and operational highlights during the quarter, and one theme that threaded prominently across all of these was AI. Netskope, Inc. is uniquely positioned as a significant beneficiary of the AI super cycle because we have engineered a unified AI-native fabric that eliminates the legacy trade-off between performance and security. We have organically built the Netskope One platform as the intelligent edge—an inherently adaptive architecture where our native AI fluency and active context are seamlessly integrated into our global infrastructure defined by its performance, resilience, and dynamic orchestration. I would like to spend some time today walking through the four pillars of our AI strategic framework, which demonstrate why Netskope, Inc. is the essential engine powering the scale of the modern AI enterprise. First, Netskope, Inc. is an AI-native platform with sovereignty and privacy by design. From day one, we were engineered as an AI-native platform. Our competitive moat is architectural, not a single bolt-on feature. Since our inception, we have leveraged and integrated AI as foundational across our platform. In the early days, we used shallow and deep learning, and today, we further augment these capabilities with generative AI models to deliver maximum impact for our customers. Every implementation follows our core principle of privacy by design. We believe intelligence should never come at the cost of data privacy or sovereignty, and we operate a library of more than 190 proprietary purpose-built, specialized AI models optimized for security and network performance. This quarter, we continued to enhance those models, and our AI labs released additional models that are used in our new AI security products. Unlike competitors using just generic LLMs, Netskope, Inc.'s intelligence is purpose-built, high speed, and hyper accurate. The second key pillar in our AI strategy is enabling and securing AI in real time. While legacy and first-generation SASE vendors perform so-called post-event autopsies with out-of-band scanners, Netskope, Inc. provides real-time, in-line AI security for corporate and shadow AI. We do not just see that an AI transaction is happening. We understand the data and intent within it and take real-time granular action. Let me explain. Most solutions simply see a connection. Netskope, Inc. understands the deep interaction. Because our proxy is natively AI fluent, we possess the active context to determine dynamically in real time the specific AI app instances, activities, data, and more. We also determine the semantic intent of prompts and responses in real time and enforce in-line policy. Our Netskope One Agentic Broker—one of a number of new AI products we announced earlier today—also seamlessly applies this to all MCP transactions, either sanctioned or unsanctioned. This is why at Netskope, Inc., we are not just observing and enabling the AI revolution. We are the engine generating the high-fidelity data that secures it. In today's world, the most valuable asset is not just the AI model. It is the unique real-time data and transaction telemetry that understands the intent and lineage behind every interaction. Netskope One generates a vast and proprietary set of AI-fluent metadata and data for trillions and trillions of transactions a month that traditional security tools simply cannot see or generate, decoding the complex language of AI agents, generative AI apps, AI tools, and cloud JSON in mid flight. But while the power of our unique data is a competitive moat, our purpose is singular—the dynamic protection of our customers and their nonhumans and humans. We leverage this unprecedented visibility to protect our customers, ensuring that they can innovate at the speed of AI without ever compromising the integrity or sovereignty of their most sensitive information. We apply in-line decisiveness—or put another way, we make granular go or no-go decisions in flight. This allows us to stop sensitive data from entering prompts and block poisoned AI responses or injection attacks before they ever reach a customer's environment, protecting users, apps, and autonomous agents alike. And our Netskope One AI Guardrails, also announced today, take this to the next level. These deep contextual controls are necessary for enterprises to move from prohibiting AI to enabling AI with confidence. We do not just see more. We protect better, turning our unique data into the ultimate foundation of trust for the agentic era. Our third AI strategy pillar centers around providing differentiated and unmatched performance and resilience through our NewEdge AI infrastructure. AI transactions are uniquely sensitive to latency. Legacy networks create a latency tax that breaks AI performance. Conversely, our NewEdge infrastructure—the world's largest, high-performance private security cloud—is the AI Fastpath. It is the most resilient, high-speed highway for AI transactions globally, including AI applications and agents hosted in public, private, and new clouds. It is also an agile edge. Our infrastructure is defined by performance, resilience, and dynamic orchestration. We process complex security at the edge, closest to the agent, app, or user, reducing lag for secure real-time inference while allowing the network to dynamically adapt to the high-velocity traffic patterns of the AI era. And lastly, our fourth AI strategy pillar is a platform built organically and natively for the agentic economy, with an AI-fluent proxy and for autonomous operations. The perimeter has shifted from being filled with people to entities. Netskope, Inc. uniquely addresses this with a platform that specifically speaks the language of AI. As we mentioned, our architecture and native AI-speaking proxy innately understand APIs and JSON. This AI-native visibility enables hyper-granular zero trust control over AI transactions that other vendors simply cannot see. Through our just announced Netskope AI Gateway, we extend this enforcement anywhere—public cloud, private data center, or the edge. We also just released our first autonomous Netskope AI agents, which have already been met with exceptional customer feedback. One of the areas our agents will address will be automating operations. These classes of agents from Netskope, Inc. automate complex network and security tasks, drastically reducing the human-in-the-loop requirements for global enterprises. Our recently released ZTNA AI agent has been received very well in this area. And finally, we offer universal governance. By marrying our market-leading data protection with our newly introduced Netskope AI Guardrails, we secure and moderate for acceptable use all communications, whether via Model Context Protocol (MCP) via our Agentic Broker, prompts, or ShadowAI, for humans and nonhumans alike. Because of these unique and highly differentiated four pillars of our AI strategic framework, many of the world's most sophisticated enterprises choose to secure, accelerate, and analyze their AI transactions through Netskope, Inc. As a result, Netskope, Inc. has become one of the most definitive sources of enterprise AI data usage and trends in the world. We were pleased to announce today the Netskope AI Index, which consists of a first-of-its-kind interactive view of real-time AI usage across the world—data covering virtually every country, industry vertical, and company size—providing a granular view of AI adoption and attributable intelligence that positions Netskope, Inc. as the authority that customers and the public can cite when describing the real-world trajectory of the AI economy. We have also kept our foot on the gas innovating across our Netskope One platform of security, networking, and analytics products, and in other related areas. Let me share a few recent examples. On the data security front, we strengthened our competitive edge with the introduction of Netskope One Data Lineage. Data Lineage enables security teams to track and visualize the movement of sensitive data across their entire organization through various levels of origin, usage, and access, including visibility into when that data propagates or evolves. We also introduced new capabilities and integrations to improve secure connections to enterprise applications from unmanaged or BYOD devices. Enterprise browser support was expanded to a new range of iOS and Android mobile devices, while deeper integration with our Remote Browser Isolation and Private Access solutions provides a range of highly secured deployment models to enable users to connect to private apps through web browsers on their unmanaged devices. And on the networking and infrastructure side, we delivered our DNS as a Service that enables customers to point their DNS traffic to Netskope, Inc. for resolution, which can then use our DNS content filtering and security to provide secure access for often overlooked and unprotected use cases like guest Wi-Fi access. Our continued innovation expands our robust Netskope One unified platform of 25 security, networking, analytics, and AI solutions, providing more opportunity to land and expand with customers. We are an organically built, truly integrated, modern platform for the AI and cloud era. I want to emphasize this point about platforms in the context of what we repeatedly hear from customers. They are telling us that while they desire truly unified platforms over a slew of point solutions, they also are not seeking a single platform for all their security and networking needs. The unification they desire in a platform is what Netskope, Inc. uniquely delivers. We built our AI-native Netskope One organically, not through M&A, which results in a disjointed, cobbled-together solution and often frustration for customers. Our 25 products share one common code base, one engine, one console, and one network, providing both better efficiency and a seamless customer experience. And our NewEdge private cloud runs Netskope, Inc.'s full stack of products at high speed at all of our more than 120 locations. To illustrate how our customers are adopting our Netskope One platform, let me pivot to our go-to-market accomplishments during Q4. We saw significant customer wins across verticals and geographies, with customers turning to the Netskope One platform to enable AI adoption, modernize their security and infrastructure, consolidate vendors, and replace legacy and first-generation cloud security products. I will touch on some key wins and expansions across common use cases. First, customers are choosing the Netskope One platform for modernization to facilitate secure access from human and nonhuman identities to their AI ecosystem, including generative AI apps and LLMs, cloud apps, web apps, and private apps. One notable win was a large global manufacturer who sought better data visibility and control and the ability to safely allow the use of AI in cloud. They chose six Netskope, Inc. products to secure generative AI and cloud access, protect their data, and improve their network performance. We also landed a top regional health system in the US who initiated a modernization selection process to replace its legacy security and network infrastructure after previously suffering a severe and costly breach. We shined in this competitive bake-off, and the customer purchased 11 products within our Netskope One platform, including our next-generation SWG with AI controls, ZTNA Next, Advanced DLP (which includes proprietary AI models from our AI labs team), Borderless WAN, Cloud Firewall, Enterprise Browser, and other products to replace legacy firewall and networking products. Customers also continue to turn to Netskope, Inc. for our superior unified data protection. For example, one of the largest hotel companies in the world with operations in nearly 150 countries was a notable unified data expansion win during the quarter. This client needed continuous real-time visibility into the full breadth of its data security posture. They also needed to confidently manage and protect sensitive data across cloud, on-premises, and hybrid environments including AI and cloud data stored. They purchased Netskope, Inc.'s DSPM solution and are now using 14 products in the Netskope One platform across its organization. Many customers also deploy our suite of Netskope One to modernize their infrastructure, including replacing legacy VPNs with our zero trust architecture, branch firewalls with our Borderless SD-WANs, and migrating their networks to our high-performance private cloud, especially as they adopt more AI and cloud where performance becomes even more critical. For example, we landed a Canadian gaming company that needed to modernize their network for AI and cloud, provide secure remote access to their global workforce, and meet governmental regulatory requirements. This customer replaced legacy hardware products at more than 5,000 locations with Netskope, Inc.'s Borderless SD-WAN and ZTNA Next secure access solutions and purchased our Next-Gen Secure Web Gateway, with added AI protections, for secure generative AI usage. In another win, a European government chose us to modernize its legacy on-prem security infrastructure and drive data sovereignty. They wanted to consolidate multiple point solutions into a single centrally managed platform to protect sensitive data while meeting strict government regulatory requirements. The organization purchased our comprehensive Netskope SSE platform covering security for AI, web, cloud, and data. Finally, our global fast and resilient NewEdge private cloud network makes us particularly well suited to deliver globally distributed and highly regulated customers the data sovereignty and regulatory compliance that they require. For example, we landed two of the largest banks in Africa in two separate deals. One was a unified data protection deal that we successfully baked off against a primary competitor. The other was a network modernization deal where we replaced the same competitor with Netskope, Inc.'s market-leading SSE solutions and higher-performing NewEdge private cloud. Our local data centers in Africa were a driver for the wins, as we are able to deliver superior performance and data sovereignty to these customers. The geographic and vertical diversity of these customer wins and use cases is a testament to our clear technical differentiation and disciplined execution across all regions. Our new customer wins were all competitive bake-offs against primary competitors, where the capabilities of the Netskope, Inc. platform proved itself in extensive POVs. We continue to land with multiple products and have seen strong growth in multiproduct adoption across our customer base. As of the end of Q4, 56% of our customers were using four or more Netskope One products, and 27% were using six or more products. I am pleased with the strong performance of our go-to-market team across the globe. Our newly hired sales reps are ramping, and our tenured reps are delivering strong productivity. We put great leaders in place and recently filled some of our remaining key sales leadership positions, including the appointment of Joe Welch to lead our US public sector vertical, an area where we are underpenetrated but have strong opportunities. Joe is a seasoned veteran with decades of public sector experience in this space. We are also continuing to hire highly talented reps in all geographies, many of whom are joining us from key competitors across our space. I just returned from our annual sales kickoff, and I can tell you that our team's excitement, energy, and conviction is truly palpable. Our momentum is only building. As part of our comprehensive go-to-market strategy, we also continue to strengthen our relationships with system integrators and strategic partners. During Q4, we partnered with the largest GSI in the world on a major enterprise deal in the energy sector, supporting digital transformation and zero trust for approximately 80,000 employees. Other recent engagements include a large government defense customer in Asia Pacific and a major health care customer in North America. This key partner holds over 150 certifications on the Netskope, Inc. platform, and their support extends our global operations. This is just one example of how we are partnering well on large-scale, partner-driven enterprise transformations globally. On the technology partner side, Netskope, Inc. also recently achieved the Amazon Web Services Security Competency status for AI Security. This competency assures AWS customers that Netskope, Inc. has met technical and quality standards to deliver best-in-class solutions for securing AI workloads across AI security use cases. In closing, I want to reiterate that we are in the early innings of an AI super cycle that is exposing a fundamental flaw in legacy and first-generation SASE architecture. Legacy security acts as a latency tax on AI performance, forcing enterprises to choose between safety and speed. We believe the next decade will be defined by a structural shift towards an intelligent edge architecture built specifically for an autonomous agentic economy. Netskope, Inc. is uniquely positioned for this era for three reasons. First, we have an architecture for the future. While legacy vendors proxy the past, Netskope, Inc. is the distinctly AI-native proxy with innate fluency to secure the languages of the future—APIs, JSON, and the emerging protocols like MCP. Two, we also scale without friction. We have eliminated the security tax. Our AI Fastpath infrastructure has unique capabilities to perform complex, real-time security at the speed of AI inference. And three, finally, we are an intelligence moat. Our advantage is rooted in active context and the real-time AI-fluent proprietary data we generate. While others count traffic, we understand intent. Our proprietary data from trillions of real-time transactions, validated by the Netskope AI Index, makes us the indispensable source of truth for the AI economy. Sitting squarely at the intersection of cloud, AI, networking, and security, Netskope, Inc. has a massive market opportunity, which is projected to grow to at least $149 billion by 2028. We have just begun to scratch the surface and look forward to what is to come. The plumbing of the AI era is being laid today, and it will take many years to fully realize. By unifying high-speed performance with deep semantic intelligence, Netskope, Inc. is not just selling a platform. We are providing the essential adaptive fabric to the modern AI enterprise. For the next, 2026 was an incredible year of growth and expansion for Netskope, Inc., and our IPO in September was just the beginning of our public company journey. We see an incredible path ahead as we attack the AI security and networking opportunity with exciting new products, continue to bring more customers onto our platform, expand business with existing ones, drive further innovation, ramp our sales team, and drive awareness globally. I am proud of what we have accomplished—particularly our first full year of positive free cash flow generation and industry-leading ARR growth at scale. I look forward to seeing many of you at RSA in a few weeks, where we will demonstrate and share more about our AI strategy and new products, and engage in other ways in the months ahead. With that, let me now turn it over to Andrew to provide financial details on the fourth quarter and our outlook for the first quarter and fiscal year 2027. Andrew? Andrew Del Matto: Thank you, Sanjay, and hello, everyone. As Sanjay shared, Netskope, Inc. had a very successful fourth quarter, closing out the year on a strong note. We continue to deliver significant growth as our investments in NewEdge, new product innovation, and our go-to-market organization continue to pay off. Before I share Q4 and fiscal year 2026 results, let me remind you that all financial comparisons are on both a year-over-year and non-GAAP basis unless stated otherwise. For the full year 2026, we are proud of what we accomplished. We delivered revenue of $709 million, or 32% growth; ARR of $811 million, up 31% year over year; net new ARR of $193 million, up 35% versus fiscal 2025; operating margin improvement of 18 percentage points while continuing to invest in our innovation and go-to-market engines; and we generated $12 million in positive free cash flow, which marks Netskope, Inc.'s first fiscal year of positive free cash flow and an improvement of $163 million over fiscal 2025. This translates to a 30 percentage point free cash flow margin improvement year over year. Moving on to Q4 results. ARR grew 31% to $811 million at the end of Q4. As Sanjay noted, we also had a record quarter for net new ARR of $57 million. Q4 revenue grew 32% to $196 million. We also experienced strength across geographies. In Q4, revenue in the Americas grew 32%, EMEA increased 36%, and APJ grew 26%. Our teams executed well, and our investments in our sales organization are paying off. In terms of customer metrics, the number of customers generating more than $100,000 in ARR in Q4 grew 22% year over year to 1,531. Enterprise and large enterprise customers are our focus, and more than 85% of our ARR comes from $100,000-plus ARR customers. Note that the average ARR from this customer cohort grew to more than $450,000 per customer. This is indicative of our success in both expanding our installed base and securing significant new enterprise deployments. Our Q4 net retention rate, or NRR, was 116%, while our churn and downsell rates remained at historic lows. Composition of deals varies quarter by quarter, but our consistently strong NRR reflects our customers' ongoing confidence in Netskope, Inc.'s platform and expansion of their deployments as they consolidate vendors and modernize their infrastructure. Customers view Netskope, Inc. as a long-term strategic partner given our commitment to innovation and ability to deliver products that solve the complex and evolving security challenges in the cloud and AI era. In addition to NRR, we look at multiproduct adoption to demonstrate our expansion opportunity within our customer base. As Sanjay mentioned, at the end of Q4, 56% of our customers were using four or more products versus 48% a year ago, and 27% were using six or more products, up from 22% a year ago. We are pleased with this progress and believe our 25-product Netskope One platform gives us a clear opportunity to continually expand within our growing customer base as they consolidate more of their security and networking stack with us. Moving on to the rest of the income statement. We saw the benefits of Netskope, Inc. being built to scale. Gross margin was 76%, an increase of approximately five percentage points from Q4 last year. Our gross margin expansion is being driven by the efficiency of our NewEdge architecture, which is generating better unit economics as we scale. Q4 operating expenses totaled $171 million, up approximately 3% sequentially. Operating margin improved five percentage points year over year to negative 10%. R&D expenses improved 100 basis points year over year to 36% of revenue, driven by earlier investments in a common data platform and hiring in high-talent, cost-efficient locations. Sales and marketing expenses remained flat at 40% of revenue as we continue to invest in quota-carrying sales reps. Our consistent improvement in gross margin and operating margin reflect the operating leverage we have unlocked as our earlier strategic investments in infrastructure and talent begin to compound. Net loss per share was $0.04 using 395 million weighted average shares outstanding. As a reminder, our non-GAAP EPS excludes the change in fair value of the convertible notes we issued prior to our IPO. Fully diluted share count using the treasury stock method was approximately 503 million shares as of 01/31/2026. We generated $4 million in free cash flow in Q4, representing a 2% free cash flow margin. Note that this was driven by our laser focus on efficiencies and in the first year of our transition to annual billings. We are pleased with our ability to drive positive free cash flow, as this demonstrates the leverage inherent in our model. While we will continue to realize the benefits of being built to scale on margins and cash flow, our path to sustainable positive free cash flow is not expected to be linear. The timing of cash collections can vary quarter to quarter, and we expect to continue investing in the business for long-term growth. And finally, we ended the fourth quarter with $1.2 billion in cash, cash equivalents, and marketable securities. Before I share our guidance for the first quarter and fiscal year 2027, let me briefly outline some factors that should be considered. We are continuing to make investments in our business, most notably in R&D and sales and marketing. We are continuing to hire sales reps across the globe to support our expanding market opportunity aligned to the AI super cycle that Sanjay noted. At the same time, we are leaning further into our AI roadmap and expanding our AI-native Netskope One platform with additional products to support our customers' AI adoption journeys both today and in the future. While we are adding AI engineers and data scientists to drive further innovation in this important emerging area, we are also empowering our teams with AI tools to drive efficiencies in development and other areas of our business. We expect to see most of the impact from these investments to operating margin during the first half of the year, leading to improving operating margin in the second half of the year. As we look at gross margin, we are on track to achieve our long-term target of 80%. With the foundational investments we have made in NewEdge, we now expect margin gains to come through top-line growth and continued optimization. Now that gross margins improved into the mid-seventies, we expect progress from here to be more gradual and may not follow the linear step function seen in recent quarters. Also, as we have discussed in the past, we are shifting customers to annual billing on multiyear contracts where possible. Billing annually will improve predictability and consistency of our cash flows. I am pleased to highlight that this transition is occurring faster than we originally expected. While it is difficult to predict exactly how this will impact future free cash flow, we expect to see the most significant impact in Q1 with negative free cash flow in the range of $50 million to $60 million. We expect that to improve in the second quarter, return to positive free cash flow during the second half of the year, and to end the full year with positive free cash flow in the range of 2% to 4%. We will continue to provide you with quarterly updates as we progress throughout the year. We began this billing transition a year ago and expect to see the bulk of the impact this year. And finally, we believe we are uniquely positioned as a significant beneficiary of the AI super cycle due to our unified AI-native fabric that eliminates the trade-off between performance and security. At the same time, we are early in the year, still have a large portion of our sales reps ramping, and we are continuing to establish our reporting cadence as a public company. And while AI and cloud adoption are driving significant interest in platforms like Netskope, Inc., we recognize that macro and geopolitical factors have the potential to impact customer spending plans. We have built our guidance with these factors in mind. Let me now provide our guidance for Q1 and fiscal year 2027. As a reminder, these numbers are all non-GAAP unless stated otherwise. For Q1 fiscal 2027, we expect revenue in the range of $197 million to $199 million, representing growth of approximately 26% at the midpoint; operating margin of approximately negative 16%; net loss per share of $0.06 to $0.07 using approximately 405 million weighted average common shares outstanding. We expect to see the largest free cash flow impact of our transition to annual billings in 2027 with much of that impact in Q1. As I mentioned, we expect negative free cash flow in Q1 of $50 million to $60 million. For the full year fiscal 2027, we expect revenue in the range of $870 million to $876 million, representing growth of approximately 23% at the midpoint; gross margin of approximately 77%; operating margin of approximately negative 10%, gradually improving from negative 16% in the first half of the year; net loss per share of $0.19 using approximately 415 million weighted average common shares outstanding; free cash flow margin in the range of 2% to 4%. Note that the annual billings transition is estimated to reduce our free cash flow margin by approximately six percentage points, which is reflected in this guidance. As noted earlier, we expect that to improve in the second quarter, return to positive free cash flow during the second half of the year, and end the year with positive free cash flow. We have highlighted these modeling points in the appendix of our investor presentation. In closing, we remain confident in our ability to execute on our long-term strategy and innovation, driving strong and durable revenue growth and capturing share of our expanding opportunity. We remain focused on prioritizing disciplined execution and strategic investments that strengthen our competitive advantage and continue to drive growth and margin expansion. Innovation drives our flywheel for growth. As such, we will continue to invest in data and AI engineers while utilizing AI to drive efficiency and product velocity. We will also continue to invest in go-to-market while remaining fiercely committed to delivering profitable growth. Thank you for your time today. With that, I will turn it over to the operator for Q&A. Operator: Thank you. To withdraw your question, please press 1-1 again. We will now open for questions. Our first question comes from the line of Brian Essex with JPMorgan. Your line is open. Brian Essex: Great. Good afternoon. Thank you for taking the question and congrats on some solid results. Maybe one question for Sanjay and then a follow-up for Andrew. I guess, Sanjay, where would you assess that we are in the maturation cycle with respect to enterprises knowing what they need to secure AI? Are your AI security announcements ahead of the curve, or are these approaches that you are already seeing CIOs demand as they look to, kind of, you know, secure their, you know, AI estate? And then, you know, for Andrew, could you maybe just help us understand the context of the sequential revenue guide? Looks like Q1 would imply only up a couple of million dollars. So we would love to understand the puts and takes there. Thank you both. Sanjay Beri: Yes. Great question, Brian. So I think, first of all, from an AI perspective, most organizations are in the infancy. They are in the first inning. 90% of their usage of AI is shadow AI, meaning they actually did not bring it in, their end users did. And so when you think about that concept, you harken back to this really just being very early. And so from an AI security perspective, our focus is always to skate to where the puck is going, anticipate what they will need, and deliver a best-of-breed solution to solve this problem—discover their AI, guardrail it, control it, and then enable it with precision. And so that is what these new products do, building upon our previous capabilities to enable AI. So we will share more at RSA and beyond as well on that. Andrew? Andrew Del Matto: Yeah. Thanks, Brian. In terms of the Q1—I think you are talking about Q1 guidance—again, first year as a public company, and so we are going to remain prudent, as we have said in the past, and so there is that. We do have reps ramping, and we talked about before they tend to ramp more later in the year, let us say, and we still have quite a bit of ramping going on with terms of the reps that have come in over the last year. And then finally, there are some geopolitical, macro headwinds that probably happened over the last, you know, I would say the last couple of weeks. Brian Essex: Right. Right. Thank you both. Very helpful on both fronts. Operator: Thank you. Our next question comes from the line of Meta Marshall with Morgan Stanley. Meta Marshall: Great. Thanks, and echo congratulations. Maybe for Sanjay, just in terms of, you know, are you seeing—I think during the IPO process, you kind of talked about these four main use cases that people were, kind of, coming in with. Are you seeing any changes in what either those use cases are, or as you start to expand more of the product portfolio that you are selling, just any changes to, kind of, where a majority of people are coming in? And then maybe a follow-up. Just in terms of, you know, maybe the net new ARR growth this quarter—net expansion stepping back from Q3—just any commentary on, kind of, what you saw there would be helpful. Sanjay Beri: Thanks. Great question. So from a use case perspective, when you look at our top use cases, they were, come in to help people enable cloud and web no matter where they are. The second was securing and enabling AI. I will say that has moved up in the stack. Every conversation I have, people come to us and say, look. We already run all our AI traffic through you. We released the Netskope AI Index today—it is probably the first definitive source of worldwide AI tracking by vertical, by geo, and by size of customer. Well, that kind of shows you the amount of AI traffic traversing the NewEdge network. And so what people have come to us to say is, look. You are the Fastpath to AI. Help us secure it, enable it, guardrail it, and let us say yes to it. And so that is a top, top use case that they are coming to us with, and that has been elevated. Obviously, the other ones—remote access, modernize my infrastructure, converge, consolidate, simplify my network security app—all of those are still top of mind, but definitely the AI one has been raised. And so we are very excited about that, to be blunt, because we feel like, hey. This is what we were born for. Right? Our proxy is really a JSON, API, MCP-fluent proxy. Start with cloud and now AI. It is sort of a one-two punch in a good way for us. So we are very excited, obviously, about what is to come, to be blunt, in the many, many years because we are early, obviously, in the AI super cycle. As far as net new ARR, we had, obviously, a high comp in Q4 of last year. You can see that as you kind of metric it and you watch through that growth. We are, obviously, happy to record the highest net new ARR we have ever had. You saw the growth in our customers of over $100,000 in ARR, right, in 23-plus percent, and, obviously, strong upsell as well. And so for us, the other big point to remember is we really started hiring and ramping our reps mid year, so beginning in Q3 last year. It takes about 12 months for them to ramp to full productivity, and, and so that is another big piece for us that we continue to drive. Operator: Great. Thanks. Thank you. Our next question comes from the line of Robbie Owens with Piper Sandler. Robbie Owens: Great. Appreciate you taking my question this afternoon. Wanted to ask more high level just around revenue model. And as you think forward—and I know it has been disclosed here—you are primarily a seat-based model. And obviously, there are some concerns in the market what seat-based models look like going forward, especially in light of all the recent layoffs. So as you add new modules and new capabilities, do you see that shifting more either towards traffic or capacity or things that will—it will be an underlying seat-based model that you are protected by adding more modules on top. So would just love some color. Thanks. Sanjay Beri: Yeah. It is a great question. So when you look at what we do, we run the traffic for most enterprises. We run everything. All their generative AI traffic, all their agentic traffic, their cloud traffic, their on-prem traffic—it goes through us. The reality, though, is there is no free lunch on our network. And so if you are going to run users through our infrastructure, which is what obviously people do, you pay for that by user. If you are going to run agentic traffic, right, whether it is server-side or client-side, whether you have an AI agent, you pay by transaction. And so all of the new products we released today, they are charged by transaction. What is a transaction? It is a prompt and a response. Right? That is kind of the token for the agentic economy, and that is how we charge. So no matter what people run and what that balance is over time, we are going to make money off that. And so you will see, and you have already seen, four new products today—all transaction-based—which essentially maps to what you can think about as tokens. Operator: Thank you. Our next question comes from the line of Gray Powell with BTIG. Your line is open. Gray Powell: Okay. Great. Thanks for taking the question. Yeah, so maybe one on the product side. So one of your larger network security peers, they appear pretty bulled up on the potential for improved demand in the SD-WAN markets and the opportunity for legacy replacement this year. Netskope, Inc. also often receives high marks on WAN capabilities. So I am just interested—what are you seeing in your pipeline, and then how often are you having discussions where both security and networking are buying centers that are involved in deals? Andrew Del Matto: Yep. Great question. So first of all, you are right. Like, in an organization, when you map out the structure, you have a CIO and you have the security leader and the infrastructure ops leader. You also now have an AI leader, and we often train all our reps—go after that square. You have to hit all four. Now where buying decisions are made, it can be in one or it could be multiple. But we obviously hunt across all of those. For us, we are a networking and a security company for the cloud and AI era. Right? And so we think about consolidation of both. The SD-WAN—what does it do? It is for speed. It is for performance. It is for resilience. And that is how we view it. And so we offer it in software form factor on your endpoint. Right? You can put it in your infrastructure. And we have seen great growth in it. You saw a great win we had in a very large distributed organization where they combined our SD-WAN as a smart on-ramp to our NewEdge network and all our security functionality. And so that concept, often called unified SASE by analysts, for us, we can deliver on that. And so what do I see in the future? Well, look at agentic traffic. The key is that agentic traffic is going to come from a user working remote. It is going to come from an oil rig, which is running AI on it. It is going to come from agents, right—many of them running on servers. All of that traffic needs to be accelerated. And that is really what the AI Fastpath is. We are the best path for agentic and non-agentic traffic, whether you are doing inference or beyond. So SD-WAN is just one small part of that fast story. Gray Powell: Okay. Thank you very much. That was helpful. Thank you. Operator: Next question comes from the line of Matthew Hedberg with RBC. Your line is open. Matthew Hedberg: Great. Thanks for taking my question, guys. Andrew, I think in your prepared remarks, I am curious—was that you said deal composition can change from quarter to quarter, sort of the reason why NRR ticked down by a couple 100 basis points? Or just, I am just trying to get a little more clarity on that element. Andrew Del Matto: Well, first of all, we view a 116% NRR as very strong, to be frank. I think anything in the mid to upper teens is something we would be very happy with, Matt. But look. NRR does vary quarter to quarter. Some quarters, we have more upsell. Some quarters, we have more new logo revenue. You know what? I think we have said that before. And note that Q4 a year ago was one of the strongest, if not, you know, a record quarter from an upsell perspective—Q4 of FY '25. That being said, looking forward, we have a large installed base. Average customer has, I think, 4.4 products. We have 25-plus products, four new products announced today—again, as Sanjay said, transaction-based—so a lot of white space and, you know, hopefully, a lot of upside there. And just want to mention that downsell and churn remain at historic lows. So retention remains very strong. Matthew Hedberg: Got it. Thanks, Andrew. Operator: Thank you. Our next question comes from the line of Brad Zelnick with Deutsche Bank. Your line is open. Brad Zelnick: Great. Thank you so much for taking the questions. A lot of good information that you have revealed, you know, in these results. I have got one for Sanjay, one for Andrew. Sanjay, you spoke to a lot of this in your remarks, but I just want to hit it head on. It is great to see the unveiling of Netskope One AI Security today, and I think there is consensus that network traffic will grow exponentially as AI agents are rolled out into production. My question is, with the massive throughput requirements that agentic east-west traffic may demand, why is SASE and more specifically Netskope, Inc. best positioned to secure this traffic versus maybe a virtual firewall vendor? And then just quickly for Andrew—Andrew, just why is the shift to annual billings happening faster, and should we expect to see that result in maybe an unexpected benefit to ARR and revenue as you get better pricing? Sanjay Beri: Thank you very much. Thanks for the question. So when you look at agentic traffic, what is, like, an AI agent doing, and what are people most worried about it doing? Well, an AI agent unleashed will go access your endpoint. Guess what? Netskope, Inc.—we monitor that. We have our endpoint data protection. It will go access your cloud apps, right, over the Internet. That is what we do. We monitor it, understand what are they accessing, restrict what it can access dynamically, whether it is a shadow agent or not. Your on-prem data—that is what our AI-enabled ZTNA does. And so I guess the summary is when you look at what Netskope, Inc. does, we have a sensor that sees all traffic that goes back on-prem, to your cloud, to your AI applications—no matter where it goes—to a website. We also have a sensor on the endpoint where we do our data protection and beyond. And then we also have a sensor which looks at all out-of-band activity, right, when you look at our lineage around understanding how these applications work, with CASB and beyond. And so we are in this unique spot where the world is about—do you have unique data? Can you generate proprietary data that no one else can see or has? And that is what we do. Because we are the most performant, largest cloud private network, because we have the ability to interpret this data at a much more granular level, we understand the agentic interactions at that granular detail. And as a result, our policy enforcement—our 1,000 of them have chosen us to secure their agentic traffic. Brad Zelnick: Very helpful. Andrew Del Matto: Yeah. And, Brad, great question on the billings. Look. I would remind everybody that, you know, the billings transition provides strong predictability and consistency of both billings and free cash flow, ultimately. We added a slide 24 to help illustrate the transition and where we are. I would point everybody to the 78% growth in the future billing commitments—the future committed billings. And the interesting part about that is we can see what is coming. We can actually see the dates we bill. We can obviously model collections better. And, again, we have been free cash flow positive, and that will, obviously, tilt up later in the year. But as far as, like, why going faster? It is just really strong execution. We have been very focused on it internally. We have been inspecting the deals, so to speak, and making sure that we are communicating with the salespeople and helping them through the transition, along with our customers. And then just in terms of pricing, I mean, the way we really think about pricing is we focus on value. You know, we have high win rates, and so pricing to us is more about selling the value of our products. And quite frankly, you know, we will continue to focus on that. We have new products to offer—I think a stronger story with the new AI products coming out—and those are the things I would really look to, to strengthen the trend on pricing. Brad Zelnick: Awesome. Thank you so much for taking my questions. Operator: Thank you. Our next question comes from the line of Jonathan Ho with William Blair. Your line is open. Jonathan Ho: In terms of your profitability guide for 2026, I know you talked a little bit about investments. You help us understand maybe where you see the most opportunity to place those investments? And what would be, sort of, the timeframe for us to see perhaps an inflection in growth as you spend more on R&D and sales and marketing? Thank you. Sanjay Beri: Yep. Great question. So from an investment perspective, obviously, you have seen our yearly guide, but you also saw that we are investing upfront. And when that upfront investment is, it is really in AI—continuing to AI-enable our R&D team. So when you look at the world today that we live in, I believe that every engineer can be a 10-times engineer. And AI is not about by coding something or so on. It is about making your elite engineers 10 times more productive and 10 times more focused on architecture. And so what do you have to do to enable that? Well, you want to invest in AI orchestration. That could be to help them automate workflows, to automate their validation and testing, to automate, sort of, the rote stuff that they have to do, so they can focus on the unique part. And so that is what we are doing in Q1—investing in that in the first half, in that AI tooling. Now what you will see after that is you will see in the second half and beyond that we really do not need to ramp our R&D in terms of headcount as what you may have thought, right? We can be a lot more efficient. And so this is about laying continually the groundwork for R&D efficiency. You have got to invest a little in AI tooling, and then you see a lot of that benefit from an R&D leverage. And you will see that, obviously, as we continue our R&D percentage of revenue downwards. And so that is probably one of our bigger investments. The second is in the sales and marketing. We mentioned that really mid last year, we started bringing on more reps, and those reps take about 12 months to ramp. Well, one, not only do we continue to invest in enabling them, but we are hiring more teams, right? And we know what is in front of us in terms of the TAM for the next decade—one of the most durable TAMs you will ever find in any industry, including security, where we operate on the far right of security, right? We operate the network. We operate the infrastructure, the highway, to everything that you can think of. And so we want to take advantage of that and continue to ramp and hire from a sales perspective. But we are doing that very responsibly, with this notion of being very efficient in R&D by investing in tooling. And so that is really our upfront investments in the first half. And that is why you see what you saw from the guide on Q1, Q2 versus the rest. Operator: Thank you. Thank you. Our next question comes from the line of Richard Poland with Wells Fargo. Your line is open. Richard Poland: Hey. Thanks for taking my question. Just a quick one for me. I think it was Andrew—you mentioned the geopolitical, macro headwinds kind of happening over the last couple of weeks. I just wanted to clarify on that. Is that something that, you know, you are starting to see show up in demand and pipeline? Or is it just, kind of, you are observing what is going on in the macro environment, so you are taking some extra cautionary steps in the guide. Alright. Andrew Del Matto: Fair question, Rich. I think, you know, it is something—I think we can all recognize that there have been more events in the last couple of weeks. So it is something just to consider in terms of being prudent, in our mind. To keep in mind, we have a, in terms of that area of the world, so to speak, we have a very small percentage of our business. So I do not—it is less about that and just more about, you know, what I would call kind of a more macroeconomic risk. Richard Poland: Okay. Great. Thanks, guys. Just prudence. Operator: Thank you. Our next question comes from the line of Shrenik Kothari with Baird. Your line is open. Shrenik Kothari: Yeah. Thanks for taking my question. So the AI Fastpath is really, as you said, shifts focus from not just securing AI to securing at scale with AI-native fabric and the new modules that you announced. So as it pulls the conversation away from, like, traditional kind of FTE-based pay cost towards more broader discussion, can you talk a little bit about how the AI Fastpath has been progressing—your pipeline right now? And then I have a quick follow-up. Thanks. Sanjay Beri: Sure. Yeah. It is a great question. Like, we have always believed that ultimately nobody implements security unless it has a great end user experience. In the agentic world, performance matters more. Agents talk constantly, right? They can talk at a rate that is 100 times a human. And so it accentuates the need for a fabric that can operate and perform and be resilient worldwide. If you look at our infrastructure, it is the largest private cloud in the world. It is the largest highway or airspace for AI. And so those 120-plus data centers, with our architecture and software and memory operating at high speed on all agentic traffic—that is a huge advantage for us. And what we tell customers is just try it. Just measure it. You will see a very, very noticeable performance difference. Whether you are an AI agent or you are an application, you are a user, right? You are an IoT device. And so the AI Fastpath is the next evolution of that for the AI era. You are going to a coding application, right? You are going to any of the thousands of generative AI apps you can see on the AI Index. We are going to be the fastest path to get there. We are going to handle that. We are not going to throw it on the public Internet. We are going to get you there directly. And so for us, the AI Fastpath is a big part of how we think about the agentic era—its performance, resilience, in addition to security—and we are combining them all. Operator: Thank you. Our next question comes from the line of Eric Heath with KeyBanc. Your line is open. Eric Heath: Hey, thanks for squeezing me in and solid finish to the year. Sanjay and Andrew, over 30%. Maybe just one for you, Sanjay, and maybe a quick one for Andrew. Sanjay, just following up on some of your comments about the customer wins in the quarter being, I think, all of them competitive bake-offs, and I think we all kind of really appreciate the static set of competitors it has been for a long time, but there are some incremental competitors out there that have popped up in the last couple of years. So curious if you could just talk to whether the competitive set—who you are bumping into in these deals—is changing at all. And then, Andrew, if I could, just any high-level guardrails you want to give us on ARR for the year would be great. Thanks. Sanjay Beri: Great. So from a competitive perspective, we have, you know, 25 products. We just released four. One of the great things about efficiency in R&D that you have seen—obviously, R&D percentage of revenue going down, obviously the supercharging of it with AI and the need to not, you know, not to hire as many from an R&D perspective—you are also seeing velocity increase. I think I previously said that we release on average two products a year or so. Well, we have already released four-plus, and I think that trend will continue for us. And so we are very excited, obviously, about that supercharging. And as a result, because of the breadth of what we do, we do see different competitors. For example, in the data protection area—which, you know, data, frankly, is what drives the agentic world—we would have seen still some, a lot of the legacy folks, right? You cannot imagine how much legacy Broadcom Blue Coat and all the rest is out there in Symantec and Trellix and so on. Whereas perhaps in the traditional kind of web world, proxying web, you would see your competitors that you may see in a Magic Quadrant that you would expect. And then when we delve into, sort of, what I called about the AI Fastpath—the performance—you really do not see anything there because the network is obviously just very different, very unique from that perspective. And so I think, like, we hit across a cross section of competitors. But what is noteworthy is our win rate of over 80% if we get to a POC, a proof of concept, right? That has held. And so our nirvana is just get to a POC—whether it is about enabling, securing AI, securing cloud, converging, consolidating your network infrastructure. That is why we are growing our sales teams. That is why we announced the GSI partnership and that win with the largest GSI. And that is why we continue, you know, to power through in the mid market with our MSPs. It is just—that is why we went public, to be blunt: drive awareness. And so that awareness takes time. It is coming. And we definitely have the platform that, when you get to knock that door open, we will win. Andrew Del Matto: And, Eric, on ARR, again, you know, while we do not guide, maybe I can be helpful with how to think about modeling. You know, last quarter, we ported the history. I would do the same thing. You can see that, I think, ARR was about a point below revenue growth. So, you know, I would say if I were modeling, kind of, at a point above, point below—something like that, right in that range. Eric Heath: Awesome. Thank you, gentlemen. Operator: Thank you. Our next question comes from the line of Shaul Eyal with TD Cowen. Your line is open. Shaul Eyal: Thank you. Hi, good afternoon. Andrew, maybe can you talk to us about ASP patterns in light of rising memory prices? Sanjay Beri: I will take that question. So for us, when you look, first of all, at our landing and our average ARR per deal size—you can calculate it—it continues, you know, for our customers to continue to go up. When you look at memory, I think that, in one case, people often talk about that as when you sell boxes and appliances and everything ships with memory. That is obviously not really what we do in the majority of cases. For us, it is our infrastructure. It is our network. What runs on it is our software. And so we feel good about our guide for this year in terms of incorporating what you just said. Obviously, that is a fluid environment, so we will watch that for next year. But we definitely feel good about the guidance we have given from a financial metric perspective that incorporates all of what you described. The reality is that for us, when you think about us, we process all this traffic. You can see it. You should go to ai-index.netskope.com. And when you look at that traffic, what matters there is what you do when you see it. And, ultimately, that, in many cases, is our moat. It is uniquely taking those transactions and generating very unique, granular data that can then inform your security policies, your security analytics, optimization of that, your guardrails, and so on. And so for us, obviously, we are excited about continuing to drive more into our existing infrastructure, which can more than handle what we need to drive for this year. Operator: Thank you, Sanjay. Thank you. Our next question comes from the line of Trevor Walsh with Citizens. Your line is open. Trevor Walsh: Great. Hey, team. Thanks for taking the question. Maybe just a quick one for you, Sanjay. Just wanted to square some of the comments that you made both in the prepared remarks and your responses to some of the questions. You said that the AI revolution is exposing legacy architectures within SASE. Is that going to result in, like, just breaking of those legacy or more just dissatisfaction, just generally, with performance? And then secondarily to that, is there some sort of leading indicator that investors could use to just determine whether or not more of that breaking or dissatisfaction is going to come once AI and agent traffic is getting to a certain point? Maybe the AI Index you just released gives us clues there. Just trying to get a sense of when we really start seeing the wheels fall off, potentially, of other players, if that makes sense. Sanjay Beri: It is a good question. So I would look at it in two sides. One is the infrastructure and the network side, and one is security—because you kind of need both. On the infrastructure and network side, the agentic era will expose networks that were built, for example, in the public cloud, where you are going to get way worse performance. When you have more interactions back and forth, the performance difference becomes bigger, right? It became big with cloud. It will become bigger with AI. And so, one, your infrastructure. The second is, for us, we run all services everywhere—120 data centers. Everything we do runs everywhere. We do not hairpin people to a public cloud for one, to your own infrastructure for another. And so just the purity and the modernness of our architecture and our infrastructure, it leads to just better performance. And AI accentuates that. So, one, I do think the infrastructure and the network of others gets exposed. The second is, remember, since the beginning of Netskope, Inc., we have always said we are not trying to build a web proxy, right? We were building a modern API/JSON proxy. And it sounds technical, but what does it mean? The language of AI is that. The language of AI is APIs and JSON. I have a patent sitting outside my door here, which is real-time interpretation of Internet traffic at the API level. And the reality is that the AI era is about that. How do I say to someone that, hey, you can use a personal instance—or you cannot use a personal instance—of Gemini, but you can use a corporate version? And if you want to send sensitive data there, you can only do that with a corporate version. How do I have all these policies that guardrail and enable people to use AI, yet satisfy the business policies they want? You need something that truly understands the new language of the Internet, which is really what AI accentuates. And so for us, one of the engines to our car is a high-speed, distributed, in-memory, API/JSON proxy. That is unique. And so I remember this customer who came to me and said, Sanjay, I bought a SASE. I bought it, and it was working. But then I started adopting AI and cloud, and I have to bypass 70% of all traffic because all it can do is block the app or allow it. I do not want to block AI. I do not want to allow it either. I want something more granular. Right? And that customer moved all their traffic to Netskope, Inc., right? It is close to 100,000 users and agents and beyond. And they are very happy. And so I think that will happen more and more over time. But as you know, it is an enterprise, and an enterprise does not do things instantly. And so that will be a transition that will happen over the next many years. Trevor Walsh: Great. Thanks all. Appreciate it. Operator: Ladies and gentlemen, due to the interest of time, our last question will come from the line of Michael Romanelli with Mizuho. Your line is open. Michael Romanelli: Yeah. Hey, guys. Thanks for squeezing me in here. So, Sanjay, you touched on this in, you know, prior response, but how does your sales capacity today compare to where you were a year ago, both in total as well as in the number of ramp reps? And then separately, I guess, how would you characterize or assess your pipeline, you know, as we head into fiscal 2027? Thanks. Sanjay Beri: Yeah. It is a great question. So for us, we obviously started ramping, hiring more reps really full force last year. And you can see that in, sort of, the S&M spend as well as it ramped early midyear last year. And it takes about 12 months for us to ramp those reps. And so if you look at that, it is really, for us, in the second half of the year when a lot of those reps will be fully ramped. And, by the way, for fully ramped—as you know, when you get a rep, we do not throw them into a place and give them a bunch of existing accounts. They are hunting new greenfield accounts. So they get on, they start hunting those accounts. They build their pipeline. They get the POC, do the MSA. That is why you have those ramp times, to be clear. And then we are continuing to hire. And so we are building that rep funnel for next year as well. And so, really, that is the best way for you to think about it—bunch of those fully ramped reps coming online in the second half of the year. Michael Romanelli: Beautiful. Okay. Great. Operator: Thank you. I would now like to turn the call back over to Michelle for closing remarks. Michelle Spolver: Thank you, Towanda, and thank you all for joining us today and also staying a few minutes over. Look forward to engaging with you in the weeks and months ahead, including at RSA this month, where we will be sharing more about our AI strategy as well as demonstrating our newly announced AI products. Thank you all. Have a good evening. Operator: Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.
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