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Operator: Good day, and thank you for standing by. Welcome to the Riskified Ltd. Fourth Quarter 2025 Earnings Call. At this time, participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. You will then hear an automated message device and your hand is raised. To withdraw your question, please be advised today's conference is being recorded. I would now like to turn the call over to your speaker today, Chet Mandel, Head of Investor Relations. Please go ahead. Chet Mandel: Good morning, and thank you for joining us today. My name is Chet Mandel, Riskified Ltd.’s Head of Investor Relations. We released our results and are hosting today's call to discuss Riskified Ltd.’s financial results for the fourth quarter and full year 2025. Our earnings materials, including a replay of today's webcast, will be available on our Investor Relations website at ir.riskified.com. Participating on today's call are Eido Gal, Riskified Ltd.’s Co-Founder and Chief Executive Officer, and Aglika Dotcheva, Riskified Ltd.’s Chief Financial Officer. Certain statements made on the call today will be forward-looking statements related to, without limitation, our operating performance, business and financial goals, outlook as to revenues, gross profit margin, adjusted EBITDA profitability, adjusted EBITDA margins, and expectations as to positive cash flows, which reflect management's best judgment based on currently available information and are not guarantees of future performance. We intend all forward-looking statements to be covered by the safe harbor provisions contained in the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect our expectations as of the date of this call, and except as required by law, we undertake no obligation to revise this information as a result of new developments that may occur after the time of this call. These forward-looking statements involve risks, uncertainties, and other factors, some of which are beyond our control, that could cause actual results to differ materially from our expectations. You should not put undue reliance on any forward-looking statement. Please refer to our Annual Report on Form 20-F for the year ended 12/31/2024 and subsequent reports we file or furnish with the SEC for more information on the specific factors that could cause actual results to differ materially from our expectations. Additionally, we will discuss certain non-GAAP financial measures and key performance indicators on the call. Reconciliations to the most directly comparable GAAP financial measures are available in our earnings release issued earlier today, and also furnished with the SEC on Form 6-K and in the appendix of our investor relations presentation, all of which are posted on our investor relations website. I will now turn the call over to Eido. Eido Gal: Thanks, Chet, and hello, everyone. Ended the year strong, and this momentum positions us for continued success in 2026. Our fourth quarter non-GAAP gross profit of $57.3 million represented strong year-over-year growth of 16%, and our adjusted EBITDA of $17.7 million translated to a margin of 18%, demonstrating the scale and strength of the business. This quarterly amount alone exceeded our full-year adjusted EBITDA of $17.2 million in 2024. Our fourth quarter revenues of nearly $100 million were a record since inception, and contributed to our first ever quarter of GAAP profitability. These results are the culmination of consistent, high-quality execution across the year. In 2025, both annual dollar retention (ADR) and net dollar retention (NDR) improved year over year. ADR reached approximately 100%, up from 96%, and NDR significantly improved to 105% from 96% in 2024. Our go-to-market team had another successful year with particularly strong results in the fourth quarter of 2025. During the quarter, we won the highest quarterly amount of new business since our IPO, which represented approximately 55% of the total new business won for the year, and was driven by high competitive win rates of over 75%. This year, we won and onboarded several leaders across industries and geographies, including Aerolineas Argentinas, Abounds, Adastria, Ace Hardware, Bangsa, Qasem, David's Bridal, NetEase, Nintendo, Temu, TripAdvisor, and XTool. In addition, merchants such as Iberia Airlines, Meta, Fast Retailing, Viva Aerobus, Vivid Seats, and Zepz were all upsold in 2025, after landing on the platform over the past few years. We believe this demonstrates the power and ROI that our platform delivers to our merchants, once onboarded onto the Riskified Ltd. network. We have processed approximately $750 billion in GMV, and have over 1 billion unique customer interactions in our network since inception. I believe that this data moat has created a structural competitive advantage and that we are well positioned to capture even more of the large opportunity in front of us. That is why we are focusing our efforts on deepening our geographic presence, and growing faster in our newer verticals while identifying additional verticals to penetrate for continued market share gains. From a geographic standpoint, our non-U.S. regions collectively grew 22% year over year, driving faster, more diversified growth. Notably, APAC and LATAM were key regions of outperformance. We plan to expand further in these regions by developing localized products and features to boost pipeline generation. We have scaled our presence in the payments and money transfer category as evidenced by 66% growth in 2024, and 90% growth in 2025. Based on the current pipeline and the annualization of new business won in 2025, end-to-vertical I expect another strong year of activity in 2026. As we capture more data and payment types, leading to more refined models and bespoke features targeted to this vertical, I believe we are positioned to continue penetrating the significant white space. According to recent industry studies, there was a 27% year-over-year increase in fraud losses related to online transactions. The total losses attributed to fraud are expected to more than double in the next five years, well outpacing the expected growth of ecommerce. In addition, over two-thirds of U.S. companies experienced an increase in AI-related fraud attempts in 2025. We are witnessing escalating complexity of fraud schemes, which now target every touchpoint across the customer journey from account creation and stored value credentials all the way through the return, customer service, and dispute portals. Every part of the transaction process is at risk. Progress varies across payment types, including ACH, credit cards, digital wallets, crypto and stablecoins, agentic checkout, and other methods. We need to be prepared to support and manage risk across the full payment landscape. We are leveraging the capabilities of our AI ecosystem that has been continuously advanced for over a decade. This increase in fraud has further elevated Riskified Ltd.’s role, solidifying our positioning as a key partner for our merchants. I believe that the combination of a more pronounced and complicated fraud landscape, enhanced platform features and functionality, and a deliberate effort to expand the top of our front deal funnel has contributed to an increase in our new business lead generation of approximately 50% year over year. Furthermore, in line with our expectations at the beginning of the year, I am pleased that we generated nearly $10 million in aggregate annual revenues from Policy Protect, AccountSecure, Dispute Resolve in 2025. And we plan to continue to grow our revenues outside of our core fraud services in 2026. As we have expanded our offering, the benefits of having a platform are becoming even more pronounced. First, we saw an approximately 50% increase in the number of merchants who are now using more than one product during the year. This multiproduct approach has made us stickier. Second, each transaction processed across our suite of products strengthens our flywheel by expanding the breadth and depth of our datasets. This integrated dataset compounds across the network, enhancing our identity engine, and enabling us to develop dynamic components that can be utilized across the platform. Third, these cross-platform synergies lead to better performance for our merchants. This strong performance with differentiated capabilities allowed us to regularly outperform our competition. And fourth, merchants utilizing more than one product generally leads to higher contribution profit for those merchants. This is part of the reason why in 2026, we are focused on driving gross profit growth versus optimizing primarily for revenue growth. As Aglika will discuss shortly, we expect non-GAAP gross profit growth to accelerate double digits at the midpoint in 2026, demonstrating the continued leverage in our model. Now on to a very topical theme: artificial intelligence. Allow me to discuss how we are observing AI impacting the market and how Riskified Ltd.’s product platform and internal operations are positioned for success in this environment. There are two main dynamics that we are seeing. First is the increased utilization of agentic commerce through general purpose LLMs, but still primarily only for discovery purposes and not checkout. The second is the rise of merchant-native LLMs, which are advanced agents within a merchant's ecosystem designed to handle the full shopping journey from answering queries to completing the purchase, closing the loop completely within their ecosystem. Both flows present unique transaction risks that our platform aims to solve. In the first agentic flow, when customers do use general purpose LLMs for checkout, we have seen instances where fraudsters utilize AI to throw authentic traffic off script by generating synthetic IDs to bypass LLM verification. Our internal estimates indicate that approximately 30% to 40% of essential model features are lost when consumers transact through general purpose LLMs, increasing risk and escalating the prevalence of fraud like this. To combat this, we strive to help merchants by providing clear visibility into agentic traffic and emerging fraud MOs that they do not otherwise have on their own, proactively adjusting models based on low-signal environments, segmenting order flows, and rapidly developing features to identify emerging agentic fraud MOs. In the second flow, merchants are building out their AI shopping assistants to offer deep personalization and loyalty programs based on customer preferences. Riskified Ltd. provides a critical risk intelligence layer that helps make these transactions both smart and secure. This is especially critical when those interactions have financial implication. An example of this is providing merchant-native AI agents with real-time risk signals while they are in the conversation with customers to offer instant refund or exchange decisions, based on that individual customer's risk and eligibility. Because Riskified Ltd. analyzes the complete purchase history of the end customer across an expansive global network of ecommerce brands, including exact product list SKUs and cross-merchant behaviors, we can provide highly differentiated data that merchants cannot otherwise access on their own. We are able to provide a decision platform for their agents to make important and accurate financial decisions. We are excited about the continuous expansion and enhancement of our agentic commerce offering. Merchants are actively preparing and ready to support agentic commerce across its various forms and flows. Our ability to not only service the dynamic needs of an evolving market, but also to innovate in real time is generating an increase in merchant dialogue. I believe that this strategic engagement is a driver for our future business pipeline and growth. Internally, we continue to adopt AI to automate and scale complex business workflows across departments. This is intended to help drive operational efficiency and productivity, lower costs, improve response times, and enhance service delivery. For our engineering teams, AI has become a force multiplier. Our developers have moved from basic coding assistance to agentic systems that span the entire development life cycle, from discovery and requirements assessment to automated root-cause analysis for production alerts. In addition, by using agentic flows for code review and observability, we are reducing technical debt while increasing release velocity. The impact on productivity is measurable. Between Q2 and 2025 many of our engineers saw more than 2x increase in tickets completed. This enables us to focus on developing new product enhancements and features, and to test, train, and deploy them more efficiently, strengthening our relationships with the hundreds of enterprise merchants in our network. We are seeing similar functional leverage across the other business units. In finance and analytics, we have moved several initiatives into production to automate processes that reduce human error and manual labor to drive merchant inbounds, and the go-to-market team has found success utilizing LLMs in high-end queries. We have also developed agents that automate time-consuming cost-benefit analysis of merchant prospecting, minimizing manual work to drive quicker and more accurate outreach. And while we are getting leverage from general purpose LLMs in our own business, I do not believe that those same LLMs pose a true threat to our decision engine. In our view, LLMs lack calibration in the precise probability intervals required for fraud engines. Additionally, LLMs are optimized for text and image, while traditional AI fraud models like ours are much better at analyzing structured data inputs. The data we collect includes browsing behavior, account activity, checkout data, and post-fulfillment signals for every transaction. Our models learn from over 5 billion historical nonpublic merchant network transactions that have been labeled and tagged. With this data, we create, update, and continuously deploy features to be used by our models that solve the increasing complexities of fraud. To that end, as we announced yesterday, we have recently developed features to address this problem. Within our PolicyProtect Decision Studio, merchants are able to identify and apply business rules to manage the risk of order volume coming from their native AI shopping agent. This control will allow merchants to confidently deploy their branded conversational AI agents without exposing themselves to programmatic refund claim abuse, reseller arbitrage, or promotional abuse. We also expanded our AI agent identity signals, allowing a merchant's AI shopping agent to directly query the Riskified Ltd. identity graph to retrieve associated risk indicators and resolve an identity programmatically. The breadth and sophistication of our platform allows us to train, test, and deploy merchant- or payment-specific models. We also use this platform to retrain models with updated data, new features, and segment calibrations to protect from emerging fraud patterns across our network. All this helps us drive optimized merchant performance which, at the end of the day, is the key driver of merchant satisfaction. Our ability to rapidly adapt in the face of a shifting landscape does more than just protect our merchants. I believe it serves as the foundation for our sustained financial strength and disciplined execution. Over the past two years, we have repurchased shares representing approximately two-thirds of our current enterprise value. Based on our current expectations of improved free cash flow of approximately $40 million in 2026, we anticipate generating a free cash flow yield of approximately 10% relative to our current enterprise value. Looking ahead, I believe that our momentum remains strong. As a reflection of our confidence in Riskified Ltd.’s long-term trajectory, I am pleased to announce that our board has authorized an additional $75 million share repurchase program. This decision reflects our conviction in the fundamentals of the business, supported by strong free cash flow, a debt-free balance sheet, and a disciplined capital allocation strategy that we believe will prove beneficial for our shareholders. I want to thank our team again for their focus and strong execution against our 2025 financial plan. Our results reflected the top of our revenue and adjusted EBITDA guidance ranges, and we enter 2026 in a position to accelerate our performance even further. Now over to Aglika. Aglika Dotcheva: Thank you, Eido, team, and everyone for joining today's call. Unless otherwise noted, this discussion will reference non-GAAP financial measures. We have provided a reconciliation of GAAP to non-GAAP financial measures in our earnings release. We achieved fourth quarter revenue of $99.3 million and full year revenue of $344.6 million, up 65% year over year, respectively. And while we do not plan on reporting our billings going forward, our fourth quarter billings of $103.3 million grew 9% year over year. Our fourth quarter GMV of $46.7 billion was the highest quarter of volume reviewed in our history, and represented growth of 18% as compared to the prior-year period. For the full year of 2025, our GMV grew by 10% to $155.1 billion. During the fourth quarter, revenue growth was partially driven by strong performance in our travel sub-vertical, reflecting continued momentum from the third quarter. These gains were partially offset by softness in our tickets and live events sub-vertical which declined year over year, primarily due to tougher second-half comparable periods versus 2024’s record level of activity and larger live events. Overall, the total tickets and travel vertical was slightly positive in the period. Our money transfer and payments category grew 75% year over year driven by new business wins and upsell activity. Our fashion, cosmetics, and luxury vertical grew 8% year over year. This was primarily driven by new business and upsell activity, and 11% growth during the Black Friday through Cyber Monday period. This growth was partially offset by continued same-store sales pressure in our high-end and sneaker sub-verticals, similar to the first nine months of the year. That being said, for the second quarter in a row, we did see year-over-year improvements in some of our largest merchants in this category. Lastly, I am encouraged that we reverted to year-over-year growth in the home category as we have now fully lapped the dynamic that impacted the first nine months of 2025. For the year, our money transfer and payments, fashion and luxury, and tickets and travel categories were the largest contributors to our annual revenue growth. The combination of these verticals represented nearly 80% of total billings and are each expected to drive continued growth in 2026. For the full year, revenue in the United States declined 6% year over year primarily as a result of the contraction in our home category. Encouragingly, we continue to grow across all of our non-U.S. regions, with accelerated year-over-year growth as compared to 2024. During 2025, APAC grew 53% year over year, while Other Americas, which represents Canada and Latin America, grew approximately 13% year over year, primarily driven by the momentum in new business and upsell activity, with particular strength in the travel sub-vertical. EMEA grew approximately 18% year over year with the strongest performance concentrated in our money transfer and payments, tickets and travel, and fashion and luxury verticals, supported by both new business and upsell momentum. Our revenue derived from merchants headquartered outside of the U.S. was 46% in 2025, up from 39% in 2024. We believe that our continued international growth reflects ongoing progress in capturing global market share. During the fourth quarter, we achieved record quarterly gross profit of $57.3 million, up 16% from the prior year, and $180.3 million for the full year, representing a year-over-year growth of 4%. The full-year gross profit growth of 4% was driven by meaningful improvements in our core machine learning models with great performance in our money transfer and payments category, and within our 2024 cohort which delivered the most pronounced year-over-year improvement across cohorts. Our increased revenue from new products further contributed to our growth. This improvement was partially offset by the ramping of merchants in newer geographies, such as Latin America, and weaker performance in our 2022 cohort, which, while still maturing, has yet to reach the performance levels of the broader portfolio. As a reminder, I encourage you to continue analyzing our gross profit on an annual basis given individual quarters can vary due to the various factors, including the ramping of new merchants and the risk profiles of transactions approved. As it relates to 2026, for the full year, we are targeting non-GAAP gross profit growth of 7% to 12%, with each quarter at or near 10% growth at the midpoint. In addition, we estimate that each quarter in 2026 will approximate the same percentage of the total as they did in 2025. Moving to our operating expenses. We continue to manage the business in a focused and disciplined manner. Total operating expenses were $39.6 million for the fourth quarter, and $153.6 million for the full year, representing a decline of 2% from 2024. Our operating expenses as a percentage of revenue declined from 48% in 2024 to 45% in 2025, reflecting leverage in the business model. We ended 2025 with 617 global employees, a decline of 3% from the prior year. This was achieved through the increased utilization of artificial intelligence tools to maximize output and increase efficiency, and by strategically reducing headcount in areas that were less critical to our product development and growth strategy. Despite this nominal decline, we ended the year with an increase in our development capacity, which we believe is critical to advancing platform innovation, outperforming our competition, and improving product accuracy and customer service to deepen our merchant relationships. In 2026, we anticipate quarterly expenses to approximate $41 million to $42 million per quarter in the first half of the year, and $42 million to $43 million per quarter in the second half. The primary driver of the increase from 2025 relates to FX headwinds, mainly from the appreciation of the Israeli shekel compared to the U.S. dollar. The FX headwind is approximately 400 basis points to our annual adjusted EBITDA margin. On a constant currency basis, we anticipate relatively flat expenses year over year, as we continue to manage the business in a disciplined manner. We achieved adjusted EBITDA of $70.7 million in the fourth quarter, the highest quarterly amount in our history, which translates to an adjusted EBITDA margin of 18%. We believe that this quarter's results demonstrate that the business is positioned for continued adjusted EBITDA margin expansion and can achieve scaled performance like this over time. For the full year, our adjusted EBITDA was $26.7 million, representing a year-over-year increase of over 55%. On a GAAP basis, we achieved net profit of $5.8 million in 2025 as compared with negative $4.1 million in the prior year. I am encouraged about the progress that we have made on achieving profitability on both GAAP and adjusted EBITDA basis. Moving to the balance sheet. We ended the year with approximately $298 million of cash, deposits, and investments, and continue to carry zero debt. In addition, we continue to maintain a healthy cash flow model. In the fourth quarter, we achieved free cash flow of $10.7 million and $33.1 million for the full year. Looking ahead, I am encouraged that we expect our free cash flow to increase at least 20% to be approximately $40 million in 2026. During 2025, we repurchased approximately 22 million shares for a total price of $105.9 million, which contributed to a reduction of 8% in shares outstanding. Since the inception of our buyback program in 2023, we have repurchased approximately 52 million shares for a total price of $259.5 million, which helped contribute to a 17% reduction in shares outstanding over that time period. As Eido mentioned, I am excited to announce that our board of directors has authorized an additional $75 million of share repurchases, subject to the satisfaction of Israeli regulatory requirements. When combined with amounts that remain available under our existing share repurchase authorization, our total outstanding authorization is approximately $84 million. We believe that our strong balance sheet and liquidity position are strategic assets that provide us with the flexibility to navigate a range of operating environments. We intend to remain disciplined and thoughtful in how we deploy capital to create long-term shareholder value. On the topic of share-based compensation and earnings per share, share-based compensation expense of $51.6 million declined from $57.8 million in the prior year. As a percentage of revenue, this amount decreased approximately 300 basis points from 2024 levels. This was on top of a decline of 700 basis points over the prior two years. Looking ahead to 2026, we expect absolute share-based compensation dollars and as a percent of revenue to continue declining due to the gradual roll-off of expense associated with large grants made in 2021 and 2022 as the awards fully vest throughout 2026. Our total absolute share-based compensation dollars should approximate $40 million for the year. We expect our free cash flow generation to approximate our share-based compensation in the year. Our annual non-GAAP diluted net profit per share of $0.20 represents an increase of 18% in 2025. Now turning to our outlook. As we look forward to 2026, we currently anticipate revenue of between $372 million and $384 million, representing growth of 8% to 11%, with $378 million or 10% at the midpoint. Consistent with past years, we anticipate that our growth will continue to be driven primarily by new business activity, and at the midpoint of our guidance, we are forecasting a similar net dollar retention rate as in 2025. We currently expect all of the quarters in 2026 to reflect a similar percentage of the total revenue as they did in 2025, and growth to accelerate sequentially with each quarter throughout the year. The behavior of the microenvironment, our success in retaining our merchants, and the level of upsell activity relative to new logo wins will impact our net dollar retention rate and ultimately determine where we fall within our revenue range. In addition, we feel confident about the new business activity levels which is supported by a robust pipeline of new opportunities. Historically, the timing of when new merchants go live during the year can be difficult to predict, and may have an impact on our calendar year revenues. As always, we will continue to monitor the performance and health of our merchants, consumer spending and the broader ecommerce landscape, and the impacts on our results. Now let me discuss our adjusted EBITDA outlook. We currently expect adjusted EBITDA to be between $26 million and $34 million, or $30 million at the midpoint, representing a margin of 8%. This is inclusive of an approximate 400 basis points FX headwind to our adjusted EBITDA margin. Overall, I am encouraged by our AI advantage and market position, and I am confident that we can continue to execute on the elements within our operational control. We remain focused on identifying and executing on the many opportunities for long-term growth and our ability to deliver value to our shareholders. Operator, we are ready to take the first question, please. Operator: If your question has been answered and you wish to remove yourself from the queue, please press 1-1 again. Our first question comes from Terry Tillman with Truist Securities. Your line is open. Terry Tillman: Yes. Thanks for taking my questions, and congrats Eido, Aglika, and Chet. The first question, and hopefully you can bear with me because it is so topical around agentic commerce. It is a multiparter. And then I will have a follow-up question. As it relates to agentic, I appreciate kind of how you talked about two types of kind of agentic use cases. I am curious if you can quantify any early GMV from those two different scenarios. And then also, what would the monetization or take rate look like in transactions in that type of flow? And then how many merchants are you actually actively working with that are just trying this out at this point? And then I had a follow-up. Eido Gal: Sure. Hey, Terry. So I will take that. So maybe taking a step back. Right? We feel we are in a great position to talk to over 50 publicly traded companies and really understand what their agentic commerce strategy is. And the way they are laying it out to us is pretty clearly there are two main flows. The first flow, what we call the merchant-native AI agents, where they continue to own the relationship with the customer. And I think it shows a lot of promise in their mind. Right? And here, you would have an AI agent on their website that can support the entire life cycle from discovery to checkout to returns and customer support interaction, and this entire experience is happening on their website. So if they are a luxury fashion merchant, they can have the right type of images and product descriptions and flows and recommendations; if they are an OTA, they can have the right type of filters that are appropriate for traveling and routing. So I think they are putting a lot of emphasis on that area. What we are seeing there is, because LLMs are really—it is easy to challenge them and get them to move off script and make financial decisions that you did not intend them to make—we are serving really as this guardrail or intelligence layer that they are querying in real time to understand, hey, should I approve this transaction? What type of refund should I provide to this customer? And we are just really leveraging the entire network that we already have, making it even more unique, the value that we are providing in there. So that is kind of the merchant-native AI agent. The second flow is more kind of that general purpose LLM where it can either act as a good referral or do the purchasing on behalf of the consumer. There, to be clear, we are seeing predominantly referrals. Actually seeing agent traffic and purchasing is still extremely low and limited. From a take rate perspective, on the general purpose LLMs, we are seeing higher risk traffic there right now. So again, even if it is very small, whenever you have some of these newer flows, fraud tends to come in because there is more limited data. There is lack of experience. There is less control in those cases. And so I think on average, the take rate there would probably be higher right now, but over time, that might, you know, kind of shift. And to just a more general question around traffic, I think merchants are in a stage where they are trying to prepare and make sure that they are ready for the changes and put their best foot forward. But the traffic is probably not there yet. Terry Tillman: Very helpful. Thank you so much for that. And I guess just a follow-up, maybe for Aglika. It is helpful when you go through the different segments that you are serving and the growth rates. Money transfer and payments, it was another exceptional year of growth as you are onboarding strategic accounts, and they are growing. I am curious, though, do you see that outsized type growth continuing in your guide for 2026 on money transfer and payments versus the other end markets? Thank you. Aglika Dotcheva: Hi, Terry. So money transfer and payments was an amazing category for us this year. The growth was really, really strong. Kind of looking into 2026, we have a number of opportunities in the pipeline, and I expect the category to continue to grow, but probably just to normalize in terms of the total amount. Terry Tillman: Alright. Thank you. Operator: One moment for our next question. Our next question comes from Ryan John Tomasello with KBW. Your line is open. Ryan John Tomasello: Everyone, just following up on the agentic commerce topic. Can you talk about how you think about the potential for rising adoption there to either structurally reduce or increase the level of fraud in the system over the long run, notwithstanding kind of early days here? And then just your thoughts on the potential second-order impacts. There is a lot of talk on agentic AI agents utilizing alternative payments rails like stablecoins, you know, just how you view that also impacting, you know, structure of the system here. Thanks. Eido Gal: Right. Sure. Look. I think what we are seeing is that in order to be good at online commerce, and payments specifically, you need to be doing a lot of things well. And right now, something that is added is agentic, you know, kind of commerce. And you can add crypto and stablecoin. So if historically, you would need to be able to manage credit cards and credit card acceptance, you now need to be able to support ACH, and digital wallets, and crypto and stablecoins, and the agentic checkout. And with agentic, we are talking about a few different flows. And you know, you do not just need to think about the checkout. You also need to think about account creation and account login, and you probably have some stored value in the account that people can transfer in and out. You obviously have the checkout experience, but you also have all these various post-checkout flows—returns, refunds, leveraging the different discount codes and abusing that. You have the entire chargeback process, which is different between credit cards and ACH. It is not called a chargeback there; it is insufficient funds. You have issues around scams that are popping up. So I think we are seeing an increase in complexity. And I would just tie in the agentic checkout into that overall increase in complexity, and we are seeing an overall increase in losses within the merchant ecosystem. And I think that as merchants are trying to solve these different use cases and these various fraud patterns, it just becomes more complicated more quickly. So I think that is kind of a net benefit to Riskified Ltd. as we see this more complex environment increasing in the years ahead. On a bit more targeted and specifically on agentic, like we just mentioned, we do see an increase in fraud right now in agentic channels. Specifically when you have general purpose LLMs. It could be a combination because it is newer, and fraud, you know, tends to shift to that area, there is less control and gating there. So hard to say how that would kind of behave in the quarters and years ahead as it gains more traction. But as of now, it is probably, you know, kind of net incremental to general take rates. Ryan John Tomasello: Great. Appreciate that. And then you know, just an update if you can provide on the mid-market expansion strategy—how that plays into your 2026 growth and just broader investment plans in that category? Thanks. Eido Gal: Yeah. I think one of the unique things about Riskified Ltd. targeting the enterprises is that we are able to really customize to a high level the modeling and the performance for each individual merchant. As we have been getting much better at completely automating the life cycle of doing that, I think that is going to present opportunities to kind of continue and refine this model in more of a down-market and referral strategy. That is not something that is expected within our guide for the year. So the more we can accelerate that, that would be upside to current guide. Operator: One moment for our next question. Our next question comes from Will Nance with Goldman Sachs. Your line is open. Will Nance: First of all, I hope all the teammates in Israel are home and safe. I wanted to ask also on the agentic kind of topic of the day. I was wondering if you could just speak to status on integrating into some of the agentic protocols. So there are—you know, it is kind of—ICP, it is Stripe, GCP, Google, and any of the other relevant ones. I know a big part of the model is kind of taking all the different signals from the user behavior in those channels. So just maybe wondering if you could speak to that and maybe shed a little bit more light on kind of, like, the value of the data that might come through those protocols in detecting fraud vectors? Eido Gal: Yeah. Thank you for mentioning the team in Israel. We appreciate that. I think the issue right now that the market is seeing is, to your point, there are a wide number of multiple protocols and, you know, some of them, I think it is clear that they are already outdated. In the months, maybe quarters ahead, there will be new protocols that are probably even more updated than that. So, obviously, internally, we are doing everything we can to support everyone in that ecosystem, whether it is, you know, kind of AI agent-approved, AWS Marketplace, Google, you know, A2A protocol, just general RESTful APIs. We do see ourselves requiring to have that full spectrum to make sure we cover everything. Unfortunately, we do anticipate a somewhat continued fragmented approach here. So, you know, I think it is still early to say if there is anyone who is going to be a clear winner in that area. So there will probably need to be some optimization between the various protocols. Will Nance: Got it. That makes sense. And maybe just one for Aglika. The FX headwind on the margin is helpful quantifying that. Could you just remind us of the—it sounds like it is the FX exposure in the cost base that we should be thinking about there, shekel and otherwise. I was wondering if you could just update us on major currency weightings as we try to fine-tune the model. Thank you. Aglika Dotcheva: I will. So, I mean, first of all, I am so excited about the quarter, the guide, kind of the returning back to double-digit growth. And when I think about the FX headwinds, we kind of spelled it out as approximately 400 basis points, or $14 million to adjusted EBITDA. And it is frustrating. I mean, over the years, we focused and we kind of ran on a flat expense base for a period of time, and this FX headwind is really obscuring some of the progress. But the truth is that the underlying business momentum is strong, and we will continue to focus on optimizing. We will continue to focus on growth. And I am just excited about 2026. Will Nance: Yep. Got it. Appreciate it. Thank you. Operator: One moment for our next question. Our next question comes from Chris Kennedy with William Blair. Your line is open. Chris Kennedy: Great. Thanks for all the details and for taking the question. I will just echo Will's comment regarding Israel. The revenues from newer products—Policy Protect, AccountSecure—doubled in 2025. Can you talk about kind of the opportunity for that set of products in 2026? Eido Gal: Sure. So maybe just to refer back to kind of Ryan’s question where we said, hey, we are seeing an increase in complexity of forms of fraud. We are seeing it across different channels like ACH, digital wallets, crypto stablecoin, the agentic checkout. We are seeing it happen in different parts of the, you know, kind of shopping experience—not just checkout, but also account creation and abusive policy rules and things around dispute management. All this to say, I think it is leading to an environment where there is kind of more demand and more value and just basically more necessity for merchants to leverage the wider product platform. So if I think about the revenue that we anticipate from, you know, kind of PolicyProtect, AccountSecure, Dispute Resolve, some of the non-guaranteed payment flows that we now work with merchants on, you know, anywhere from $15 million to $20 million in 2026, I think, is a good range at this point. Chris Kennedy: Right. Thanks for that. And then just one for Aglika. If you think about the 2024 cohort, the CTB ratio really improved. Can you give us a little bit more color on what drove that improvement there? Aglika Dotcheva: Yeah. Of course. I am very excited about some of the improvements in that cohort, and we can see already the result of that in Q4. So there are some merchants there that are specifically about the money transfer and payments category, and we were able to kind of do significantly better there. It is kind of evident in the cohort. I think it is a great base for some of the merchants that are in the pipeline there, and just continuing to kind of optimize incoming merchants as well. Chris Kennedy: Great. Thanks for taking the questions. Operator: One moment for our next question. Our next question comes from Timothy Chiodo with UBS. Your line is open. Timothy Chiodo: Thanks a lot for taking the question. This one, we have brought this up in the past, but I thought it would be a good one just to check in on to see if anything is different in the agentic channel. My guess is it is the same, but the question is really the services that you are providing to merchants, do you consider them and/or see them operating in addition to value-added services coming from the card networks or instead of value-added services coming from the card networks? Eido Gal: Hey, Tim. So sorry. Could you rephrase—our services in addition to the services from the card networks? Timothy Chiodo: Sure. So if a merchant is working with Riskified Ltd., are they using Riskified Ltd. in addition to some of the fraud-related value-added services coming from the card networks, or are they using Riskified Ltd. instead of some of the fraud tools that are coming from the card networks? Eido Gal: Okay. Thank you for clarifying. So, look, I think there is no direct comparable in the stack of the card service providers right now to the spectrum of Riskified Ltd. One of them has more data-related features—so I think Mastercard acquired Ekata; Visa probably has Visa Verify. So those are, you know, kind of what we consider data features. You know, one of them has a more older-generation scoring tool that we do not really view as competitive. No one has a policy product. Definitely, no one has, you know, kind of what we would consider a modern machine learning type solution for fraud prevention. I think the dispute product also—there is nothing comparable. On the account side, there is nothing comparable. If you think about support for ACH, crypto stablecoin, you know, kind of the fiat conversion and account storage, there is nothing comparable. On agentic checkout, there is definitely nothing that we have seen comparable to some of the releases we have recently made. So I think overall, on the Venn diagram, it is pretty distinct and different. There could be different services that they provide, you know, maybe more towards financial institutions—anything around tokenization and rails for 3-D Secure. That is not in our wheelhouse. But hopefully that gives kind of a good mapping of what we do that they do not do. Timothy Chiodo: Excellent. That is a great answer. Thank you so much. My follow-up is around—you were talking around some of the other forms of payment, whether it be account-to-account, stablecoin—basically, alternative payment methods in general. I know that it is early, but in your experience and with your position in the industry, do you have any reason to believe that card mix within the agentic channel would be any different than the card mix is in traditional ecommerce? So whatever you believe the mix is to be in traditional ecommerce, do you think through the agentic channel that it would be roughly the same—maybe the card mix is a little lower, maybe the card mix is a little higher—and what would be the reason that would lead you to believe the answer to the question? Eido Gal: Yeah. Thank you. I think that is a great question, and obviously, a lot of debate on that. I think there are specific industries—and probably payments, remittance, you know, kind of brokerages—which would probably see an increase over time on whether it is kind of stablecoins, crypto. Those are also direct ACH connections, just because, you know, exchange fees, FX rates, everything that we know. So I think there probably is the potential for more to migrate. You know, maybe with long-term as things like ACH and others become easier, maybe merchants would have an easier time transferring some customers for, you know, kind of various discounts to that area. But overall, by and large, in most categories, I would not anticipate a shift. I think that overall consumer preference for cards, for rewards, continues to be incredibly high. And I think merchants adapt to that. I do not see that changing based on, kind of, you know, the LLM channel or merchant-native AI agents. I think merchants already have the ability, you know, to capture with extremely low interchange fees, debit cards. I think when you think about things like, you know, reward cards, the customer gets so much value from that. They have a clear preference. I think, you know, large merchants also have the ability to issue their own reward cards and take a meaningful portion of that interchange fee, and usually through agreements with, you know, kind of network or the issuers also take some, you know, kind of potential float or value of, kind of, installments or late payments there. So from an ecosystem perspective, I think, you know, cards are still around to stay in most categories. But there are probably a few specific areas where we will see an increased adoption in alternative payments. And I do not see a clear difference between kind of general purpose LLMs or merchant-native AI that would make them specifically work on, you know, kind of stablecoins or anything else relative to the existing rails. Timothy Chiodo: Thank you so much. Really do appreciate that. Operator: One moment for our next question. Our next question comes from Reginald Lawrence Smith with J.P. Morgan. Your line is open. Reginald Lawrence Smith: Yes. Congrats on the quarter and in achieving GAAP profitability. I guess I have got another question about agentic as well. So, you know, I get it, and I appreciate that there is not a lot of transaction flow coming from, I guess, third-party LLMs today, and so it is early days. Definitely get that. But I am thinking about—someone asked earlier about, you know, like, how pricing may work here. I am curious just, like, how that would roll out in general. And specifically, like, would merchants need separate contracts for agentic? Would it just be rolled into their standard, you know, ecommerce that occurs on their website? And then, you know, kind of beyond that, as you think about, you know, this new surface and these new potential risks, like, does that give you any pause at all, or concern around, like, what early losses could be like and what kind of differentiates you there, given that you will not have, like, a 13-year head start or, you know, backtesting history that you do on the traditional commerce side. So I am just curious, like, how you are thinking about that and, like, practically how this could actually roll out to your customers. Eido Gal: Sure. Thanks, Reggie. That is a great question. So I think there are two ways this can go. One is with the client that is on various submission plans and not giving everything right now to Riskified Ltd., and usually they would proactively come and say, hey, we are opening up this agentic channel or we are seeing some initial, you know, kind of traffic, or maybe we are even reaching out to them, and then they say, you know, we would want you to manage this, definitely, because, you know, we are not prepared to do that. And we have seen some of the larger clients that we work with approach us proactively with that. We are also in contact, you know, directly with some of our other merchants. And the pricing there, it is just, you know, slightly more flexible pricing to start. I think merchants are very open to having higher price initially, both because they understand there is an increased fraud in this day one and also because the absolute dollar amounts are still so small. It is, you know, less of an issue. And, obviously, we would kind of better negotiate mutually the fees once we understand the actual risk profile and the volume there. So that is one instance. The other one is merchants that, you know, already are providing all their volumes to Riskified Ltd. Yes, it continues to be the case that we would just see this traffic, and, you know, based on the risk profile there, if there is a significant increase, we might need to have a discussion with the merchant what that means from a commercial perspective. As I think about, you know, how do we anticipate some of this fraud, you know, on the one hand, you are right to say that it is still early stage, and a single merchant might only see, you know, a single transaction. But by that same token, you know, we are seeing it across the network of the largest merchants, and we are seeing some of the newer fraud MOs happen. And if you think about our system overall, what is unique and great about our system is that we are able to see fraud MOs in real time in one place, and then adapt features or create new segments and deploy that relatively quickly to other parts in the model. So even though this is something that is, you know, kind of newer, our system really is adept at learning new fraud rings, new fraud MOs, and, you know, pushing updates to the rest of the system based on that. It is what we have done as we have expanded into LATAM, into, you know, kind of other APAC regions. And you can continue to see that. I think Aglika mentioned on, you know, some of the CPB cohorts, some of that continued quick improvements there. In agentic, you know, it behaves the same. Right? There is, like, new fraud trends. You need to stop bleeding there, and then solve it for the rest of the portfolio. Reginald Lawrence Smith: Got it. Okay. And if I can ask one quick one on kind of FX. I appreciate that you guys are paid in dollars, but I was curious, is there any FX benefit to GMV growth next year? Or is that in U.S. dollars as well? Like, FX is not my strong suit. So anything you could share there would be helpful. Thank you. Aglika Dotcheva: Alrighty. I will take this one. So, specifically, the way I kind of view the FX, the fluctuations over the years have been something that we were able to absorb. Specifically this year, where I see the FX impact and kind of isolated it in this 400 basis points effect on adjusted EBITDA is around the strengthening of the Israeli currency, the shekel, versus the dollar. And since half of our expenses approximately are in Israel, it is impacting it more materially. So that is the main kind of FX impact that I talked about and it is worth mentioning. Without this, as I mentioned, on a constant currency basis, our expenses would have been flat year over year. Reginald Lawrence Smith: Got it. So, I guess, just to put a finer point on it, will there be a FX tailwind to revenue from the dollar just being weaker in general? Clearly, you have isolated the expense side, but I am just curious. Like, is there anything we should think about, you know, at the revenue line? Aglika Dotcheva: The revenue line, it is probably much, much minor. I would imagine it is, if anything, probably from the euro, but that will be probably less than half a percent, and it is something that we have already incorporated in projections as kind of, like, we are basing our projections on what we see today. Reginald Lawrence Smith: Okay. No. That is fine. Thank you so much. Operator: One moment for our next question. Our next question comes from Clark Joseph Wright with D.A. Davidson. Your line is open. Clark Joseph Wright: Thank you. At the beginning—or I believe this actually might have been Eido—you spoke about the fact that your strategy is more oriented going forward on gross profit growth versus revenue growth. What does that mean from a go-to-market perspective and your risk tolerance for specific product categories? Eido Gal: Yeah. Thanks for that question. Look. We have seen internally—I mean, we have always focused as a management team on gross profit, profit dollars, gross profit dollar growth. But it has probably been more of a focus recently over the past few quarters and will be over the next few quarters, just because we are seeing more demand and more bundling strategies for the, you know, kind of wider product portfolio. And overall, you know, there is a different margin profile within those products. So for us, it is clear we really want to focus on the gross profit dollars and that growth. From a sales perspective, you know, anything from how they target accounts to how they think about—how we think about—commission structures is more oriented in this direction now. Clark Joseph Wright: Awesome. Appreciate that. And then just on another topic that was already discussed partially earlier, but just wanted to understand the penetration rate on the non-chargeback guarantee products and the assumptions that you have for the 2026 guide. You referenced the $15 million to $20 million, but what does that mean in terms of the overall customer base and their willingness to accept, or to adopt these offerings? Eido Gal: Yeah. I think we shared on the script that we were seeing good progress of around 50% kind of increase in adoption. We have not really spelled it out by the specific product or what dual product, what single product. We will think about the best way to represent that to make it easier for investors to follow. But right now, we think that, you know, kind of revenue is probably the best proxy for that. And like we mentioned, it went from, you know, I think it was really, you know, low single-digit millions to $10 million, and we think we can continue to grow that to $15 million to $20 million this year. Clark Joseph Wright: Got it. Thank you. Operator: And I am not showing any further questions at this time. I would like to turn the call back over to Eido for any further remarks. Eido Gal: Thank you. Just before I conclude, I want to send my support to our team members in Israel and their families, and thank everyone for their hard work. And with that, just thank you everyone for joining us on today's call. I look forward to continuing to update you on our progress throughout the year. Operator: Thank you, ladies and gentlemen. This does conclude today's presentation. You may now disconnect, and have a wonderful day.
Operator: Good afternoon, ladies and gentlemen, and welcome to the Evertz Q3 Investor Conference Call. [Operator Instructions] This call is being recorded on Wednesday, March 4, 2026. I would now like to turn the conference over to Brian Campbell, Executive VP of Business Development. Please go ahead, sir. Brian Campbell: Thank you, John. Good afternoon, everyone, and welcome to Evertz Technologies conference call for our fiscal 2026 third quarter ended January 31, 2026, with Doug Moore, Evertz' Chief Financial Officer; and myself, Brian Campbell. Please note that our financial press release and MD&A will be available on SEDAR and on the company investor website. Doug and I will comment on the financial results and then open the call to your questions. Turning now to Evertz' results. I'll begin by providing a few highlights, and then Doug will provide additional detail. First off, sales for the third quarter totaled a record $139.3 million, up 5% sequentially from the prior quarter. This includes revenue in the international region of $43.7 million, up 27.7% sequentially. Recurring software, services, and other software revenue increased 12.3% year-over-year, totaling $62.5 million in the quarter. Our sales base is well diversified with the top 10 customers accounting for approximately 44% of sales during the quarter, with no single customer accounting for more than 16% of sales. In fact, we had 107 customer orders of over $200,000. Gross margin in the quarter was $81.2 million, or 58.3% compared to 57.8% in the third quarter of the prior year. Net earnings were $18.7 million, resulting in fully diluted earnings per share of $0.24 for the quarter. Investment in research and development totaled $36.7 million. And Evertz working capital was $133.2 million, including cash of $24.8 million as at January 31, 2026. At the end of February, Evertz's purchase order backlog was more than $246 million and shipments during the month of February were $32 million. We attribute this strong financial performance and solid combined shipments and purchase order backlog to: channel and video services proliferation; increasing global demand for high-quality video anywhere, anytime; the ongoing technical transition to IP, IT, and cloud-based architectures in the industry; and specifically the growing adoption of Evertz's IP-based software-defined video networking solutions Evertz's IT cloud solutions; our immersive 4K, 8K Ultra High Definition solutions; our state-of-the-art DreamCatcher IP replay and live production with BRAVO Studio featuring the iconic Studer audio. And today, the Board of Directors declared a regular quarterly dividend of $0.205 per share payable on or about March 20. I will now hand over to Doug Moore, Evertz's Chief Financial Officer, to cover our results in greater detail. Doug Moore: All right. Thanks, Brian, and good afternoon, everyone. So the sales were $139.3 million in the third quarter of fiscal 2026. That's a 2% increase compared to $136.9 million in the third quarter of fiscal 2025. For the 9 months ending January 31, 2026, sales were $384.2 million, up $10.4 million, or 3% for the 9-month period ending January 31, 2025. Quarterly hardware revenue was $76.8 million, a decrease from $81.2 million in the prior year, while software and services revenue increased to $62.5 million from $55.7 million in the prior year. Revenues from software and services represented approximately 45% of the total revenue in the quarter. Year-to-date, hardware revenue is up 1% year-over-year to $209.3 million for the 9 months ending January 31, 2026, while revenues from software and services is up 5% to $174.9 million from $166.4 million in the prior year. Year-to-date, software and service revenue represented approximately 46% of total revenue over the period. Looking at regional revenue. Quarterly revenues in the U.S./Canadian region declined 3% to $95.6 million compared to $99.1 million in the prior year. This was more than offset by a 15% increase in quarterly revenues in the international region, which were $43.7 million compared to $37.8 million in the prior year. The International segment represented 31% of total sales in the quarter compared to 28% in the same period last year. For the 9 months ending January 31, revenues in the Canadian and U.S. region were up 2% to $273.6 million, while international revenue increased 3% to $110.6 million compared to $105.9 million in the same period last year. For the 9 months period ending January 31, international sales represented 29% of total sales compared to 28% in the same period last year. Gross margin for the quarter was 58.3% as compared to 57.8% in the prior year. And then for the 9 months ending January 31, the gross margin was 59.3%. Both the quarter end and year-end gross margin percentages were within the company's 56% to 60% target range. Looking at S&A expenses. S&A was $18.6 million in the third quarter, a decline of $0.6 million, or 3%, for the same period last year. Selling and admin expenses as a percentage of revenue were approximately 13.3% compared to 14% for the same period last year. Sequentially, selling and admin is down approximately $0.5 million from Q2. The decline is primarily driven by the timing of tradeshow and promotions costs, which decreased about $900,000, as in Q2, we attended our IBC tradeshow last quarter. For the 9 months ending January 31, selling and admin expenses were $56.3 million, or 14.7% of sales as compared to $55.2 million, or 14.7% of sales for the same period last year. Research and development expenses were $36.7 million for the third quarter. That represents a $0.1 million increase over the same period last year. As a percentage of revenue, R&D expenses were 26.4% compared to 26.7% in the prior year. For the 9 months ending January 31, R&D expenses were $110.4 million, or 28.7% of sales, as compared to $110.2 million for the same period last year. ITCs for the quarter were $4.8 million as compared to ITCs of $3.6 million in the prior year third quarter. Foreign exchange for the third quarter resulted in a loss of $2.3 million as compared to a gain for the third quarter ended January 31, 2025, of $3.9 million. The largest driver behind the current period loss was the translation of U.S. dollar assets into Canadian dollars, given the decline of the U.S. dollar versus the Canadian dollar over the quarterly period. We had closed October 31 at approximately 1.4:1 U.S. to Canadian, and that dropped to approximately 1.3612 as at January 31. For the 9 months ended January 31, foreign exchange resulted in a loss of $0.8 million compared to a gain of $4.7 million in the same period last year. Turning to the discussion of liquidity of the company. Cash as at January 31, 2026, was $24.8 million, a decline compared to cash of $111.7 million as at April 30, 2025. The decline was primarily due to $91 million in dividends distributed in the quarter, including $75.5 million in special dividends paid during Q3. Working capital was $133.2 million as at January 31 compared to $206.9 million at the end of April 30, 2025. Looking at cash flows for the quarter. The company generated cash from operations of $29.3 million, which is net of a $4.4 million change in noncash working capital and current taxes. If the effects of change in noncash working capital and current taxes were excluded from the calculation, the company generated $24.9 million in cash from operations during the quarter. It's worth noting we did use about $10 million in cash and inventory in the quarter as we purchased some [ standby ] products and also securing parts for planned production. We increased raw materials. The company used cash of $7 million for investing activities, which was principally driven by the acquisition of capital assets in the quarter, including the acquisition of an airplane for $4.4 million, replacing aircraft previously sold during the year. The company used cash from financing activities of $92.4 million, which, as noted, was principally driven by dividends paid of $91 million, including the special dividend of $75.5 million. Finally, looking at our share capital position. At January 31, 2026, shares outstanding were approximately 75.5 million and options and share-based RSUs outstanding were approximately 4.5 million. Weighted average shares outstanding were 75.5 million and weighted average fully diluted shares were 76.7 million as at January 31. That concludes the review of our financial results and position for the third quarter. Finally, I would like to remind you that some of the statements presented today are forward-looking, subject to a number of risks and uncertainties, and we refer you to the risk factors described in the Annual Information Form and the official reports filed with the Canadian Securities Commission. Brian, back to yourself. Brian Campbell: Thank you, Doug. John, we're now ready to open the call to questions. Operator: [Operator Instructions] Your first question comes from the line of Thanos Moschopoulos from BMO Capital Markets. Thanos Moschopoulos: North American growth was clearly a little bit slower, recognizing you had strong growth internationally. But just with respect to North America, anything you'd call out as far as what you're seeing in the environment? Or is that just reflective of project timing, which, as we know, can be sometimes lumpy? Brian Campbell: Dennis, it's Brian. I'm actually on a remote cell phone here in Ottawa at a defense conference event, and you were breaking up a little bit there. Could you repeat the question for us? Thanos Moschopoulos: I was just asking about the slower growth in North America during the quarter, whether you've seen any change in the end markets or whether that's just reflective of project timing and lumpiness? Brian Campbell: I would advise that it's more reflective of timing and lumpiness. So we haven't seen a significant change, and we are heading into the NAB events in the tail end of April, where we're going to be connecting again directly with many customers on site. So it's -- we're quite excited by that. Thanos Moschopoulos: Clearly, defense is topical. So maybe on each side of the border, we've seen Canada focusing on ramping up domestic procurement. And in the U.S., you're obviously you've been investing in building out your operations. Can you update us in terms of what you're seeing in terms -- with respect to defense opportunities? Brian Campbell: We're definitely encouraged by the steps that are being taken on multiple fronts, whether that's government initiatives that mandate the defense -- Canadian defense sector and the internal people as well, too. So that is -- it tends to be a longer-term sales cycle, but it's all quite encouraging. And we're very intent on devoting sufficient resources to help the Canadian government as they're moving forward. As you know, we have had successes over the years in the U.S. and with NATO partners. Thanos Moschopoulos: And then maybe one last one for me. OpEx has been relatively stable in recent quarters, which is good to see that expense discipline. Any puts and takes as we think about the near-term OpEx trajectory? Or should this be representative of the run rate near term? Doug Moore: No. The big thing to call out there is like while Q2 had IBC, Q4 has NAB or N-A-B. So that is a pretty significant show for us. Just from a Q3 to Q4 perspective, you can -- I would expect an increase of $1.5 million to $2 million. The same with on the Q4 front as we ramp up for a show. We -- a little bit harder to forecast, but we do often have some increases in R&D materials and prototypes, which is historically the last couple of years anyway been about an extra $0.5 million in Q4. And then beyond Q4, there's nothing specific to call out other than inflationary matters. Operator: Your next question comes from the line of Robert Young from Canaccord Genuity. Robert Young: Brian, I think you noted you were attending the Ottawa Conference on Security Defense earlier in the call. I think I heard that. Could you talk about what you're showing at the conference? What are the products that you're displaying to a defense customer? What are the areas where you think Evertz could be meaningful in supplying the Canadian defense establishment? Brian Campbell: Yes. So it isn't as much a tradeshow as you're familiar with the NAB and IBC. So we're attended conference, but we're definitely continuing to reinforce and make strong relationships on multiple fronts. And it is the monitoring command and control solutions or transport, as you know, core elements of our key technologies are Common Criteria and NIAP certified. And that plays very well to the direction that's being taken by much of the new spending initiatives. Robert Young: So no specific product areas that you're in a sales motion at this conference. Is there anything worth highlighting? I understand you're highlighting products that you have certifications related to. But is there any -- what product areas would you highlight as particularly relevant to a defense customer? Brian Campbell: So Rob, other than the ones I articulated previously, which is the command and control relevant ones, which are multiviewers, signal processing, the DreamCatcher Live Production solutions, that whole family of technical operations center, live production, replay, storage solutions, all -- and transport all fall into categories that would be of demand and of course, the RF solutions of which we have many, and we're at the forefront of the DIFI push, which is the digitization of IF and RF solutions. Robert Young: Also noted you added SOC 2 to the Evertz.io product, which -- maybe if you could just give us a sense of what that opens up for Evertz. Is that a meaningful addressable market change? Brian Campbell: It's very early days. I don't have anything to add there. Robert Young: And then the backlog ticked up for the first time in quarter-over-quarter, sequentially it ticked up for the first time in a while. Is that driven by like maybe a weaker level of February shipments? Or is it -- is there another factor to call out there? Brian Campbell: Doug, do you want to handle that? Doug Moore: Yes, sure. It's just -- again, there's some lumpiness in projects, whether we deliver or they come in, some significant orders come in at a time. But it's just a reflection of strong demand. So you are correct that the February shipments are a bit light. That's fair. But yes, the growth in backlog, I think, $6 million quarter-over-quarter is very positive, but I think it's not directly attributable to 1 item. I would say it's just strength across and strong demand. Robert Young: Maybe last question. You noted the inventory build in the quarter. Is that driven by anything in the pipeline or maybe unannounced programs that you've won. Brian Campbell: No... Robert Young: Something that's not -- go ahead. I'm sorry. Brian Campbell: No, it's actually -- it's more driven by market, I guess, procurement realities with -- there's some memory -- certain components like memory on allocation where we have to secure parts to guarantee our ability to ship. So it's more driven by the procurement side and then seeing there's certain products on allocation or potential company shortages that we're using some of the cash to stockpile. Operator: [Operator Instructions] Your next question comes from the line of Paul Treiber from RBC Capital Markets. Paul Treiber: Just a question on recurring software and services revenue was strong again this quarter. Is there anything to call out in terms of either unusuals or project completion? Or do you see it as continue to grow in these low double digits here? Doug Moore: I think you still have -- if you track it for the last 8 quarters, there's been a strong trend in growth. And there's not a milestone of achieved a $10 million, or something like that. But there's always some volatility based on project completion and milestone completion. So it's not a specific 1 contract to point to, and there will be some peaks going forward. But you'll see over the past 8-plus quarters or more really, 12 quarters, it's been growing, if you look at the trend, so. Paul Treiber: And then international, the strength in international is the highest quarterly level in a number of years. Has anything changed in terms of your momentum there and the drivers of that growth and what's driving that? Doug Moore: A lot of the growth in the current quarter, at least compared to the prior year, it was a couple of projects in Europe that we completed. I don't know it's really a macro thing to call out necessarily than the lumpiness and volatility, in this case, helping us in the quarter. Paul Treiber: And then just lastly, just on gross margins, it ticked down a little bit sequentially. Does that relate to international or some of these larger projects, the mix may have a lower gross margin than the past? Doug Moore: Yes. the main driver, of course, is the product mix. But in this case, there is some drag due to international margins being a bit tighter than elsewhere. So it's still well within the range. It's still a strong margin, but there will be volatility even going forward. But yes, there's a bit of a drag in the quarter with the international sales. Paul Treiber: And then just lastly, just on the topic of gross margins. With memory costs going up, how will that impact gross margins? Is it a relatively small portion of your BOM that it's basically immaterial from a consolidated point of view? Doug Moore: Yes. What we do is we analyze BOMs on an individual level. So if there's markable cost increases, we may have to address that through pricing. But it's not -- in the current quarter it hasn't affected margins necessarily. It's really just having to acquire -- use cash to basically acquire inventory, so we have it there to ship basically when we need it. So it hasn't really been a drain on margins, but it is causing us to react with procurement. Operator: There are no further questions at this time. I will now turn the call over to Brian Campbell. Please continue, sir. Brian Campbell: I'd like to thank the participants for their questions and to add that we are pleased with the company's performance during Q3 of fiscal 2026, which saw record sales of $139.3 million, including $62.5 million in software and services revenue, solid gross margins of 58.3% in the quarter, which, together with Evertz's disciplined expense management, yielded quarterly earnings of $0.24 per share despite a foreign exchange loss of $2.3 million in the quarter. We're entering into the last quarter of fiscal 2026 with significant momentum fueled by over $32 million of shipments in the month of February with a combined purchase order backlog plus February shipments totaling in excess of $278 million; by the continuing adoption and successful large-scale deployments of Evertz's IP-based software-defined video networking and cloud solutions by the largest broadcast, new media, service provider, and enterprises in the industry; and by the continuing success of DreamCatcher BRAVO, our state-of-the-art IP replay production suite. With Evertz's significant investments in software-defined IP, IT, and cloud technologies, the over 600 industry-leading IP SDN deployments, and the capabilities of our staff, Evertz is poised to build upon our leadership position in the broadcast and media technology sector while further penetrating government and defense. Thank you, and good night. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Ladies and gentlemen, welcome to the Symrise Full Year 2025 Results Conference Call. I am Hilli, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Rene Weinberg, Head of Investor Relations. Please go ahead. Rene Weinberg: Good afternoon, ladies and gentlemen. Welcome to our full year 2025 results call. Thank you for joining us today. All related documents, including the press release and presentation are available in the Financial Results section on our IR website. With me today are our CEO, Jean-Yves Parisot; and our CFO, Olaf Klinger. After reviewing our financial performance, a strategy update and the outlook for 2026, we will open the line for questions. With this, I hand over the call to Jean-Yves. Jean-Yves Parisot: Thank you, Rene, and thank all of you for joining us. Today, we'll review the full year 2025 results and provide an update on our ONE Symrise strategy and our ONE SYM transformation journey and conclude with the full year 2026 outlook. 2025 was a defining year for Symrise. At our Capital Market Day in November 2024, we introduced the One Symrise strategy. Over the past year, we have translated that strategy into concrete actions. And our ambition remains very clear: to deliver sustainable above-market growth while structurally improving profitability. 2025 was marked by soft demand in certain end markets and continued regional volatility. Against this backdrop, we focused on what we control, execution, efficiency, cash discipline and strategic transformation, and we delivered. First, our core Flavor & Fragrance businesses once again demonstrated our resilience as well as the strength of our portfolio and customer relationships. In Food & Beverages, we continue to outperform in nonalcoholic beverages, particularly in Europe and further expanding our leadership in Naturals and Savory. Our Food & Beverages business remained an industry benchmark for growth and profitability. At the same time, we strengthened our growth platform. We completed multiyear capacity expansions in Granada and Vizag, enhanced our chemical footprint in Asia and opened our new fragrance development and production site in Grasse, deepening our access to high-growth customers in the Middle East and Africa. Innovation remains a key differentiator for us with captive launches and new technologies enabling our customers to win in their respective markets. Second, 2025 also marked a step change in our operational performance. Efficiency initiatives delivered EUR 50 million in incremental profit, well above our EUR 40 million target, building on the EUR 50 million already achieved in 2024. These are structural improvements, not onetime gains. We established global procurement and operations organizations to drive scale benefits and asset optimization while preserving customer centricity and the entrepreneurial focus that differentiates our specialized businesses. We are also systematically strengthening connectivity across our segments and our divisions. And third, all of this is embedded in our ONE SYM transformation, a holistic transformation program designed to structurally enhance our competitiveness. A comprehensive review of our chemical production footprint identified clear opportunities to strengthen performance. The divestment of the Terpene business and ongoing operational improvements are direct outcomes. The carve-out was executed with speed and precision, underscoring our execution capability. We also completed the acquisition of Probi, now integrated into our new Care & Wellness division, which I will discuss more in a few slides. We continue to advance our sustainability and circularity initiatives. In 2025, we completed decade work to establish a new [indiscernible] accounting baseline, increasing our measurable impact. We are also implementing a data-driven decarbonization plan step-by-step across our value chain. Equally important is our commitment to the social dimension of sustainability. We continue to strengthen our impact through targeted initiatives and long-term programs. Across our organization, we have introduced a wide range of measures to support the health, safety, well-being and professional development of our people. In parallel, we foster global engagement for environmental protection, education and equity through our sustainability ambassadors network. In summary, 2025 was demanding, but highly productive. Despite challenging demand globally and purchase of softness across our markets, we delivered market-leading organic growth driven by strong performance in our core businesses. Operational improvements translated into the highest profitability in 10 years and a record adjusted business free cash flow, strengthening financial flexibility. This performance enables us to once again increase our dividend, extending our 16-year track record of annual dividend growth. In addition, we launched our inaugural share buyback program with a EUR 400 million authorization in January 2026, reflecting our belief that investing in Symrise itself currently represents the most attractive use of capital and offers compelling long-term value for our shareholders. We enter 2026 stronger, more focused and structurally more competitive, well positioned to accelerate performance going forward. Before we turn to segment performance, I want to note that going forward and aligned with our ongoing commitment to transparent financial reporting, we'll be reporting adjusted supplemental non-IFRS performance measures. An adjusted EBITDA is intended to enhance investor understanding of the group's underlying operating performance and improve comparability across reporting periods, in line with the sector practice. Olaf will go into more details on this in this section. With that, let's turn to Slide 5 to review our full year 2025 sales by segment. Taste, Nutrition & Health grew organically sales by 2.6%, reaching reported sales of EUR 3 billion, led by Food & Beverages with strong performance in Beverages, Savory and Naturals. Scent & Care delivered organic sales growth of 3.2% with reported sales of EUR 1.9 billion. Fragrance remained strong across all major applications in Fine and Consumer Fragrance. Let's move now to the full year regional results on Slide 6. Organic sales in North America were up slightly, both year-on-year and sequentially compared to the first quarter as macroeconomic uncertainties, persistent inflation and growing political and regulatory unpredictability led to pockets of softness and continued weaker overall consumer sentiment. Europe, Africa and the Middle East performed well despite global demand softness with organic sales growth of 2.8%. Asia Pacific grew organically by 3.2% due to softer consumer demand. And Latin America delivered 6.6% organic growth with strong broad-based performance. I will now turn the call over to Olaf to share more details on our financials. Thank you, Olaf. Olaf Klinger: Yes. Thank you, Jean-Yves, and also a warm welcome to everybody tuning in today. I'll start with our group Q4 sales performance on Slide 8. In the fourth quarter, organic sales growth was 3.6%, led by volume and a flat pricing environment. FX remained a headwind, reducing sales by EUR 61 million or 5.2%. Taste, Nutrition & Health achieved 2.5% organic sales growth, driven by a 1.6% volume increase and positive pricing of 0.8%. Food & Beverage continues to deliver strong results with market-leading mid-single-digit growth driven by Beverages, Naturals and Savory. Pet Foods was flat year-on-year with Palatability growing at low single digits in line with the market, while Nutrition delivered mid-single-digit volume growth, helped somewhat by strategic pricing actions implemented in early 2025. Scent & Care achieved 5.5% organic sales growth in the fourth quarter, driven by a 7.5% volume increase and negative pricing of 2%. In Fragrance, we saw continued momentum with high single-digit growth led by Consumer Fragrances, which delivered double-digit growth and supported by Fine Fragrances on strong prior year comparables. Cosmetic Ingredients delivered low single-digit growth amid tough year-on-year comparables. UV filters continued to normalize following a very strong prior year, while Micro Protection saw strong momentum. Aroma Molecules achieved mid-single-digit growth on weak comparables, driven by strong demand for fragrance ingredients. Please turn to Slide 9. For full year 2025, we delivered above-market organic growth and meaningful margin expansion despite a lower volume operating environment as we focus on controlling the controllables. Organic sales grew 2.8%, driven primarily by 2.2% volume growth and pricing contributing of 0.6%. Portfolio changes related to the Aqua Feed divestment earlier in 2025 and also the 51% divestment of our U.K. beverage trading business in March 2024, reduced reported sales by EUR 60 million. FX was a significant headwind, negatively impacting sales by EUR 194 million, largely due to the depreciation of multiple currencies, most prominent the U.S. dollar. As Jean-Yves mentioned, as part of its ongoing commitment to transparent financial reporting, we will be reporting adjusted supplemental non-IFRS performance measures going forward. It will be an adjusted metric to align reporting more closely with peers and market standards and enhance transparency, comparability and clarity around underlying operating performance. Our adjustment framework is clearly defined and focused strictly on nonoperational and nonrecurring items, primarily portfolio changes, restructuring and optimization initiatives and other exceptional events. For full year 2025, adjustments included first, the previously announced noncash impairments of EUR 150 million related to Swedencare and EUR 148 million related to the revaluation and reclassification of the Terpene business, with the latter being EBITDA neutral. Second, EUR 11 million tied to portfolio optimization, of which around EUR 1 million is EBITDA neutral. Third, EUR 6 million associated with the ONE SYM transformation program; and fourth, EUR 3 million costs related to the antitrust investigation. These are the onetime. Adjusted EBITDA margin expanded by 120 basis points, driven by accelerated execution of the ONE SYM transformation. We realized EUR 50 million in cost savings and efficiency gains, outperforming our own target of EUR 40 million, which is a clear demonstration of operational focus and execution rigor. Please turn to Slide 10 for a review of our Taste, Nutrition & Health segment performance. For the full year, we delivered solid organic growth of 2.6%, driven by a 1.8% volume increase with pricing contributing 0.8%. Taking into account portfolio and exchange rate effects of EUR 142 million or minus 4.6%, sales were EUR 3.028 billion in reported currency. Food & Beverage delivered industry-leading mid-single-digit organic sales growth, and this despite strong comparables with high single-digit organic growth in both EAME and North America. Beverages delivered high single-digit organic sales growth with continued strong momentum, while Naturals and Savory continued to grow at mid-single-digit organic growth rate. Pet Food growth was in line with the market and flat year-on-year, reflecting disciplined strategic pricing actions implemented at the beginning of 2025 to enhance competitiveness in our Pet Nutrition business. Pet Palatability delivered low single-digit organic sales growth. Adjusted EBITDA for the TNH segment increased by 5.2% to EUR 722 million. The adjusted EBITDA margin increased 160 basis points to a market-leading 23.8%, primarily driven by profitable sales growth, portfolio mix effects and efficiency gains related to our ONE SYM transformation. Please turn to Slide 11 for the performance of our Scent & Care segment. Organic sales growth was 3.2% for the full year, driven by a 3% volume increase and pricing of 0.3%. FX continued to be a headwind of 3.5%. Segment sales were EUR 1.901 billion in reported currency. Fragrance delivered high single-digit organic growth, reflecting continued strong momentum across the portfolio. Fine Fragrance achieved high single-digit organic growth, supported by new wins, particularly in North America and Latin America. Consumer Fragrances also delivered high single-digit organic growth, driven by a strong business pipeline. Cosmetic Ingredients reported a low single-digit decline, reflecting tough prior year comparables in UV filters, while microprotection continued to grow [Technical Difficulty] low single-digit growth in a dynamic market environment impacted by competition from Asia. Scent & Care adjusted EBITDA increased 3.5% to EUR 359 million. Segment adjusted EBITDA margin improved to 18.9%, an increase of 70 basis points, primarily driven by profitable sales growth and efficiency gains. Turning to group profitability on Slide 12. This year, we delivered 120 basis points of improvement to both adjusted gross profit and adjusted EBITDA margin, mainly driven by product mix and efficiency gains through our ONE SYM transformation. Through our ONE SYM transformation, we delivered EUR 50 million in cost savings and efficiency gains, underlining our continued focus on sustainable profitability improvement. This included EUR 35 million from sourcing and procurement scale, driven by a more global approach and evaluation of key raw materials for efficiencies with citrus being a good example. Productivity and capacity optimization contributed another EUR 10 million. Global asset and logistics management actions such as facility optimization, distribution contract renegotiations and regional logistics tenders contributed EUR 5 million. The decline in adjusted D&A was mainly due to a noncash impairment on plant and machinery in 2024 and FX translation. Moving to our strong business free cash flow on Slide 13. We delivered absolute cash flow of EUR 780 million and expanded the adjusted business free cash flow margin by 220 basis points to 15.8%, the company record. This performance was driven by a strong EBITDA uplift, lower CapEx intensity and disciplined working capital management through targeted inventory reduction. Net working capital was 32.5% of last 12 month sales, reflecting tight operational control across the organization. The robust performance puts us well into the range of our midterm target of greater than 14% business free cash flow margin, demonstrating our earnings quality, resilient cash generation and execution strength. Let's quickly move to our balance sheet and net debt on Slide 14. We continue to strengthen our balance sheet throughout the year. Net debt, including pension provisions and leasing obligations stood at EUR 2.1 billion, while net debt to adjusted EBITDA decreased to 1.9x, driven by disciplined debt reduction and strong cash generation. We were pleased to receive our inaugural investment-grade credit ratings from both S&P Global and Moody's at BBB+ and BAA1, respectively, each with a stable outlook. We have updated our long-term leverage target range to 1.5x to 2.5x. Maintaining a solid investment-grade profile remains a priority and providing financial flexibility, resilience across cycles and a strong foundation for disciplined value creation going forward. Turning to our disciplined approach of capital allocation on Slide 15. Our capital allocation priorities are clear and consistent, focused on both organic and inorganic investments to drive long-term value creation, return of capital to shareholders while maintaining financial strength and flexibility. First, we continue to invest in organic growth, prioritizing high-return projects that build on our core capability and support profitable, scalable growth. Our midterm CapEx target remains disciplined at 4% to 5% of sales, enabling strong reinvestments while maximizing cash conversion. Second, we pursue disciplined value-accretive M&A. We focus on opportunities that strengthen our portfolio, expand our footprint and deliver tangible synergies, always within a clear financial framework. Third, return of cash to shareholders remains a key priority. Our dividend policy targets a payout ratio of 30% to 50% of net income, and we are committed to growing the dividend over time. And fourth, we added share buybacks as a new option of our capital allocation policy. In January this year, we announced our inaugural share buyback program with a EUR 400 million authorization to October 2026, providing further flexibility how to return capital to shareholders. Across all those priorities, we remain committed to maintain a solid investment-grade profile. Moving to Slide 16. We continue to enhance shareholder value through resilient earnings and disciplined capital allocation, including sustainable dividend growth. Adjusted full year 2025 earnings per share were EUR 3.67, a significant year-on-year increase by 7.2%. Without adjusting for the Swedencare and Terpene business write-downs, earnings per share were EUR 1.78. This year, we are proposing our 16th consecutive dividend increase to EUR 1.25 per share, demonstrating our strong financial position and proven ability to reward shareholders across dynamic market environment. In addition, we are further strengthening shareholder returns through our share buyback program, reflecting our confidence in the business and our strong financial position. And with this, I will hand the call back to Jean-Yves to discuss further our strategy. Thank you. Jean-Yves Parisot: Thank you. Thank you, Olaf. Turning now to Slide 18. As a quick reminder, ONE Symrise is our purpose-driven strategy aligned to our financial ambitions and built on 3 pillars: portfolio growth and efficiency. It defines where to play and how to win, ensuring we allocate capital and resources to the highest value opportunities for our customers and our shareholders. To deliver our strategic ambition and execute our road map, we are investing across the organization in 3 key enablers: sustainability, digitalization and people. Sustainability is an integral part of Symrise purpose, and we are committed to delivering measurable impact. We are combining resilience along our relevant supply chains with science-based innovation and circularity to meet evolving customer expectations. Sustainability is essential for our competitiveness and our ability to sustain strong performance over time. At the same time, we are accelerating digitalization, including AI to sharpen our competitive edge and drive value creation. And we are investing in our people because ultimately, it is a committed and knowledgeable Symrisers who make our transformation possible. The ONE SYM transformation serves as the execution engine of our strategy. It is a multiyear program focused on improving the quality of sales and delivering sustainable above-market growth while enhancing profitability, increasing returns and strengthening our long-term competitive position. Please turn to Slide 19. Today, the most visible proof of our transformation is a EUR 100 million in cumulative cost savings and efficiency gains we delivered in '24 and '25, alongside a 280 basis point expansion in adjusted EBITDA margin. This very tangible progress reflects disciplined execution. We streamlined sourcing and procurement, improved capacity utilization across our network and optimize facilities through global asset management. These actions structurally improved our cost base and strengthened operating leverage. But this is only the most visible part of the story. In parallel, we completed the strategic assessment of our chemicals production footprint and activities. We sharpened the portfolio, divesting Aqua Feed and advancing the divestment of the Terpene business to focus capital on higher return opportunities. Moreover, we laid the groundwork for future growth with strategic investments. We launched a global data and AI hub in Barcelona to significantly advance our digital capabilities. At the same time, we expanded capacity to meet demand in key markets, including Grasse, Granada, Monterrey and Holzminden, ensuring we remain close to our customers and resilient in supply. In parallel, we initiated the implementation of a company-wide innovation ecosystem designed to accelerate connectivity, speed product development and translate IDs into scalable solutions. We also strengthened our leadership bench by appointing 10 new leaders to key roles across the organization. Finally, we improved our organizational structure to enhance our competitiveness and better position Symrise to capture the significant opportunities in Care & Wellness. Together, these actions create a stronger Symrise and provide the foundation from which we are accelerating our transformation. Turning to Slide 20. We are well into Phase 2 of our transformation. Over the past year, we prioritized operational rigor, strengthened accountability and tightened cost management. We sharpened our focus on the most attractive growth platform through deliberate portfolio choices, and we also began optimizing our commercial model. Thanks to this strong foundation, we are now positioned to accelerate this transformation to unlock faster growth, structurally higher profitability and improve earnings quality. This acceleration is designed to drive above-market growth in our strategic segments, embed efficiency and structural cost reduction across Symrise, enabled by digitalization and advance innovative and sustainable technologies that reinforce our competitive advantage. This acceleration does not mean changing direction. It means scaling what is working and executing with greater speed and focus. Our objective is crystal clear, strengthen competitiveness today and position Symrise to consistently deliver durable, profitable growth, cash and returns in an increasingly dynamic market environment. Turning to Slide 21. As we continue to build this foundation for growth, we are further aligning our portfolio with customer needs and opportunities, focusing on differentiated science-based holistic solutions. This reflects how our customers are innovating and how end markets are evolving. A key step in this journey is the evolution of the ONE CARE project into our new Care & Wellness division. This is much more than a structural change. It is strategic. By bringing together Cosmetic Ingredients, health active solutions and probiotics, we have created an integrated platform designed to meet customer demand for science-based holistic self-care solutions as the convergence of beauty and health. Care & Wellness addresses a large and structurally growing market. While this will not be an intermediate -- immediate growth accelerator, it is a mid- to long-term value driver in an attractive segment where innovation, credibility and scale matter. We are innovating in this category with leverage through our scientific leadership, application expertise and customer intimacy. As of January 1, 2026, Care & Wellness is reported as a division within our Scent & Care segment, underlining its strategic relevance within the group. This platform establishes a differentiated position in a significant market, which is growing more than 5% annually, and we expect Care & Wellness to exceed EUR 500 million in sales in 2026. By leveraging Symrise unique capabilities across attractive segments, product formats, biotech and green chemistry, we are very well positioned to scale this platform and unlock long-term value. At the same time, we continue to actively shape our business. With some key initiatives, we are completing the divestment of the Terpene business and further strengthening the portfolio through ongoing strategic reviews and the evaluation of selective accretive M&A, ensuring continued focus, competitiveness and disciplined capital allocation. Turning to Slide 22. Looking ahead, our focus is clear, speed and differentiation. As we have discussed today, the foundation is in place. We have strengthened the cost base, improved earnings quality and sharpened the portfolio. Now we are pivoting from the efficiency to the effectiveness. We will provide more details of our plan in the coming quarters, but I can already share with you some details. First, driving commercial excellence by strengthening our go-to-market model. Second, scaling customer-driven and differentiated innovation by converting our R&D strength and customer centricity into higher value growth. Third, extracting greater scale benefits by leveraging our global footprint, procurement capabilities and asset base to continue expanding margin. And fourth, accelerating digitalization and utilizing AI to embed data-driven decision-making, productivity gain and speed-to-market advantages across the organization. Let me emphasize that our strategy is not about choosing between profitability and growth. It is about delivering both consistently and sustainably. Our disciplined execution on the structural improvements we made over the past 2 years give us control and leverage. The strategic investment we made give us capacity to grow. We are now entering the next phase and accelerating from a position of strength. Our ambition is clear: to become a sharper, faster, more competitive Symrise to deliver superior long-term value. And let me conclude with our outlook on Slide 24. For the full year 2026, we take a prudent approach to guidance and expect organic sales growth in a range of 2.0% to 4.0% with an adjusted EBITDA margin of 21.5% to 22.5%, and an adjusted business free cash flow margin of above 14%. This full year 2026 outlook assumes Q1 organic growth to be down low single digits year-on-year, reflecting high year-on-year comparables as pockets of end market demand remains soft and the conflict in the Middle East adds another layer of uncertainty to the macro picture. From a year-on-year perspective, comparisons will be more challenging in the early part of the year before becoming more favorable as we move through the back half. Our 2026 guidance is not only underpinned by the acceleration of our transformation, but also supported by a very strong project vitality with key customers and a very solid pipeline of new solutions and a key resilience in our core end markets. We believe this will help offset near-term market pressures and position us for growth as demand normalizes. Looking beyond 2026, we remain very confident in our midterm targets and ability to outgrow our reference market. We see sustained multiyear growth supported by structural tailwinds, including evolving regulation, increasing demand for clean-label and natural solutions, ongoing reformulation and continued expansion in emerging markets. With a focused advantaged portfolio and strong innovation pipeline, we are well positioned to convert this tailwind into long-term profitable growth, supported by the acceleration of our transformation. Accordingly, we reaffirm our 2025 to 2028 targets, annual organic sales growth of 5% to 7%, EBITDA margin of 21% to 23% and a business free cash flow margin of more than 14%. With that, let's open the floor for questions. Thank you very much. Operator: [Operator Instructions] the first question comes from the line of Charles Eden from UBS. Charles Eden: Limited to 2. Can I start on the 2026 organic sales growth guidance, please? And I guess both of my questions are actually on this. Firstly, for the full year, what are you assuming is the contribution from volume and pricing in the 2% to 4% range, please? And then more specifically on the Q1 guidance for a low single-digit decline in organic sales. I've looked back through my model. And as far as I can see, Symrise has never seen an organic sales decline in a quarter, not during COVID nor when you had the cyber attack in Q4 2020. Now I understand the comment on high prior year comps, but you've had tough comps before, too. So can I ask, how much of this guidance is realism? And how much of it is baking in some conservatism or prudence for current global conflicts and any other impact that this might have in March. I guess maybe a different way of asking this question is, we're 2 months through Q1 already, are you seeing organic sales growth down low single digits across January and February? Jean-Yves Parisot: Okay. So thank you very much, Charles. Thank you for these 2 questions. And I will answer the 2% to 4%, first. What would be the price volume impact on that? Just let me put that in a context. So we delivered a very strong 2025, and we are very proud on the way we are really acting, very strongly and very diligently when the market is really making everybody suffer. So I think we need a very good end year also, and it's something we need to be aware of. Now concerning the coming year, our organic sales growth guidance reflects what I should say, a realistic and balanced view of the environment. And it is designed to cover both downside and upside scenario we have in mind. So if the market rebounds, second part of the year should be lower end of our guidance. If it rebounds, more should be high end of the guidance. So I am myself confident to delivering this 2% to 4% guidance, taking into account that it will be mainly driven by volumes. I cannot tell you what will be the price volume in advance, but it will be definitely driven by volumes. Now concerning the Q1 low single-digit information I just gave you, it is the first time. Is it due to tough comparables? Yes. Last year, we had a very high Q1, and it was the most impressive quarter of the last year and the comparables for the end of the year will be less challenging for our growth. That's the first answer to your question. The second question concerning is it a realism or prudence? I think we have shown that we can act very strongly, but we want to stay prudent. We want to stay prudent. Why? Because not only this high comparable, but the macro economy is not something we can control. The last days events are also participating also to our real prudence. And we remain very confident even if the Q1 slowdown forecast anticipation is there. And I should say, yes, it's a prudent anticipation. I am myself very confident for delivering 2% to 4% because, as I was mentioning also before, we have a very strong pipeline. We have a very strong pipeline, very good customer relationship, and we see that the market is ready to rebound. And when the market will rebound, we will really take a major piece of it by overperforming the market like we did the previous years. Charles Eden: Understood. So just to clarify, if we come in at a midpoint of low single-digit decline in Q1, so minus 2%, you need 4.7% organic for the rest of the year to hit the midpoint of the guidance, you'd need 6% organic for the rest of the year to hit the top end of the guidance. You're confident in that even if Q1 lands at minus 2%. Is that correct? Jean-Yves Parisot: Yes, exactly, Charles. I remain confident on the full year, but we remain prudent for the Q1 organic sales growth. But yes, I am confident for delivering the guidance. Operator: We now have a question from the line of Lisa De Neve from Morgan Stanley. Lisa Hortense De Neve: I just have one follow-up on the first quarter guidance, if I may. Can I just confirm with you whether there has been no phasing effects that may have benefited fourth quarter and may not be seen in the first quarter? That would be helpful. And secondly, on that first quarter as well, given the tensions, I mean, are you currently expecting that maybe some orders are being deferred into second quarter or shifted forward and that's what's driving the guidance? And what have you seen year-to-date? I mean, so far in the first few months, has trading been solid? So that's the question on the first quarter. And then secondly, I would love for you to outline how you see the Pet Food market for this year and whether you can confirm whether any incremental price negative should be expected for this year, especially in Pet Nutrition? Jean-Yves Parisot: Okay. Thanks a lot, Lisa. So concerning the first question, Q1. Q1, we did a very strong Q4 in 2025. So again, the market is there. Comparatively, by the way, to the Q4 2024, we had an easier comparable. It's also -- I'm sorry to make a lot of comparables, but it's also explaining the quarterly performance in terms of organic sales growth. So the quarter-to-quarter 2024, 2025 was easier. And the quarter-to-quarter Q1 2025 and 2026 is not so easier. So it's really mainly due to the comparable. And again, I am very prudent. So is it something where also some orders are shifting to Q2? We don't know yet. We don't know what will be the impact also, and we are measuring the impact of the last days events, and it's too early for us to really give an idea on a day-to-day basis, what will be the impact between Q1 and Q2. So again, we are following on a day-to-day. And the idea for us is really to deliver the customer when the customer is really needing the product. Concerning the Pet Food, the Pet Food is a key strategic growth driver for Symrise. So we are really very well positioned for following the rebound of the pet market when the rebound will happen. And this year should see a better market dynamic than last year. And concerning your Pet Nutrition, I just remind that Pet Nutrition represent 1/4 of the Pet Food market. And we took some actions in 2025 to restate and reposition the pricing -- the prices. So the prices in Pet Nutrition begin to normalize with the exception of selective price adjustments. And we really anticipate in 2026, a return to moderate volume net organic growth. So again, we are out of the readjustment of the prices we did strategically in 2025. Now it will be selective price adjustments if necessary. And we will do that because also what I said before, our growth will be mainly driven by volume this year. And then when the price adjustments are needed, we will adjust the price because we're selling added value products, but selling added value product, even unique product doesn't mean that we have also to oversell, and we want really to sell the right price for the right usage value. Lisa Hortense De Neve: I mean, just one small follow-up, if I may. Can I just confirm that you just stated that you've already agreed on selective price adjustments or that you would be open if needed to do that? Jean-Yves Parisot: No, we already embedded in our organic sales growth, some price adjustments. We did the major part of our contract for 2026. So the picture is much better than 2025. And we still have some price negotiation in front of us. So not everything is done. So that's the reason why I cannot give you the full picture. But if necessary, we'll make. And in any case, the growth is there and the volumes are there. So in any case, the growth in Pet Nutrition will be substantial this year. Operator: We now have a question from the line of Alex Sloane from Barclays. Alexander Sloane: The first one was actually, again on the organic sales growth. And just in terms of what's driving the acceleration beyond Q1? Is there any particular business line or end market that you would expect greatest step up? And maybe I could sort of just press on the question that's been asked a couple of times. Has the sales in January and February already been down low single-digit? Or is this low single-digit outlook for Q1 really premised on March? That's the first one. And then secondly, just on profitability, the 21.5% to 22.5% guide. Could you give a bit of context on what you're assuming in terms of energy and input costs within that range? Obviously, I appreciate, it's been quite volatile on that front over the last week. Jean-Yves Parisot: Thank you very much, Alex. So I will take the first question. I will let the second to Olaf. Concerning organic sales growth, we are very confident for growing in 2026. We are very dynamic, very active. We stay very agile on entrepreneur, and we have a lot of good news in our pipeline. So in Food & Beverage, we signed new type of contracts, which we delivered in 2026. And we had a very nice mid-single-digit growth in 2025, which will continue in 2026, [ normally ], right? Fragrance, we did an extraordinary also year -- last year in Fine and Consumer and the dynamic is there. So we have also very nice new wins in the pipe. So if you add EUR 2 billion Food & Beverage, EUR 1 billion of Fragrance, EUR 3 billion are really representing a nice growth perspective for the year. Pet Food is really rebounding. We see some movements in the market. And as I was explaining also in the past, we're also shifting with the market, moving some big brands for more regional or local brands, and we are really capitalizing on what we started to deliver and to build in the last months. So -- and Care & Wellness to make the full picture is a new baby in the organization, and there are a lot of good news, a lot of customer traction, which are making me also confident for the growth. So it's not one business-driven growth. It's really a growth across the 4 strategic markets of Symrise. Now coming back to -- before handing over to Olaf, coming back to your question about January, February, March, I will let you know when we'll have the full picture of the quarter about the dynamic inside the month. But what we see today make us feeling prudent about what we promised for the Q1. So I hand over to Olaf for the second question. Olaf Klinger: Yes. Thank you, Alex, for the question. On the energy side, as you rightly observed, there's a lot going on in this market. Having said that, Symrise is relatively less exposed to energy prices. As a percentage of sales, around 2.5% is energy cost related. And out of that, around 80% is hedged for Symrise at this point in time. So with this short-term noise, which we all experienced, I think we should be well protected against the major impact from energy prices as we see it right now. Operator: The next question comes from the line of Edward Hockin from JPMorgan. Edward Hockin: I've got 2, please. One is on Aroma Molecules. I was wondering, it looks like the Q4 was somewhat stronger, growing mid-single digit. Can you give any color on why this was besides the comparatives? And any details you can give on 2025 and also your outlook for 2026 on Menthol terpenes and Fragrance Ingredients? And then my second question, please, is on Cosmetic Ingredients. Obviously, a softer year with the comparatives. How should we be thinking about the growth trajectory for this business in 2026? Should we be baking in some acceleration, some step-up in the growth there? Jean-Yves Parisot: Yes. Thank you very much, Edward. So again, Aroma Molecule, Aroma Molecule did a strong Q4 this year also because the comparables of 1 year before was not so high. So Aroma made a good delivery. Concerning what's happening within Aroma Molecule, we are still on the way to divest it in. We are still building very strong position on Menthol, and we have a lot of added value also with our Menthol, specific raw material, innovation, customer relationship. So we are working on it, and we are continuing to develop specific captive and specific molecules, not only for us, specific flavor SFI, specialty flavor ingredients, not only for you -- for us but our competitors. So Aroma Molecule, by the way, we have also a new leadership, and we are refining the strategy. So we will come back, by the way, to you when there will be more to tell. Concerning Cosmetic Ingredients, Cosmetic Ingredients, I should say, had 2 big different type of products. The first one, sun protection. And you know that sun protection, we suffered a lot last year about comparables. We will not have the same situation today. So it means that in terms of volumes, the comparables will be much better. On some of our products, we have to adjust some prices in sun protection, but also we are on the way to this adjustment. And concerning the second business unit, I want to address for answering your question, Micro Protection. So Micro Protection, we invested a lot in a key product, Hydrolite. We're only producing in Germany. Now we produce in Germany, in Spain, in U.S., in Mexico. And we are really facing a strong demand. Now we are in a way to qualify the product and the growth will come in the coming months. Operator: Your next question comes from the line of Nicola Tang from BNP Paribas. Ming Tang: I'll ask a question about the margin since there's been so much focus on organic growth. You have a relatively wide guidance range for 2026. I was wondering if you could talk about key drivers here. Is it simplistically low end of organic growth means lower end of the margin range? Or are there other factors to think about in terms of your cost efficiencies versus reinvestment? And then maybe just a sort of small clarification one. You've referenced the Middle East a few times. Could you remind us of your direct exposure and things that we need to bear in mind when thinking about the potential impact of the events over the weekend? Jean-Yves Parisot: So Nicola, I will start to answer and will let Olaf complete what I will have missed certainly for the second question. I will start with the first question. Even if it looks like flattish profitability, we are still working a lot on profitability improvement. What we started to do, we are still [indiscernible]. So it means that it will not decrease the outcome of what we started. And the annual compounding effect will not decrease. It will improve. Now what you see in the P&L and in our forecast is also including some reinvestment. And as I clearly said, the growth is a story of Symrise. Growth remains the story at Symrise, the profitable way. That's the profitable growth story. And the question to really drive profitable growth is to make the portfolio adjustments, and it costs money also to make some portfolio adjustments and to really invest also in new way of selling new route to market, new innovation, new digitalization tools. And that is the investment we want also to put in our company for really compounding our story. So this is the answer to your question. So the efforts will pay off even more even if it is not totally embedded in the figures we are showing to you. Now concerning the Middle East, I will hand over to Olaf. Olaf, please? Olaf Klinger: Yes, Nicolas, naturally, it's also of interest for us at the moment what's going on in the region, and we looked at it. The core region for Symrise is around close to 3% of turnover. So it's not a massive environment, which we have in front of us, around EUR 140 million, EUR 150 million is a good number for the size of this business environment. Operator: We have now a question from the line of Eric Wilmer from Kempen. Eric Wilmer: I wanted to press a bit on Aroma. Could you perhaps talk a bit about the price and volume dynamics within the Aroma portfolio, perhaps first fitting it between the part that is and that isn't under Chinese pressure? And secondly, you mentioned EUR 150 million related to Middle East. Is that number perhaps a bit higher when you factor in lower air traffic from other airports into the Middle East? Jean-Yves Parisot: As Olaf wants to started to answer for Middle East, I will let him answer your second question. Concerning the question about the Chinese competition, we are well equipped for competing. We were anticipating some trends and the terpenes divestment is also some divestment, we anticipate some pressure. The terpenes technology is a very good technology and the business is a very good business, but not corresponding to our future guidance. That's the reason why we [indiscernible]. And concerning the Chinese pressure on Aroma Molecule, we have in front of us some Chinese producer for the menthol solutions. We have not only Chinese, we've also a German competitor. And we are really reinforcing our competitive edge. So we face a structural change in the market. We are very transparent about it. We are very aware about it. We are conscious, and we are putting in place a very strong action plan for compensating. So apart from that, concerning our portfolio of Molecules, we are very well protected by some IP, some intellectual property, some type of property protection. And if there are some fights on the cost of goods so -- we will face also the competition. We are really also for adjusting some prices when necessary for guaranteeing some volume. This is also the way to go through this type of competition. I'm very confident that we really can make the best out of it. Concerning Middle East, I will hand over to Olaf. Olaf Klinger: Yes. So Eric, what I gave you was the size of the business. Naturally, things can change by the hour at the moment. And when it comes to logistics and transportation, it's hard to predict what will happen in the coming days. And therefore, I think it's too early to assess where all this is going in the coming days and weeks. Therefore, I think at the moment, the focus is really on our people, make sure that they are safe and then we interact with customers as good as we can in these days. Jean-Yves Parisot: So I don't know if we are still some questions, but I think we are now at closing the session. And I thank you all for your questions. And in closing, just some words, we are controlling the controllables. We are executing our strategy and accelerating the transformation. I think we are really [indiscernible] talk. We are backed by a very clear strategy, everybody, all our customers, all our people and a lot of messages from the market are making me very comfortable that it is a very clear strategy. We are very disciplined in our execution, and we have a very strong investment-grade balance sheet. So altogether, we are very confident in our ability to deliver durable earnings growth, expanding returns and sustain long-term value for our shareholders. Again, I thank you for your interest in Symrise. I thank you for your time, for your questions, and we look forward to speaking with all of you again in the future. Thanks again. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect you lines.Goodbye.
Operator: Good afternoon, ladies and gentlemen. Welcome to the TriplePoint Venture Growth BDC Corp. Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] This conference is being recorded, and a replay of the call will be available in audio webcast on the TriplePoint Venture Growth website. Company management is pleased to share with you the company's results for the fourth quarter and full fiscal year of 2025. Today, representing the company is Jim Labe, Chief Executive Officer and Chairman of the Board; Sajal Srivastava, President and Chief Investment Officer; and Mike Wilhelms, Chief Financial Officer. Before I turn the call over to Mr. Labe, I'd like to direct your attention to the cautionary safe harbor disclosure in the company's press release regarding forward-looking statements and remind you that during this call, management will make certain statements that relate to future events or the company's future performance or financial conditions, which are considered forward-looking statements under federal securities law. You are asked to refer to the company's most recent filings with the Securities and Exchange Commission for important factors that could cause actual results to differ materially from these statements. The company does not undertake any obligation to update any forward-looking statements or projections unless required by law. Investors are cautioned not to place undue reliance on any forward-looking statements made during the call, which reflects management's opinions only as of today. To obtain copies of our latest SEC filings, please visit the company's website at www.tpvg.com. Now I'd like to turn the conference over to Mr. Labe. James Labe: Thank you, operator. Good afternoon, everyone, and welcome to TPVG's fourth quarter earnings call. 2025 was a year of meaningful progress and improved performance across the portfolio. We continue taking important steps aimed at increasing TPVG's scale, durability, income-generating assets and NAV as we seek to create enduring shareholder value over the long term. During the year, our team executed with discipline and focus, proactively managing our portfolio and selectively capitalizing on opportunities with high-quality U.S.-based venture growth stage companies. We're pleased to have achieved progress in strengthening the portfolio during 2025 and continuing to resolve past credit situations, while at the same time, making strong progress on our path of portfolio diversification, geographic and investment sector rotation. The portfolio continued to stabilize during the year with NAV increasing year-over-year from 2024 to 2025. We believe this reflects the progress we're making in creating a more durable platform and portfolio that's supportive of increasing NAV over time. In 2025, the investment portfolio grew year-over-year. TPVG closed $508 million of new debt commitments to venture growth stage companies. This represents a significant increase from the $175 million we recorded back in 2024, and it marks the highest levels of originations activity in over 2 years. In the second half of the year, as expected, our fundings began to increase as we executed on the pipeline and existing borrowers drew on their committed facilities amid the improvements in the venture landscape. We ended the year with $287 million in fundings, more than double that of the previous year. The demand for venture debt remains active, and our platform ended the year with a pipeline exceeding $2 billion. We benefited from the notable uptick in venture capital investment activity throughout 2025. According to PitchBook, venture capital deal value increased to $339 billion across more than 16,000 deals as of the end of 2025, second highest in a decade. Deal value in our core venture growth market segment rose 131% year-over-year. As a result of this strong market environment, in 2025, we signed $1.2 billion of term sheets alone with venture growth stage companies at our sponsor, TriplePoint Capital, one of the largest venture lending firms serving this market. Taking a closer look at the portfolio. Throughout the year, we made significant progress diversifying our business with commitments to 8 new borrowers during the fourth quarter and 28 new borrowers in 2025. This was an increase of 250% over the previous year. These borrowers are all in what we believe are high potential durable sectors, including those leveraging AI to drive product differentiation, market disruption and efficiency. We continue to take advantage of this strong market demand, preferring companies with meaningful revenues, strong margins, solid cash runways and at or near EBITDA positive or with path to cash flow generation and debt service without the need for further equity fundraising. Turning to our ongoing portfolio investment sector rotation and in particular, AI, we believe AI is no longer a cyclical theme. It's a structural multi-decade transformation reshaping every sector of the economy. AI alone represented 65% of the total U.S. venture deal value last year and 39% of the deal count, underscoring both the scale and the breadth of capital flowing into the space. We expect this momentum to continue, driving significant venture investment activity this year and a sustained opportunity as a result for us in the years to come. Over the past, we've been proud to support innovative AI leaders in our portfolio such as Observe AI, Edge, Aradoo, Marvin, Encord and EnCharge AI, among others. These companies reflect our strategy of backing what we believe to be category-defining companies at the forefront of applied AI infrastructure and deployment. We'd be remiss not to discuss our current view of SaaS and the potential impact AI has on this industry. Despite persistent headwinds warning a SaaS-pocalypse, we believe concerns surrounding software and SaaS markets, especially those for venture capital-backed businesses are overstated. While this is clearly a headline issue, this is more problematic in our minds for PE sponsors and middle market lenders dealing with those legacy software companies in their portfolios and believe it's less relevant in the VC industry, particularly at these venture growth stages. We note that most of the TPVG portfolio companies in this space are typically considered AI native or AI-enabled companies and market disruptors, not to disrupt it and are leveraging AI natively to enhance product offerings or driving more efficient operations or taking market share from those legacy incumbents. As we highlighted in the last 4 earnings calls, we've been adding AI-enabled software companies ever since AI and the large language models began gaining widespread adoption in 2023. If you look at the makeup of our portfolio, while under 35% of our exposures could be classified in that broader software categories, 70% of those companies that we invested in were 2024 and 2025 vintage investments, all companies which we invested in during the last 2 years during this AI era and all of them with AI enablement and tech-forward AI attributes. Importantly, even those vintages prior to 2024, only 5 companies by count are all made of embedded vertical application software companies that are so entrenched and mission-critical, it'd be a major challenge to replace them. It's not all AI. In addition to it, we continue to pursue opportunities in other diversified sectors. We're witnessing a renewed focus on American domestic priorities, particularly in aerospace and defense, infrastructure and the ongoing of advanced manufacturing. Policy tailwinds and national security are driving notable capital markets activity, reinforcing the durability of investment in those sectors. We're positioning TPVG to benefit directly from these secular trends through portfolio companies such as PerryLabs, USCT, Valor and Standard Bots, among others. These are businesses that align with national priorities and are building mission-critical technologies. As capital increasingly flows towards these strategic sectors, supported by federal policy and procurement reform, we believe venture-backed innovators in cybersecurity, aerospace, defense, robotics, energy and resources and advanced manufacturing will remain durable recipients of both equity and venture debt capital. I'd say we're also encouraged by the health of these venture markets and some reemerging signs of liquidity with M&A and IPOs. As the exit market continues to improve, we are well positioned to realize value for shareholders with our sizable equity and warrant portfolio. At year's end, we held warrant positions in 118 portfolio companies and equity investments in 55. As we've been mentioning, we have positions in several leading companies cited as top IPO candidates, including Cohesity, Zevs, Revolut, Dialpad, Fiovine, GrubMarket and others. Finally, in the first quarter of 2025 and building off the momentum of a strong year of performance, we successfully refinanced our $200 million in 2026 notes. This further strengthens our capital structure, and Mike will provide further details during his prepared remarks. We intend to continue building on the momentum we experienced in 2025, positioning TPVG for growth and shareholder value creation with the strong support of our sponsor, TriplePoint Capital, the parent of our investment adviser. TPC brings an exceptional brand name, reputation, proven track record, venture capital relationships and direct originations capabilities. As we mentioned last quarter, our advisers' income incentive fee waiver has been extended through 2026. And in addition, our sponsor also purchased more than 1.8 million shares of TPVG during the third and fourth quarters under the discretionary share purchase program. In summary, we delivered measurable progress in 2025 and saw improved venture market conditions throughout the year. As we look ahead, we're excited about the path forward and believe the combination of durable AI tailwinds, strong demand, disciplined underwriting and creative customized structuring places us in a strong position to capitalize on these market conditions in 2026 and beyond. Let me turn the call over now to you, Sajal. Sajal Srivastava: Thank you, Jim, and good afternoon. 2025 was a year of disciplined execution as we continue to build a strong foundation and position TPVG for the long term. Beginning with investment activity, TriplePoint Capital signed $207 million of term sheets with venture growth stage companies during Q4 and $1.2 billion for the full year, up more than 60% from $736 million of signed term sheets in fiscal year 2024. With regards to new investment allocation to TPVG during the fourth quarter, our adviser allocated $90 million in new commitments with 12 companies to TPVG. 2/3 of the commitments made during the fourth quarter were to new portfolio companies, reflecting our focus on the obligor diversification and sector rotation. For the full year, we closed $508 million of debt commitments with 28 new portfolio companies and 7 existing obligors, up almost 2x from the $175 million of debt commitments in 2024 with 13 companies. As mentioned during our Q3 call, in anticipation of prepayment and scheduled repayment activity during this quarter, we exceeded our guided range and funded $93 million in debt investments to 16 companies. These funded investments carried a weighted average annualized portfolio yield of 12%. For the full year, we funded $287 million in debt investments to 31 companies, up more than 100% from $135 million to 13 companies in 2024. The lower overall onboarding yields in 2025 reflect a number of factors in addition to the declining rate environment, including originating revolving loans, which enable us to be the sole lender to our portfolio companies, lending to more robust enterprises from a size and scale perspective, including EBITDA positive companies and lower OID as a result of reduced enterprise valuations. During Q4, we had $44 million of loan prepays from relatively seasoned loans, resulting in an overall weighted average portfolio yield of 12.7%. And excluding prepayments, our core portfolio yield was 12.1%. For the full year, we had $120 million of loan prepays as compared to $170 million of loan prepayments in fiscal year 2024. We also had $64 million of scheduled principal amortization and repayments under revolvers during the quarter. For the full year, we had $92 million of these payments, which together with the previously mentioned $120 million of prepays, provided us substantial liquidity to reinvest in our portfolio and to use strategically as we refinance and optimize our go-forward debt stack. During the fiscal year, our investment portfolio grew by over $100 million or 15% as a result of new fundings exceeding prepayment, repayment and amortization within the portfolio. Of our 55 obligors with outstanding loans as of year-end, 7 were added in 2024 and 22 were added in 2025. So progress on our plans for obligor, vintage and sector rotation. Although we continue to see robust demand for debt financing from venture growth stage companies as demonstrated by our $155 million of new term sheets and $15 million of funding so far in Q1, quarterly target for new fundings continues to be in the $25 million to $50 million range for 2026, unless we have line of sight to higher-than-expected prepayment activity. Two portfolio companies with debt outstanding raised $71 million of equity capital during the quarter. And for the full year, 15 debt portfolio companies raised $474 million of equity capital. Although down from 2024, it is not unexpected given the number of new obligors we have added in the past year. In addition, the pace of up round valuations has picked up, which is reflected well in our credit quality as well as the warrant and equity investments associated with these debt investments. No new companies were added to our credit watch list during the quarter, and the weighted average credit ranking of our portfolio slightly improved from Q3. During the quarter, we saw a fair amount of prepayment and repayment activity, along with both net unrealized and net realized gains in the debt portfolio from the resolution of credit situations in addition to fair value adjustments related to obligor performance, sector outlook changes and foreign currency exchange. Briefly reviewing material updates across all of our credit rating categories. During the quarter, we had 2 Category 1 or Clear rated obligors repay their loans. We added $72 million of loans to 13 obligors to Category 2 or White rating as a result of new investment activity, offset by $42 million of loans to 5 companies as a result of prepayments and repayments due to acquisition, the most material being 30 Madison, which closed its acquisition by RemedyMeds. As a reminder, 30 Madison was an existing TPVG portfolio company, but also acquired the assets of TPVG portfolio company, Pill Club and assumed our outstanding loans. This transaction represents a full recovery inclusive of end of term payments on both transactions. With regards to our Category 3 or yellow-rated loans, during the quarter, we saw a partial prepay from one obligor, fair value increases in our loans to Flink as a result of its recently announced equity raise as well as reductions in the fair value of our loans to Prodigy Finance, a fintech focused on lending to international graduate students due to sector and business performance. With regards to Category 4 or orange rated loans, the most material development is associated with our portfolio company, NA-KD, an EBITDA positive Swedish women's fashion e-commerce company. During the quarter, NA-KD's lenders, which includes TPVG and other investment vehicles controlled by our sponsor, have recapped and restructured the company and now own a controlling position of the equity of the company. As part of this process, the lenders reduced the total amount of debt outstanding by converting a portion of the outstanding loans into a hybrid loan instrument, which we now treat as an equity investment on our balance sheet and a small amount into common equity to take the controlling position. As part of our process, we experienced gains as a result of getting full recognition for unaccrued interest end of term payments and fees, which was higher than both our cost basis and fair value. The lenders are working with NA-KD to evaluate strategic alternatives for the business over the next 12 to 18 months. Our sole Category 5 or Red obligor, Frubana, continues to work through its recovery process. And here in Q4, we received recoveries of approximately 25% of Q4's fair value. We believe that the resolution on 30 Madison Pill Club and the developments with NA-KD demonstrate that while some of these credit journeys may take longer than expected, our continued efforts have the potential to work out in our favor. As of year-end, we held warrants in 118 companies and equity investments in 55 companies with a total fair value of $138 million, up from warrants in 98 companies and equity investments in 48 companies with a fair value of $116 million last year. During the quarter, we did experience a fair amount of volatility in our warrant equity portfolio, resulting in an overall net unrealized loss despite the unrealized gains from our debt investments and a slight reduction in our NAV for the quarter, although NAV is still up $0.12 year-over-year. These unrealized warrant and equity losses were driven from fair value marks on Prodigy's preferred equity, which, as previously mentioned, was due to performance and sector concerns, and write-offs resulting from companies acquired or where our investments expired, offset by unrealized gains from positive results from recent equity rounds by Upgrade, Filevine, [indiscernible] and others. As we take a step back to assess 2025 and our outlook for 2026, our playbook continues to be focused on building a strong foundation for TPVG and positioning TPVG for the long term by strengthening our balance sheet, driving portfolio scale and quality, rotating the portfolio into newer vintages, resolving credit situations, increasing the earnings power of our business and growing net asset value and shareholder value over the long term. With that, I will now hand the call over to Mike. Mike Wilhelms: Thank you, Sajal, and good afternoon, everyone. For the full year, we generated net investment income of $42.3 million or $1.05 per share on total investment income -- sorry, on total investment and other income of $90.9 million. Our weighted average annualized portfolio yield on debt investments was 13.7% for the year compared to 15.7% in the prior year. The decline in yield primarily reflects the lower interest rate environment, including reductions in the prime rate as well as a shift in portfolio mix toward lower-yielding, higher-quality borrowers. During the year, we funded $287 million of new debt investments compared to $135 million in the prior year, reflecting the continued strength of our origination platform. We received $212 million of scheduled principal amortization, prepayments and early repayments during the year, resulting in a net increase of approximately $85 million in our debt investment portfolio at cost. As of year-end, our total investment portfolio at fair value totaled approximately $784 million compared to $676 million at December 31, 2024, representing a 16% increase year-over-year. For the full year 2025, we declared and paid total distributions of $1.08 per share, consisting of $1.06 in regular quarterly distributions and a $0.02 supplemental distribution. We ended the year with estimated spillover income of $42.3 million or $1.04 per share, providing meaningful earnings carryover into 2026. Net asset value increased year-over-year to $8.73 per share at December 31, 2025, compared to $8.61 per share at December 31, 2024. For the full year, we recorded a net increase in net assets resulting from operations of $49.2 million or $1.22 per share compared to $32 million or $0.82 per share in the prior year. Overall, 2025 was characterized by disciplined capital deployment, active portfolio repositioning and continued strengthening of our balance sheet. Total investment and other income for the fourth quarter was $22.5 million, representing a weighted average annualized portfolio yield on debt investments of 12.7%. The decrease in yield compared to the prior quarter primarily reflects lower base rates, including reductions in the prime rate. Approximately 63% of the debt portfolio is floating rate and 79% of those loans are at their prime rate floors as of December 31, 2025. As a result, we expect the impact of any additional interest rate reductions on our net investment income to be limited, particularly as lower base rates would also reduce interest expense on our floating rate borrowings under the revolving credit facility. This structural positioning continues to serve as an important stabilizing factor in a declining rate environment. Net investment income for the fourth quarter was $9.9 million or $0.25 per share compared to $10.3 million or $0.26 per share in the prior quarter. Net increase in net assets resulting from operations was $8.1 million or $0.20 per share. During the fourth quarter, the company recognized net realized gains on investments of $4.8 million, resulting primarily from the restructuring of an investment in one portfolio company. The net change in unrealized losses on investments for the fourth quarter was $6.6 million, consisting of $11.6 million of net unrealized losses on the existing warrant and equity portfolio resulting from fair value adjustments, offset by $3.3 million of net unrealized gains on the existing debt investment portfolio from fair value adjustments and $1.7 million of net unrealized gains from the reversal of previously recorded unrealized losses from investments realized during the period. Total operating expenses for the fourth quarter were $12.6 million, net of income incentive fee waivers. During the quarter, $2 million of income incentive fees were earned but fully waived by the adviser. For the full year, the adviser waived $5.3 million of income incentive fees. In addition, under the total return requirement embedded in our incentive fee structure, income incentive fees were further reduced by approximately $3.1 million earlier in the year. Collectively, these items increased net investment income by approximately $8.5 million for fiscal year 2025. As previously announced, the adviser amended its waiver in November to waive the quarterly income incentive fee through the end of fiscal year 2026. As of December 31, 2025, we had total liquidity of $252.4 million, consisting of $47.4 million of cash, cash equivalents and restricted cash and $205 million of available capacity under our revolving credit facility. We ended the quarter with a gross leverage ratio of 1.33x and a net leverage ratio of 1.20x. We ended the quarter with $260 million of unfunded commitments, down modestly from $264 million in the prior quarter. Of these commitments, approximately $51 million are milestone-based and therefore, contingent upon borrowers achieving specified performance targets. The remaining commitments are well laddered over the next several years with approximately $80 million scheduled to expire in the first half of 2026, $71 million in the second half of 2026, $83 million in 2027 and $27 million in 2028. During the quarter, we successfully extended our revolving credit facility, extending the revolver period to November 30, 2027, and the final maturity to May 30, 2029. The amendment also improved key economic terms, including reduced borrowing spreads and higher advance rates. On February 27, 2026, the company entered into a note purchase agreement providing for the issuance of $75 million in aggregate principal amount of senior unsecured notes due February 2028 with a fixed interest rate of 7.5%. On March 2, 2026, we used the net proceeds from this issuance, together with borrowings under our revolving credit facility and cash on hand to repay in full the $200 million of unsecured notes that matured March 1, 2026. With the March 2026 maturity fully addressed, our capital management strategy remains focused on preserving liquidity and financial flexibility while optimizing our overall fixed to floating debt mix and managing our forward maturity profile. While certain maturities are now more concentrated in late '27 and early 2028 as a result of recent refinancing activity, we are actively managing that profile and expect to address those opportunistically well in advance of their respective due dates, consistent with our disciplined and proactive approach to capital markets execution. During 2025, our sponsor, TPC, purchased approximately 1.8 million shares of our common stock under its discretionary share purchase program, further demonstrating alignment with shareholders. Following year-end, TPC continued purchasing shares, bringing total purchases under the program to approximately 2 million shares or nearly 5% of our outstanding shares. Combined with the extension of the income incentive fee waiver through the end of fiscal year 2026, these actions underscore our continued focus on long-term shareholder value. In summary, 2025 was a year of stabilization and repositioning. We strengthened overall credit quality, enhanced our capital structure and extended our revolving credit facility on improved terms. With a higher quality portfolio mix, approximately 79% of our floating rate debt investments already at their prime rate floors and the income incentive fee waiver in place through the end of fiscal 2026, we believe TPVG enters 2026 on solid footing. That concludes our prepared remarks. Operator, please open the lines for questions. Operator: [Operator Instructions] And the first question today will come from Finian O'Shea with Wells Fargo Securities. Finian O'Shea: One thing we picked up, it said 2 names raised money this quarter, 2 debt investment names. Can you remind us like is that a low number in the historical context? And if so, anything sort of to see there on the macro for venture, if that's kind of just a one-off timing thing? Sajal Srivastava: No, Fin, as I mentioned in my prepared remarks, I think it's a reflection of the freshness of the vintages of our portfolio given the number of new obligors we added both in 2024 and 2025. So we expect the fundraising activity for those names to be more in '26, '27. And so I would say it is a reflection, though, obviously, of more of the capital going into AI and AI-related investments overall, as Jim mentioned during his prepared remarks. But I'd say, if anything, just again, a reflection of the rebalancing and rotation of our portfolio into newer vintages. Finian O'Shea: Okay. No, I appreciate that. And then sort of high level on the sort of long-term goals as you outlined. I just wanted to ask if there's any maybe change in the playbook. You've been above book, fairly well above book BDC at one time, obviously, more generous environment. But today, the sort of starting point is below ground for you. It's a pretty small BDC. Your cost of capital is pretty high. It just feels like a pretty long march to be generating an adequate market yield. So seeing if there's any like if you have -- and I appreciate that you could only say so much if there was something, but do you think about change in strategy kind of thing? Or is it sort of same playbook, get back to ideal clean high-yielding venture debt portfolio? Sajal Srivastava: Well, I would definitely say it's not the same playbook. I think our playbook is refined every year, a reflection of market conditions and strategic initiatives. I would say, yes, obviously, we're disappointed with the performance of TPVG from a market cap and a trading perspective. It's not a reflection of our sponsor and our platform and the size and scale of our originations and our capabilities, but we are very much focused on it, I think, demonstrated by our sponsor and the things our sponsor has done, particularly with the share purchase program. But I think more importantly, to your point, Fin, I think, listen, we've been articulating it's a multifaceted playbook to get TPVG back to where it should be. It's a combination of, again, building this foundation, positioning for the long term, it's about strengthening the balance sheet and the activities that Mike has done. It's about what Jim and the team are doing about driving new investments and the portfolio scale and rotating into newer vintages. It's what our credit teams are working on and resolving credit situations. It's about improving fundamentally the percentage of income-earning assets in the book. And I think shareholders will benefit from that over the long term. And then I think the wildcard always is the warrant and equity portfolio. And again, Revolut continues to do amazing things. Fingers crossed, they continue to -- but we have others. We're not just one trick pony. And so I'd say it's a multifaceted strategy. It's a refined strategy dealing with the realities of the market and market conditions, but also the advisers strategy experience, Jim and I are now in our 26th year of working together, and we're working hard. So it's not a short fix, it's a long-term playbook, and we appreciate the support and patience from our investors along that journey. Operator: The next question will come from Brian McKenna with Citizens. Brian Mckenna: Okay. So when you look across the portfolio today, do you think you've worked through most of the negative marks? I'm trying to think through the trajectory of NAV from here. It did increase modestly in 2025. So I'm wondering, is this maybe a new trend and if we should expect this to persist moving forward? Sajal Srivastava: I would say that, again, you can never fully have the crystal ball on credit. We continue to work through the situations. There are known situations. I think -- we're pleased that credit has generally been stabilized over the course of 2025. I think the biggest concern is market conditions and macroeconomic impact. And so I would say I'm hesitant to say we're out of the woods, but I would say we are proactive as we can be. We're resolving situations, and we're making progress, and we'll continue to do so. Brian Mckenna: All right. That's helpful. And then two questions for Mike. Repayments were clearly elevated in the quarter. You also disclosed that there's been $24 million of prepayments quarter-to-date. But any visibility for the rest of the quarter here in March? And then my other question there, I mean, why not start buying back more of the stock at 60% of book value and maybe do some of that -- you use some of the incremental NII from waiving the incentive fees in 2026. Just curious on a couple of those as well. Mike Wilhelms: Yes, I'll take the remaining prepayment and the activity in the quarter. You're correct. We saw an elevated amount of prepayments in the fourth quarter. We saw some prepayments here early on. Currently, not a ton more visibility in prepayments for the remainder of the quarter, but it is something we're monitoring, but nothing material to note as far as the remainder of the quarter. James Labe: And I may add on the share repurchases. And these are things we've done before. I can remember at least twice and remain committed to creating the long-term shareholder value in the near term. The focus these days is, as Sajal mentioned, on our investment earnings and enhancing the earnings power and growing the NAV. It's maintaining financial flexibility. But absolutely, with that said, management, the Board, we're going to continue to consider all these options, including buybacks to create value for our investors. Operator: The next question will come from Crispin Love with Piper Sandler. Benjamin Graham: This is Ben Graham in for Crispin Love. Looking at your investment portfolio composition, roughly 27% is made up of software companies. So I'm just wondering if you could maybe drill a little deeper within the cohorts of software where you have exposure and what areas in your portfolio you're most confident in? And then also which areas you're more cautious on given these AI disruption themes? James Labe: Yes. On the software, the way we think of it is that literally last year, we -- TPVG added 28 portfolio companies and 14 of them were software, of which 9 were, I'd call it, native AI. The other ones were all tech-enabled AI or absolutely leveraging AI tech forward kind of plays. There's only 5 companies, and these were all ones done pre 2024. It's about $85 million, $89 million or so of exposure. Those ones would be more your general software companies, except each of those in themselves are not these SaaS software kind of makeup type companies. So the end of the day in terms of software, the majority of the portfolio of TPVG is deals we've done in the last 2 years. And as I mentioned in prepared remarks, the overwhelming majority all have or a part of, if not AI native AI-enabled solutions. Benjamin Graham: Awesome. And then if I could ask one more. I was wondering if you could share your latest views on M&A and IPO activity expectations for 2026. And if these expectations have changed again given these market reactions to AI disruption impacts to public software as well as other sectors. Sajal Srivastava: Yes. I would definitely say, given the developments of the last week or so, obviously, there's a significant amount of volatility in the market. And so I would say any overall optimism we had about the IPO markets probably is delayed. I wouldn't say closed, but I would say delayed with regards to IPO activity. As Jim mentioned in his prepared remarks, I mean, we have a number of portfolio companies that are preparing and hope to be part of the next class of IPO activity. I think we are pleased, though, we are seeing M&A discussions pick up. Now it's to be determined valuations and multiples and seeing those transactions actually close. But as folks will remember, in prior years, we saw significant lack of M&A activity. And I think we're pleased to see that activity pick up and cautiously optimistic that in light -- even if the IPO markets don't open up, that the M&A markets will continue to be opportunistic and open for those unique opportunities or compelling opportunities. Operator: The next question will come from Christopher Nolan with Ladenburg Thalmann. Christopher Nolan: A recent discussion I had with indicated that some of the concern around software is not so much their near-term cash flow, it's the terminal value for these companies thinking that AI is just going to cut the legs out from under them over time. If that's the case, and given that you guys have a significant exposure to software, does this affect how you evaluate software companies? And if so, is there a risk of meaningful markdowns in your equity portfolio? Sajal Srivastava: Yes. Chris, let me parse through that in a couple of nuances. So I'd say the -- as Jim first talked about, the majority of our "software companies" they're the class of 24 or the class of 25, and the majority of them are AI-enabled. So we -- there is no -- the codes we use don't have AI categories yet. So we define those as fundamentally AI or AI-enabled companies. As we look to more fundamentally to the other companies that are not in those vintages, as Jim was saying, they're so entrenched with their customers that the ability for a company to replace them is particularly challenging, which makes them incumbent, which again, I think, is important because now let's add the part of the venture lending aspect. So 3-year loans. So this is where cash paying loans. And so this is where we add in the fact the uniqueness of our business that these are short-term financings that these are transactions that are not -- our exit is not predicated on a sponsor selling the company or the company getting acquired. It's fundamentally on companies' either ability to raise another round of financing or cash flow from the business to service our debt. So that's what gives us comfort. So fundamentally, that's the benefit of venture lending to software companies or SaaS companies or AI companies versus more traditional middle market lending. Christopher Nolan: Sajal, do you guys think in general that AI is a real product now? Or it's just something in the product pipeline of these companies that's going to hit? Sajal Srivastava: No, no, it's a real product. It's all the above. James Labe: Yes. I would say it's -- it's not a sector. It's absolutely horizontal across everything. The way I think of it, it's everything these days is AItopia, AI euphoria. And to your question, we're not looking and really don't look at software-only plays, on-prem software, anything like that. It's all AI-enabled software across the Board. Christopher Nolan: Great. And I guess a final question on this is you guys see a lot of AI out there. Is there any way that this could come into your own operations and start improving your operating leverage on your earnings? James Labe: Well, we're already using AI actively software, including some of our portfolio companies, AI in our due diligence processes and other aspects and parts of our business. So that's absolutely something. And we're actually using it as well when we're looking at AI opportunities themselves and actually have some AI software companies, which actually their business is evaluating other AI companies for identity and other issues. But Mike, I don't know if you wanted to add. Mike Wilhelms: Yes, I was going to add just from an operations back of the house, middle of the house standpoint, we've been starting to deploy AI in the back half of 2025 and going to continue that in 2026, rolling it out to all associates and really asking them to rather than us tell them how to use the AI, look for them to find ways to make more efficient -- their jobs more efficient. We're definitely seeing some efficiency already, and I expect to see that more in 2026 and 2027 for sure. Christopher Nolan: Okay. Is it something you can quantify as you go along? Like provide some guidance, it would be helpful if we can get this efficiency ratio improved. Mike Wilhelms: From my standpoint, it would be a headcount standpoint as far as whether it's the accounting and finance division or the operations division. So I'm not sure that's something we would be disclosing to you all as far as our headcount within the back of the office, but something we can talk about further. Operator: The next question will come from Finian O'Shea with Wells Fargo. Finian O'Shea: Just seeing if you could tell us the OID on the post-quarter bonds? Mike Wilhelms: 0%. Yes. When you say OID, are you talking about the discount? Yes, there is no discount. It's 7.5%. That's right. Yes, we did not issue it at a premium or a discount. Sorry, I didn't quite understand the question. But yes, the $75 million was issued and proceeds were at face value. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Jim Labe for any closing remarks. Please go ahead. James Labe: As always, I'd like to thank everyone for listening and participating in today's call. We look forward to updating and talking with you all again very next quarter. Thanks again, and have a nice day. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good afternoon, and welcome to Vinci Compass Fourth Quarter and Full Year 2025 Results Conference Call. [Operator Instructions] As a reminder, this call will be recorded. I would now like to turn the conference over to Anna Castro, Investor Relations Manager. Please go ahead, Anna. Anna Castro: Thank you, and good evening, everyone. Joining us today are Alessandro Horta, Chief Executive Officer; Bruno Zaremba, President of Finance and Operations; and Sergio Passos, Chief Financial Officer. Earlier today, we issued a press release, slide presentation and our financial statements for the quarter and for the full year 2025, which are available on our website at ir.vincicompass.com. I'd like to remind you that today's call may include forward-looking statements, which are uncertain and outside of the firm's control and may differ from actual results materially. We do not undertake any duty to update these statements. For a discussion of some of the risks that could affect results, please see the Risk Factors section of our 20-F. We will also refer to certain non-GAAP measures, and you'll find reconciliations in the release. Also note that nothing on this call constitutes an offer to sell or solicitation of an offer to purchase an interest in any Vinci Compass fund. On results for the fourth quarter 2025, Vinci Compass generated fee-related earnings of BRL 80.4 million or BRL 1.23 per share, FRE margin of 32.6% and adjusted distributable earnings of BRL 81.3 million or BRL 1.24 per share. For full year numbers, Vinci Compass posted fee-related earnings of BRL 288.4 million or BRL 4.52 per share, FRE margin of 30.4% and adjusted distributable earnings of BRL 292.4 million or BRL 4.58 per share. We declared a quarterly dividend of $0.17 on the dollar per common share payable on April 2 to shareholders of record as of March 19. With that, I'll turn the call over to Alessandro. Alessandro Morgado Horta: Thank you, Anna. Good evening, and thank you all for joining our call. We are delighted to be with you today as we present our results for the fourth quarter and full year 2025. As you all know, 2025 marked a pivotal chapter in our history. It was our first full year operating as a pan-regional platform following our business combination with Compass. I'm deeply proud of all the teams across our countries in Latin America who have worked tremendously to extract the most value from our merger. In 2025, we were able to, right from the start, position our company as a Latin America platform, working together across all teams to drive synergies across products and commercial teams. In 2025, we also hosted our first Investor Day at Vinci Compass with the heads of all our main strategies present. We presented our vision for the next cycle and how and why we are well positioned to capture the growth in alternatives in Latin America. On the same day as our Investor Day, we also announced the acquisition of Verde, which closed in December and added approximately BRL 16 billion in AUM. As we did with Compass, we were able to start working on revenue synergies with the Verde team from the start. We are pleased to share that we have launched the first product born out of the collaboration between the 2 companies. The Vinci Verde FE Infra or VVFE Infra combines Vinci Compass' credit expertise with Verde's well-established multi-strategy track record as co-manager. The feedback from the local community has been great, and we are already seeing strong demand and growing interest from investors, especially in the intermediaries channel at this point. We view this launch as a clear demonstration of the strategic rationale behind the combination, expanding our solutions set by joining forces, leveraging Verde's team's outstanding track record in multi-strategy funds and strong brand strength across intermediary channels and deepening synergies between the 2 firms. The collaboration between the teams has just started, and we are very excited about what's ahead. Having Luis Stuhlberger and the Verde team as partners is one of the proudest achievements of 2025 and will be an extremely fruitful partnership for the company in 2026 and coming years. Shifting to a brief overview of our fourth quarter fundraising. We ended the year with BRL 354 billion in total AUM, reflecting not only the impact of inorganic growth, but also strong capital formation and portfolio appreciation across our strategies. Only during this quarter, we had BRL 14 billion in capital formation and appreciation favorably impacting our AUM. For the full year, this adds up to BRL 42 billion, representing a 13% year-over-year growth. Our fundraising momentum remained robust across the Global IP&S and Credit segments. Infrastructure credit specifically continues to demonstrate strong long-term momentum across multiple vehicles and client segments. The tax-exempt nature of several of these assets creates compelling investment opportunities, and we believe Vinci Compass has established itself as a reference manager in this space. The positioning was further reinforced in January 2026 when we won a new BNDES tender process. We are very proud of this achievement, which marks the third time Brazil's Development Bank has appointed Vinci Compass to manage a long-term private credit fund focused on sustainable finance and incorporating strict ESG guidelines. Another particularly strong highlight was in real assets, where we signed a BRL 2.8 billion SMA with an Asian LP within our infrastructure strategy. We have been investing a lot of time in Asia, and this SMA represents a significant milestone for our platform and reflects the growing interest we have been highlighting throughout the year from global investors seeking alternative investment exposure in Latin America. In our view, this can be the first of several mandates that we arranged for global institutional investors to allocate capital to the region, and it reinforces our view that the macro backdrop continues to support increased international allocations to the LatAm opportunities. Turning to private equity. The first couple of months of 2026 have been exciting for the segment. Our team has announced 2 transactions that increased the liquidity profile of both VCP II and VCP III. In January, VCP III IPO-ed Agibank on the New York Stock Exchange. This marks an important step in the fund's history, crystallizing a 3.8x gross MOIC in Brazilian reals and a 35% IRR for VCP III at the IPO price. This is the first step to generating liquidity in this investment, which has been one of the best-performing assets in Fund III. In February, the team signed a definitive agreement for the reverse IPO of CBO, a VCP II portfolio company into OceanPact, a Novo Mercado listed company. Upon closing, the combined company will become the second largest offshore service vessel operator in Brazil and the fifth largest globally by fleet size, forming a scaled and diversified offshore and environmental services platform with long-term contracted backlog. This quarter, through the combination of markups in VCP IV and appreciation in our listed REITs position, we noticed a very positive impact on our unrealized ROE. As we underlined during our Investor Day, we expect this phase of the ROE cycle characterized by portfolio appreciation to continue supporting unrealized gains from our proprietary commitments in closed-end funds. Towards the end of the cycle, we expect to realize the value of these investments, which will then reflect in our realized IRE and distributable earnings. These accomplishments across the 3 vintages underscore the team's outstanding ability not only to source compelling opportunities, but also to actively create value within portfolio companies and execute successful divestments, reinforcing our discipline and hands-on approach to value creation. On the deployment side, the current macro environment continues to create attractive entry opportunities, positioning VCP IV advantageously as private markets present compelling entry multiples relative to historical levels. Looking ahead, the expected start of a monetary easing cycle would gradually reduce debt service costs for leverage companies and lower discount rates in Brazil. The conditions for this move appear increasingly well established and expectations of monetary easing have already supported a re-rating of domestic assets. That said, we do anticipate periods of volatility, particularly considering upcoming electoral cycles in Brazil, Colombia and Peru. In addition, we remain attentive to the broader global macroeconomic environment and its potential impact on alternative managers' portfolios. However, our business was built to navigate and capitalize on volatility and market dislocation. We have a natural hedge across geographies and strategies with the opportunity and flexibility to allocate capital locally, regionally and globally. This structural resilience is directly linked to the stage we have reached as a firm, clearly differentiating us from the other local and regional players. As we enter the new year, we do so with a clear set of opportunities in front of us and an extensive fundraising pipeline that Bruno will address shortly. We firmly believe that the strength, scalability and diversification of Vinci Compass position us to continue displaying healthy growth in 2026 deepening our leadership across Latin America and continue delivering long-term value for our shareholders. Thank you again for joining our call. With that, I'll turn it over to Bruno. Bruno Sacchi Zaremba: Thank you, Alessandro, and good evening, everyone. In January, we marked the fifth anniversary of our IPO, an opportunity to recognize how far we have come as a public company and to reaffirm the long-term vision that has guided our execution. Before discussing the present and looking ahead, I would like to take a moment to reflect on our journey. From the outset, our objective was to deepen and diversify our asset allocation capability in Brazil through complementary strategies while building towards a pan-regional platform. We have made significant progress on both sides. On the capital deployment side, we committed approximately BRL 1.4 billion worth of GP commitments into our proprietary funds and gains from these investments compose our investment-related earnings or IRE. The portfolio has a gross blended target IRR of 18% to 20% and an expected realized IRR annual run rate contribution of more than BRL 100 million based on a normalized realization schedule for capital gains between 2028 and 2031. The capital invested has leveraged fundraising by 13x, meaning that for every real we committed, we raised roughly BRL 13 from our limited partners. The commitments are instrumental to successful fundraising, anchoring the funds and assisting the attraction of institutional investors in the early rounds of fundraising. This represents value creation reflected across multiple fronts, strengthening our recurring earnings base while also enhancing the long-term return profile of our capital. We are close to the end of this first cycle of deployment into funds and intend to keep it as a staple of the platform, anchoring fundraising for strategies and driving capital gains and FRE growth for Vinci Compass. In parallel, we executed a series of strategic acquisitions that strengthened our business mix in Brazil and supported our evolution into a pan-regional platform. By the end of 2025, we had funded our M&A transactions with approximately BRL 400 million in cash and issued close to 15 million shares to our new partners. Considering 2025 numbers and accounting for potential earn-out payments based on results achieved so far, our blended EV to FRE multiple on a post-tax basis was 8.6x on these acquisitions. This underscores our commitment to smart capital allocations, focusing on complementing our asset base and driving shareholder value through accretive transactions. On top of IRE results and M&A activity, we have been extremely active on capital return to our shareholders, having distributed over BRL 1.4 billion on dividends and share buybacks since our IPO. This disciplined execution has brought us to a new stage as a firm as we enter 2026 with a clear sense that we are on the right trajectory. The platform has been substantially complemented with new strategies, distribution capabilities, and increased regional and global reaches. The progress we delivered in 2025 offers a strong snapshot of the potential and scalability of our platform going forward as we achieved BRL 42 billion of capital formation and appreciation for the full year of 2025. During the fourth quarter, we generated BRL 14 billion in capital formation. As Alessandro mentioned, a highlight was the BRL 2.8 billion SMA mandate to invest in infrastructure assets across Latin America. This capital will begin contributing to fee-earning AUM as deployment progresses. We view this achievement as highly encouraging and believe it may represent the first of several SMAs focused on Latin American investment opportunities that we expect to originate over time following the nascent cyclical improvement in the region. Beyond this mandate, the largest contributions during both the quarter and the year came from Global IP&S and Credit as anticipated. Global IP&S delivered another strong quarter in our TPD business with BRL 4.6 billion in net inflows. The largest share came from the liquid platform, as most of the TPD alternatives commitments we expected for the year were signed earlier in 2025. We expect TPD to continue exhibiting strong momentum as global allocations expand. In addition, this segment is launching a series of new discretionary allocation products designed to provide Latin American investors with diversified exposure to portfolios of semi-liquid funds across developed markets, while also allowing us to increase fees in this segment. Now let me spend a bit of time on Credit, which remains one of the most dynamic areas of our platform. Credit continues to be a cornerstone of our platform, and we see ample room to expand market share across both local strategies and regional solutions. In the fourth quarter, our Credit vertical delivered approximately BRL 3 billion of capital formation appreciation, contributing to a total of roughly BRL 10 billion for the full year. As a result, Credit AUM reached BRL 36 billion, up 25% year-over-year. The breadth of our Credit franchise is a key differentiator. We operate with multiple specialized teams across the region, and we continue to increase information flow and coordination across these groups to ensure we are capturing synergies in origination, structuring capabilities, and most importantly, risk management. The LatAm corporate debt strategy is a clear sign of the growing regional interest. We recorded more than BRL 300 million of net inflows in the quarter and BRL 2.4 billion for the full year, supported by a diversified investor base across multiple geographies and capping a solid year for the strategy. We're encouraged by the breadth of this demand and expect additional inflows following continued commercial efforts expected for 2026. In infrastructure credit, as Alessandro mentioned, we are launching a new product following the winning of a BNDES tender process. The new fund will be co-managed by the high-grade Credit and MAV teams, once again, demonstrating the strategic rationale behind our acquisitions and the synergies across the platform. The fund will target sectors ranging from energy transition and decarbonization to nature-based solutions with an expected term of 12 years. Its structure is innovative, featuring multiple local fund vehicles and a combination of subordinated mezzanine and senior tranches designed to address different investment profiles, particularly considering the tax-exempt characteristic of certain vehicles. We also expect several additional product launches across the entire region in 2026. In Colombia, we are preparing to launch our first local fund, COPCO, a direct corporate private lending vehicle, primarily targeting institutional investors. In Chile, we're currently on roadshow for the second vintage of our direct lending strategy, CHILPCO. The first vintage was highly successful and has recently completed the investment period. In Peru, we're seeing strong interest from local investors in LAPCO II, which is also expected to launch this year. To round out our credit pipeline, we expect additional commitments from SPS IV ahead of the fund's final closing, which is scheduled for the second half of 2026. This strategy is gaining increased momentum, particularly among Chilean and global investors, following its first offshore commitment in the third quarter. In equities, we recorded net outflows in the fourth quarter, concentrated among foreign investors in our Brazilian equity strategy. These investors typically have a more countercyclical profile and increased their exposure in mid-2024 when Brazilian equities were trading at more depressed valuations. Looking ahead, we remain very optimistic about our UCITS LatAm and Brazil funds and are already in advanced discussions with several institutional investors for commitments into these strategies. Shifting to real assets. In 2025, the infrastructure team partnered with Changi and acquired a controlling stake in Rio de Janeiro's International Airport, Galeao. We are preparing for the March auction for the airport's new concession contract. Within this segment, we also expect new commitments for Lacan IV this year under our forestry strategy, reflecting continued institutional interest in real asset exposure. In real estate, we remain attentive to the potential reopening of market windows following SELIC cuts, which could create a more favorable environment to raise capital for our REITs. As you know, REITs remain one of the most attractive investment vehicles for individual investors in the Brazilian capital markets. At the same time, we continue to advance with other opportunities within real assets, including our opportunistic development fund strategy focused on industrial and residential segments. This strategy enhances our diversification and earnings potential as it attracts institutional investors such as pension funds and family offices, while complementing our income-oriented products and adding carry optionality to the platform. Overall, we entered 2026 with strong momentum and clear visibility across product launches, institutional mandates and multi-country fundraising initiatives. The combination of a broader distribution, a very comprehensive product shelf and ongoing operational enhancements give us confidence in our ability to continue compounding growth. With that, I'll hand it to Sergio to walk through the financial results. Sergio Passos Ribeiro: Thank you, Bruno, and good evening, everyone. 2025 was a very solid year for the firm, and we are very satisfied to report an exceptionally strong quarter, reflected across multiple fronts and delivered to shareholders through a dividend of $0.17 on the dollar per share, payable on April 2nd to shareholders of record as of March 19th. Let me start by walking you through our revenues. In management fees, we generated BRL 220 million in the fourth quarter, up 29% year-over-year. This growth reflects the combined effect of our strategic transactions, including Compass, Lacan, and Verde, as well as a strong fundraising momentum, particularly within credit and Global IP&S. It's also important to note that Verde contributed to our results for only 1 month in the quarter, following the closing in December. Advisory fees totaled BRL 15 million in the quarter, posting a decrease year-over-year. As a reminder, upfront fees in our third-party distribution alternative business can vary meaningfully depending on the timing of commitments, and we signed most of our commitments early in 2025. In addition, advisory revenues from corporate advisory were lower in the quarter given quieter deal activity. Turning to fee-related earnings. We generated BRL 80 million of FRE in the quarter, or BRL 1.23 per share, with a 32.6% FRE margin. The year-over-year comparison was partially impacted by catch-up fees recognized in the Private Equity segment in the fourth quarter of 2024. Excluding that non-recurring effect, FRE grew 26% year-over-year, driven primarily by fundraising across Credit and Global P&S and acquisitions executed during the period. For the full year 2025, FRE reached BRL 288 million or BRL4.52 per share, with a full-year margin of 30.4%. We are very pleased to have delivered FRE margin we have been targeting throughout the year. The improvement in margin reflects operating leverage from revenue growth, combined with the cost reduction initiatives we began implementing at the start of the year, as well as a small but present Verde contribution following the acquisition. Looking ahead to 2026, we expect continued momentum in FRE growth, supported by our strong fundraising pipeline and the full contribution of Verde's revenue and FRE. Moving to performance-related earnings. We recognized BRL 5 million of PRE in the quarter, primarily across Global P&S, Credit, and Equities. Performance fees normalized after a strong fourth quarter last year, which included one-off contributions from opportunistic funds in Argentina and Peru. On investment related earnings, or IRE, we posted a record BRL 45 million in the quarter. The unrealized component benefited from positive year-end markups in our private markets IRE commitments, combined with appreciation in our listed REIT positions. This reflects the embedded value creation within our balance sheet commitments, which remain an important driver of long-term earnings power. Before moving to distributable earnings, I want to highlight an important reporting change. Starting this quarter, other comprehensive income or OCI, which reflects foreign exchange variations, now flows to our distributable earnings, adjusted distributable earnings and adjusted net income. Up to the third quarter of 2025, OCI did not impact these adjusted metrics. We believe this change provides a more comprehensive view of our results as it incorporates the impact of our consolidated U.S. dollar exposures and presents our performance in a more holistic manner. I'd also like to highlight that following the Verde transactions, we introduced a minority interest line this quarter, which represents the portion of Verde earning attributable to the remaining 49.9% non-controlling interest. Putting it all together, Vinci Compass generated BRL 81 million or BRL 1.24 per share of adjustable distributable earnings in the fourth quarter, representing 10% growth on a nominal basis and 8% growth on a per share basis. For the full year, adjusted distributable earnings totaled BRL 292 million or BRL 4.58 per share, reflecting 22% nominal growth and 7% growth per share. The fourth quarter and full year 2025 underscored our disciplined approach to growth and capital allocation, leaving us well positioned for continued progress in 2026. In closing, I would like to once again emphasize the strong momentum we continue to see across the firm. We remain fully committed to generating long-term value supported by breadth of our fundraise pipeline for 2026. With that, I'd like to close our remarks and open the call for questions. Once again, I'd like to thank you for joining our call. Please, operator, you may proceed with the questions. Thank you. Operator: Thank you. [Operator Instructions] Our first question comes from Lindsey Shema from Goldman Sachs. Lindsey Marie Shema: I have 2 questions, actually. Let's maybe start on the first, which is a bit broader. It seems like you have strong fundraising expectations for the year. But as you said a lot of uncertainty, a lot of elections in the region. Do you get the sense that maybe there's some money on the sidelines? And if the elections go in a certain direction, there could be a big increase towards the end of the year? Is there anything you're kind of looking for in elections that could be a big catalyst? And kind of just, in general, what are you thinking about elections and the impact on fundraising? And then I'll ask my second question after. Bruno Sacchi Zaremba: Lindsey, this is Bruno. Yes. So we had -- I think we had a good '25 in regards to AUM. We had 13%, if I'm not mistaken, 13% growth in our AUM on a year-on-year basis if you take out the effects from the exchange rate variation that was against us in '25 when you look at the reais number. So I think that number was healthy. And it is a number that we are expecting to hopefully repeat this low double-digit growth rate on a currency-adjusted basis for '26. As we said, there is a very big pipeline, mainly in the credit segment. We have 6 or 7 funds that are structured funds across the region, Colombia, Peru, Chile, Mexico, Brazil. So there's a lot of different strategies and opportunities to raise capital there. I think other than -- I think elections are obviously one of the variables. But more than elections, I think the main variable for us is the impact from cyclicality on products that are more correlated with interest rates. So this is something that obviously, over the next -- over the last few years has been idle for us. So if you look at our equities business, if you look at our real estate business and even the Brazilian investment solutions business, we have had a little bit more challenge to raise capital in these verticals. And with -- now we're seeing for the first time in a very long time, real interest rates, the long-term curve starting to come in. And obviously, there is an expectation of lowering rates, and we saw that through the REIT's performance during the fourth quarter. Now the first quarter, again, we're seeing good REIT performance in the portfolio. So this is a variable that has more of an impact. Obviously, interest rate curve has by itself a correlation with the election outlook. But at the end of the day, what impacts us is the curve, right? So if we are in a position where the curve is more benign, and we see that coming down and with that create an opportunity for us to grow in these more cyclical asset classes, I think that would be very, very positive for the platform. So the 13% that we did last year growth was without the contribution of the cyclical groups. So if we can have real estate REITs, local Brazilian investment solutions, equities participating, I think this would be a tremendous uplift to the expectations of further AUM gains. Lindsey Marie Shema: Definitely makes sense on the interest rate side. And then maybe for my second question, a bit more specific. Just trying to get a sense of how to model the advisory fees line going forward. I mean, I understand that the TPD alts upfronts can be kind of chunky depending on when you expect them. I mean, one, do you have any expectations for kind of how the timing is going to go throughout 2026? Or is it better to maybe just annualize the 2025 level? And then second, on the corporate advisory side, how much of an increase do you kind of expect this year in deal-making activity from the expected decrease in rates? And kind of where can that number go to? Bruno Sacchi Zaremba: Okay. So we have a little bit more visibility at this point on the corporate advisory at least. The first half looks like, at least for now, it's going to continue to be more on the softer end. So we do have some transactions that are in the pipe, but the volume is still not as relevant as we saw in '22 and '23, or maybe '23, I would say. It was a good year for us. We're still lagging in terms of volume and the level of advisory mandates that we have that are in line to be closed. So I would expect at least the first half to be a little bit slower, like what we saw in '25. And in regards to the upfront on the Global IP&S side, it's really very tough to say when those will fall. As you said, it really depends on the calendar and how the fundraisings fall over the year. Overall, we expect '26 to be slightly lower than '25 on the advisory -- on the upfront as well. So advisory probably at the same level and then upfront a little bit slower than we saw in '25, given the calendar that we have. But timing the quarterly -- like every quarter, how that will fall at this point is very, very difficult, Lindsey. So what I can say that directionally, the overall advisory line, if you add upfront and corporate advisory, is likely going to be a little bit smaller than '25. Lindsey Marie Shema: Got it. So it seems like the impact from corporate advisory would not be enough to offset the TPD alts? Bruno Sacchi Zaremba: Yes. That's how it's looking like today, but these things change. But as far as we can forecast, we see that total advisory line a little bit down when compared with '25. Operator: Our next question comes from Ricardo Buchpiguel from BTG Pactual. Ricardo Buchpiguel: I have 2 questions here. So first, we saw that in the last couple of quarters there was a materialization of some of the cost synergies related to the M&A appearing, particularly as we see the FRE margins going up mainly in Q3, and then a little bit more in Q4. So I wanted to ask what is the next step in terms of M&A synergies to be captured, particularly in 2026, right? And where would that appear in the results? And then I ask my second question. Alessandro Morgado Horta: Thank you, Ricardo. That's Alessandro. Of course, the low-hanging fruit type of synergies, we already incorporated in the numbers. But still, there is -- there are a lot of other opportunities moving forward. We are looking for optimization of the structure, procurement, also rationalizing our investment in strategies and people, expanding some of our strategies through other geographies. So still inside the M&A, and of course, Compass is the most relevant here. One, the transaction of our combination of Compass, we see interesting possibilities to continue appropriating of this value. Of course, there is more recent ones like Verde that we kept as a more like segregate in terms of strategy. But still, we do have some synergies, especially from the commercial side in Verde, for example. So answering your question straightforward, yes, we still see synergies to be captured moving forward from the previous M&A activity. Ricardo Buchpiguel: Well, that's clear. And should we see something -- some improvement, for example, in inflows related to this commercial synergies that you mentioned already appear in 2026? Or it should be something more relevant for '27 onwards? Alessandro Morgado Horta: No, we probably will see already. We mentioned in our previous -- in the call that we are launching new products with Verde, for instance. So we will see gains of that. New products that we are launching from the alts -- alternative for local markets in other countries through our expertise and also the commercial effort coming from Compass presence in the countries. So yes, we do see that we will probably capture some of these commercial efforts within 2026. Of course, that will ramp up, but we probably will see some of these numbers appear in 2026. Ricardo Buchpiguel: That's clear. And for my second question, I wanted to see if you can talk a little bit more about the expectations in terms of the investment-related earnings in 2026, both in terms of realized and unrealized portions, right? I understand there are a few moving parts here since you need to keep investing the capital proceeds. So it will be very helpful to get any guidance on this line for this year. Bruno Sacchi Zaremba: Thank you for that question, Ricardo. It's Bruno. So, yes, I think the IRE is -- what's happening now is I think we're getting to the interesting part of the IRE development because over the past couple of years, or 1.5 years, it wasn't a very good point, right, because we were in the deployment phase and the funds were in the J-curve. So we had a situation where we were taking money out of short-term rates, which are at a very high level and putting money into these funds that were in the beginning of their life cycle, within the J-curve and not really contributing a lot to profitability. I think in the fourth quarter, we saw for the first time mark-to-market in one of the funds that we have contributed capital, which was VCP IV on top of the appreciation of the REITs. And given that the fund is now out of the J-curve, we would expect this movement to start being more material going forward. So as VCP IV, SPS IV, VICC, these 3 main funds in which the balance sheet of the company has a bigger exposure, are getting out of the J-curve, this should materialize in higher unrealized IRE. Obviously, this is the, let's say, the next stage that we're getting in, right? So we're getting into this phase where we're going to see the profitability and the increase in the share value of the funds in our net profit. And then the following phase, once these funds start to return capital, those proceeds are going to become impactful to our distributable earnings number. This will probably take a little bit longer to happen. There might be -- given the better liquidity environment that we see in Brazil over the past few months, there might be an opportunity for us to start having a quicker monetization of these funds, but it will take a little bit longer. So the expectation for '26 is for us to start having the IRE on the unrealized part being more of a contributor to net profits. And hopefully, this can be translated to distributable earnings as soon as the end of this year or next year. But the expectation is for this number to start being more material for the net profit line in '26. Operator: Our next question comes from Guilherme Grespan from JPMorgan. Guilherme Grespan: My question is on the private credit side. It has been a big discussion globally, right? I think the thesis that we are hearing nowadays, I think, is less applicable to Vinci's portfolio. But I see the mood on the private credit, which has been important, I think, credit as a strategy, I think, added more than BRL 5 billion in fundraising in the last 12 months. Just want to get your views on how is the sentiment on fundraising on this vertical. And just remind us a little bit the profile of the client that you fundraise. If I recall correctly, I think on credit, the 2 main products is going to be Compass, high yield and corporate debt. But just a refresh on this vertical. What is the mood? Is it affecting the fundraising or not? And if there's any impact to you? Alessandro Morgado Horta: Okay. Thank you for the question. That's Alessandro. I would say that that's a very good question. If you take into consideration what's happening in the global markets, in the alts business globally, we still believe -- reinforce that we are very optimistic with the credit vertical. Our credit business is today very diversified. We've seen different strategies, different type of funding. But as you said, we have an important component that's more like corporate debt, that's different type of clients from institutional to high net worth, especially, international money flowing, in Latin America, corporate debt. So this is really more liquid stuff, with less linked to what's going on, on the private credit side, especially the semiliquid fund globally. Also talking more about the countries, we do not have first exposure to the same sectors that have been a question like IT, tech and et cetera. Of course, Latin America is one good example, let's say, in terms of the majority of the business as the hollow type of investment. So it's really assets and low obsolescence. So even our private credit business within Brazil or the other countries like America, like Peru, Colombia and so it's still much more plain vanilla stuff. And the exposure to this asset class is still very small. We do not have, especially on this specific private credit funds, a lot of funding coming from retail or affluent business like the main semi-liquid fund is not the reality here. This is more institutional money, closed-end funds. So it's really not -- the peril is really very small. Where maybe we can see some effect is the fundraising of private credit globally in our TPD business. But still this is not the most relevant pipeline that we have moving forward, but it's where technically, we can see the investor a little bit more cautious in allocating private credit moving forward, globally in TPD. Not in our main business that's our own self-managed funds. That's in a strategy that not relates a lot with the main drivers of the worries regarding private credit internationally. Operator: [Operator Instructions] I would like to turn the floor over back to Mr. Alessandro Horta for the closing remarks. Please, Mr. Horta, you can proceed. Alessandro Morgado Horta: So I'd like to once more thank you all for your continuous interest and support. Being a public company for more than 5 years now bring us a lot of optimism with the future. We strongly believe that we'll continue to deliver value for the years to come. So thank you again and good night. Operator: This does conclude today's presentation. We thank you all for your participation and wish you a very good night.
Operator: Thank you for standing by, and welcome to the Magnachip Semiconductors Corporation's Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this program is being recorded. And now I'd like to introduce your host for today's program, Mike Bishop with Investor Relations. Please go ahead, sir. Mike Bishop: Thank you. Hello, everyone, and thank you for joining us to discuss Magnachip's financial results for the fourth quarter and year-end December 31, 2025. The fourth quarter earnings release that was issued today after the close of market can be found on the company's Investor Relations website. The webcast replay of today's call will be archived and available on our website shortly afterwards. Joining me today are Camillo Martino, Magnachip's Chief Executive Officer; and Shin Young Park, our Chief Financial Officer. Camillo will discuss the company's recent operating performance and business overview, and Shin Young will review the results for the quarter and provide guidance for the first quarter of 2026. There will be a Q&A session following the prepared remarks. During the course of this conference call, we may make forward-looking statements about Magnachip's business outlook and expectations. Our forward-looking statements and all other statements that are not historical facts reflect our beliefs and predictions as of today and therefore, are subject to risks and uncertainties as described in the safe harbor statement found in our SEC filings. Such statements are based upon information available to the company as of the date hereof and are subject to change for future developments. Except as otherwise required by law, the company does not undertake any obligation to update these statements. During the call, we'll also discuss non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles, but are intended as supplemental measures of Magnachip's operating performance that may be useful to investors. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures can be found in our fourth quarter earnings release in the Investor Relations section of our website. With that, I'll now turn the call over to Camillo Martino. Camillo? Camillo Martino: Thank you, Mike, and good afternoon, everyone. I would like to open with a comment I made last quarter. Specifically, Magnachip has a strong foundation, a strong history in power, our reputation for reliability and quality and relationships with customers who care about performance and execution. Looking back at 2025, we have implemented many changes to lay the foundation to improve the financial and go-to-market fundamentals, which we believe will result in a positive and consistent recovery over time. We are investing responsibly in areas where we see great potential while staying disciplined and realistic about what it takes to turn a power semiconductor business around. I would like to look back on Q4 and 2025, highlighting what we have completed and we will provide more detail on our go-forward operating strategy. First, a quick review of the quarter. For Q4, revenue was $40.6 million and gross margin was 9.3%. For the full year, revenue was $178.9 million and gross margins were 17.6%. Consistent with our comments from our last earnings call, our results continue to reflect 3 realities. Pricing pressure on legacy products remains intense, especially in China. Factory loading and utilization was a headwind, although we saw utilization slightly above in Q4, what we had said during last quarter's earnings call. We need highly competitive products to win. This is a very important reality. And when we do have competitive products, we can absolutely win. That's the core point behind our product strategy. Shin Young will walk through the financial details and guidance later, moving to the more important changes that we have made during 2025. Over the past year and especially over the past several months, we have taken 3 meaningful actions. Firstly, we significantly reduced our cost structure. We exited the display business, and we resized the organization accordingly. We also executed workforce actions and cost reduction programs to reduce OpEx and to focus the company exclusively on the power business. Secondly, we reorganized and focused our sales and marketing teams on specific market segments and customers. This is important because winning in power setting is not a one size fits all. It is segment by segment and customer by customer. Thirdly, we increased our investments in R&D to significantly improve our mid- to longer-term product competitiveness. In 2025, we launched 55 new generation products versus a total of 4 for the entire 2024 year. This is a massive acceleration by our engineering team and reflects targeted investment for longer-term growth. These new generation products are designed to improve our competitiveness and improve our product margin structure over time. So those 3 definitive changes have already been made. With respect to our go-forward operating strategy, I would now like to highlight 6 foundational pillars that we believe are fundamental to the successful recovery and longer-term profitable growth in our power business. Number one, focus market segments. We are investing in the priority end markets where we believe we can earn better margins and build durable customer positions. The markets are the following: automotive, industrial motor control, solar and energy-related applications and server data infrastructure. And in the future, we expect to be delivering advanced power solutions to the robotics market as well. We are not going to chase every end market. We are going to concentrate on segments where our technology road map and proximity to significant and strategically important customers can translate into sustainable share and better economics. Number two, our product competitiveness. At the heart of our turnaround strategy is product competitiveness. This is a comment that we have made many times previously. We are continuing to accelerate our product development activities. Our plan is to deliver more than 40 new generation products in 2026. This is in addition to the 55 new generation products launched in 2025. This compares to a total of only 4 new generation products launched in 2024 and none at all in 2023. Again, this is the result of a targeted investment with a specific aim to increase revenue, utilization and product margins over time. These products are designed to be meaningfully better, not incremental. Number three is our power IC business. As we expand our focus on certain market segments, we will begin to develop key systems expertise that will align power ICs and gate driver ICs with our future power product road map, and it will augment Magnachip's revenue generation potential. Number four, modules. We are also expanding how we go to market with customers through a module strategy. A module allows us to combine multiple diodes, sometimes our own, sometimes third party into a packaged solution that should increase our product content per application. Our aim is to increase sales efficiency, drive higher revenue at better target in markets where customers want integration and where the economics support it. Number five, technology road map. To continue to support and offer greater value to our key customers, we are actively evaluating offering silicon carbide product solutions to them. Our entry into the silicon carbide market will be thoughtful and deliberately targeting markets where we can have longer-term revenue visibility and in which return on invested capital and payback are demonstrably attractive. We believe our reputation and geographical location should enable us to access such attractive market segments. Finally, number six, strategic partnerships. Our position as a trusted power semiconductor company in Korea places us in a strong position to establish mutually beneficial relationships with key customers and technology partners who value our local access, security of supply, expertise and reputation. Building stronger and deeper customer relationships in our focused market segments is critical, and we believe having multiple anchor customers that adopt a broad range of our products will be highly beneficial and a testament to our value proposition. Likewise, partnerships with technology leaders who recognize our value as a trusted partner in a strategically important market will accelerate our product road maps while expanding our market reach in a capital-efficient manner. We believe developing these close relationships with anchor customers and technology partners will provide a foundation for significant value creation over time. We believe the strategic customer relationships we are developing, the focused market segments we are pursuing and the advanced technology we are developing, including silicon carbide, will significantly expand Magnachip's TAM and SAM. Selling modules and higher value-added power ICs will further expand our TAM to approximately double over the next 5 years. Even more importantly, our SAM is expected to nearly triple over the next 5 years. We are building a more balanced, resilient business, one where customer relationships support investment decisions and value creation over a multiyear horizon. Now let me address some recent Board-level activities. We recently announced that Cristiano Amoruso, Chief Investment Officer of Byreforge, has joined the Board as a Director. His firm became a significant shareholder of Magnachip because it believes in Magnachip's ability to create significant long-term value for its customers, shareholders and employees. The Board also believes the company is significantly undervalued relative to its long-term value creation potential and believes that focused execution and the strategic realignments we are implementing, product competitiveness, market focus, technology road map and customer technology partnerships can turn the company to growth and create significant long-term shareholder value. In line with its fiduciary responsibilities, the Board will responsibly and carefully evaluate any actionable opportunities that can accelerate and derisk shareholder value creation and compare it with all other options available to the company. Looking forward, allow me to set the expectations clearly. This turnaround will take time. We believe that great products and great customer partnerships will turn Magnachip around. At the same time, and as we discussed previously, new generation products take time to qualify, to ramp and to contribute meaningfully towards revenue. In 2026, we still expect legacy products to represent the vast majority of revenue and pricing pressure affecting these products will continue. We expect new generation products to comprise approximately 10% of our total revenue in the fourth quarter of 2026, up from 2% for the full year 2025. So 2026 will remain a challenging period, especially for gross margin as we transition the portfolio and scale new generation products. We believe we are taking the right corrective actions to improve our competitive position and create a path to meaningful value creation. We will continue to be transparent, prioritize cash discipline and execute the product road map with urgency. With that, I'll turn over the call to Shin Young to walk through the quarterly financial results and our outlook. Shin Young? Shin Young Park: Thank you, Camillo, and welcome, everyone, on the call. Let's start with key financial metrics for Q4 and full year 2025. Quarter Q4 consolidated revenue from continuing operations, which includes Power Analog Solutions and Power IC was $40.6 million, approximately at the midpoint of our guidance range of $38.5 million to $42.5 million. This was down 17% year-over-year and down 11.7% sequentially on an apples-to-apples basis. This compares with the equivalent revenue of $48.9 million in Q4 2024 and $45.9 million in Q3 2025. For the full year 2025, total consolidated revenue from continuing operations was $178.9 million compared with $185.8 million in 2024, representing a 3.7% year-over-year decline. This reserve was consistent with our prior guidance, which anticipated an approximately 3.8% year-over-year decrease. Revenue from Power Analog Solutions in Q4 was $36.8 million, down 15.3% year-over-year and down 11.4% sequentially, primarily due to competitive pricing pressure on our older generation products, which was especially intense in China. The $2.7 million onetime sales incentive was recognized as a reduction in revenue in Q4 2025 as part of our efforts reduced elevated inventory levels in the channel, primarily in China. For the full year 2025, revenue from Power Analog Solutions was $160.5 million compared with $166.8 million in 2024. This 3.8% year-over-year decline was primarily due to intensified pricing pressure on our older generation products, partially offset by revenue growth in low-voltage MOSFET attributable to market share gains. Revenue from Power IC in Q4 was $3.8 million. This was down 30.4% year-over-year and down 14.5% sequentially. The sequential decline was due mainly to customer order pulls in Q3 from Q4. Revenue from Power IC for the full year 2025 was $18.4 million, down 3.4% year-over-year compared with $19 million in 2024. In Q4, consolidated gross profit margin from continuing operations was 9.3%, within the guidance range of 8% to 10% compared with 23.2% in Q4 2024 and 18.6% in Q3 2025 on an apples-to-apples basis. The previously mentioned onetime sales incentive had a 560 basis point negative impact on gross profit margin. Year-over-year and sequential decline was primarily attributable to an unfavorable product mix driven mainly by ASP version, particularly in China and filling our fab with lower-margin products and a lower utilization rate. For the full year 2025, consolidated gross profit margin from continuing operations was 17.6% within our annual guidance range of 17% to 18% compared with 21.5% in 2024. Year-over-year change was primarily driven by continuing pricing pressure, continued pricing pressure, lower margin products loaded in our fab and a lower fab utilization rate. The company's display business has been classified as a discontinued operation in 2025. Accordingly, all of the following figures reflect results from continuing operations and prior periods have been recast on a comparable basis. Q4 SG&A was $8.6 million compared with equivalent SG&A of $9.8 million in Q4 '24 and $8.3 million in Q3 2025. We expect to see annual OpEx savings of more than $2 million beginning in Q4 2025 from our cost reduction efforts, including the execution of the voluntary resignation program, primarily for shared function employees in Q3. Stock-based compensation charges, including SG&A were $0.4 million in Q4 as compared with $1.6 million in Q4 '24 and negative $28,000 in Q3 2025. Both in Q3 and Q4, we recorded adjustments to stock-based compensation expense related to the separation of certain executives and associated for feature of their equity grants. For the full year 2025, SG&A was $35.1 million compared with $38.1 million in 2024. Stock-based compensation charges, including SG&A were $1.9 million in 2025 and $4.8 million in 2024. Q4 R&D was $7.6 million compared with equivalent R&D of $6.6 million in Q4 2024 and $7.8 million in Q3 2025. R&D in Q4 increased year-over-year due to the acceleration of new product development. We introduced 65 new generation products in 2025, of which 44% were introduced in Q4. This compares to 4 in all of 2024. For the full year 2025, R&D was $27.3 million compared to $25 million in the prior year. Before I go into the details of our non-GAAP results, please note that our GAAP financial results are available in our Form 8-K filing with our fourth quarter earnings release. Our non-GAAP results are as follows: Q4 adjusted operating loss was $11.9 million compared with an equivalent adjusted operating loss of $3.5 million in Q4 2024 and adjusted operating loss of $10.4 million in Q3 2025. Q4 adjusted EBITDA was negative $8.9 million compared with an equivalent adjusted EBITDA of $0.3 million in Q4 2024 and negative $4 million in Q3 2025. For the full year 2025, adjusted operating loss was $28.5 million compared with an equivalent adjusted operating loss of $19.1 million in 2024. Adjusted EBITDA in '25 was negative $15.6 million compared with an equivalent adjusted EBITDA of negative $4.2 million in 2024. Adjusted operating loss and adjusted EBITDA deteriorated year-over-year, primarily due to lower gross profit and higher R&D expenses as explained above. Our Q4 non-GAAP diluted loss per share was $0.08 compared with equivalent non-GAAP diluted earnings per share of $0.15 in Q4 2024 and non-GAAP diluted loss per share of $0.01 in Q3 2025. Our weighted average non-GAAP diluted shares outstanding for the quarter were 36 million, 37.7 million in Q4 2024 and 35.9 million shares in Q3 2025. For the full year 2025, non-GAAP diluted loss per share was $0.22 compared with $0.22 in 2024. Weighted average non-GAAP diluted shares outstanding for 2025 were 36.2 million shares compared with 37.8 million in 2024. Moving to the balance sheet. Previously, we had expected our cash at the end of 2025 to be in the mid-$90 million range. However, we ended Q4 with cash of $103.8 million, and this compared with $138.6 million at the end of Q4 2024. The main cash outflow during 2025 included $13 million in net cash CapEx, $4 million related to package costs and statutory severance associated with the warrant resignation program executed in Q3 and $3.6 million spent on share repurchases, primarily in the first half of 2025. The remaining debt was primarily attributable to net cash loss from operations. At the end of Q4, our long-term borrowings totaled $44.6 million, which included $16.7 million of the equipment loan including maintenance CapEx, our total CapEx for the full year 2025 was $30 million. However, the net cash impact was $13 million due to partial funding through the equipment loan. Now moving to our first quarter 2026 guidance. While actual results may vary, for Q1 2026, Magna currently expects consolidated revenue from continuing operations, which includes Power Analog Solutions and Power IC businesses to be in the range of $44 million to $48 million, up 13.4% sequentially and up 2.9% year-over-year at the midpoint. This compares with $40.6 million in Q4 2025 and $44.7 million in Q1 2025. Consolidated gross profit margin from continuing operations to be in the range of 14% to 16%, up from 9.3% in Q4 2025, but down from 20.9% in Q1 2025. Finally, I'd like to add that on a reported basis and excluding stock-based compensation and onetime charges, total operating expenses, SG&A and R&D together decreased by 35% in 2025 compared with 2024. Also, as a result of our cost reduction efforts, we expect more than $2 million of annualized SG&A savings that started in the fourth quarter of 2025. On the other hand, to support the go-forward operating strategy Camillo discussed earlier, we expect to increase -- we plan to increase our investment in R&D in 2026. Thank you. And now I'll turn the call over to Camillo for his final remarks. Camillo? Camillo Martino: Thank you, Shin Young. We are committed to executing on the 6 foundational pillars we emphasized earlier. We have implemented a new go-forward strategy and many of the necessary changes to position Magnachip for future success and value creation. I want to thank our employees for their continued hard work and dedication and our investors and partners for their patience and support as we return the company to growth. I will turn the call to the operator to open the call for questions. Operator? Operator: And our first question for today comes from the line of Suji Desilva from ROTH Capital. Sujeeva De Silva: First, a question on the gross margin guidance. I know there was a gross margin inventory reserve hit in 4Q. Are you assuming a similar impact or are you assuming an impact Shin Young in 1Q? Or is that 14% to 16% range a pure range without expected? Shin Young Park: That did not include the onetime incentive that we did executed in Q4 '25. So had we excluded Q4's onetime impact, Q4 margin would be like 15%. So like we are expecting the Q1 2026 to be the similar range, and that's mainly driven by the utilization and also the pricing pressure. So that's actually impacting us our gross margin at this time. Our revenue, still the vast majority of that is older generation product. We are still feeling the pricing pressure, especially in China. Sujeeva De Silva: Understood. Okay. That helps. And then on the operating expense savings from the restructuring, it will flow through you said -- I think you said SG&A, right, the $2 million run rate, and that would be -- we see that benefit toward the end of '26? Or when would that step down? What's the linearity of that step down? Shin Young Park: Well, that's actually -- it's going to be the continuing basis. So we started in Q4 2025. I just quantified the annualized impact is at $2 million plus, and we are going to see the full impact in 2026. And I'm hoping that, that's going to minimize the investment that we are going to do in R&D to support the go-forward strategy operating the strategy. Sujeeva De Silva: Okay. And then a question for yourself or maybe Camillo. The geographic exposure, as you bring these new products to market and the new focus segments, does that move your business out of China where it's competitive price-wise? Or does it stay in China in less price competitive markets? What's the shift there as you go to new products and new markets versus the competitive China market right now? Camillo Martino: Look, it's very clear that we have some very, very important, strategically important and very large customers right here in Korea. And so I think it's important that we do an excellent job in servicing their needs for the next many, many years. So to me, it's -- they're here, they're in our backyard, let's deliver the value that we can realize together. It's not a strategy of moving away necessarily from any one country. It's more about focusing more of Korea because we're right here. And clearly, at the same time, we are a global company. We have sales offices in every country, every major country around the world. And so we're going to continue to service them as well. But frankly, I would expect to have a higher percentage of our revenue coming from Korea because they're very close to us, right, very, very close, and we want -- and really service them extremely well. Sujeeva De Silva: Okay. That's very helpful. And then last question on the silicon carbide effort. Can you tell us where you are in that? Is that in development effort? Do you have the technologies in-house that you need? Do you have to invest or partner to get there? And what products or end markets might you target with silicon carbide? Camillo Martino: So I don't want to disclose what products we're developing. I would say that we're in development. We are in development, absolutely. We're building the team as well as we are speaking. And to some of our key customers, we're sharing some of that information with them under NDA. At the same time, I would say that this is a long-term plan. This is not a 12-month plan. Clearly, silicon carbide is going to take many years first to develop and then potentially, we're going to look for ways to potentially manufacture either in-house or maybe in the short term, we may go to an outside fab in the short term. So we're looking at everything there. But very clearly, as I stated in my prepared remarks, silicon carbide is a very, very important part of our future road map. If you look at the market segments that we are pursuing, if you look at the key customers that we are deepening our relationships with, silicon carbide is very, very important for them. Operator: This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Mike Bishop for any further remarks. Mike Bishop: Thank you, everyone, for participating on today's call. We appreciate your support of Magnachip. Operator? Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.
Operator: Good morning, and welcome to the Kits Eyecare Fourth Quarter 2025 Financial Results Conference Call. This call is being recorded and available later today for replay. Your hosts today are Roger Hardy, Chief Executive Officer; Joseph Thompson, Chief Operating Officer; and Zhe Choo, Chief Financial Officer. Before we begin, I'm required to provide the following statement respecting forward-looking information, which is made on behalf of Kits and all of its representatives on this call. Certain statements made on this call will contain forward-looking information. These forward-looking statements generally can be identified with the use of words such as intend, believe, could, expect, estimate, forecast, may, would and other words of similar meaning. This forward-looking information is based on management's opinions, estimates and assumptions in light of the experience and perception of historical trends, current conditions and expected future developments as well as factors that they currently believe are appropriate and reasonable in the circumstances. Actual results could differ materially from a conclusion, forecasts, expectation, belief or projections in the forward-looking information, and certain material factors and assumptions were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information. Management cautions investors not to rely on forward-looking information. Additional information about the material factors that could cause actual results to differ materially from the conclusion, forecast or projection in the forward-looking information and material factors or assumptions that were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information are contained in Kits' filings with Canadian provincial security regulators. During today's call, all figures are in Canadian dollars, unless otherwise stated. And with that, I would like to turn the call over to Mr. Roger Hardy. Please go ahead. Roger Hardy: Thank you, operator. Good afternoon, everyone, and thank you for joining us. At Kits, we're building a modern vision care platform, digital-first, direct-to-consumer and designed to serve the customer of today where they actually spend their time and live their lives. Our mission remains simple, make eye care easy for eyes everywhere. What differentiates us is how we execute, combining digital scale, premium product mix, embedded AI and deep, thoughtfully designed physical spaces that foster community connection and deepen engagement. The model and our plan continued to deliver strong results. Combined with disciplined digital execution, this model continues to drive structural growth and improving profitability. And now turning to our financial performance. In Q4, revenue increased 20% year-over-year to a record $53.9 million, and we delivered $2.8 million of adjusted EBITDA in Q4. In Q4 alone, we generated $6.4 million in operating cash flow. As I turn to the full year, revenue grew 27% to $202.5 million, and full year adjusted EBITDA was $11.7 million, marking our 13th consecutive quarter of positive adjusted EBITDA. We are growing at a premium rate while maintaining profitability and cash generation. Our glasses business continues to lead growth and expand our profitability. In the quarter, glasses revenue grew 32.7% year-over-year and glasses units increased 42%. Average order value rose 4% and returning glasses revenue grew 42.8%. Sales of digital progressives increased in units by 40% year-over-year, and sales of designer glasses increased 44% year-over-year. Gross margin on glasses increased to approximately 45% in Q4 as these higher-value categories are expanding our margin profile and deepening customer engagement. This is a mix-driven premium-led expansion. Turning to contact lenses, revenue grew 18% year-over-year in Q4 to $45.2 million. While new contacts revenue moderated sequentially, repeat contacts revenue climbed to $30.9 million, up 24% year-over-year. Across our entire business, approximately 66% of Q4 total revenue came from repeat customers, up from 62% in Q3. Average order value for contact lenses increased to $229. And our 5-year lifetime value for customers is now at $422. Lifetime value for customers acquired in recent cohorts is accelerating faster than those acquired prior to 2020. This demonstrates the health of our recurring revenue base continues to strengthen due to skilled execution by our team and the unique data capture characteristics of our model. Turning to our Kits Daily Contacts revenue. It was a growing and profitable part of our business and it increased 316% year-over-year in Q4. Average order value increased 10% sequentially, driven by growing adoption of larger pack sizes. Gross margin remained strong at 46.5% in this product. And repeat revenue continues to trend higher quarter-over-quarter. KITS Dailies is still early in its life cycle but the trajectory is highly encouraging. This product deepens our vertical integration, enhances lifetime value capture while offering customers a great product at exceptional pricing. And turning to our retail model, I'd like to spend a few minutes on the business. Our retail revenue grew 46% year-over-year. Optical revenue in store grew 65% and units per order increased significantly during Q4 promotions. Average order value grew 36%. Optometry now operates 7 days per week in our clinic, and we launched a contact lens fitting room to bundle prescriptions with Kits Daily trials, targeting a 10% attach rate. Our Toronto flagship is planned for late spring, and we continue evaluating additional locations in key markets. We're not scaling retail for footprint density. We're scaling a model that increases engagement, attachment rates and cross-category conversions. When I stop into a store at the beach in Vancouver's Kitsilano neighborhood on, say, a Wednesday morning, I'm greeted by a group of polar bear swimmers who do weekly polar bear swims in the ocean, then come to Kits, sit and have a coffee and talk about challenges and opportunities they face in the world. On weekends, I meet countless guests often lined up out the door who have stopped in to see and be seen while evaluating the latest Kits eyewear styles with one of our eyewear fashion consultants. We're building something unique, not just retail storefronts, but genuine community, and it's exciting to see the momentum and talk about the results. For this reason, we plan to expand into additional markets with Toronto opening spring 2026 and more openings to be announced shortly, all of which we envision doing much more than providing a distribution point, instead providing spaces to connect over coffee and conversations surrounded by beautiful glasses that help them see and be seen. We found these beautiful spaces can also be very productive. In Q4, our Vancouver store averaged 300 pairs of glasses sold per week and delivered annualized revenue of approximately $1,200 per square foot. Turning to product. Product design made another big step forward for us in Q4. In the quarter, our team introduced 8 new collections, 48 net new silhouettes and 148 distinctive color expressions, delivering premium, contemporary eyewear for Kits customers at a very accessible price point. Product highlights included investing further in proven silhouettes such as the Clyde capsule with optimized sizing and expressive transparencies in acetate as well as expanding our offering with the new-to-the-world Progressive Readers collection and the Pangolin 3 AI Glasses collection, which sold out quickly. We ended the quarter with over 530,000 frames in stock and more than 16,600 styles in our product portfolio. Maintaining the highest quality eyeglasses and constantly raising the bar each quarter has been our focus since the launch of our first collection. From the highest grade material to our German-engineered hinges to the latest in lens puck technology, our team knows that a repeat customer is earned and maintained after they've tested Kits frames every day. And the quality is as good on day 365 as it was on day 1. Now turning to technology and AI integration. The optical category is now in the midst of its most important shift in 100 years. AI glasses are rapidly becoming the newest form factor in technology. Looking ahead, we believe eyewear is evolving beyond just vision correction into a connected AI-enabled interface. Kits has been at the forefront of this movement to AI and AI glasses as a future driver of health and human performance. We now have 18 months of in-market experience with AI glasses and have sold out 3 generations of Kits Pangolins. In 2026, we will launch Gen 4 Pangolin, incorporating camera, video, voice and powered by a Kits app with full AI integration. Over 75% of AI glasses ordered on Kits have been ordered with a prescription lens and the average order value of AI glasses is over 3x our current glasses AOV. Yes, it's exciting. We believe that our strong start in AI and AI glasses has been dramatically aided in Kits' vertically integrated model. It's designed for where the market is going, not where it's been. Customers looking for AI glasses in every corner of North America can find the widest selection of AI frames on Kits. They can add a prescription lens with the click of a button and can receive them delivered right to their home in as little as a day. We can pass on the savings from our lack of reliance on thousands of brick-and-mortar locations and from our onshore automated lab to our customers. We see AI glasses as an emerging long-term trend and growth vector and a natural extension of our vertically integrated model where performance, innovation and prescription expertise converge. In addition to AI glasses, in Q4, we brought our OpticianAI technology directly into product pages and lens selection flows. OpticianAI still in beta on our site is increasing frame discovery, improving lens upgrade attachment and is driving conversion. It's still early days for OpticianAI, and we are excited to bring you more updates in the coming quarters. On our core business, in Q4, the technology team enhanced product discovery across both glasses and contact lenses, improved insurance UX in the U.S. and Canada, implemented an endless aisle automation, enabling an additional selection of more than 3,500 frames and introduced readers as a simplified new category. Our team has ensured that the latest technology is embedded throughout our funnel, not layered on top. Finally, as we grow at industry-leading levels, our operational discipline remains strong. Gross margin was 35% in Q4. Margins were affected by the timing of supplier rebates. However, excluding the timing difference, our underlying margin performance remained stable and supported by mix expansion in glasses. Glasses gross margin continues to expand structurally. Fulfillment improved as a percent of revenue and GA improved by 160 basis points year-over-year. Marketing increased to 16.3% of revenue in Q4, driving 88,500 new customers. As repeat revenue grows, we expect marketing efficiency to improve over time. We are balancing growth investment with operational discipline as we continue to take meaningful share. As we look at the capital markets momentum, we are now in our fifth year as a public company on the Toronto Stock Exchange. In FY 2025, our stock appreciated over 120% and trading volume reached record levels in Q4. Liquidity improved meaningfully, and we now benefit from broad analyst coverage and strong external validation of our growth trajectory. For Q1, we've outlined that our 2026 targeting $58 million to $60 million in total revenue, $10.5 million of that to come from glasses and $48 million of that to come from contact lenses with gross margins of approximately 35%. This quarter, priorities remain clear: accelerate our glasses and our AI glasses growth, strengthen our contact lens retention, expand prescription product offering with Progressive Readers and further integrate OpticianAI across the funnel. In closing, Kits is executing on a powerful, simple strategy. With that, I'll turn things over to Joe. Joe? Joseph Thompson: Thanks, Roger. Since becoming a public company in January 2021, we focused on delivering balanced and consistent performance across our business and our financial statements. 2025 might have been our best year yet. Growth continued and the quality of the growth improved. We've gone from investing heavily to build the platform to a business that is now generating meaningful and growing profitability along industry-leading top line growth. This gives us the flexibility and the confidence to continue investing in the growth opportunities ahead. 2025 growth was broad-based and balanced across the business. Glasses revenue grew 36% year-over-year, driven by premium mix expansion and the continued scaling of our optical lab. Contact lens revenue grew 26%, powered by the recurring nature of our customer base and strong retention economics. Our Canadian business grew 38%, reflecting increasing brand awareness and the momentum of our Vancouver retail location. And importantly, working capital more than doubled, up 142% year-over-year to $15.3 million. We repaid our BDC term loan ahead of schedule, ended the year in a strong cash position and today carry zero long-term debt. The balance sheet is in the strongest position it's been since we went public. This isn't a business that's trading off one metric for another. We're delivering growth, profitability, cash generation and balance sheet strength simultaneously. And that's by design. The vertically integrated model we've built is designed to compound across all of these dimensions as we scale, which is a good segue to Zhe Choo to review our financials. Zhe? Zhe Choo: Thanks, Joe. Gross profit in Q4 was a record $18.8 million, up 16% year-over-year. For the full year, gross profit grew 34% to $72.1 million and gross margin expanded 190 basis points to 35.6%. A meaningful driver of that expansion is premium lens upgrades, which accounted for approximately 42.5% of full year glasses revenue and grew 50.4% year-over-year, demonstrating customers' growing willingness to trade up and the effectiveness of our multi-tier pricing strategy in capturing that demand. Adjusted EBITDA in Q4 was $2.8 million or 5.3% of revenue. For the full year, adjusted EBITDA was at $11.7 million. Full year operating cash flow was $11.5 million, which translates into approximately 98% of adjusted EBITDA. That level of cash conversion tell us our reported profitability is translating almost entirely into cash with little divergence between earnings and cash generation. That's the kind of quality we want to see as the business scales. We enter 2026 well capitalized and with meaningful financial flexibility, the strongest liquidity position we have carried as a public company. That financial flexibility gives us the capacity to continue investing in the growth ahead. I will now turn the call over for questions. Operator: [Operator Instructions]And your first question comes from the line of Gianluca Tucci from Haywood Securities. Gianluca Tucci: Congrats on the good numbers. Glasses' growth seems to really be accelerating here, Roger and Joe. Could you unpack this a bit for us? What's driving it? Is it BOGO? Is it other things? Some insight there, I think, would be helpful. Roger Hardy: Yes, sure. Gianluca, maybe I'll start and then turn it over to Joe. Just from a high level, it was really an exciting quarter for Q4 and as we've outlined into Q1. What stands out in the quarter is just the continuing strength of the platform overall. I mean I think it's the strength of the contact lens customer, that recurring nature, coming back. They're coming back and they're spending more. It is a very loyal annuity stream of customers. And as you're seeing and pointing out, they're starting to test us out and try us out on glasses. And so we're starting to see that some growth from that as well. So super exciting to see the lifetime value is expanding as customers try us on glasses. And then as we look out even further, thinking about how AI glasses are, as I touched on, 3x the regular spend and also just how powerful that component is going to be in our business, there's just a lot of positive things happening. Joe, anything you want to hit on? Joseph Thompson: Gianluca, maybe just a few complementing points on the glasses performance in Q4. There was a number of initiatives that really yielded some growth. And you saw glasses really materially step up both on new and on repeat. I think one driver was reigniting investment in the U.S. Another was the influencer channel, which just continues to grow for us and we saw steady growth over 32% year-on-year in the quarter of active Kits influencers. And then we had great success on our buy one, get one free promotion, which launched in Q4 as well. So strong growth on glasses. Importantly, for us, I'm sure you noted the repeat revenue on glasses, which was at its strongest level ever in the quarter. Gianluca Tucci: It's super fascinating and strong. And I guess following up to that on marketing, it seems like you're keeping marketing ROI quite healthy. Could you dive into the marketing efficiency that you're seeing? And how should we be thinking about 2026 from a marketing spend perspective and a marketing ROI perspective? Roger Hardy: Yes. Again, maybe I'll start. I mean, great question. I think we've been very consistent over the last number of quarters. Marketing spend has been somewhere in that 14% to 16% of revenue, and it's been yielding quite nicely. So I'd expect us to continue to invest in the right type of customers upfront, building out that contact lens customer, also finding the right glasses customers. As you noted, we are seeing great healthy returns from that spend. So as we think about it long term, it's a great investment. We're getting significant ROI, return on that investment. And yes, I think it's -- that's the plan is we'll just continue making those investments. Joe? Operator: And your next question comes from the line of Martin Landry from Stifel. Martin Landry: Congrats on your good results. I want to talk a little bit about your high-level strategy. It seems that you are pushing revenue growth a little bit more than before. And I was wondering if this is a new shift in strategy with a bit of a greater focus on top line. I'd love to hear you talk about that a little bit. Roger Hardy: Yes, Martin, nice to -- thanks for calling in. I think as we think about Q4, and it's really probably more practical, pragmatic to think about growth in yearly terms. And I think we've said historically, our target is to grow somewhere around 25% to 30%. And so as we look at the last year, we grew 27% on the year. We're seeing increasing leverage from that growth. But more specifically, just as it relates to growth, Q4, there was a big uptick last year in Q4. Over the course of the year, it kind of smooths out. So I think we're thinking about investing in a balanced way. We obviously like our business very much. And when -- there's probably a reason we've shared these return numbers. If you look at the number of customers, it's really inflecting from a return standpoint that we're getting better and better at serving customers, so they come back sooner. They're spending more. This is the kind of flywheel that you dream of in business. And so to the extent we can continue to accelerate acquiring customers, putting them into this flywheel, serving them in a way that wows them and compels them to return, gosh, we can't think of anything better to do with our time or money. So -- and I guess, at the end of the day, we're seeing the lifetime value compound. And that's the exciting piece of the business. We're combining customer growth with increasing lifetime value. And so the long-term economic potential of our platform, it becomes significant. And I think you're really starting to see that this quarter. I mean if we ask internally here, we've got a lot of enthusiasm for the model, and we really think it can support the creation of a multibillion-dollar vision care platform. We're just so early in the going here with one location and probably market awareness in one market, as you and I have spoken about previously. So I'll stop there. Anything to add? No? Okay. Martin Landry: Okay. And is there a potential to still reach double-digit EBITDA margins when you get to -- I think you had an aspirational goal of hitting $500 million. So when you get to that revenue level, do you still think you can hit the double-digit EBITDA margins? Roger Hardy: I mean, absolutely, Martin. I think if you look at these numbers, even you might believe that if you -- I mean you just need to take care of this terminal value out maybe 8 or 10 years, and you tell me what your model spits out. If I look at it, even on the most conservative level, no question, we're seeing margins expand as we talked about. So just to back it up a bit, contacts is this recurring revenue engine. We've always said the contact lens customers, it's 20- to 30-year-old individual. Then that person moves into glasses in the 30s and 40s and then they move into progressives in the 40s and 50s. Each time they age, their eyes don't get any better and the value -- the economic value from the company standpoint and also from the consumer standpoint, increase. We're delivering more value per customer as they age, and we're also generating more revenue, more gross margin and more EBITDA. Now you layer in -- and again, there's a reason we broke out for you the Kits contact lens sales. It's still early, but it's a higher-margin product. It's growing very quickly. Now I blend in glasses at a higher margin, growing very quickly. Now I blend in specialty products, as Zhe outlined, growing very quickly in that mix at again, higher margin. Last but not least, AI glasses, where 75% of them are including an Rx lens, something that we uniquely are able to do that differentiates us over everybody in the market who thinks they're going to sell AI glasses. So yes, it's -- there's no question that we will be in the double digits of EBITDA and happy to talk more with you offline about how to model that. But yes, when you think about the terminal value, maybe 10 years out, it's easily there. Operator: And your next question comes from the line of Luke Hannan from Canaccord. Luke Hannan: I wanted to dig in a little bit more on the retail strategy. Roger, I hear you loud and clear that this is more about generating brand awareness and ultimately, I think, funneling those customers more into the online channel. But how should we think about, I guess, the overall profitability? I mean you did share the sales per square foot, and I appreciate that. But can you help us think through the profitability of the new store that will be coming in Toronto and the other stores you have planned, how quickly you expect it could get maybe to the level of the Vancouver -- the Kits location? And then more broadly, how does this -- do you expect it to potentially be dilutive to the overall margin of the retail strategy? And if not, why not? Roger Hardy: Yes. Great. Luke, I mean, great questions. Again, from a retail standpoint, we are excited to get our Toronto flagship open. We've seen great results in our Vancouver location. We've probably been working on building it out over a couple of years and see, as I said, the market around Vancouver, a real strength, a real community buildup around that location. And in the end, when you're building a consumer business, you're trying to generate word of mouth. The most efficient way to grow your business is that word of mouth, someone having a positive experience with your staff as a guest or with -- ideally with the product that they've engaged with. So we have seen great results from that store. It's been very accretive to brand awareness. It's been very accretive to growth. It's been very accretive to earnings and especially when I include the revenue that's derived from the markets surrounding the store, from the market of Vancouver itself. People travel from all over Vancouver just to come into that store and engage with the location. Literally, I mean, you see it on a weekend. It's lined up out the door now. So it's highly, highly productive. And again, we've given you some of the metrics there. That's the reason to expand it. Now it's a great location. So we have to be discerning. We have to be disciplined as we always are in terms of what locations we want to expand to and which ones will deliver a similar kind of community experience, a similar brand enhancement and community creation. And so we believe we found that type of location in Toronto, and we're continuing to look in Calgary, for example, Edmonton and other markets where we think there's great possibility. So that's kind of how we're thinking about it. We see it as absolutely accretive. Again, that the contact engine can bring customers in. I mentioned we have 7 days a week now of our optometrists. We've had to increase the number of people there because one optometrist was just overrun. So we can use the contact lens business to bring people in, let them engage with the eyewear in person. And that helps us, again, have a unique differentiated strategy that will amplify that location. But that was longer than I meant to be. I'll turn it over to Joe to see if he'd like to add. Joseph Thompson: Luke, just maybe a few small points here. So on your question of is it accretive on the -- just the economics. One thing that we've seen in the Vancouver store is the -- it is gross margin accretive. Folks are coming in, buying more than one item, looking at premium lenses. So we've been happy with the performance on the gross margin line to your question. But for us, I think as Roger outlined, the greater opportunity is the awareness build. So almost exclusively, when we've seen awareness increase, we've seen traffic follow and revenue follow. And Vancouver is just a perfect example of it. It's almost a positive correlation in the surrounding area. And so we're really excited. As you think about the Toronto market, it's almost a mathematical equation, about 6.5 million people in the Greater Toronto area. And as we think about those folks hearing about events that we're having in our store on Queen Street, seeing it as they drive by, we're really excited about the shadow benefits that, that will provide us from awareness, from traffic and from revenue in the Toronto area. Luke Hannan: For my follow-up here, I did want to unpack, Roger, you shared the LTV, the 5-year LTV number there and then also mentioned that the new customers that you're seeing being brought in actually have higher LTVs as well. And I imagine that does, if we just think about how this waterfalls down into the P&L, a higher LTV customer, presumably the customer acquisition cost has not grown quite as much as perhaps as the LTV has. So that means it should be overall accretive to margins. Can you confirm, I guess, that the new customers you're acquiring today when they do come in and reorder that still is -- it's overall additive and accretive to your margin profile? Roger Hardy: Yes, absolutely. I think -- and as we said, we're seeing that customer be stickier, return more often at higher LTVs and gross margins continue to expand. As we pointed out, you have a bit of a noise in last year's Q4, but we're continuing to see gross margins, again, it probably makes more sense to look at it on a longer period than because you're going to get a few ups and downs quarter-on-quarter. But absolutely, over the long term, it's very accretive and it is continuing to grow. Yes, from a lifetime value standpoint, the contact lens customers are generating $495 of revenue per year. Margins have certainly trended up. You could go all the way back to 2020 to validate that. And glasses purchases further expand that relationship. So I think we're seeing -- well, I know we're seeing that this customer acquisition is really creating a long-duration economic asset. It's a great model from that standpoint. And as the repeat revenue continues to grow, Luke, we are beginning to see meaningful operating leverage. You saw adjusted EBITDA grow significantly faster than revenue. Is it going to be a straight line? No. But it demonstrates really the platform economics they're improving. And again, the trend, if we look back out more than week-on-week or month-on-month, we'll start to see that trend emerge. And that's really, like I said, the place you want to be as you create a super high-value vision care platform like we're doing. Operator: And your next question comes from the line of Matt Koranda from ROTH Capital. Matt Koranda: Great work. I wanted to start off on AI glasses and the traction that you're citing there. Just curious what you're seeing in terms of demand for your Pangolin product versus some of the other large marquee brands like Ray-Ban Meta, what you're seeing on sell-through there? And then I know it's off a low base, but what's the best way to think about unit growth potential in AI glasses over the next few years, maybe a unit penetration percentage of your overall glasses would be helpful if you have something in mind as we kind of think about how to model this out. Roger Hardy: Wow, Matt, just a softball to kick us off. Okay. No, I think that's a tough question to think out to the specifics on how big AI can get. It certainly is a compelling and interesting opportunity. We're glad to be in it early with multiple quarters behind us. We do have the widest selection, as we've touched on. We are seeing some great early trends like we talked about, 3x the regular value, 75% are including an Rx. We think we can deliver faster than anyone else in that capacity. So all those things give us confidence that we're in the right place in a category where it is getting started, and it's doing well. We haven't broken it out as of yet. So it's less than 10% of our revenue at this point. But it could very quickly become more meaningful. We've certainly allocated time and resources. We've got a version 4 coming out very shortly. Our expectation, again, when you have 1 million existing customers that are returning on a regular basis, that's the platform piece. And then we start to layer in glasses, sunglasses, then you think about an AI pair of glasses that you also want sun in. One of our Board members had a Pangolin pair that he was out bicycling on the weekend and telling us about and capturing video where he's out mountain biking and capturing the trail as he's riding. So I can see a world where you're not just prescription, but you've got that in sun, you've got it in photochromatic or transition, so it's working in light and dark. So all kinds of add-on capabilities. So I think the important part is secure the customer, take great care of them, make them a loyal Kits customer, make them part of the community set up in a way that they can engage with our brand, where they are -- feel like a guest in our store, both online and offline, and where we have the opportunity to cross-sell and introduce them to AI glasses and other high-value solutions for optical. Joe, what do you want to touch on there? There's got to be something. Joseph Thompson: That's great. I'm sold. Roger Hardy: All right. We'll leave it there. Matt Koranda: You handled it well, Roger. So on the -- I guess on the guide for the first quarter, I understand there's kind of limited flow-through from sales into the EBITDA line. So that implies there's some investment still going on through the P&L, which I would assume is in the form of marketing. But maybe if you can call out anything that we should be thinking about in terms of reinvestment through the P&L in the first quarter? And then how should we think about flow-through as we kind of head into the latter portion of the year? I assume that should pick up as scale grows for the rest of the year, but maybe just give us kind of just the qualitative shape of how you think about it. Roger Hardy: Yes. And we don't want to look too far out over our skis. But absolutely, we are thinking about when we have this predictable economic retention engine in contact lenses growing, we think it's important to acquire customers early. We think we're seeing that expansion now of wallet share into glasses. And we're beginning to see that operating leverage. Over time and over the year as it progresses, we do think it expands. I guess to some extent, you've got a model and we've got some models, but there's a best case, a median case. I don't think our model is working. It's not working that hard right now. There's a lot more opportunity for upside in terms of EBITDA, in terms of gross margin expansion. So that's kind of where we see this year and even looking out a little further, I mean, that's how this looks to be playing out is -- and again, track back to our 2020 gross margins, have a look where they were, have a look at what we said we were going to do. And I think we're -- we've meaningfully improved them, and that's kind of the trajectory. I suspect that's what we target, and that's what we suspect continues. Joseph Thompson: Matt, so I think part of the reason that we wanted to include a little bit more on LTV is just to share some of the thinking and some of the data that we're seeing. So I think as you heard in the prepared remarks, on the contact lens business, it just continues to be the strong recurring engine for growth with LTV, 5-year LTV about $495 across the whole business, 5-year LTV, $422 and the cohorts getting stronger over time. So customers are spending 170% of their original investment in under 4 years. And the recent cohorts getting even stronger. And so as repeat hits its highest level, which we saw in Q4, we look back on our business to say, each quarter, we've shown the ability to acquire young vision-corrected customers and then retain them at a very high LTV. And so should we stop or pause on bringing more new customers in and because we know what the economics of those customers look like as they go through the model and as they retain. And that's why you saw in 2025, a record number of new customers come in, 30% we added 393,000 new customers, which is just future revenue streams to help our platform economics. So as you'd expect, we're going back and assessing that every quarter. But at this point, it feels like this model is working extremely well. And as we add new customers, we're just building the platform economics for the future years. Operator: And your next question comes from the line of Doug Cooper from Beacon Securities. Doug Cooper: Congratulations on the quarter. I just want to talk about the consumer for a second. What's your feeling on the consumer? Obviously, it looks for sure there's an economic slowdown, both in Canada and the U.S., same-store sales growth from a number of other retailers is, call it, muted at best. It seemed in one sense to play into your hands from a cost perspective, were low. I mean there's not a lot of -- people still need to buy glass, they need to see. So it's a purchase -- it's a bit of a nondiscretionary purchase, and your pricing seems to play into the hands of where the economy is at right now with the consumer. I was just in an optical store the other day and designer frames are $500 and higher. So how are you feeling about the consumer in the business model right now? Joseph Thompson: Doug, yes, thanks for the question. On the inputs, the inputs are strong. As we look at traffic, conversion, revenue, AOV, all positive, all continuing to improve. So we're seeing what you're outlining that more customers are coming to our platform each quarter, and that's giving us the confidence to really invest in this moment. I think more broadly speaking, our view would be that across industries, but especially in this one, the retailers and the brands that are keeping costs low ideally through vertical integration that are avoiding cost increases in this moment and that are introducing new innovation at a rapid pace, almost all are doing well. And we're working hard on all 3 of those areas. And I think one small area in Q4 where we saw a great return was buy one, get one on the glasses side. If you think about the average cost, you outlined it, the average cost in the U.S. last year for a pair of prescription glasses was approximately $350. So even if someone else offers a buy one, get one free promotion, the customer is still paying $350 to $400. And at our price points, helped by vertical integration, we saw a strong word of mouth as folks were sharing buy one, get one. And so we've got high expectations for our business in 2026 based on all the elements that you called and all the inputs we're seeing on the business from traffic to AOV. Doug Cooper: So when you gave an outline for Q1 glasses revenue of $10 million plus, can you give us an idea of the geographic dispersion of that $10 million? I mean I'm assuming a lot of it is still in BC where the brand is more recognized. Like I'm just trying to understand when you move into Canada's largest market here in Toronto, like how much revenue do you get from glasses today from Southern Ontario? And what do you anticipate the impact will be of the store there and the brand building exercise? Joseph Thompson: Yes. Thanks, Doug. It's a good set up to kind of our investment in the Toronto location that's coming later in Q2. I think we have seen a strong uptake across many markets in Canada, led by Vancouver, driven by awareness. So almost exclusively, when awareness grows on Kits, we see traffic and revenue follow. And so the way we think about the Greater Toronto market, again, almost as like a mathematical equation, kind of 6.5 million folks in that Greater Toronto area, and we have a huge awareness opportunity there. And so we expect to close a good portion of that awareness gap in the next 2 quarters with all the news and excitement of a new store and promotions in the area. We do have a great -- I guess, back to the platform, we have a strong base of about 1 million -- just over 1 million active customers across contact lenses and glasses spread throughout North America. And so we're already kind of coming into the Toronto market with likely tens of thousands of active customers already in contact lenses. And so that's just even more opportunity, we think, grow awareness first, see traffic follow and see revenue right behind it is how we're thinking about the Toronto market. Doug Cooper: Perfect. And just my last one. Trade barriers seems to be ever present conversation. What's the latest update as far as you're concerned in terms of tariffs and the impact it may or may not have on the business going forward? Roger Hardy: There's always lots of variables as it relates to what could or could not happen. To date, it's not been a material impact one way or the other. Obviously, the change from de minimis does have a slight impact. It changed the way we file and enter things, but not really a material impact from an economic standpoint. So we're continuing to monitor the situation. It's dynamic. Why we have a great team at Kits and we really do is because they're able to manage and solve these problems before they become problems. The challenges, they fix the challenges, and they have been very, very good at resolving those challenges. I think fulfillment, we could talk about fulfillment more specifically cost and how well they've performed over the last 6, 8 quarters. But I'll probably leave it there just from a high level. Does anybody want to hit on it? Zhe, you want to hit on that? Zhe Choo: No, I think Roger put up on it very well, like from a fulfillment expense perspective, if you look at the trend of the cost of -- fulfillment cost as an percent of revenue, we see that trending down. I think that really speaks to the volume of our -- the cost efficiencies in the lab -- vertically integrated lab that is able to turn the glasses over -- contact lens over at a speedy time, right? So I think that really speaks volume to the team that has been built up and that also translates to the efficiencies that we're seeing from a P&L perspective. Operator: And your last question comes from the line of Frederic Tremblay from Desjardins Capital Markets. Frederic Tremblay: You mentioned recent cohorts of returning customers have been spending more. Just curious if you could maybe give a bit more color on the main sources of that increase in AOV. Is it mainly lens upgrades or higher price frames? If you can maybe share a bit of details on that? And then maybe as a follow-up to that, do you see additional opportunities as in terms of add-ons or other sources of AOV increases to keep that trend going? Roger Hardy: Yes. Great. Thanks, Frederic, and thanks for hanging around to be on the call. Yes, I'll let Joe speak specifically to kind of customer value creation. But as we touched on, the contact lens customers are generating about $495 of revenue over that 5 years. Our belief is that with glasses purchases, it will further increase lifetime value as that relationship deepens. And so like so many businesses have a 1x or 2x purchase, but we're really seeing customer retention be so high. And that's why you see 63% of revenue is coming from repeat customers, and it really supports us in terms of marketing efficiency getting better and that cohort profitability over time getting better. Maybe I'll let Joe touch on just from a marketing standpoint, the other opportunities to continue to grow that. Joseph Thompson: Fred, great to hear from you. The nice thing about our glasses business now is it's getting to a nice scale. And as we outlined in our Q1 guidance, tracking to grow by another 50% year-on-year in Q1. And there's a number of franchises within that class of business. So as we think about digital progressives growing over 40% again in the quarter and the year and continue -- we see that continuing on in 2026. Premium lenses, the same. And maybe one kind of unlock that we discovered was in Q4, you're constantly just adding new tools to the toolkit and the team discovered this consumer insight that customers typically, when they're shopping, in particular, for glasses, get down to their last 2 choices, and it becomes a debate, which one should I choose? Let me wait, maybe I'll check with my significant other, my friends and come back. Well, that insight is really kind of what part of what went behind buy one, get one free. And now the customer can say, well, I'm done on my last 2, I can get them both. And so that's been a driver of conversion initially, and we're excited about it. Premium lens attachment, and we're excited about that. But then we're also seeing customers -- repeat customers come back. So even though it was initially an investment in new customers, we're seeing the repeat profile really be interested in, now I don't have to choose, I can get them both. So more behind that, there's many parts to the glasses business. Marketing team has just done an unbelievable job on everything from influencers to buy one, get one to reigniting the U.S. business, but those are a few. Roger Hardy: And probably the last thing in there, if I could, Frederic, is really just the quality of the product that the team has been producing. I'd be remiss if I didn't call it a product team. The product has just been getting better and better and better each quarter, each year. And that's the real annuity is when people get a pair of glasses from us and they're wowed by not just the experience of buying online, how quickly it comes to them. But wow, this is a great pair of glasses. The lens is crystal clear. As Joe likes to say, mouthwatering is always the target. So a mouthwatering pair of eyeglasses. Yes, so that gets us excited as well about what is the long-term possibility on that product. Frederic Tremblay: Yes, that's great. Maybe just a quick last question for me. It feels like contacts are kind of the entry to the platform for some customers. As you think about building awareness in Toronto and eventually other markets, you'll obviously have that showroom and the glasses will be available. How do you think about how the product mix will play out initially in those new markets between contacts and frames? Joseph Thompson: Sure, Fred. Yes. No, I think initially, we will see probably some more growth out of the gate on glasses in new markets that we come into. But don't rule out just how powerful the annuity stream can be with the contact lens business. We saw, again, on a bigger and bigger base in 2025 on the fiscal year, 25% growth on the contact lens business. Now that's helped by quite a bit of repeat. But I think to your question, as we go into new markets and bridge that awareness gap, we will see more acceleration faster on the glasses side. Operator: Thank you. And there are no further questions at this time. I will now hand the call back to Mr. Roger Hardy for any closing remarks. Please go ahead. Roger Hardy: In closing, Kits is executing on a simple but powerful strategy, grow faster than the category, increase premium mix, strengthen recurring revenue, embed technology into every stage of the customer journey and scale our retail with discipline and community focus. We are building a structurally stronger vertically integrated vision care platform, and we believe the opportunity ahead remains significant. I'd like to thank all the investors who've joined us for the call today and look forward to updating you on progress as it continues. Thanks for joining. Have a great day. Operator: And this concludes today's call. Thank you for participating. You may all disconnect.
Operator: Ladies and gentlemen, welcome to the Symrise Full Year 2025 Results Conference Call. I am Hilli, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Rene Weinberg, Head of Investor Relations. Please go ahead. Rene Weinberg: Good afternoon, ladies and gentlemen. Welcome to our full year 2025 results call. Thank you for joining us today. All related documents, including the press release and presentation are available in the Financial Results section on our IR website. With me today are our CEO, Jean-Yves Parisot; and our CFO, Olaf Klinger. After reviewing our financial performance, a strategy update and the outlook for 2026, we will open the line for questions. With this, I hand over the call to Jean-Yves. Jean-Yves Parisot: Thank you, Rene, and thank all of you for joining us. Today, we'll review the full year 2025 results and provide an update on our ONE Symrise strategy and our ONE SYM transformation journey and conclude with the full year 2026 outlook. 2025 was a defining year for Symrise. At our Capital Market Day in November 2024, we introduced the One Symrise strategy. Over the past year, we have translated that strategy into concrete actions. And our ambition remains very clear: to deliver sustainable above-market growth while structurally improving profitability. 2025 was marked by soft demand in certain end markets and continued regional volatility. Against this backdrop, we focused on what we control, execution, efficiency, cash discipline and strategic transformation, and we delivered. First, our core Flavor & Fragrance businesses once again demonstrated our resilience as well as the strength of our portfolio and customer relationships. In Food & Beverages, we continue to outperform in nonalcoholic beverages, particularly in Europe and further expanding our leadership in Naturals and Savory. Our Food & Beverages business remained an industry benchmark for growth and profitability. At the same time, we strengthened our growth platform. We completed multiyear capacity expansions in Granada and Vizag, enhanced our chemical footprint in Asia and opened our new fragrance development and production site in Grasse, deepening our access to high-growth customers in the Middle East and Africa. Innovation remains a key differentiator for us with captive launches and new technologies enabling our customers to win in their respective markets. Second, 2025 also marked a step change in our operational performance. Efficiency initiatives delivered EUR 50 million in incremental profit, well above our EUR 40 million target, building on the EUR 50 million already achieved in 2024. These are structural improvements, not onetime gains. We established global procurement and operations organizations to drive scale benefits and asset optimization while preserving customer centricity and the entrepreneurial focus that differentiates our specialized businesses. We are also systematically strengthening connectivity across our segments and our divisions. And third, all of this is embedded in our ONE SYM transformation, a holistic transformation program designed to structurally enhance our competitiveness. A comprehensive review of our chemical production footprint identified clear opportunities to strengthen performance. The divestment of the Terpene business and ongoing operational improvements are direct outcomes. The carve-out was executed with speed and precision, underscoring our execution capability. We also completed the acquisition of Probi, now integrated into our new Care & Wellness division, which I will discuss more in a few slides. We continue to advance our sustainability and circularity initiatives. In 2025, we completed decade work to establish a new [indiscernible] accounting baseline, increasing our measurable impact. We are also implementing a data-driven decarbonization plan step-by-step across our value chain. Equally important is our commitment to the social dimension of sustainability. We continue to strengthen our impact through targeted initiatives and long-term programs. Across our organization, we have introduced a wide range of measures to support the health, safety, well-being and professional development of our people. In parallel, we foster global engagement for environmental protection, education and equity through our sustainability ambassadors network. In summary, 2025 was demanding, but highly productive. Despite challenging demand globally and purchase of softness across our markets, we delivered market-leading organic growth driven by strong performance in our core businesses. Operational improvements translated into the highest profitability in 10 years and a record adjusted business free cash flow, strengthening financial flexibility. This performance enables us to once again increase our dividend, extending our 16-year track record of annual dividend growth. In addition, we launched our inaugural share buyback program with a EUR 400 million authorization in January 2026, reflecting our belief that investing in Symrise itself currently represents the most attractive use of capital and offers compelling long-term value for our shareholders. We enter 2026 stronger, more focused and structurally more competitive, well positioned to accelerate performance going forward. Before we turn to segment performance, I want to note that going forward and aligned with our ongoing commitment to transparent financial reporting, we'll be reporting adjusted supplemental non-IFRS performance measures. An adjusted EBITDA is intended to enhance investor understanding of the group's underlying operating performance and improve comparability across reporting periods, in line with the sector practice. Olaf will go into more details on this in this section. With that, let's turn to Slide 5 to review our full year 2025 sales by segment. Taste, Nutrition & Health grew organically sales by 2.6%, reaching reported sales of EUR 3 billion, led by Food & Beverages with strong performance in Beverages, Savory and Naturals. Scent & Care delivered organic sales growth of 3.2% with reported sales of EUR 1.9 billion. Fragrance remained strong across all major applications in Fine and Consumer Fragrance. Let's move now to the full year regional results on Slide 6. Organic sales in North America were up slightly, both year-on-year and sequentially compared to the first quarter as macroeconomic uncertainties, persistent inflation and growing political and regulatory unpredictability led to pockets of softness and continued weaker overall consumer sentiment. Europe, Africa and the Middle East performed well despite global demand softness with organic sales growth of 2.8%. Asia Pacific grew organically by 3.2% due to softer consumer demand. And Latin America delivered 6.6% organic growth with strong broad-based performance. I will now turn the call over to Olaf to share more details on our financials. Thank you, Olaf. Olaf Klinger: Yes. Thank you, Jean-Yves, and also a warm welcome to everybody tuning in today. I'll start with our group Q4 sales performance on Slide 8. In the fourth quarter, organic sales growth was 3.6%, led by volume and a flat pricing environment. FX remained a headwind, reducing sales by EUR 61 million or 5.2%. Taste, Nutrition & Health achieved 2.5% organic sales growth, driven by a 1.6% volume increase and positive pricing of 0.8%. Food & Beverage continues to deliver strong results with market-leading mid-single-digit growth driven by Beverages, Naturals and Savory. Pet Foods was flat year-on-year with Palatability growing at low single digits in line with the market, while Nutrition delivered mid-single-digit volume growth, helped somewhat by strategic pricing actions implemented in early 2025. Scent & Care achieved 5.5% organic sales growth in the fourth quarter, driven by a 7.5% volume increase and negative pricing of 2%. In Fragrance, we saw continued momentum with high single-digit growth led by Consumer Fragrances, which delivered double-digit growth and supported by Fine Fragrances on strong prior year comparables. Cosmetic Ingredients delivered low single-digit growth amid tough year-on-year comparables. UV filters continued to normalize following a very strong prior year, while Micro Protection saw strong momentum. Aroma Molecules achieved mid-single-digit growth on weak comparables, driven by strong demand for fragrance ingredients. Please turn to Slide 9. For full year 2025, we delivered above-market organic growth and meaningful margin expansion despite a lower volume operating environment as we focus on controlling the controllables. Organic sales grew 2.8%, driven primarily by 2.2% volume growth and pricing contributing of 0.6%. Portfolio changes related to the Aqua Feed divestment earlier in 2025 and also the 51% divestment of our U.K. beverage trading business in March 2024, reduced reported sales by EUR 60 million. FX was a significant headwind, negatively impacting sales by EUR 194 million, largely due to the depreciation of multiple currencies, most prominent the U.S. dollar. As Jean-Yves mentioned, as part of its ongoing commitment to transparent financial reporting, we will be reporting adjusted supplemental non-IFRS performance measures going forward. It will be an adjusted metric to align reporting more closely with peers and market standards and enhance transparency, comparability and clarity around underlying operating performance. Our adjustment framework is clearly defined and focused strictly on nonoperational and nonrecurring items, primarily portfolio changes, restructuring and optimization initiatives and other exceptional events. For full year 2025, adjustments included first, the previously announced noncash impairments of EUR 150 million related to Swedencare and EUR 148 million related to the revaluation and reclassification of the Terpene business, with the latter being EBITDA neutral. Second, EUR 11 million tied to portfolio optimization, of which around EUR 1 million is EBITDA neutral. Third, EUR 6 million associated with the ONE SYM transformation program; and fourth, EUR 3 million costs related to the antitrust investigation. These are the onetime. Adjusted EBITDA margin expanded by 120 basis points, driven by accelerated execution of the ONE SYM transformation. We realized EUR 50 million in cost savings and efficiency gains, outperforming our own target of EUR 40 million, which is a clear demonstration of operational focus and execution rigor. Please turn to Slide 10 for a review of our Taste, Nutrition & Health segment performance. For the full year, we delivered solid organic growth of 2.6%, driven by a 1.8% volume increase with pricing contributing 0.8%. Taking into account portfolio and exchange rate effects of EUR 142 million or minus 4.6%, sales were EUR 3.028 billion in reported currency. Food & Beverage delivered industry-leading mid-single-digit organic sales growth, and this despite strong comparables with high single-digit organic growth in both EAME and North America. Beverages delivered high single-digit organic sales growth with continued strong momentum, while Naturals and Savory continued to grow at mid-single-digit organic growth rate. Pet Food growth was in line with the market and flat year-on-year, reflecting disciplined strategic pricing actions implemented at the beginning of 2025 to enhance competitiveness in our Pet Nutrition business. Pet Palatability delivered low single-digit organic sales growth. Adjusted EBITDA for the TNH segment increased by 5.2% to EUR 722 million. The adjusted EBITDA margin increased 160 basis points to a market-leading 23.8%, primarily driven by profitable sales growth, portfolio mix effects and efficiency gains related to our ONE SYM transformation. Please turn to Slide 11 for the performance of our Scent & Care segment. Organic sales growth was 3.2% for the full year, driven by a 3% volume increase and pricing of 0.3%. FX continued to be a headwind of 3.5%. Segment sales were EUR 1.901 billion in reported currency. Fragrance delivered high single-digit organic growth, reflecting continued strong momentum across the portfolio. Fine Fragrance achieved high single-digit organic growth, supported by new wins, particularly in North America and Latin America. Consumer Fragrances also delivered high single-digit organic growth, driven by a strong business pipeline. Cosmetic Ingredients reported a low single-digit decline, reflecting tough prior year comparables in UV filters, while microprotection continued to grow [Technical Difficulty] low single-digit growth in a dynamic market environment impacted by competition from Asia. Scent & Care adjusted EBITDA increased 3.5% to EUR 359 million. Segment adjusted EBITDA margin improved to 18.9%, an increase of 70 basis points, primarily driven by profitable sales growth and efficiency gains. Turning to group profitability on Slide 12. This year, we delivered 120 basis points of improvement to both adjusted gross profit and adjusted EBITDA margin, mainly driven by product mix and efficiency gains through our ONE SYM transformation. Through our ONE SYM transformation, we delivered EUR 50 million in cost savings and efficiency gains, underlining our continued focus on sustainable profitability improvement. This included EUR 35 million from sourcing and procurement scale, driven by a more global approach and evaluation of key raw materials for efficiencies with citrus being a good example. Productivity and capacity optimization contributed another EUR 10 million. Global asset and logistics management actions such as facility optimization, distribution contract renegotiations and regional logistics tenders contributed EUR 5 million. The decline in adjusted D&A was mainly due to a noncash impairment on plant and machinery in 2024 and FX translation. Moving to our strong business free cash flow on Slide 13. We delivered absolute cash flow of EUR 780 million and expanded the adjusted business free cash flow margin by 220 basis points to 15.8%, the company record. This performance was driven by a strong EBITDA uplift, lower CapEx intensity and disciplined working capital management through targeted inventory reduction. Net working capital was 32.5% of last 12 month sales, reflecting tight operational control across the organization. The robust performance puts us well into the range of our midterm target of greater than 14% business free cash flow margin, demonstrating our earnings quality, resilient cash generation and execution strength. Let's quickly move to our balance sheet and net debt on Slide 14. We continue to strengthen our balance sheet throughout the year. Net debt, including pension provisions and leasing obligations stood at EUR 2.1 billion, while net debt to adjusted EBITDA decreased to 1.9x, driven by disciplined debt reduction and strong cash generation. We were pleased to receive our inaugural investment-grade credit ratings from both S&P Global and Moody's at BBB+ and BAA1, respectively, each with a stable outlook. We have updated our long-term leverage target range to 1.5x to 2.5x. Maintaining a solid investment-grade profile remains a priority and providing financial flexibility, resilience across cycles and a strong foundation for disciplined value creation going forward. Turning to our disciplined approach of capital allocation on Slide 15. Our capital allocation priorities are clear and consistent, focused on both organic and inorganic investments to drive long-term value creation, return of capital to shareholders while maintaining financial strength and flexibility. First, we continue to invest in organic growth, prioritizing high-return projects that build on our core capability and support profitable, scalable growth. Our midterm CapEx target remains disciplined at 4% to 5% of sales, enabling strong reinvestments while maximizing cash conversion. Second, we pursue disciplined value-accretive M&A. We focus on opportunities that strengthen our portfolio, expand our footprint and deliver tangible synergies, always within a clear financial framework. Third, return of cash to shareholders remains a key priority. Our dividend policy targets a payout ratio of 30% to 50% of net income, and we are committed to growing the dividend over time. And fourth, we added share buybacks as a new option of our capital allocation policy. In January this year, we announced our inaugural share buyback program with a EUR 400 million authorization to October 2026, providing further flexibility how to return capital to shareholders. Across all those priorities, we remain committed to maintain a solid investment-grade profile. Moving to Slide 16. We continue to enhance shareholder value through resilient earnings and disciplined capital allocation, including sustainable dividend growth. Adjusted full year 2025 earnings per share were EUR 3.67, a significant year-on-year increase by 7.2%. Without adjusting for the Swedencare and Terpene business write-downs, earnings per share were EUR 1.78. This year, we are proposing our 16th consecutive dividend increase to EUR 1.25 per share, demonstrating our strong financial position and proven ability to reward shareholders across dynamic market environment. In addition, we are further strengthening shareholder returns through our share buyback program, reflecting our confidence in the business and our strong financial position. And with this, I will hand the call back to Jean-Yves to discuss further our strategy. Thank you. Jean-Yves Parisot: Thank you. Thank you, Olaf. Turning now to Slide 18. As a quick reminder, ONE Symrise is our purpose-driven strategy aligned to our financial ambitions and built on 3 pillars: portfolio growth and efficiency. It defines where to play and how to win, ensuring we allocate capital and resources to the highest value opportunities for our customers and our shareholders. To deliver our strategic ambition and execute our road map, we are investing across the organization in 3 key enablers: sustainability, digitalization and people. Sustainability is an integral part of Symrise purpose, and we are committed to delivering measurable impact. We are combining resilience along our relevant supply chains with science-based innovation and circularity to meet evolving customer expectations. Sustainability is essential for our competitiveness and our ability to sustain strong performance over time. At the same time, we are accelerating digitalization, including AI to sharpen our competitive edge and drive value creation. And we are investing in our people because ultimately, it is a committed and knowledgeable Symrisers who make our transformation possible. The ONE SYM transformation serves as the execution engine of our strategy. It is a multiyear program focused on improving the quality of sales and delivering sustainable above-market growth while enhancing profitability, increasing returns and strengthening our long-term competitive position. Please turn to Slide 19. Today, the most visible proof of our transformation is a EUR 100 million in cumulative cost savings and efficiency gains we delivered in '24 and '25, alongside a 280 basis point expansion in adjusted EBITDA margin. This very tangible progress reflects disciplined execution. We streamlined sourcing and procurement, improved capacity utilization across our network and optimize facilities through global asset management. These actions structurally improved our cost base and strengthened operating leverage. But this is only the most visible part of the story. In parallel, we completed the strategic assessment of our chemicals production footprint and activities. We sharpened the portfolio, divesting Aqua Feed and advancing the divestment of the Terpene business to focus capital on higher return opportunities. Moreover, we laid the groundwork for future growth with strategic investments. We launched a global data and AI hub in Barcelona to significantly advance our digital capabilities. At the same time, we expanded capacity to meet demand in key markets, including Grasse, Granada, Monterrey and Holzminden, ensuring we remain close to our customers and resilient in supply. In parallel, we initiated the implementation of a company-wide innovation ecosystem designed to accelerate connectivity, speed product development and translate IDs into scalable solutions. We also strengthened our leadership bench by appointing 10 new leaders to key roles across the organization. Finally, we improved our organizational structure to enhance our competitiveness and better position Symrise to capture the significant opportunities in Care & Wellness. Together, these actions create a stronger Symrise and provide the foundation from which we are accelerating our transformation. Turning to Slide 20. We are well into Phase 2 of our transformation. Over the past year, we prioritized operational rigor, strengthened accountability and tightened cost management. We sharpened our focus on the most attractive growth platform through deliberate portfolio choices, and we also began optimizing our commercial model. Thanks to this strong foundation, we are now positioned to accelerate this transformation to unlock faster growth, structurally higher profitability and improve earnings quality. This acceleration is designed to drive above-market growth in our strategic segments, embed efficiency and structural cost reduction across Symrise, enabled by digitalization and advance innovative and sustainable technologies that reinforce our competitive advantage. This acceleration does not mean changing direction. It means scaling what is working and executing with greater speed and focus. Our objective is crystal clear, strengthen competitiveness today and position Symrise to consistently deliver durable, profitable growth, cash and returns in an increasingly dynamic market environment. Turning to Slide 21. As we continue to build this foundation for growth, we are further aligning our portfolio with customer needs and opportunities, focusing on differentiated science-based holistic solutions. This reflects how our customers are innovating and how end markets are evolving. A key step in this journey is the evolution of the ONE CARE project into our new Care & Wellness division. This is much more than a structural change. It is strategic. By bringing together Cosmetic Ingredients, health active solutions and probiotics, we have created an integrated platform designed to meet customer demand for science-based holistic self-care solutions as the convergence of beauty and health. Care & Wellness addresses a large and structurally growing market. While this will not be an intermediate -- immediate growth accelerator, it is a mid- to long-term value driver in an attractive segment where innovation, credibility and scale matter. We are innovating in this category with leverage through our scientific leadership, application expertise and customer intimacy. As of January 1, 2026, Care & Wellness is reported as a division within our Scent & Care segment, underlining its strategic relevance within the group. This platform establishes a differentiated position in a significant market, which is growing more than 5% annually, and we expect Care & Wellness to exceed EUR 500 million in sales in 2026. By leveraging Symrise unique capabilities across attractive segments, product formats, biotech and green chemistry, we are very well positioned to scale this platform and unlock long-term value. At the same time, we continue to actively shape our business. With some key initiatives, we are completing the divestment of the Terpene business and further strengthening the portfolio through ongoing strategic reviews and the evaluation of selective accretive M&A, ensuring continued focus, competitiveness and disciplined capital allocation. Turning to Slide 22. Looking ahead, our focus is clear, speed and differentiation. As we have discussed today, the foundation is in place. We have strengthened the cost base, improved earnings quality and sharpened the portfolio. Now we are pivoting from the efficiency to the effectiveness. We will provide more details of our plan in the coming quarters, but I can already share with you some details. First, driving commercial excellence by strengthening our go-to-market model. Second, scaling customer-driven and differentiated innovation by converting our R&D strength and customer centricity into higher value growth. Third, extracting greater scale benefits by leveraging our global footprint, procurement capabilities and asset base to continue expanding margin. And fourth, accelerating digitalization and utilizing AI to embed data-driven decision-making, productivity gain and speed-to-market advantages across the organization. Let me emphasize that our strategy is not about choosing between profitability and growth. It is about delivering both consistently and sustainably. Our disciplined execution on the structural improvements we made over the past 2 years give us control and leverage. The strategic investment we made give us capacity to grow. We are now entering the next phase and accelerating from a position of strength. Our ambition is clear: to become a sharper, faster, more competitive Symrise to deliver superior long-term value. And let me conclude with our outlook on Slide 24. For the full year 2026, we take a prudent approach to guidance and expect organic sales growth in a range of 2.0% to 4.0% with an adjusted EBITDA margin of 21.5% to 22.5%, and an adjusted business free cash flow margin of above 14%. This full year 2026 outlook assumes Q1 organic growth to be down low single digits year-on-year, reflecting high year-on-year comparables as pockets of end market demand remains soft and the conflict in the Middle East adds another layer of uncertainty to the macro picture. From a year-on-year perspective, comparisons will be more challenging in the early part of the year before becoming more favorable as we move through the back half. Our 2026 guidance is not only underpinned by the acceleration of our transformation, but also supported by a very strong project vitality with key customers and a very solid pipeline of new solutions and a key resilience in our core end markets. We believe this will help offset near-term market pressures and position us for growth as demand normalizes. Looking beyond 2026, we remain very confident in our midterm targets and ability to outgrow our reference market. We see sustained multiyear growth supported by structural tailwinds, including evolving regulation, increasing demand for clean-label and natural solutions, ongoing reformulation and continued expansion in emerging markets. With a focused advantaged portfolio and strong innovation pipeline, we are well positioned to convert this tailwind into long-term profitable growth, supported by the acceleration of our transformation. Accordingly, we reaffirm our 2025 to 2028 targets, annual organic sales growth of 5% to 7%, EBITDA margin of 21% to 23% and a business free cash flow margin of more than 14%. With that, let's open the floor for questions. Thank you very much. Operator: [Operator Instructions] the first question comes from the line of Charles Eden from UBS. Charles Eden: Limited to 2. Can I start on the 2026 organic sales growth guidance, please? And I guess both of my questions are actually on this. Firstly, for the full year, what are you assuming is the contribution from volume and pricing in the 2% to 4% range, please? And then more specifically on the Q1 guidance for a low single-digit decline in organic sales. I've looked back through my model. And as far as I can see, Symrise has never seen an organic sales decline in a quarter, not during COVID nor when you had the cyber attack in Q4 2020. Now I understand the comment on high prior year comps, but you've had tough comps before, too. So can I ask, how much of this guidance is realism? And how much of it is baking in some conservatism or prudence for current global conflicts and any other impact that this might have in March. I guess maybe a different way of asking this question is, we're 2 months through Q1 already, are you seeing organic sales growth down low single digits across January and February? Jean-Yves Parisot: Okay. So thank you very much, Charles. Thank you for these 2 questions. And I will answer the 2% to 4%, first. What would be the price volume impact on that? Just let me put that in a context. So we delivered a very strong 2025, and we are very proud on the way we are really acting, very strongly and very diligently when the market is really making everybody suffer. So I think we need a very good end year also, and it's something we need to be aware of. Now concerning the coming year, our organic sales growth guidance reflects what I should say, a realistic and balanced view of the environment. And it is designed to cover both downside and upside scenario we have in mind. So if the market rebounds, second part of the year should be lower end of our guidance. If it rebounds, more should be high end of the guidance. So I am myself confident to delivering this 2% to 4% guidance, taking into account that it will be mainly driven by volumes. I cannot tell you what will be the price volume in advance, but it will be definitely driven by volumes. Now concerning the Q1 low single-digit information I just gave you, it is the first time. Is it due to tough comparables? Yes. Last year, we had a very high Q1, and it was the most impressive quarter of the last year and the comparables for the end of the year will be less challenging for our growth. That's the first answer to your question. The second question concerning is it a realism or prudence? I think we have shown that we can act very strongly, but we want to stay prudent. We want to stay prudent. Why? Because not only this high comparable, but the macro economy is not something we can control. The last days events are also participating also to our real prudence. And we remain very confident even if the Q1 slowdown forecast anticipation is there. And I should say, yes, it's a prudent anticipation. I am myself very confident for delivering 2% to 4% because, as I was mentioning also before, we have a very strong pipeline. We have a very strong pipeline, very good customer relationship, and we see that the market is ready to rebound. And when the market will rebound, we will really take a major piece of it by overperforming the market like we did the previous years. Charles Eden: Understood. So just to clarify, if we come in at a midpoint of low single-digit decline in Q1, so minus 2%, you need 4.7% organic for the rest of the year to hit the midpoint of the guidance, you'd need 6% organic for the rest of the year to hit the top end of the guidance. You're confident in that even if Q1 lands at minus 2%. Is that correct? Jean-Yves Parisot: Yes, exactly, Charles. I remain confident on the full year, but we remain prudent for the Q1 organic sales growth. But yes, I am confident for delivering the guidance. Operator: We now have a question from the line of Lisa De Neve from Morgan Stanley. Lisa Hortense De Neve: I just have one follow-up on the first quarter guidance, if I may. Can I just confirm with you whether there has been no phasing effects that may have benefited fourth quarter and may not be seen in the first quarter? That would be helpful. And secondly, on that first quarter as well, given the tensions, I mean, are you currently expecting that maybe some orders are being deferred into second quarter or shifted forward and that's what's driving the guidance? And what have you seen year-to-date? I mean, so far in the first few months, has trading been solid? So that's the question on the first quarter. And then secondly, I would love for you to outline how you see the Pet Food market for this year and whether you can confirm whether any incremental price negative should be expected for this year, especially in Pet Nutrition? Jean-Yves Parisot: Okay. Thanks a lot, Lisa. So concerning the first question, Q1. Q1, we did a very strong Q4 in 2025. So again, the market is there. Comparatively, by the way, to the Q4 2024, we had an easier comparable. It's also -- I'm sorry to make a lot of comparables, but it's also explaining the quarterly performance in terms of organic sales growth. So the quarter-to-quarter 2024, 2025 was easier. And the quarter-to-quarter Q1 2025 and 2026 is not so easier. So it's really mainly due to the comparable. And again, I am very prudent. So is it something where also some orders are shifting to Q2? We don't know yet. We don't know what will be the impact also, and we are measuring the impact of the last days events, and it's too early for us to really give an idea on a day-to-day basis, what will be the impact between Q1 and Q2. So again, we are following on a day-to-day. And the idea for us is really to deliver the customer when the customer is really needing the product. Concerning the Pet Food, the Pet Food is a key strategic growth driver for Symrise. So we are really very well positioned for following the rebound of the pet market when the rebound will happen. And this year should see a better market dynamic than last year. And concerning your Pet Nutrition, I just remind that Pet Nutrition represent 1/4 of the Pet Food market. And we took some actions in 2025 to restate and reposition the pricing -- the prices. So the prices in Pet Nutrition begin to normalize with the exception of selective price adjustments. And we really anticipate in 2026, a return to moderate volume net organic growth. So again, we are out of the readjustment of the prices we did strategically in 2025. Now it will be selective price adjustments if necessary. And we will do that because also what I said before, our growth will be mainly driven by volume this year. And then when the price adjustments are needed, we will adjust the price because we're selling added value products, but selling added value product, even unique product doesn't mean that we have also to oversell, and we want really to sell the right price for the right usage value. Lisa Hortense De Neve: I mean, just one small follow-up, if I may. Can I just confirm that you just stated that you've already agreed on selective price adjustments or that you would be open if needed to do that? Jean-Yves Parisot: No, we already embedded in our organic sales growth, some price adjustments. We did the major part of our contract for 2026. So the picture is much better than 2025. And we still have some price negotiation in front of us. So not everything is done. So that's the reason why I cannot give you the full picture. But if necessary, we'll make. And in any case, the growth is there and the volumes are there. So in any case, the growth in Pet Nutrition will be substantial this year. Operator: We now have a question from the line of Alex Sloane from Barclays. Alexander Sloane: The first one was actually, again on the organic sales growth. And just in terms of what's driving the acceleration beyond Q1? Is there any particular business line or end market that you would expect greatest step up? And maybe I could sort of just press on the question that's been asked a couple of times. Has the sales in January and February already been down low single-digit? Or is this low single-digit outlook for Q1 really premised on March? That's the first one. And then secondly, just on profitability, the 21.5% to 22.5% guide. Could you give a bit of context on what you're assuming in terms of energy and input costs within that range? Obviously, I appreciate, it's been quite volatile on that front over the last week. Jean-Yves Parisot: Thank you very much, Alex. So I will take the first question. I will let the second to Olaf. Concerning organic sales growth, we are very confident for growing in 2026. We are very dynamic, very active. We stay very agile on entrepreneur, and we have a lot of good news in our pipeline. So in Food & Beverage, we signed new type of contracts, which we delivered in 2026. And we had a very nice mid-single-digit growth in 2025, which will continue in 2026, [ normally ], right? Fragrance, we did an extraordinary also year -- last year in Fine and Consumer and the dynamic is there. So we have also very nice new wins in the pipe. So if you add EUR 2 billion Food & Beverage, EUR 1 billion of Fragrance, EUR 3 billion are really representing a nice growth perspective for the year. Pet Food is really rebounding. We see some movements in the market. And as I was explaining also in the past, we're also shifting with the market, moving some big brands for more regional or local brands, and we are really capitalizing on what we started to deliver and to build in the last months. So -- and Care & Wellness to make the full picture is a new baby in the organization, and there are a lot of good news, a lot of customer traction, which are making me also confident for the growth. So it's not one business-driven growth. It's really a growth across the 4 strategic markets of Symrise. Now coming back to -- before handing over to Olaf, coming back to your question about January, February, March, I will let you know when we'll have the full picture of the quarter about the dynamic inside the month. But what we see today make us feeling prudent about what we promised for the Q1. So I hand over to Olaf for the second question. Olaf Klinger: Yes. Thank you, Alex, for the question. On the energy side, as you rightly observed, there's a lot going on in this market. Having said that, Symrise is relatively less exposed to energy prices. As a percentage of sales, around 2.5% is energy cost related. And out of that, around 80% is hedged for Symrise at this point in time. So with this short-term noise, which we all experienced, I think we should be well protected against the major impact from energy prices as we see it right now. Operator: The next question comes from the line of Edward Hockin from JPMorgan. Edward Hockin: I've got 2, please. One is on Aroma Molecules. I was wondering, it looks like the Q4 was somewhat stronger, growing mid-single digit. Can you give any color on why this was besides the comparatives? And any details you can give on 2025 and also your outlook for 2026 on Menthol terpenes and Fragrance Ingredients? And then my second question, please, is on Cosmetic Ingredients. Obviously, a softer year with the comparatives. How should we be thinking about the growth trajectory for this business in 2026? Should we be baking in some acceleration, some step-up in the growth there? Jean-Yves Parisot: Yes. Thank you very much, Edward. So again, Aroma Molecule, Aroma Molecule did a strong Q4 this year also because the comparables of 1 year before was not so high. So Aroma made a good delivery. Concerning what's happening within Aroma Molecule, we are still on the way to divest it in. We are still building very strong position on Menthol, and we have a lot of added value also with our Menthol, specific raw material, innovation, customer relationship. So we are working on it, and we are continuing to develop specific captive and specific molecules, not only for us, specific flavor SFI, specialty flavor ingredients, not only for you -- for us but our competitors. So Aroma Molecule, by the way, we have also a new leadership, and we are refining the strategy. So we will come back, by the way, to you when there will be more to tell. Concerning Cosmetic Ingredients, Cosmetic Ingredients, I should say, had 2 big different type of products. The first one, sun protection. And you know that sun protection, we suffered a lot last year about comparables. We will not have the same situation today. So it means that in terms of volumes, the comparables will be much better. On some of our products, we have to adjust some prices in sun protection, but also we are on the way to this adjustment. And concerning the second business unit, I want to address for answering your question, Micro Protection. So Micro Protection, we invested a lot in a key product, Hydrolite. We're only producing in Germany. Now we produce in Germany, in Spain, in U.S., in Mexico. And we are really facing a strong demand. Now we are in a way to qualify the product and the growth will come in the coming months. Operator: Your next question comes from the line of Nicola Tang from BNP Paribas. Ming Tang: I'll ask a question about the margin since there's been so much focus on organic growth. You have a relatively wide guidance range for 2026. I was wondering if you could talk about key drivers here. Is it simplistically low end of organic growth means lower end of the margin range? Or are there other factors to think about in terms of your cost efficiencies versus reinvestment? And then maybe just a sort of small clarification one. You've referenced the Middle East a few times. Could you remind us of your direct exposure and things that we need to bear in mind when thinking about the potential impact of the events over the weekend? Jean-Yves Parisot: So Nicola, I will start to answer and will let Olaf complete what I will have missed certainly for the second question. I will start with the first question. Even if it looks like flattish profitability, we are still working a lot on profitability improvement. What we started to do, we are still [indiscernible]. So it means that it will not decrease the outcome of what we started. And the annual compounding effect will not decrease. It will improve. Now what you see in the P&L and in our forecast is also including some reinvestment. And as I clearly said, the growth is a story of Symrise. Growth remains the story at Symrise, the profitable way. That's the profitable growth story. And the question to really drive profitable growth is to make the portfolio adjustments, and it costs money also to make some portfolio adjustments and to really invest also in new way of selling new route to market, new innovation, new digitalization tools. And that is the investment we want also to put in our company for really compounding our story. So this is the answer to your question. So the efforts will pay off even more even if it is not totally embedded in the figures we are showing to you. Now concerning the Middle East, I will hand over to Olaf. Olaf, please? Olaf Klinger: Yes, Nicolas, naturally, it's also of interest for us at the moment what's going on in the region, and we looked at it. The core region for Symrise is around close to 3% of turnover. So it's not a massive environment, which we have in front of us, around EUR 140 million, EUR 150 million is a good number for the size of this business environment. Operator: We have now a question from the line of Eric Wilmer from Kempen. Eric Wilmer: I wanted to press a bit on Aroma. Could you perhaps talk a bit about the price and volume dynamics within the Aroma portfolio, perhaps first fitting it between the part that is and that isn't under Chinese pressure? And secondly, you mentioned EUR 150 million related to Middle East. Is that number perhaps a bit higher when you factor in lower air traffic from other airports into the Middle East? Jean-Yves Parisot: As Olaf wants to started to answer for Middle East, I will let him answer your second question. Concerning the question about the Chinese competition, we are well equipped for competing. We were anticipating some trends and the terpenes divestment is also some divestment, we anticipate some pressure. The terpenes technology is a very good technology and the business is a very good business, but not corresponding to our future guidance. That's the reason why we [indiscernible]. And concerning the Chinese pressure on Aroma Molecule, we have in front of us some Chinese producer for the menthol solutions. We have not only Chinese, we've also a German competitor. And we are really reinforcing our competitive edge. So we face a structural change in the market. We are very transparent about it. We are very aware about it. We are conscious, and we are putting in place a very strong action plan for compensating. So apart from that, concerning our portfolio of Molecules, we are very well protected by some IP, some intellectual property, some type of property protection. And if there are some fights on the cost of goods so -- we will face also the competition. We are really also for adjusting some prices when necessary for guaranteeing some volume. This is also the way to go through this type of competition. I'm very confident that we really can make the best out of it. Concerning Middle East, I will hand over to Olaf. Olaf Klinger: Yes. So Eric, what I gave you was the size of the business. Naturally, things can change by the hour at the moment. And when it comes to logistics and transportation, it's hard to predict what will happen in the coming days. And therefore, I think it's too early to assess where all this is going in the coming days and weeks. Therefore, I think at the moment, the focus is really on our people, make sure that they are safe and then we interact with customers as good as we can in these days. Jean-Yves Parisot: So I don't know if we are still some questions, but I think we are now at closing the session. And I thank you all for your questions. And in closing, just some words, we are controlling the controllables. We are executing our strategy and accelerating the transformation. I think we are really [indiscernible] talk. We are backed by a very clear strategy, everybody, all our customers, all our people and a lot of messages from the market are making me very comfortable that it is a very clear strategy. We are very disciplined in our execution, and we have a very strong investment-grade balance sheet. So altogether, we are very confident in our ability to deliver durable earnings growth, expanding returns and sustain long-term value for our shareholders. Again, I thank you for your interest in Symrise. I thank you for your time, for your questions, and we look forward to speaking with all of you again in the future. Thanks again. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect you lines.Goodbye.
Operator: Greetings. Welcome to the Hudson Technologies Fourth Quarter and Year-End 2025 Earnings Call. [Operator Instructions]. Please note, this conference is being recorded. I will now turn the conference over to your host, Jen Belodeau of IMS Investor Relations. You may begin. Jennifer Belodeau: Thank you. Good evening, and welcome to our conference call to discuss Hudson Technologies financial results for fourth quarter and year-end 2025. On the call today are Ken Gaglione, Hudson's President and Chief Executive Officer; Brian Bertaux, CFO; and Kate Houghton, Hudson's Senior Vice President of Sales and Marketing. I'll now take a moment to read the safe harbor statement. During the course of this conference call, we will make certain forward-looking statements. All statements that address expectations, opinions or predictions about the future are forward-looking statements. Although they reflect our current expectations and are based on our best view of the industry and of our businesses as we see them today, they are not guarantees of future performance. Please understand that these statements involve a number of risks and assumptions, and since those elements can change and in certain cases, are not within our control, we ask that you consider and interpret them in that light. We urge you to review Hudson's most recent Form 10-K and other subsequent SEC filings for a discussion of the principal risks and uncertainties that affect our business and our performance and of the factors that could cause our actual results to differ materially. During the call, we will also be referring to certain non-GAAP financial measures. For a detailed reconciliation of these measures to GAAP financial measures, we refer you to the press release issued earlier this afternoon and the 8-K filed this afternoon with the SEC. With that, we will now turn the call over to Ken Gaglione. Please go ahead, Ken. Kenneth Gaglione: Good evening, everyone, and thank you for joining us. Since we're turning to Hudson as CEO in November, I've already had a chance to speak with many of you, and I'm pleased to have this opportunity tonight to address a broader audience of investors and analysts. It's been a very busy and productive 3 months with our internal operating teams as well as with key customers. There are many positive changes and a lot of progress in a few years since I left Hudson and I found the underlying foundation of the company and my return remains very solid. Hudson is comprised of a tremendous group of knowledgeable and service-oriented professionals with a commitment to delivering innovation and sustainable refrigerant products services and technology that our customers need in this continuously evolving and frequently complex HVAC landscape. I'm excited to be back and to have this opportunity to lead Hudson as we write our next chapter. Before we get into the financial results, I want to take this opportunity to discuss my vision for Hudson and our strategy and priorities going forward. As you know, Hudson has been an industry leader in refrigerant distribution and an innovator in reclamation and refrigerant management service for decades, our founder pioneered refrigerant reclamation in the U.S., and we successfully navigated 2 previous refrigerant phaseouts. CFCs in the late '90s and HCFCs in the mid-2000s and now we're currently moving through another phasedown of HFCs to HFOs. Our core business of refrigerant reclamation sales and associated services remains the focus of our organic growth strategy. This is critical to our commitment to the refrigerant life cycle management and sustainability, whereby we help to ensure optimum system performance using environmentally beneficial reclaimed refrigerants. There are many opportunities for our continued growth in support of this core mission. In the near term and in alignment with our capital allocation strategy, we're focused on investing in a few concentrated areas that I'd like to speak about tonight, infrastructure, inventory and ERP. First, investing in our infrastructure includes expanding our separation technology and automation to ensure we are well prepared and positioned to meet the evolving needs of our customers and the new more complex HFO refrigerant blends. Additionally, we are investing in inventory that is crucial to our operations and supports our well-earned reputation for efficiently supplying our customers with the refrigerants they need when they need them. Looking back, we were somewhat light on inventory at the end of 2024. And as a result, misdelivering on some orders during the 2025 selling season, a situation that was corrected in the fourth quarter. We remain committed to investing in our inventory so that we are well positioned to deliver the service excellence that our customers have come to rely on. More recently, we went live with the new ERP system in February 2026. This will add connectivity to our operations and provide a more efficient platform for our ability to reliably serve our customers. Like many new ERP implementations, we have had our share of start-up headaches, which Brian will cover in more detail. Second, we're focused on the organic and strategic expansion of our service capabilities in the commercial market. In the short time that I've been back and working with our internal teams, we have identified several opportunities to apply our existing technology and expertise to provide additional service offerings to our customer base, the HVAC market has a multitude of servicing needs, and we believe we have an opportunity to capture more of that demand. Some examples include the separation of packaging of new refrigerant blends that require specialized balancing and handling, providing new methods to recover refrigerant from underserved segments of the market, and HVAC system optimization services, just to name a few. Third, we'll continue our disciplined approach to accretive acquisitions. In conjunction with driving organic growth, we will continue to evaluate our acquisition and alliance opportunities that complement our core capabilities and/or strengthen our geographical presence in the market. As example, our recent acquisition of Refrigerants Inc. is an example of that approach and has given us an enhanced presence in the western portion of the U.S. for both securing recovery refrigerant and refrigerant distribution. And lastly, fourth, returning capital to our shareholders via our opportunistic stock repurchase program. We repurchased $20 million in stock during 2025 and intend to continue our practice of opportunistic buybacks in 2026. Let me take this opportunity to acknowledge that these initiatives build upon the strong foundation passed to me from my predecessor. And for that, I and the company are truly grateful. And I don't believe this is a time for a transformative change. It's not necessary for our company right now. But instead, it's a time for diversification of our revenue stream to reduce seasonality and our dependence on a few dominant refrigerants. Our entire team here is committed to capitalizing on the opportunities in front of us this year. Now I'll touch briefly on fourth quarter and full year results before turning the call over to my colleagues. As many of you know, Q4 is historically our weakest quarter from a sales volume perspective as it falls outside of our 9-month selling season. Nonetheless, we delivered impressive revenue growth of 28% in the fourth quarter 2025, primarily related to strong sales volume, which we believe is a promising indicator of the demand environment going into 2026 and a validation of our focus on driving volume by exceeding customer expectations. Additionally, during the fourth quarter, we completed our accretive acquisition of Refrigerants Inc. Headquartered in Denver, which strengthens our presence and access to the recovered refrigerant supply chain in the Western United States. I'll give you a brief overview of our full 2025 financial performance. We grew 4% for the full year to $246.6 million in annual sales volume with a growth of 6%. Our gross margin was 25%, and we posted non-GAAP adjusted net income of $19.7 million or $0.44 per diluted share. Also important here is that 2025 also marks our second consecutive year in achieving an 18% increase in reclamation volume. This is directly related to our activities at the contractor level. As we frequently mentioned in these calls and elsewhere, refrigerant recovery is critical to the reclamation process and Hudson has been an industry leader in building awareness among contractors around the importance of recovery both from a sustainability standpoint and an economic perspective. We have substantially heightened our ability to secure recovered refrigerant via our acquisitions of USA Refrigerants and Refrigerants Inc. which expanded our recovery team and our geographic reach. Expanding reclamation as a critical part of our supply chain, and it will be increasingly important with the EPA's further reduction in consumption allowances in 2029. I'll take a moment now and turn to our work for the Defense Logistics Agency or the DLA. Last year, we recorded revenue of $38 million for the full year under our DLA contract. As many of you know, during the fourth quarter, we announced that we had been awarded the renewal of our DLA contract to support the U.S. military as a prime contractor. In late January '26, this last January, we were notified that a competitor had filed a bid protest regarding an administrative challenge to the DLA's evaluation of proposals and the contract award to Hudson Technologies. Our contract award has been rescinded while the DLA conducts its review of its internal processes. And while this development is disappointing, Hudson has a proven and successful 10-year working relationship with the DLA and we'll continue providing logistics support on our existing contract with runs through 2026. We are determined to preserve our position as a value partner to the DLA while this protest is being resolved, and we will provide further updates as we learn more. In closing, I would say, overall, I am very pleased -- we are very pleased with our solid fourth quarter close to 2025, and we are energized for the opportunities we see to grow our business. Now I'll turn the call over to Kate Houghton, our Senior Vice President of Sales and Marketing, to provide some additional detail around Hudson's market opportunity. Kathleen Houghton: Thank you, Ken, and good evening, everyone. We executed well in the fourth quarter and delivered increased sales volume and what is historically our seasonally slowest quarter when a large portion of our customers transition from cooling applications to heating. In fact, our execution in the back half of 2025 offset what had been a late start to our 9-month cooling season. It's still relatively early in the year, but as we begin the 2026 cooling season, we currently see supply and demand is balanced in the market with some slight refrigerant price appreciation. At the close of 2025, the average price of HFCs was slightly below $6 per pound and as we report to you today, it's slightly above $6 per pound. As Ken mentioned, for the second consecutive year, we achieved an 18% increase in reclamation volume. We believe our solid growth reflects our successful grassroots effort to promote recovery and reclamation activities to the field technicians who facilitate the recovery and return process as well as the expanded recovery capabilities resulting from our acquisitions of USA refrigerants and Refrigerants, Inc. During the fourth quarter, we continued to actively engage with our refrigeration technician and contractor partners to highlight the environmental and economic benefits of recovering and returning refrigerants rather than venting refrigerant, and we will continue these efforts as we move through 2026 and beyond. In addition to our industry outreach during 2025, we also launched 2 innovative reclaim pilot programs to promote recovery and reclamation process and technology. In September, we began our partnership with DC Sustainable Energy Utility, or DCSEU to establish the nation's first refrigerant recovery and reclamation pilot in Washington, D.C. The program is linked to DCSEUs greenhouse gas emission goals. And through this pilot, Hudson provides HVAC contractors with training on recovery best practices, supplies proper storage containers for use refrigerants, covers shipping and logistics and offers financial incentives for recovered refrigerant. The pilot is off to a strong start with early positive results. Participating contractors have avoided 600,000 pounds of equivalent CO2 emissions by reclaiming with Hudson, and the program is set to expand to a wider range of participating contractors this year. We are encouraged that CSU program is also thinking about refrigerant recovery as greenhouse gas CO2e reduction rather than the typical view of reduced energy consumption. This approach is key to encouraging utilities around the country to accelerate the support of refrigerant reclamation in decarbonization efforts. In December of 2025, we announced that Hudson was selected to support the California Air Resources Board, or CARB, with their REFRESH pilot program, the state's first program to incentivize refrigerant recovery and reclamation. In this pilot, Hudson will partner with contractors who are part of the California Energy Commission's Equitable Building decarbonization direct in-store program to provide training on safe and efficient recovery practices and as a purchaser of recovered HFCs and HCFCs for reclamation. We're very excited to be part of these innovative new programs and optimistic that we'll continue to see additional opportunities as more state and local governments adopt legislation mandating the use of reclaimed refrigerants. Finally, I'd like to take a minute to address the recent development at the EPA revoking the endangerment finding established in the Obama administration. The endangerment finding has served as a basis for regulating certain pollutants, including HFCs under the Clean Air Act. The recession of this endangerment finding primarily limits EPA's ability to develop further HFC regulations under the Clean Air Act, and we don't believe it will affect the AIM Act's independent statutory authority for the HFC phasedown. OEMs and refrigerant producers are already well on their way in developing next-generation lower GWP alternatives to HFC refrigerants and equipment and Hudson remains in a strong position to reclaim and provides HFCs to meet the anticipated continued demand into these 100 million plus units reach the end of their useful lives. As we begin to move through 2026, I want to echo Ken's comments about our optimism for what lies ahead for Hudson. We have a strong foundation to build from, which includes our long-standing customer base, leadership position in supply of both surgeon and reclaim refrigerants of all types, innovative thinking to engage nontraditional industry partners in the growth of refrigerant recovery, sophisticated field service capabilities and the ability to leverage our proprietary technology and expertise to drive growth. With our renewed focus on expanding our core business through complementary opportunities and focuses on strategic expansion in complementary areas, we believe we are well positioned to grow our leadership role in the marketplace. Now I'll turn the call over to Brian Bertaux to review our fourth quarter and full year 2025 results. Go ahead, Brian. Brian Bertaux: Thank you, Kate. First, I'll review our Q4 '25 financial results with a comparison to Q4 '24. We recorded $44.4 million in revenue, an increase of 28%, primarily driven by increased sales volume. As Kate noted, our strong sales volume execution in the back half of 2025 more than offset what had been a late start to our 9-month selling season. We posted gross profit of $3.5 million compared to $5.8 million of Q4 '24. The Q4 '25 gross profit reflected the impact of $4.2 million of inventory-related costs including a lower of cost or market adjustment resulting from the fourth quarter inventory build. Hudson recorded SG&A expenses of $13.9 million compared to $8 million in Q4 '24. SG&A in the '25 quarter included $4 million of executive severance costs. Excluding the $4 million severance costs, non-GAAP adjusted SG&A was $9.9 million compared to $8 million in Q4 '24, with the variance related to increased staffing. Operating loss was $11.2 million compared to an operating loss of $3.2 million in Q4 '24. The Q4 '25 operating loss includes $8.2 million in inventory and the $4 million severance costs. Non-GAAP adjusted operating loss, which excludes the $4 million of severance-related costs was $7.2 million compared to Q4 '24 operating loss of $3.2 million. We recorded a net loss of $8.6 million or $0.20 per diluted share which includes the after-tax impact of the $8.2 million of previously described costs compared to a net loss of $2.6 million or $0.06 per diluted share in Q4 '24. Non-GAAP adjusted net loss was $5.4 million or $0.13 per diluted share, which excludes the after-tax impact of the $4 million executive severance cost compared to a non-GAAP net loss of $2.6 million or $0.06 per share for Q4 '24. Turning to the full year. Hudson posted $246.6 million in revenue a 4% increase from 2024, and that increase was primarily related to a 6% increase in sales volume, which was partially offset by slightly lower pricing. Revenue from our DLA contract was $38 million in 2025. 2025 gross margin was 25.2% compared to 27.7% in 2024. This reflects slightly lower refrigerant market prices and higher freight costs. 2025 SG&A was $40.2 million compared to $33 million in 2024. Non-GAAP adjusted SG&A was $36.2 million compared to $32.6 million in 2024. Excluding the $4 million of severance costs, the increase in SG&A includes the midyear 2024 increase to our sales staff. The company recorded operating income of $18.6 million compared to $29.3 million in 2024. Non-GAAP adjusted operating income was $22.6 million compared to $29.7 million in 2024. The decrease from 2024 reflects the aforementioned lower gross profit and increased SG&A costs, primarily from increased staffing. Hudson recorded net income of $16.7 million or $0.37 per diluted share compared to net income of $24.4 million or $0.52 per diluted share in 2024. Non-GAAP adjusted net income and diluted earnings per share were $19.7 million and $0.44, respectively, compared to non-GAAP EPS and diluted shares of $24.7 million and $0.52, respectively, for 2024. The company's unlevered balance sheet remains strong at year-end with $39.5 million of cash. During the quarter, we demonstrated our commitment to our capital allocation strategy of organic and strategic growth and opportunistic share repurchases. In Q4 '25, we invested in restocking inventory acquired Refrigerants Inc., and repurchased $14 million of company stock. The investment in inventory at year-end ensures that we are well positioned for the 2026 selling season. Consistent with our capital allocation strategy, we repurchased $20 million of common stock in 2025, and we expect to continue to pursue opportunistic buybacks in 2026 with our $20 million authorization. As Ken noted, we recently went live with a new ERP system that we expect will add an activity to our operations and provide a better platform for reliably serving our customers. Like many new ERP implementations, we have experienced some start-up inefficiencies in Q1 2026. Despite that headwind, we expect Q1 2026 revenue to increase by a low to mid-single-digit percentage as compared to Q1 2025, and we don't expect the ERP-related inefficiencies to persist in the second quarter and forward. Now I'll turn the call back to Ken for his closing remarks. Kenneth Gaglione: Thank you, Brian. So 2025 was a year of notable changes and foundational progress for Hudson. We enter 2026 energized by the opportunities we see to grow our leadership role as a provider of sustainable refrigerant and reclamation products, technologies and services through strong execution as well as through our strategy to expand our core capabilities by leveraging new opportunities in adjacent markets. Operator, we'll now open it up for questions. Operator: [Operator Instructions] First question comes from Gerry Sweeney with ROTH Capital. Gerard Sweeney: I just wanted to talk about -- I mean, you highlighted some of your, I think, key focuses going forward in organic and accretive and specifically, I wanted to get an idea of what we were thinking in terms of maybe opportunities around service, HVAC optimization and removing some of the lack of, a better word, focus on just refrigerants and reclamation and moving some seasonality. Kenneth Gaglione: Absolutely, Gerry. Thanks for the question. So I'll add a little color to that. And when people think about services in the HVAC industry, they tend to immediately think about contracting services, people that show up in the driveway, the technicians. But that's not really what we're speaking about directly. When we talk about our services expansion, we are looking at other types of services that -- and there are a lot of them that are hidden behind, let's say, chiller operations that people are less familiar with, including proactive services where we monitor and measure chiller performance. We look at other aspects of the chiller in terms of its operating performance, which we've been doing with our services group for some time. And there's adjacencies to where there are services that we can provide with new infrastructure capabilities for A2L refrigerants, HFO refrigerants, complicated HFO refrigerant blends that we feel we have a unique advantage in the marketplace to take -- to help balance those refrigerants, package them and redeploy them. Gerard Sweeney: Got you. And when you're talking chillers, you're referencing like commercial sized opportunities. Kenneth Gaglione: Correct. Yes. Gerard Sweeney: How do you go about sort of opening up this opportunity? Obviously, you do have -- Hudson has had a service component that's been around for years. And I think it's received lots of attention maybe from the investment community, but maybe not from the internal aspect, but curious as to how you built this out. Kathleen Houghton: Yes. Great question, Jerry. So thinking about it, as Ken touched upon, thinking about taking our services in a more proactive manner versus an emergency response. So Hudson is very well known in the industry for an emergency response to large chiller built systems. Taking our expertise into that stage before you have to have an emergency response, how do you better manage that chiller, how do you proactively think about it as an asset, and all the things that go into that with the refrigerant circuit is one of those areas that we're focusing on and spending more time on lightly. Gerard Sweeney: Got you. And one more question. This may be very early in the process, but maybe do you have any like aspirational targets as to where revenue could be in terms of maybe opportunities outside just direct refrigerants distribution. So maybe a balancing perspective. Kenneth Gaglione: Yes. That's a little hard to say, but we do have some targets we're developing, Jerry, in terms of percentages of sales. And as I said earlier, the key for us is to reduce our dependency on certain refrigerants as we go forward into our strat plan. So I think we'll be able to give you some guidance on that, a little better guidance on that in the coming months. But right now, it's a little bit early to say. Operator: Next question is from Ryan Sigdahl with Craig Hallum. Matthew Raab: This is Matthew Raab on for Ryan. I just want to start on HFC pricing, like it seems like things are mostly stable. I think you mentioned slightly above $6 a pound. I guess just any update on the trends you're seeing whether it be inventory, what's going on in the channel? What you're hearing from tax in the field? And then I don't know if I caught it, was there any change in expectation on pricing for 2026 as a whole? Kathleen Houghton: Yes. That's again, great question, Matthew. And thank you for that. So as we said, when it came into the beginning of the year, pricing and typically, we're talking use 410A as a bellwether because it's the dominant HFC refrigerant, it's a little bit below $6 a pound. It's a little -- as we're talking to you today. It's a little bit above $6 a pound. We see right now that the market is balanced in terms of supply and demand. So not thinking about and not seeing indications right now of some of the shortages and disruptions that happened in the market last year. We're seeing the signs of small price appreciation. It's still a little early in the year, some places in the country, including with Cliff Lake, New Jersey, have 2 feet of snow on the ground. And it's not a lot of people thinking about turning on their ACs yet. But we are starting to see a little bit of upward price appreciation, and we think we'll see that continue. Matthew Raab: Understood. Maybe moving over to I guess, broadly, do you have any expectation for the mix in '26? We've heard from some of the OEMs that the aftermarket demand for HFO is going to kick in more so in the second half of '26. Do you have any thoughts on what that mix could be for Hudson? And then any commentary maybe on HFO pricing versus HFC pricing would be helpful. Kenneth Gaglione: Let me take a stab at it, Ryan. I mean the HFO demand for a company like cuts in is all service demand, right? It's all aftermarket demand. And the build-out for HFOs is ongoing for first fill and OEM, as you mentioned. So I'm not expecting -- we're not expecting to see any real significant increase in HFO demand from our side for, let's say, the first part of 2027. So we still -- we see it today. We see it. We get it. We understand it. We know how to rebalance it. But in terms of actual real continuous service demand, I wouldn't think it would be second half of this year. I think more likely you're looking at early next year. Operator: The next question is from Austin Moeller with Canaccord. Austin Moeller: So just my first question here. How much cylinder inventory do you expect to need to meet demand in 2026? And how close are you to that target given the build? Brian Bertaux: We really don't speak to the cylinders. However, we have the inventory both in refrigerants and cylinders, again, not to short the market, we leaned in heavy. So we feel ready and equipped to meet all demand for 2026. Austin Moeller: Okay. And what do you view as the most important factor this year to improving the gross margin relative to last year? Is it just appreciation in pricing? Or are there other factors we should be focused on? Brian Bertaux: Well, in addition, I mean pricing is one variable, but we work day in and day out. We use fixed asset investments to automate things and to reduce costs. We have a new ERP system that we spoke to that should provide us efficiencies, better information, better information to make informed decisions. So with information, with investments in fixed assets and just focus on continuous improvement, we find ways to reduce costs. Operator: [Operator Instructions] The next question comes from Josh Nichols with B. Riley. Matthew Maus: This is Matthew Maus on for Josh Nichols. I guess to start off on the inventory build. You mentioned feeling light on inventory at the end of 2024, not having enough firepower in 2025. So I'm wondering at what price levels were you accumulating in 4Q? And how does the full dynamic set up for margins as you sell in the sell through the peak season? Brian Bertaux: Yes. So just number one, if you historically looked over, say, the last 7 years, we typically have maybe a little bit more than 6 months of inventory on hand at any given year. And we entered 2024 significantly below that. So we did miss themselves, and it didn't move the needle. We just -- we -- as far as our reliability and service our customers, we don't want to miss one cell. So for 2025, we just went back up to more historical standards and around a 6-month inventory days on hand. Matthew Maus: Got it. So then with pricing at around like $6 a pound and inventory stock. I'm assuming at similar levels, how should we think about gross margins for 2026 directionally? Brian Bertaux: Gross margins for 2026. And as we noted in our last call, if there's no real change in pricing, then really our gross margin for '26 should be comparable to '25. Matthew Maus: Got it. And just last one on the DLA. Is there any update on the bid process time line? And should we assume a similar $38 million run rate for 2026 under the existing contract? Kenneth Gaglione: I think that's a fair assumption. We think it's going -- we're good through the end of this contract that we have currently. We see it continuing through the end of the year. So that's our projection as well. And I think the updates, there's been some recent activity that's positive for us, but it's hard to know right now what the timing looks like. So I'd rather not comment about it. It's a convoluted process they go through. But I think in the end, we're very optimistic that we're going to prevail. Operator: We have reached the end of the question-and-answer session, and I will now turn the call over to management for closing remarks. Kenneth Gaglione: All right. Thank you, operator. So I appreciate everyone's interest in Hudson Technologies. I think you understand that we have a lot of opportunity here for growth. And on behalf of Kate, Brian and myself, I want to thank our employees, particularly our employees for their commitment to our success. And we also want to thank you for your interest and support of Hudson's Technologies mission and our commitment to the sustainable practices around refrigerant life cycle management. At Hudson, that's not just a slogan, it's not just words, it's actually something that we really believe in, and we believe in effective refrigerant life cycle management. We look forward to speaking with you in May to discuss our first quarter 2026 results. Operator: This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
Operator: Good afternoon, everyone, and welcome to the Cross Country Healthcare's Earnings Conference Call for the Fourth Quarter 2025. Please be advised that this call is being recorded, and a replay of the webcast will be available on the company's website. Details for accessing the audio replay can be found in the company's earnings release issued this afternoon. At the conclusion of the prepared remarks, I will open the lines for questions. I would now like to turn the call over to Josh Vogel, Cross Country Healthcare's Vice President of Investor Relations. Thank you, sir. You may go ahead. Joshua Vogel: Thank you, and good afternoon, everyone. I'm joined today by our Chairman of the Board and Chief Executive Officer, Kevin Clark; as well as Bill Burns, our Chief Financial Officer; Marc Krug, Group President of Delivery; and Amiee Hawkins, Chief Solutions and Operations Officer. Today's call will include a discussion of our financial results for the fourth quarter of 2025 as well as our outlook for the first quarter of 2026. A copy of our earnings press release is available on our website at crosscountry.com. Please note that certain statements made on this call may constitute forward-looking statements. These statements reflect the company's beliefs based upon information currently available to it. As noted in our press release, forward-looking statements can vary materially from actual results and are subject to known and unknown risks, uncertainties and other factors, including those contained in the company's 2024 annual report on Form 10-K and quarterly reports on Form 10-Q as well as in other filings with the SEC. The company does not intend to update guidance or any of its forward-looking statements prior to the next earnings release. Additionally, we reference non-GAAP financial measures such as adjusted EBITDA or adjusted earnings per share. Such non-GAAP financial measures are provided as additional information and should not be considered substitutes for or superior to those calculated in accordance with U.S. GAAP. More information related to these non-GAAP financial measures is contained in our press release. With that, I will now turn the call over to our Chief Executive Officer, Kevin Clark. Kevin Clark: Good afternoon, and thank you for joining us. As you know, 2025 was a challenging year for Cross Country Healthcare. The pending merger introduced uncertainty for our employees and our customers, which weighed on our growth during the year. With that process now behind us, we have improved momentum and a renewed focus across the organization. However, what did not change was the strength of our client relationships, the quality of our clinicians or the financial strength of our balance sheet. I stepped back into the CEO role with a clear objective: restore momentum, sharpen execution and position the company to grow faster than the market again. As reflected in the recent Becker's article on Cross Country, we are advancing a strategy built on operational rigor, technology-powered workforce solutions and disciplined capital allocation to drive long-term shareholder value. We enter 2026 with no debt and a significant amount of cash, providing us the flexibility to invest in growth initiatives that generate durable returns. Our priorities are straightforward. Simply put, we must expand our market share within large health systems, capture new logos across our divisions, improve operational efficiency and speed to fill and leverage technology as a differentiator. I am confident that this will be a year of execution and acceleration. The opportunity in front of us is meaningful and with disciplined execution and renewed commercial focus, we expect to return to revenue and earnings growth by the end of 2026. Now turning to our business performance. I'll start with discussing the markets we serve and the actions we are taking to achieve growth in 2026 and beyond. Looking at the health care staffing market and travel in particular, we believe that the industry has stabilized and is poised for growth in 2026. With stability in both demand and in bill rates, clients are increasingly focused on the speed to fill rather than reducing contingent labor, signaling a shift to a more normal operating environment. This is evident in our weekly production since the start of the year, which has outpaced the fourth quarter. For the first time in more than three years, we are anticipating travel to be flat to up slightly on a sequential basis with projected travelers on assignment growing each month into the second quarter. Contributing to the improved production is our growing book of business. As highlighted in our third quarter 2025 earnings release, we successfully renewed, expanded and won more than $400 million in contract value, predominantly with our MSP clients. Given our robust pipeline of sales activity across multiple business lines, we are well positioned to expand our portfolio and secure new clients in 2026. Shifting to gross margin. We expect travel will continue to experience a tight bill pay spread as competitors jockey for market share. As a leader in this space, Cross Country will remain competitive to protect and grow clinicians on assignment. Although we do not anticipate margin pressure easing for the travel business in the near term, we will seek to maintain and expand our consolidated gross margins through growth in our higher-margin businesses, which had aggregate annual revenues over $350 million last year. We see a path for growth across all our lines of business through our growing proprietary technology portfolio anchored by Intellify, our market-leading workforce intelligence platform that supports virtually all of our MSP and vendor-neutral programs. Through this technology, we've delivered predictive visibility, optimized clinician deployment and improved labor cost management for health systems. At its core, Intellify is a highly scalable VMS capable of managing all staffing categories including physicians, per diem and internal resource pools or travel programs. And we are seeing growing interest from other staffing organizations seeking to leverage the platform within their own offerings. In 2026, we plan to expand Intellify into the home-based and education staffing markets, extending its reach into adjacent sectors that demand scalable workforce solutions. Our software portfolio also includes Xperience, an established mobile platform actively used by health care professionals to discover opportunities and manage their careers digitally, strengthening engagement and retention across our talent network. Our staffing business remains a strong foundation, but our long-term growth strategy is increasingly powered by our proprietary technology portfolio, enhancing client value, improving efficiency, expanding margins and creating scalable recurring revenue streams. These solutions represent the continued evolution of our broader technology road map. Our objective is not to move away from staffing, but to transform how workforce solutions are delivered. Our other technology priorities involve automation across the enterprise through AI and other means such as the rollout of the middle office functionality within our ERP. Unleashing the power of AI will improve speed to market and boost recruiter productivity, while the completion of the ERP project will improve our efficiency in back-office operations. It's clear that technology is central to how we will grow and deliver better outcomes while improving efficiency and productivity, but it is not the only lever we are pulling to drive top line growth. Since the start of the year, we have made conscious and purposeful investments in revenue producers across the organization, primarily funded by redeploying cost savings we were able to identify and act quickly upon. In the first quarter, we have added several dozen revenue producers, including recruiters, account managers and sales professionals, and we are already seeing positive results from these investments. Looking ahead, I believe we will see sequential progression across 2026 with both top line growth and improved profitability. Bill will cover the first quarter guidance, but our goal is to exit 2026 with a revenue run rate north of $1 billion and an adjusted EBITDA margin of 4% to 5% and on a path to higher margins for 2027. With a strong balance sheet and more than $100 million in cash on hand, we are well positioned to accomplish our goals. We will be diligent and purposeful in deploying capital with an eye towards a mix of complementary acquisitions and returning capital to shareholders through continued share repurchases. One of the biggest strengths for Cross Country is our high-performing, highly engaged team, both here in the U.S. and in our center of excellence in India. I've had the pleasure of seeing a lot of familiar faces as well as meeting new ones over the past three months. And I could tell you that I'm truly excited by their focus, energy, teamwork and execution. I want to take this moment to thank all of our employees for your hard work and steadfast commitment to making Cross Country the best in the industry. I also want to thank all of our health care professionals for your continued dedication and contributions as well as our shareholders for believing in the company. In closing, I'm excited to be back, and I'm equally excited about what lies ahead for Cross Country. With that, let me turn the call over to Bill. William Burns: Thanks, Kevin, and good afternoon, everyone. It's great to be speaking with you all again and to share some insights on our results as well as the business. Since we've not held quarterly earnings calls throughout the past year due to the merger, I'll spend a bit of time focusing on the full year in addition to the most recent quarter. As noted in today's press release, consolidated revenue for the fourth quarter was $237 million, down 5% sequentially and 24% over the prior year, while full year revenue was $1.05 billion, down 22% from the prior year. The majority of the decline for both the quarter and the year stems from the prolonged period of normalizing contingent utilization by clients across our core Nurse and Allied businesses, most notably Travel, Nurse and Allied. I'll go into the segments in more depth in just a few minutes, but we're pleased to see a slow turning in those businesses as we enter 2026, pointing to a return to a more normal cycle for contingent labor. Gross profit for the quarter was $48 million, which represented a gross margin of 20.3%. Gross margin was down 10 basis points sequentially, but up 30 basis points over the prior year. Throughout the year, gross margin was relatively stable, ranging between 20% and 20.4%, with the majority of the fluctuation stemming from mix shifts across the portfolio, which partially muted the continued margin pressure within travel. Moving down the income statement. Selling, general and administrative expense was $51 million for the quarter, up 9% sequentially and down 8% over the prior year. Full year SG&A was $200 million compared with $233 million in the prior year, down 14%. SG&A for the quarter and the year included nonrecurring severance costs related to the recent CEO change. Excluding those costs, SG&A would have been $43 million for the quarter and $186 million for the full year, representing declines of 19% and 16% over the respective prior year period. The majority of the reduction in SG&A comes from the reductions in U.S. headcount, which was down 21% from the start of the year. We continue to tightly manage our costs as well as leverage technology and our center of excellence in India to reduce our overall cost of labor. Coming into 2026, we further reduced headcount in the United States and anticipate we will identify further cost savings as we progress through the year. As Kevin highlighted in his comments, we are redeploying some of those cost savings with investments in revenue producers, which we anticipate will fuel organic growth throughout the year. Adjusted EBITDA was $4 million for the quarter and $27 million for the full year, which as a percent of revenue was 1.7% for the quarter and 2.5% for the full year. The decline in margin across the year was driven primarily by declines in revenue and continued bill pay spread compression, most notably in travel and partly offset by the cost savings I mentioned a moment ago. I'll speak to guidance in a moment, but as we progress through 2026, we expect to see improved operating margins as we realize organic top line growth and continued operational efficiencies. Below adjusted EBITDA, there are a number of items to call out. First, with the recent decline in share price following the termination of the merger agreement, the company recorded noncash impairment charges of $78 million principally related to the indefinite-lived assets such as goodwill as well as the abandonment of certain trade names. Acquisition and integration charges were a net credit of $16 million for the quarter and $3 million for the full year due to the receipt of the $20 million merger termination payment. We also recognized net interest income of $300,000 for the quarter and $1 million for the full year as we maintained a substantial cash position and had no debt outstanding aside from letters of credit. As we progress through the year, we will be exploring the renewal and rightsizing of our credit facility in an effort to bring down the carrying costs of the unused facility. And finally, on the income statement, we realized an income tax expense of $12 million in the quarter and $11 million for the full year. The significant impairment charge noted a moment ago triggered the recognition of a valuation allowance on our deferred tax assets. However, the company fully expects to utilize all of its NOLs as profitability improves. Turning to the segments. Nurse and Allied reported revenue for the quarter of $194 million, down 4% sequentially and 24% from the prior year. Travel, our largest business within Nurse and Allied, was down 9% sequentially and 30% from the prior year, entirely driven by a decline in travelers on assignment as average bill rates remained stable. As Kevin highlighted, we are optimistic that the travel staffing market appears to be reaching an inflection point as we are seeing the average number of travelers on assignment holding steady in the first quarter, and we project that to rise into the second quarter despite seasonal winter needs subsiding at the end of the first quarter. Our local and per diem business closed the year with $19 million in revenue, which was down 8% sequentially, a slightly faster decline relative to travel. We continue to believe this roughly $80 million business plays an important part in meeting client needs for urgent needs of clinicians at the shift level and continues to operate with a gross margin close to our consolidated average, which remains several hundred basis points higher than our travel business. Also within Nurse and Allied, our Education Staffing business reported revenue of $18 million, up 48% sequentially as schools returned from the summer recess. We saw this business decline approximately 7% on a year-over-year basis, largely driven by the in-sourcing of roles at several of our larger clients. For the full year, education revenue was $71 million with a gross margin of approximately 28%, and we believe this business will return to growth in 2026. Finally, our home-based staffing business once again experienced strong organic growth with revenue of $34 million in the fourth quarter, up 34% over the prior year. We anticipate the growth trajectory for this business will continue, especially with an aging U.S. population and strong evidence remaining in the home drive better outcomes at a lower cost. Looking at our only other segment, Physician Staffing reported $43 million in revenue, which was down 20% from the prior year and 12% sequentially, principally due to a decline in billable days across several of our top specialties such as hospitalists, anesthesia and CRNAs. Revenue per day filled was up 10% year-over-year, driven by modest increases in bill rates as well as favorable mix. Turning to the balance sheet. We ended the fourth quarter with $109 million in cash and no outstanding debt. With the health of our balance sheet, we remain well positioned to make strategic investments as well as execute on our capital allocation strategy. In December, we repurchased more than 800,000 shares of our common stock or 2.5% of the shares outstanding at an aggregate price of $6.8 million. In the first quarter of 2026, we continue to repurchase shares under our 10b5-1 trading plan and as of today, have bought an additional 486,000 shares. Given we believe that our stock does not reflect the underlying value of our business, we anticipate making further share repurchases throughout the balance of the year. From a cash flow perspective, we generated $18 million in cash from operations during the quarter and $48 million for the full year. Included in these amounts were the costs relating to the merger transaction incurred throughout the year and the subsequent termination payment, which essentially offset those costs incurred on a year-to-date basis. Our DSO in the fourth quarter was 58 days, in line with our stated goal of 60 days. Cash used in investing activities was $2 million, primarily reflecting capitalized technology investments related to ongoing projects such as the continued expansion of features and functionality for Intellify as well as our candidate-facing platform Xperience. Cash used in financing activities was reflective of the share repurchase that I noted a moment ago as well as the final payments of contingent consideration related to Mint and Lotus acquisitions completed in 2022. This brings me to our outlook for the first quarter. We're guiding to revenue of between $235 million and $240 million. The sequential increase is being driven by organic revenue growth in the number of travelers on assignment as well as a small amount of labor disruption revenue. We are extremely encouraged to see the number of travelers rising throughout the first quarter and anticipate to exit the quarter 2% higher than the fourth quarter average. We are guiding to an adjusted EBITDA range of between $4 million and $5 million, representing an adjusted EBITDA margin of approximately 2%. As a reminder, we expect payroll tax to negatively impact the first quarter by approximately $2 million. Adjusted earnings per share is expected to be a loss of between $0.04 and $0.06 based on an average share count of approximately 31.5 million shares. Also assumed in this guidance is a gross margin of 19.5% to 20%, net interest income of $300,000, depreciation and amortization of $4 million, stock-based compensation of $1.3 million and a tax provision of approximately $400,000. Though we only guide one quarter out, we anticipate that both revenue and profit will improve throughout the year as we aggressively pursue organic revenue growth across all lines of business as well as continue our cost containment efforts and realize efficiencies through technology and further leverage of our operations in India. Given the investments and improving market conditions, we are looking to exit the year with fourth quarter revenue above $250 million and an adjusted EBITDA margin of between 4% and 5%. And that concludes our prepared remarks, and we'd now like to open the lines for questions. Operator? Operator: [Operator Instructions] First question from Trevor Romeo with William Blair. Trevor Romeo: Kevin, welcome back. Just wanted to maybe start by following up on your comment, I think, about exiting 2026 at those run rates above $1 billion in revenue and I think 4% to 5% EBITDA margins. So, first on that, I guess, what is your confidence in achieving that goal? And then second, particularly on the margin side, that is quite a bit higher than where you're exiting '25. So maybe you could just help us understand a bit more what needs to happen or what levers you need to pull to get up to those margin levels at the end of the year? Kevin Clark: Yes. Thanks, Trevor. It's great to be back. Look, we have a high level of confidence in what we just described in our comments. We have a large pipeline coming out of last year from the sales side, MSP and VMS. We've got what we think is market-leading technology with Intellify. We have a whole house strategy of bringing Intellify across all of our divisions for our customers. We have a terrific balance sheet. As you know, we have cash on hand to invest in the business. We've recently ramped up our revenue producers, and they're driving great results. We're going to see quarter-over-quarter growth with our core business. And our second largest business, we also are very optimistic in the second quarter with our locums business as well. Things are going to come together really great. We think the market has stabilized, and we think we're extremely well positioned I'll also point out that we're excited to celebrate this month our 40th year being in business. For 40 years, Cross Country Healthcare has led this industry with clinical excellence. We are the trusted brand in the marketplace. So when I put all those things together, I personally have never been more excited about the market conditions and our own ability to excel and you take a look at our balance sheet and our positive cash flow, and I think we're poised for a lot of growth this year. Bill, you might want to cover from the margin perspective, a few more comments. William Burns: Of course. Trevor, so look, as Kevin said, I think in his comments, we've made a lot of investments to start out the year. We took out several million dollars in cost and redeployed that in revenue producers. So those investments, we do expect -- we're already starting to see return on that investment. So that's part of the growth story sequentially, an improving market backdrop in travel. Our home care business continues to do very, very well. Education is doing well as well. So you look at that the trajectory on the top line. But I would say from a margin perspective, we're not sitting today looking at a very big gross margin expansion, especially from the pay bill side. I think we're still in a very hypercompetitive market when it comes to that. But there will be some margin appreciation, notably as the businesses with the margins that are above the consolidated average, our home care, our physician business and our education business, those will continue to produce a better mix. So the margins will lift up on the gross margin side. But in truth, the opportunity to get to the 4% to 5% that Kevin called out is really about operating leverage. So besides the fact that we're going to get return on the investments, we've got plans to continue to look at offshoring more work to our center of excellence in India. We've got identified actions around automation of activities of the things that we're doing. And candidly, we're not leaving any stone unturned. So I think from the standpoint of how we envision exiting the year, north of $250 million and that 4% to 5% seems very doable. Trevor Romeo: Great. That was going to be my follow-up on kind of gross margin versus SG&A. So, I appreciate that, too. And then maybe just shifting over to your balance sheet and capital allocation. So having no debt, I think, in this industry seems like a pretty big advantage right now. Maybe specifically thinking about M&A, what kind of opportunities and pipeline do you see out there? I think we've heard from a lot of people in the industry that travel would benefit from consolidation. Are you still maybe more focused on expanding the non-travel businesses? Or would you be more interested in consolidating travel at this point? Or how are you thinking about the acquisition strategy going forward? Kevin Clark: Yes, great question. Look, it's a disciplined capital allocation strategy. We're being patient. I will say coming back into the seat and with the termination of the merger, literally, the phone has rung off the hook for the last three months. So we've had a lot of interesting discussions and meetings and so forth. We know that our future path is all through our footprint of customers. So as we look at kind of strategic allocation of our capital and we look at acquisitions, we're not looking at more supply partners or third-party suppliers. But our ability to invest in our technology platform to grow our footprint of clients and our customers that's areas that we're excited. We're also very excited about our home-based staffing division. We think we've had a lot of growth there. We think we'll continue to see a lot of growth. We're looking for accretive tuck-in acquisitions in a division like that. We certainly like the locums area quite a bit. So it's being patient. It's looking at the marketplace. And to the point that you made earlier, it's -- the other thing is some of our competitors are over their skis somewhat in terms of their balance sheet. And we think it's an excellent time for us to be in the market with a strong balance sheet, and we'll look to consolidate where we can. Operator: Our next caller is Constantine Davides from Citizens. Constantine Davides: I wanted to maybe touch on technology a little bit. In the release, you put in a lot of metrics around Intellify. And then I think you referenced outsourcing Intellify to some other staffing companies. So I wanted to get some color there. And then when you talk about expanding its use to other markets, is that home care, education, locums, just a little bit more detail there? And then how -- what kind of time frame is there to sort of expand that platform into some of those other markets? Kevin Clark: Yes. I'll start with the last question. The time frame is 2026. We're excited to have a whole house strategy. We believe with the consolidation of large health care systems, we need to be a provider of solutions, not just for nursing and allied, but also for locums, also for home-based staffing. What our strategy is -- parallels is the continuum of care. The way we have diversified our company is to be wherever we need to be from a talent acquisition perspective, providing solutions to our clients across that continuum of care. So the technology that we've built, we've been building it for the last four years. We're well on our way to diversify that offering across all of the divisions. We already have -- to your point, we have licensed the technology to other companies in our industry. We have also provided a vendor-neutral VMS strategy in this industry in addition to our MSP. We have an existing footprint of locums and VMS for that particular market. So, these other divisions, we will be coming to market later this year, hopefully, sooner than later, and we'll be happy to update you on that. I don't know, Amiee, do you have any additional comments? Amiee Hawkins: Kevin, I would just share that we have a really healthy pipeline around those items all the way through from MSP, VMS to whole house. So, I think, again, I would echo you, more to come early in the year. Constantine Davides: Great. And then just a follow-up. Obviously, a lot of strike activity out there in the market. It sounds like you're going to benefit from that somewhat in the first quarter, Bill. I just wonder if you could size that for us. And then I'm just curious, are there any negative effects from all this activity just in the sense of your own ability to staff on behalf of your clients? Kevin Clark: Maybe I'll just start, and I'll throw it over to Bill. Look, we've participated in two events, two strike events, two labor disruption events. It's not material for us this quarter. We have a terrific division in CRU48. We're prepared as there's future labor disruption events to participate. We have a strong track record of providing crisis staff historically, and we feel very confident that we could stand up whatever -- one of our clients may require. But I don't know if you want to size more on. William Burns: Yes, Constantine, I would just say, look, from a labor disruption perspective, to Kevin's point, we support it to. It's not our core business. We will do it certainly with our clients. These events were not our clients, but we do -- we will support where it makes sense. So we had some labor disruption revenue in the first quarter. It will be in the single millions. That's why Kevin is saying it's not really overall material, and it's not included in those travel metrics we're talking about with the TOA, with our travelers on assignment, excuse me, that is ramping continuously throughout the first quarter and into the second quarter. Operator: Would you like to go to the next question? Kevin Clark: Yes, please. Operator: Tobey Sommer with Truist. Tobey Sommer: I wanted to ask a question about the sequential momentum that you think you have going into 2Q. Is that something you're already seeing in sort of your weekly revenue runs? Or is that a product of putting together the pipeline and the new sales resources and sort of probability weighting and eventual impact from the combination of those two. Kevin Clark: Tobey, nice to hear your voice again. Look, I don't want to speak in hypotheticals, but we were under a merger agreement last year and perhaps our results were suppressed because of that process that we were through. So, as we enter 2026, we have a lot of momentum. And this company was poised, I think, for growth because we've seen a stabilization in orders. We have some wonderful clients. If you look at our specific orders, our MSP orders are up from Q4 to Q1 or direct MSP indirect orders, I will say. So if you look at in terms of the way we look at the business, I mean, there's plenty of demand out there. There's also plenty of competition. But this company moving forward in this year is all about sharpened execution, about rigor and discipline about getting the culture right, restoring the momentum coming out of that merger period of time. But Marc, you might want to add some color? Marc Krug: Sure. Tobey, Yes, we are realizing some sequential momentum. And we invested heavily in revenue producers late in the year. We have tweaked our model so they ramp up much faster, and the results are very positive so far. We expect to continue to ramp up and gain momentum. William Burns: And Tobey, this is Bill. I just would add. We're sitting here in March. Obviously, these are 13-week assignments. We have a pretty good lens certainly into the first four to six weeks of Q2. So we've got a pretty good optimistic view that, that is going to continue on that trajectory. We obviously are following our production weekly and are able to forecast that out. Tobey Sommer: Thank you for that answer. In terms of what you're seeing and what you think the market is like, how would you compare and contrast your own experience? And I understand contextually, we've got the merger agreement towards the end of last year and maybe some latent ability to perform better. But I'd love to hear whether you're saying that the market is, in fact, turning or this is really just market stabilization and you're performing a little bit better? Kevin Clark: Well, I definitely can say we're performing better than we were last year. And our goal is, from a historical perspective is to grow above the market averages. And I think everybody that works in this company feels that way. But I think some of the strategic decisions we've made, some of the operating leverage that we have from our center of excellence, for example, in India, some of the technology that we've deployed in the company and are deploying, we are AI-first technology platform for our client side, but we're also an AI-first company from the delivery perspective. So we're clearly managing the business better. But as I said earlier, direct orders, MSP orders are up quarter-over-quarter. I think we've seen stabilization of bill rates. Average bill rates now are around $90 to $95. We didn't get the typical bump up in Allied Health this winter, which means that we won't see a step back in the second quarter. So we'll see a consistent quarter-over-quarter improvement in both Allied and Travel Nursing. So, I think, I can't speak for the rest of the industry, but we're very optimistic. We're very excited about this company. We're very excited about the position that we have and our ability to execute for our customers and grow our market share this year and get back to a trend line where we are outperforming the industry averages. Tobey Sommer: If I could ask two brief ones. What are you hearing from customers about the prospective and prior changes to federal funding within the health care system? And I guess, the subsidies on the exchanges come to mind in terms of sort of current stuff and then Medicaid in nine months or a year. And does your fourth quarter revenue level that you kind of outlined, does that include any kind of strike revenue at this point? Or would that be considered sort of core revenue at this stage? William Burns: I can take the latter part, Tobey, this is Bill. The fourth quarter revenue does not have labor disruption in it of any significant level at all. The numbers I called out a moment ago really reflect the first quarter guidance. Kevin Clark: Yes. I mean in terms of the first part, I mean, we haven't noticed anything unusual in the marketplace. We're looking at certain segments like that don't really answer your question. But I think, for example, with foreign trained nurses, the backlog is slowly clearing. So we're keeping an eye on retrogression. It still exists because of annual visa caps, but we think that there's a greater appetite for international nurse candidates as well. So we're seeing different things. I think nationally, we're seeing kind of a broad usage of contingent labor. I think health care systems are getting smarter. Obviously, there is a cost environment that is tight. And that's why we excel because we are not a staffing company. We are a technology company that provides staffing, and we can help our customers with solutions, whether that's building their own talent pool, managing their -- managing that talent pool with our IRP technology or helping them either in a vendor-neutral situation or as a primary supplier. Operator: [Operator Instructions] Our next caller is Kevin Steinke with Barrington Research. Kevin Steinke: I wanted to start off first by asking about your comments on the sequential progression in revenue as we move throughout 2026. Are you just -- they're referring to that you expect the year-over-year rate of change in revenue to improve in each quarter as we move forward, and we should still expect a typical sequential revenue pullback in the third quarter just due to education staffing? William Burns: Yes, Kevin, this is Bill. I guess our lens right now, as you look at Q3 and Q4 into the back half is we're looking at sequential growth across all the quarters, even as the education business pulls back that's predicated on continued growth in the other lines of business, travel, home-based staffing, et cetera. So our lens is right now that we're going to see sequential progression all throughout. When do we get to year-over-year growth? We're expecting that in the back half. Is it Q3 or is it Q4? I think a little bit to be seen there, but I would hazard a guess it's going to be hopefully -- well, I shouldn't say hazard guess. I'll say we're looking at Q3 as the quarter we get back to year-over-year growth is our target, but that's going to be close. So we'll see if it's in Q3 or Q4. But we're on that right trajectory, and it's really about continuing getting the return on the investments we've made this year. Kevin Steinke: Okay. That's helpful. And you expressed some optimism about locums, physician staffing moving forward. But specific to the fourth quarter, was there anything that you saw impact that business? William Burns: Yes. I don't know that there's any one specific thing. It seemed to be a broader pullback across some of our larger specialties. We do have -- we concentrate in primary care, hospitalist, emergency medicine, anesthesia. Those were the ones that we saw the pullback. What was started in the third quarter is just a handful of clients was a little bit more widespread in the fourth quarter. But again, I do want to stress, we don't know how much of this is due to disruption or distraction from the merger because we've started to see the production, the weekly production already turn this year as we come into 2026. So the indications are that business is poised to start seeing sequential growth as we get into the second quarter. Kevin Steinke: Okay. Great. Just lastly, you talked about the center of excellence in India and how that's helping drive cost savings. Can you maybe just give us some perspective on how that center of excellence has progressed over the last year in terms of capacity, what kind of work you're doing there and how much more capacity you have there that you want to build out there? Kevin Clark: Look, I would say I think Cross Country has done an excellent job, as Bill pointed out in his comments, reducing our headcount by 21% over the past year. We've moved a substantial number of our business process and functions to that center of excellence in Pune, India. We now have approximately between 700 and 800 employees that work there, and it's across everything from strategic sourcing and delivery to shared services to payroll and billing to IT and engineering. So we -- it's a full suite of employees that we have got a phenomenal culture there. We're very proud of the team, and they're very excited to be a part of our story, and they give us great net operating leverage. But Amiee, do you want to maybe add? You were just there recently. Amiee Hawkins: I was just there, Kevin, thanks. I think it's -- clearly, you hit it on all fronts, but I think it's also important to note that they're doing a fantastic job of automation as well. So as we continue to automate there and move additional pieces offshore, we just continue to see better and better results. Operator: Our next caller is Bill Sutherland with Benchmark Company. William Sutherland: I wondered if you were starting to look at an AI strategy across the enterprise. I'm sure you are. Kind of where do you think you can apply it in the next year or two? Kevin Clark: Yes. Bill, yes, great question. We're infusing AI and Agentic AI throughout the enterprise. So we have an enterprise-wide strategy. In particular, we're leveraging Agentic AI in the way that we provide delivery and recruitment. So our processes there are becoming more and more automated. We're leveraging AI technology in our locums business, for example, around the credentialing component. We think there's an opportunity. One of the things we talked about in our earlier comments is delivery speed and accelerating. And so a lot of what we're doing strategically is accelerating our ability to deliver candidates at the right moment for our customers wherever 24/7. So we're leveraging that technology almost in every part of the company, and we're constantly evaluating new tools and business processes that we want to automate. And I think it also goes back to why I think I'm very excited about the market environment we're in. We believe as a innovation company, a technology-led company that over time, we can take a tremendous amount of cost out of our company, and we could see our margins -- our EBITDA margins grow over time by getting operating leverage from technology. So, we employ a lot of people, both here in the U.S. and offshore, as I mentioned, in the IT area. And we are -- we'll continue to invest. And again, that also speaks to our strong balance sheet and our ability to leverage the cash that we have on hand to invest. We have a robust technology budget, whether it's projects that we have underway or CapEx. William Sutherland: Got it. And looking at the home and education businesses, can -- is there a way to give us a sense of their relative size. They keep moving the needle pretty nicely. And I'm not sure kind of what percent of the business they are now. William Burns: Yes, sure. I can give you that. This is Bill Burns. So home-based staffing is run rating north of $140 million annualized right now. And we -- as we said, we continue to see mid-single-digit kind of sequential growth, double-digit year-over-year growth on that business. And education, just we had a slight pullback as we came into the fourth quarter this year. So I'd say it's run rate at about $75 million on an annual basis. William Sutherland: Okay. And that growth there is probably going to resume this year, Bill? William Burns: Yes. William Sutherland: Okay. The international side, do you guys have a pipeline that you're kind of nurturing right now? Kevin Clark: We don't. We partner with others, but it's an area of opportunity that perhaps we will invest in downstream because we think it's an opportunity for us to have another important part of the supply chain figured out for our customers. Operator: Ladies and gentlemen, this concludes the Q&A period. I'll now turn the call back over to Kevin Clark for closing remarks. Kevin Clark: Thank you, operator. I'd like to thank everyone for participating in today's call, and we look forward to updating you on our progress on the next call. Thank you. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Good day, everyone, and welcome to Sight Sciences Fourth Quarter 2025 Earnings Results. [Operator Instructions] Please note, this conference is being recorded. Now it's my pleasure to turn the call over to Trip Taylor with Investor Relations. Please proceed. Philip Taylor: Thank you for participating in today's call. Presenting today are Sight Sciences Co-Founder and Chief Executive Officer, Paul Badawi; and Chief Financial Officer, Jim Rodberg. Also in attendance is Sight Sciences' Chief Operating Officer, Ali Bauerlein. Earlier today, Sight Sciences released its financial results for the fourth quarter ended December 31, 2025, and initiated its revenue guidance and adjusted operating expense guidance for full year 2026. A copy of the press release is available on our website at investors.sightsciences.com. I would like to remind everyone that comments made by management today and answers to questions will include forward-looking statements, including statements about material business considerations, 2026 outlook and financial guidance. These statements are based on plans and expectations as of today, which may change over time. In addition, actual results could differ materially from projected results due to a number of risks and uncertainties. For a discussion of factors that may affect the company's future financial results and business, please refer to the earnings release issued prior to this call and the company's most recent SEC filings. We undertake no obligation to publicly update or revise any forward-looking statements, except as required by law. Also on this call, management refers to certain financial measures that were not prepared in accordance with generally accepted accounting principles in the United States, including adjusted operating expenses. We believe that these non-GAAP financial measures are important indicators of the company's operating performance because they exclude items that are unrelated to and may not be indicative of its core operating results. See our earnings release for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures as well as additional information about our reliance on non-GAAP financial measures. I will now turn the call over to Paul. Paul Badawi: Thanks, Trip. We ended 2025 with solid execution across our business, highlighted by fourth quarter revenue growth in both segments, strong gross margins and continued operating expense discipline and cash management. In 2026, we're building on this momentum with a clear strategy to return to double-digit growth while maintaining our operational rigor and financial discipline. Before reviewing the quarter, I want to frame our discussion around the size and significance of the markets we serve and why we're confident in our long-term opportunity. Our flagship interventional technologies, OMNI and TearCare, address 2 of the most prevalent anterior segment diseases, glaucoma and dry eye disease. Glaucoma remains the leading cause of irreversible blindness globally and dry eye disease continues to be one of the most common reasons patients seek care from eye care providers. With proprietary minimally invasive technologies designed to comprehensively address the root underlying causes of disease, we are expanding both the role of interventional solutions in the markets we serve and the markets themselves. Together, these 2 increasingly interventional categories offer substantial runway for continued growth in the years ahead. Consistent with that strategy, we've updated the way we describe our businesses. What we previously referred to as surgical glaucoma and dry eye, we now call Interventional Glaucoma and Interventional Dry Eye, reflecting our focus on elevating the standards of care with earlier procedure-based interventions. We believe this interventional focus positions us to participate in an important part of the treatment continuum and over time, creates multiple durable growth drivers across both glaucoma and dry eye. We believe there is significant customer and patient overlap in these 2 categories that can unlock synergistic commercial value. Many patients who suffer from glaucoma also suffer from dry eye disease and meibomian gland dysfunction, which can be exacerbated by continued use of glaucoma medications, a known cause of ocular surface disease. In addition, many practices have dedicated eye care providers managing patients with both diseases, creating a natural synergy in care pathway and treatment. With strong collaboration between our Interventional Glaucoma and Interventional Dry Eye teams, we have the potential to enhance our customer engagement, support adoption across both businesses and strengthen the scalability of our interventional eye care strategy. With proven technologies, experienced teams, strong customer relationships and a track record of execution, we believe we are well positioned to drive meaningful value as we continue building a leading interventional eye care company. Now turning to our segments. I'll begin with Interventional Dry Eye, where we recently achieved a very important reimbursement milestone. In the fourth quarter, 2 MAC, Novitas Solutions and First Coast Service Options, established pricing for CPT code 0563T, the code associated with our TearCare procedure. This marks a turning point for our TearCare business model, and we are now executing our strategy with the goal of pioneering the reimbursed Interventional Dry Eye treatment market. We were very encouraged by the commercial traction we generated with a variety of dry eye customers in the fourth quarter. As preannounced in January, Interventional Dry Eye revenue in the fourth quarter was $0.7 million, up both sequentially and compared to the prior year. Revenues were driven by the sale of approximately 700 SmartLids to approximately 80 accounts, roughly 30 of which were new account engagements. The sequential and year-over-year revenue growth in the quarter was largely driven by sales in the Novitas and First Coast regions, where customer engagement with TearCare has been strong and reflects positive momentum in the reimbursed business model. A portion of new customers are existing glaucoma customers of ours who are excited to partner further on the TearCare treatment opportunity. The increasing engagement across accounts as they establish their Interventional Dry Eye practices and validate successful processing and payment of their first claims is promising. This progress is particularly notable, given our small but growing sales team and the limited time since our reimbursed launch. As part of our commercialization strategy, we are focused on high-volume dry eye prescribers where TearCare presents a clear and compelling clinical and economic value proposition. In parallel, we are engaging new eye care providers in states where fee schedules have been newly established based on existing dry eye treatment activity. And we continue to expand our outreach to glaucoma customers in these markets, where TearCare is a natural complement to their current practice offerings. Early interest from new providers and renewed engagement from existing providers underscore growing demand for tier care and Interventional Dry Eye procedures. In order to scale this business in fuel growth, we are making additional investments in our Interventional Dry Eye commercial organization. These investments are intended to strengthen provider engagement and expand commercialization in markets with established reimbursement. We added resources in the fourth quarter, and we'll continue building out our commercial infrastructure to drive growth in 2026. Expanding market access also remains a critical pillar of our growth strategy. As we deepen our engagement with additional max and commercial payers throughout 2026, we believe we can accelerate adoption and expand access for patients. We have built a strong foundation on clinically differentiated technology, initial market access fee schedules and early commercial validation, positioning us to pioneer the reimbursed Interventional Dry Eye market for years to come. Turning to Interventional Glaucoma. The fourth quarter marked an important milestone in 2025 as we fully lap the LCD changes, restricting multiple mix procedures in combination with cataract surgery. These LCDs reduce the number of devices used and caused meaningful headwinds to market growth in 2025. Despite these headwinds, our OMNI technology once again demonstrated its importance in the glaucoma treatment paradigm in this single MIGS environment. In the fourth quarter, we built on our strong third quarter performance and generated another quarter of growth compared to the prior year. Revenue was $19.7 million, up 5% year-over-year and flat sequentially. And at the top end of our preannounced revenue range provided in January. Ordering accounts increased 2% compared to the prior year, driven by a combination of reactivating accounts and adding new accounts. Utilization remained healthy, down only slightly after a particularly strong third quarter. Additionally, we saw continued benefit from higher Omni Edge utilization, which drove higher average selling prices in the quarter. With the interventional mindset increasingly impacting the glaucoma treatment algorithm, we are focused on developing the stand-alone market with OMNI. We are investing in targeted commercial resources to drive pseudophakic education and activation with surgeons and clinic staff. With similarities to the office-based cataract evaluation workflow, that is familiar to most ophthalmic and optometric practices. We have designed an Interventional Glaucoma evaluation workflow that we believe represents a significant opportunity to expand omni adoption and stand-alone interventions, and support a meaningful source of revenue growth over time. In 2026, our Interventional Glaucoma strategy focuses on disciplined execution to drive share gains, expansion of the combo cataract segment and further development of the underpenetrated stand-alone market, driven by our experienced commercial team, clinically differentiated technology, our investments in our dedicated psuedophakic market development team, we are positioned for a return to sustainable growth in Interventional Glaucoma. In closing, our strong fourth quarter performance reflects consistent execution across the organization and reinforces the momentum we are carrying into 2026. We believe we are well positioned to return to durable revenue growth in both segments as we leverage our differentiated technologies, experienced teams and the synergies of these 2 opportunities to continue building a leading interventional eye care company. I will now turn the call over to Jim to discuss our financial results. Jim Rodberg: Thanks, Paul. Before I turn to the results, I want to emphasize that we're entering 2026 and from a position of strength. With the operating discipline and cost structure we need to support growth, and over time, we believe this positions us to achieve cash flow breakeven without the need to raise additional equity capital. Unless otherwise noted, my comments reflect results for the fourth quarter of 2025 and comparisons are to the same period in the prior year. In the fourth quarter, total revenue was $20.4 million, a 7% increase. Interventional Glaucoma revenue was $19.7 million, an increase of 5%, driven by increases in ordering accounts and average selling prices. Interventional Dry Eye revenue was $0.7 million up from $0.3 million, reflecting positive traction in our reimbursed Interventional Dry Eye business model. Gross margin was 87%, consistent with the prior year. Interventional Glaucoma gross margin remained strong at 88% compared to 87% with the increase primarily due to higher average selling prices and product mix, slightly offset by tariff costs. Interventional Dry Eye gross margin improved to 68% compared to 51%, primarily due to higher average selling prices. Total operating expenses were $21.5 million, a decrease of 25% compared to $28.5 million primarily due to lower personnel-related expenses and stock-based compensation. As a reminder, we conducted a reduction in force in August 2025 and the fourth quarter was the first full quarter of our lower cost structure. Adjusted operating expenses were $18.9 million, a decrease of 23% compared to $24.4 million. Net loss was $4.2 million or $0.08 per share compared to a net loss of $11.8 million or $0.23 per share. We ended the quarter with $92 million of cash and cash equivalents compared to $120.4 million at the end of 2024. Cash usage was $0.4 million in the quarter the lowest cash usage quarter of the year, reflecting continued operational discipline. We ended the year with $40 million of debt, excluding unamortized discount and debt issuance costs from our 2024 year-end balance. Moving to our revenue outlook for full year 2026. We are initiating revenue guidance of $82 million to $88 million, which reflects growth of 6% to 14% compared to 2025. This guidance includes revenue for our Interventional Glaucoma segment of $77 million to $81 million, representing growth of 2% to 7%. And our Interventional Dry Eye segment of $5 million to $7 million compared to $1.6 million in the prior year. This guidance reflects our philosophy of setting prudent targets and our focus on disciplined execution and the growth we believe we can deliver. Looking closer at the first quarter, we expect Interventional Glaucoma to grow low single digits compared to the first quarter of 2025. We expect the first quarter revenue to be the lowest quarter of the year in this segment. and expect the second half of 2026 to be higher than the first half. Interventional dry high revenue is expected to be approximately $1 million in the first quarter. And as we expand and scale our reimbursed TearCare care launch, we expect revenue to ramp throughout the year. We are also initiating our guidance expectations for full year 2026, adjusted operating expenses of $93 million to $96 million. representing an increase of 6% to 9% compared to 2025. The expected increase is driven primarily by targeted market access and commercial investments in both Interventional Dry Eye and Interventional Glaucoma. We're pleased with the operational and strategic progress achieved in the fourth quarter and throughout 2025. We remain focused on pioneering 2 significant categories in the Interventional Stand-alone Glaucoma and reimbursed Interventional Dry Eye markets. As we continue to execute against our long-term objectives, we're laying a strong foundation for sustainable growth and future success. Operator, please open the line for questions. Operator: [Operator Instructions] Our first question comes from the line of Frank Takkinen with Lake Street Capital Markets. Frank Takkinen: Great. Congrats on a strong finish to the year. I was hoping to start with one on guidance. Just curious if you could provide some color on kind of low-end versus high-end assumptions and it'd be helpful to talk about Interventional Glaucoma and Interventional Dry Eye disease separately. Paul Badawi: Yes. Thanks, Frank. I can take that one. On Interventional Glaucoma, we're in a much more stable market and reimbursement environment than we saw a year ago. And we've got a couple of areas that we talked about in the prepared remarks, where we're focused on there, expanding the combo cataract segment as well as taking share there and expanding the stand-alone market opportunity. So on the guidance there in a much more stable market and stable environment. It's an area where we've been a leader in implant-free MIGS and we've got a team that's had a proven track record of execution. And in a one MIGS world, OMNI performs quite well. So we feel good about getting back to growth here in 2026. On IDE, baked into that guidance, we're early. Q4 was a really critical milestone for us with the MAC fee schedules established. And you saw $0.7 million of revenue in the fourth quarter. As we look ahead to 2026, our initial guidance here we want to step prudent guidance. And then really within that, we haven't assumed additional market access wins within our guidance, but the team is certainly heavily focused on market access initiatives and moving that forward here in 2026. So overall, I think we're excited about getting back to growth with both of our segments here getting to growth in 2026 and looking forward to executing here in 2026. Frank Takkinen: Perfect. And then a follow-up on kind of both of those factors. What are you assuming for underlying market growth in Interventional Glaucoma? And then saw the ASP a little bit over 1,000 for dry eye. Does that feel like a sustainable ASP rate? Or is that maybe a little bit high for how we should be thinking about it? Jim Rodberg: Yes. On the glaucoma market, Frank, we think it's in the low to mid-single-digit market growth there. And then Ali? Alison Bauerlein: Yes. Happy to take the ASP question. So remember, when you look at the IDE revenue, that includes a mix of Smart Lids sold as well as Smart Hub sold. So that the ASP would be reflective of that mix within those segments. And we don't provide specific ASP information of our products but that is certainly a factor that you should think about when you're building out your IDE model and considering the different components of revenue. Operator: Our next question is from Danielle Antalffy with UBS. Danielle Antalffy: Sorry for my voice. I'm a little sick. Just a question on the standalone glaucoma market. I'm just curious what you see or how you see this evolving in the near term. I was at AO back in October, it seems to be very much a focus. And I'm a big believer in the standalone glaucoma market. But from a percentage penetration perspective, like how quickly can this ramp? And the second part of the question, what are the obstacles to getting there? And what are you guys doing to help break down some of those obstacles? Paul Badawi: Danielle, this is Paul. Happy to take that one. Yes, it's an exciting time in Interventional Glaucoma for the past several years, Sight Science, as well as a handful of other industry players, have been spending a lot of time working with our eye care provider partners in educating the field on the benefits of earlier intervention with minimally invasive procedural-based solutions for glaucoma. I think we're moving, we're excited to be making some targeted investments in activating the stand-alone market so moving beyond an interventional mindset, moving beyond education. I think most glaucoma surgeons today do genuinely believe that intervening earlier with proven procedural interventions, whether that's pharmaceutical or medical device, pure procedure is better for patients over the long term. And now the goal is how to activate, how to turn that understanding of interventions being better earlier into actual cases. And we spent the last year at Sight Sciences really trying to understand how to activate the stand-alone opportunity. I talked about it a bit in the prepared remarks. We're modeling our stand-alone activation after something that's so well understood in ophthalmology, that's cataract surgery. Cataract surgery is a wonderful procedure. It's the #1 procedure by volume in all of medicine. And there's a well understood patient workflow for cataract surgery. So a patient understands that they need to get cataract surgery, what happens next, they come back to their eye care provider for a dedicated visit to really understand what are the available cataract options. And then from there, they get a surgery schedule. And we're finding in 2025 when we do that with a handful of accounts when we bring, when we work with our providers to help them follow this workflow where they bring back an Interventional Glaucoma patient candidate for an Interventional Glaucoma dedicated consult. That consult results in a much higher level of procedural activation. That activation might be OMNI. It might be some other interventional procedure. But if we do that well and our industry partners do that well, and we convert this market from eye drops to intervention, whether that's omni or other procedures. It's good for patients. It's good for providers and ultimately, it will be great for Sight Sciences as well. In terms of percentages, I think, Danielle, your other question, we believe we estimate that the current MIGS market is approximately like in terms of revenue cases, maybe 90% combo cataract stand-alone. We believe we have a slightly higher percentage of mix of stand-alone. We estimate mid-80s combo cataract, mid-teens stand-alone. And we believe that mix for us is going to shift. Again, we've made some dedicated pseudophakic market development commercial investments, about half a dozen market development focused professionals at Sight Sciences right now, who are working across the country with our eye care providers and customers to activate the stand-alone market to follow that Interventional Glaucoma console playbook that we arrived at in 2025 and actually implementing it to drive stand-alone case volume. So we're excited about it. It takes time to develop significant markets, but we believe that this will continue to be an area of growth for us over the years ahead. Operator: Our next question comes from the line of Steve Lichtman with William Blair. Steven Lichtman: Apologies for any background noise, I'm in the car. Congrats on the progress. I wanted to ask first actually on the operating expenses. 4Q performance and the 2026 outlook were both better than our thinking. So as you think about this year, how are you balancing the opportunity you see on both sides of your business, but in particular, on dry eye with keeping the level of spend in check. Are you focusing really on the 2 MAC areas for now in dry eye? Any color there would be helpful. Jim Rodberg: Yes. Thanks, Steve. It's Jim. So as we look at investments in 2026, yes, the bulk of them are on commercial infrastructure, and you nailed it on our Interventional Dry Eye we're going to be placing investments in that space and both on the market access side and driving market access progress and then also on the commercial infrastructure side. So if and when we get additional market access wins, we're ready on the commercial side to drive traction. Our thinking is we want to have a mind -- we have an eye on breakeven and financial discipline, like we've done over the past couple of years, we've proven we can really manage OpEx and manage spend. And now we're in a position with a strong balance sheet to go fuel that growth. And we're going to invest -- we're going to learn a lot and invest and potentially pivot quickly, but invest where it makes sense to go fuel that growth. in both dry eye as well as on the Interventional Glaucoma, particularly the stand-alone opportunity. Alison Bauerlein: Yes. Just to add to that, I mean we see the Interventional Dry Eye opportunity as such a compelling large market opportunity and the early traction that we're seeing with accounts has validated that with us. So the investments that we already have in commercial infrastructure appear to be seeing good returns on those investments. and we do expect to grow that team as we move forward, both in the areas where we already have fee schedules established and then also over time as we have additional reimbursement wins. So we are very excited about that, and that was something that we wanted to make sure we accounted for when putting out our operating expenses guidance. Steven Lichtman: Great. And then just double-clicking on that. In terms of the dry eye revenue for this year, it sounds like you're really laying out guidance essentially in those 2 MACs predominantly. And can you remind us, obviously, you're looking to get more wins, but just in those 2 MACs alone, what you see the revenue opportunity is for dry eye? Alison Bauerlein: Yes, sure. So it's still an incredible opportunity just with those 2 MACs. They have 10.4 million covered lives our estimate because there is a higher prevalence of dry eye disease in a Medicare age population that there's about 700,000 patients in those markets with moderate to severe MGE. So still a very large market opportunity when you think about in Q4, we sold 700-ish smart lids, we're still at 0.1% of the market. So very early in terms of adoption curve here. And when we think about guidance, even the revenue opportunity in those areas is quite significant. Our bigger constraint is our own commercial infrastructure and resources to go activate those accounts and work with customers to set up their Interventional Dry Eye practices. So we do have a small team that is growing, but we also wanted to be careful to that prudent guidance, even taking into account the 2 states. So we won't be providing today kind of what's the full revenue opportunity of those markets, but it is quite compelling, and we think we've put guidance in a very prudent and reasonable place to start the year. And as we learn more and as we expand the team, we will provide updates as we go. Operator: Our next question is from Tom Stephan with Stifel. Thomas Stephan: Great. First one on TearCare. I know it's early and this may be a difficult question. But as coverage and reimbursement starts to take hold, can you talk to us a bit about sort of how you think about the peak sales potential of TearCare, the inputs, the framework, et cetera, and as a figure, I'll take a stab here, is the figure of at least $100 million a reasonable starting point as we think about TearCare peak sales? And then I have a follow-up. Alison Bauerlein: Yes. Thanks, Tom. I'll take that. So first of all, obviously, dry eye disease is a prevalent problem here in the United States. And if you look at the people who have moderate to severe MGD, there are 7 million to 8 million people who suffer from dry eye disease. Obviously, TearCare Care is a procedure that has been proven through the Hera data to show real benefits to signs and symptoms of those patients with dry eye disease. And so we think it's a compelling opportunity for patients who need procedural intervention and want procedural intervention versus regular daily or multiple times a day drop. And so in terms of the opportunity from a market potential, it's obviously very large. What is critical in that is our ability to gain market access to patients being able to get interventional procedures using their insurance benefits. And obviously, we are still very early in the curve of adoption there with $10.4 million covered lives, and we do look to expand that over time to be able to really make procedural intervention a standard of care. In terms of your question of peak sales, we see this as a very large market opportunity. We aren't going to quantify that today. But you can very quickly do some math that shows this is an incredible opportunity for us from a revenue perspective. But more importantly, this is also an opportunity that is better for patients in terms of having a procedural intervention versus regular eye drops with proven clinical results. It's also better for the eye care providers because the eye care providers get to participate in the economics since they are doing a procedural intervention versus drops where there's no incremental reimbursement for them. And we've also proven that it's better for the payers with our budget impact and cost utility analysis that shows that this is a better economic outcome for the payers as well. So we really think that this is a win for all we're very, very early in terms of market adoption and penetration. So we aren't going to get out ahead of that today. But to us, this is one of the most compelling opportunities in eye care today. Paul Badawi: And Tom, I would just add to that. Obviously, we've spent a lot of time together in the MIGS category where you've got several thousand MIGS trained surgeons, several thousand surgeons who are trained on OMNI, in particular, when you think about procedural dry eye opportunity, not only are there more patients suffering from dry eye disease but there's also many more eye care providers and customers that will be our customers for TearCare across the country. That includes, obviously, in surgery, it's just ophthalmology. In Interventional Dry Eye, we have both the ophthalmic customers as well as the optometric customers. So there's thousands of ophthalmologists who can be customers for TearCare and there's many, many more optometrists who can be and will be customers for TearCare. So that's another way to think about the TAM. We'll obviously prove it as we go. We're excited to prove it commercially and generate the traction and deliver the results quarter after quarter. But I think you're going to see a different kind of business model, one, because there's so many more patients. Two, there are so many more eye care providers. And lastly, the model the model becomes more interesting over time because unlike surgery and unlike MIGS, where the goal is a single treatment and hopefully, that treatment keeps pressure under control. for as many years as humanly possible. We know that's not the case with dry eye treatments drop or procedure and in this model patients should stay in the model, getting 1 to 2 treatments per year. So we think that the TAM is super interesting for all of those reasons. Thomas Stephan: Got it. Really appreciate the color. And then maybe to pivot to glaucoma, and just on the first quarter outlook, up low single digit year-over-year. I would presume maybe is a bit below market and it's against an easy comp. So can you talk a bit about just what you're seeing in the first quarter that supports that near-term view, anything we should be cognizant of from maybe a headwind standpoint that's driving that outlook? Jim Rodberg: Tom, it's Jim. I'll take that one. I would say the only thing to really call out that's impacted us here in the first quarter as well as many others are the storms across the U.S. in January and February. So that's one piece. Otherwise, we don't see any other meaningful things to call out here in the first quarter. Operator: Our next question comes from Adam Maeder with Piper Sandler. Adam Maeder: Two for me, one on dry eye and one on international glaucoma. On dry eye, I was hoping just to get some additional color around your conversations that you're having with the other MACs as well as commercial payers. Just trying to get a sense for when we could start to see some of those other payer domino's fall and would love just to better understand what exactly is -- are they pushing back on anything? Maybe it's just a matter of time and bureaucracy, but you have 24-month randomized controlled trial data. So what do we kind of need to get those additional payers over the goal line? And then I had an additional question. Alison Bauerlein: Yes, I'll take that one. And we've continued to be very active engaging with the other MACs having great conversations discussing their own review processes of the clinical and economic data as well as establishing pricing. And I will say that those conversations are continuing to progress. We do expect to have more MACs join and have more MACs established fee seals, and we would expect that to happen this year. So that's kind of our expectation. More granularity, it's always hard to predict exact timing with MACs. But I will say that, as you pointed out, there is very strong clinical evidence and economic data and we are showing demand and interest from constituents in their market. They are ECPs and patients are wanting access to this technology. And because we do have fee schedules already established in First Coast and Novitas, that is creating tightened pressure on other MACs to also allow access to their Medicare beneficiaries to have a fee schedule established. So we are happy with the progress there. Again, we won't speculate on exact exactly who will be the next one to establish a fee schedule or when that will be. But I will say that those conversations have continued to move forward, and that's really what we expected at this point. Adam Maeder: Okay. Fantastic. And for the follow-up, I actually wanted to ask a reimbursement question on the glaucoma side. And I saw recently that AMA elected to move forward with the new goniotomy codes with an effective date of January 2028. So I guess what is Sight's expectation for kind of where reimbursement ultimately shakes out with those new codes. Can you level set us on the percentage of revenue tied to goniotomy for your business? And how are you thinking about any potential impact either positive or negative? Paul Badawi: Adam, yes, we are aware of the potential read rock of goniotomy. We believe it's going to be -- the code will be split into an adult goniotomy code and a pediatric goniotomy code. Pediatric goniotomy, as you might expect, is more intensive procedurally and has more follow-up requirements. And so we would expect that the pediatric goniotomy economics might be maintained, but the adult goniotomy when it's revalued everyone, all experts in this area are saying they would expect it to be unfortunately reduced. If and when that happens, it would be in effect January 2028. A fee reduction would obviously put pressure on the utilization of that procedure. OMNI, our flagship Interventional Glaucoma technology, it performs canaloplasty followed by trabeculotomy, or AKA goniotomy. It's built either 2 canaloplasty or 2 goniotomy. We would expect if there's pressure on goniotomy alone as a procedure from an OMNI perspective as the leader in implant-free Mig, and the leader in ab interno canaloplasty that, that could actually be a tailwind at that time. Obviously, we believe, hopefully, the valuation of goniotomy is fair and reasonable. It's an important procedure in glaucoma. We hope that the assessment is acceptable to all stakeholders, mainly eye care providers. Operator: Our next question comes from the line of David Saxon with Needham & Company. David Saxon: Two for me, one on both of the businesses. First, just on Interventional Dry Eye I think you talked about in the script, you're selling to some omni customers. And I think in the past, you've talked about something like 200 OMNI accounts in those 2 MAC regions. So just wanted to get an understanding, like is the selling approach to ophthalmologists, any different than what you would do with optometrists either in terms of the length of the sales cycle or clinical education or any other dynamics like that? Alison Bauerlein: Yes, I'll take that. So first of all, I'd say we're still very much in early days with this. So the accounts that we're engaging with now truly are the early visionaries. They're the ones that are seeing procedural dry eye as real opportunity for them, an important part of their procedure practices and are looking to be leaders in this area. And so I do think that, that profile of account is already different than what we'll see kind of at scale, especially with coverage density. Obviously, right now, it's a very targeted density associated with those accounts that have traditional fee-for-service Medicare beneficiaries. And so that also influences the accounts that are primary targets right now. So right now, we are seeing a lot of synergies with ophthalmology practices that are existing Interventional Glaucoma accounts because they do have a high mix of Medicare beneficiaries already, and they have a lot of experience with parts with Sights Sciences. That said, when we look at kind of our revenue mix, we are continuing to see new -- both a mix of new accounts and existing accounts order. So both accounts that already believed in the benefits of procedural dry eye and had adopted the product without reimbursement and then those that are now coming on board. So I think it's too early for us to call out specific trends or dynamics here just because it is a unique market environment, but we are very encouraged that our OMNI customers also have a serious problem with dry eye within their patient population, and they're looking for options to treat those. So that has been a great synergy for us and one that we expect to continue to grow on in 2026. David Saxon: Okay. And then on the IG business, it looks like ordering facility count was down sequentially. Any color there? And then since you rolled out on the edge, you've been seeing a benefit from some pricing. I think you have Ultra the next iteration coming out shortly. So like anything baked into the guide around kind of additional pricing up a fair? Paul Badawi: Thanks, David. On the utilization or account question, utilization has been fairly strong and from Q3 to Q4, relatively flat. On the account side, we did have year-over-year growth Q3 to Q4 down slightly, but Q3 was particularly strong in 2025. So as we look ahead, we continue to have a balance of reengaging accounts as well as adding new accounts. So our growth will come from a balance of accounts and adding new accounts as well as reengaging existing accounts and utilization at those. In terms of pricing, we did have some favorable pricing from Edge in 2025. And as we look ahead to launching Ultra here at some time in 2 we don't have specific uplift baked in for ultra ASPs into the guidance. Operator: And this concludes our Q&A session. I will pass it back to Paul Badawi for his closing comments. Paul Badawi: Thank you for attending today's call. We appreciate your interest in Sight Sciences, and we look forward to updating you on our progress in the future. Thank you. Operator: And with that, we conclude our conference. Thank you for participating, and you may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by, and welcome to Niagen Bioscience, Inc. Fourth Quarter of 2025 Earnings Conference Call. My name is Tiffany, and I will be the conference operator today. [Operator Instructions] And as a reminder, this conference call is being recorded. This afternoon, Niagen Bioscience issued a news release announcing the company's financial results for the fourth quarter of 2025. If you have not reviewed this information, both are available within the Investor Relations section of Niagen Bioscience website at www.niagenbioscience.com. I would now like to turn the conference call over to Kendall Knysch, Senior Director of Publicity and Public Relations. Please go ahead, Ms. Knysch. Kendall Knysch: Thank you. Good afternoon, and welcome to Niagen Bioscience Inc.'s Fourth Quarter of 2025 Results Investor Call. With us today are Niagen Biosciences' Chief Executive Officer, Rob Fried; Chief Financial Officer, Ozan Pamir; and Senior Vice President of Scientific and Regulatory Affairs, Dr. Andrew Shao. Today's conference call may include forward-looking statements, including statements related to the company's research and development and clinical trial plans and the timing and results of such trials, the timing of future regulatory filings, the expansion of the sale of Niagen products and ingredients in new markets, business development opportunities, future financial results, cash needs, operating performance, investor interest and business prospects and opportunities as well as anticipated results of operations. Forward-looking statements represent only the company's estimates on the date of this conference call and are not intended to give any assurance as to actual future results. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties. Many factors could cause Niagen Biosciences actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These risk factors include those contained in Niagen Biosciences' annual report on Form 10-K most recently filed with the SEC, including results of operations, financial condition, cash flows as well as global market and economic conditions on our business. Please note that the company assumes no obligation to update any forward-looking statements after the date of this conference call to conform with the forward-looking statements' actual results or to changes in its expectations. In addition, certain financial information presented in this call references non-GAAP financial measures. The company's earnings presentation and earnings press release, which were issued this afternoon and are available on the company's website, present reconciliations to the appropriate GAAP measures. Finally, this conference call is being recorded via webcast. The webcast will be available at the Investor Relations section of our website at www.niagenbioscience.com. With that, it is now my pleasure to turn the call over to our Chief Executive Officer, Rob Fried. Robert Fried: Thank you, Kendall. Good afternoon, everyone, and thank you for joining us on today's investor call. We delivered another quarter of strong financial performance. In the fourth quarter, revenue was $33.8 million, growing 16% year-over-year with net income of $4.1 million. So for the full year of 2025, we delivered $129.4 million in net revenue, representing 30% growth year-over-year and net income for the year of $17.4 million. We ended the year with $64.8 million in cash and no debt. I'm very proud of what the Niagen Bio team accomplished in 2025. We began the year with an initial top line guidance of 18% growth and finished the year at 30%, and we dramatically exceeded expectations on the bottom line as well. But most importantly, we're well positioned to deliver a great 2026. There are some challenges. There's increased competition in this fast-growing NAD space, a space that is only hitting the tip of the spear, but we have spent many years laying a strong foundation. We have the expertise. We have the intellectual property. We have the relationships and we have the trusted brand. We're ready to build on this foundation. The most critical element of this foundation is our science. Niagen Bioscience continues to be the undisputed global leader in NAD science. Since our last earnings call, a total of 29 studies involving nicotinamide riboside were published. 8 of these studies were clinical studies. So I've asked Dr. Andrew Shao, Senior VP of Global Scientific and Regulatory Affairs to summarize some of these studies on this call. Of note is a study out of Finland that showed NR supplementation slowed biological aging according to several epigenetic clocks. Also a comparison study from Dr. Tzoulis in Norway between NR and NMN that showed significant superiority of NR. We're seeing some consistent trends in these studies that show fatigue to be a consistent positive functional benefit from NR, as was displayed in the recent Harvard long COVID study. Some of these studies did not show a clear benefit such as the NOPARK Parkinson's study, but still provide great learnings for future research. We can see how elevating NAD with Niagen improves people's lives. And we will continue to further our understanding of how it works, when it works and how to best deliver it. Another important component of our foundation is Niagen Plus. Last week, we announced that the company secured a patent that covers the methods of use of NR and derivatives in intravenous and injectable formulations. There is great opportunity for Niagen Plus. We're now present in over 1,200 health clinics and will be adding doctors' offices and med spas this year. Now those locations mostly offer Niagen IV, but we plan to launch our Niagen Plus branded at-home injection kits through our own telehealth platform during the first half of 2026. And we hope to partner with other telehealth providers to distribute our at-home Niagen Plus injection kits later in the year. We also plan to expand our presence in the beauty, cosmetics market this year. Following the successful launch of Tru Niagen Beauty in late 2025, we've developed topical products featuring Niagen. In addition to our own Tru Niagen branded topical products, we're in discussions with large cosmetics companies for Niagen ingredient partnerships. And I hope to share more about these partnerships in the near future. As mentioned on the previous earnings call, last September, the FDA reversed its prior determination that NMN could not be lawfully marketed as a dietary supplement. This decision by the FDA has been met with confusion within the industry as the agency did not provide a clear rationale for its seemingly arbitrary reversal. Earlier this year, we commenced litigation in federal court in Washington, D.C., challenging the FDA's reversal. We believe we have a strong case. And as a reminder, all NMN sellers in the market are at their own risk as they are all infringing on existing patents that cover the commercially available forms of NMN. Last December, we announced the acquisition of existing patents for multiple NR salt forms, including NR maleate and NR tartrate and other NR derivatives. This consolidation of core intellectual property not only provides protection to Niagen in the marketplace, but also provides the company with enhanced flexibility and control over our portfolio to advance innovation in NAD science. And we continue to work with our NAD precursor portfolio for pharmaceutical applications in orphan indications, particularly ataxia telangiectasia. We've identified NB-4168 as our lead development small molecule candidate for AT. We intend to continue to make strategic R&D investments to further characterize NB-4168 with the long-term objective of advancing towards regulatory approval. Potential value creation pathways for this asset include a spinout transaction or an out-licensing partnership. We'll continue to update shareholders as we achieve key development milestones. And last month, we announced the sale of the ChromaDex Reference Standards business. This divestiture further streamlines Niagen's operations, advances the company's strategy to exit non-core activities and focuses resources on NAD science, intellectual property and commercial growth. NAD+ remains at the forefront of health and longevity discussions with continued coverage across mainstream press, health care practitioner channels and general discourse with consumers from social media platforms. NAD is not just a trend or a fad, it is a fundamental component to cellular health and overall healthy aging. While awareness of the benefits of NAD is expanding, we believe that the category has not yet reached its tipping point. As I repeated in the past, NAD itself, the molecule NAD, in any form of administration has not proven to directly and effectively boost NAD levels. Individuals require an NAD precursor to properly boost NAD levels, and Niagen remains the gold standard for NAD precursors and remains the most trusted and clinically and scientifically validated solution to effectively raise NAD levels. As the leader in this space, we will continue to stand by our scientific research to drive innovation and I look forward to future announcements of new ways and new products for Niagen to benefit everyone's lives. And I would now like to hand the call over to Andrew to provide an update on the scientific research, Ozan will then run through the financial performance in greater detail, our outlook and we will then end on Q&A and closing remarks. Andrew? Andrew Shao: Thank you, Rob. It is my pleasure to address our investors, partners and employees and provide an update on the state of NAD science. As the leader in NAD science, Niagen Bioscience is committed to remaining the global scientific authority on NR and NAD research. I'm pleased to share some of the exciting results from newly published studies since our last update. On our last earnings call, Bob briefly touched on the completion of a study involving individuals with long COVID conducted by Mass General Hospital. The study published in the November issue of The Lancet eClinicalMedicine, demonstrated NR supplementation resulted in significant within group improvements in executive functioning, fatigue severity, sleep quality and depressive symptoms. These findings highlight the therapeutic potential for those that are impacted by long COVID, but also reflect promising benefits of NR supplementation for general challenges such as fatigue, sleep and depression. Regarding Parkinson's disease, as Rob mentioned in his remarks, the NOPARK study did not achieve its primary end point. We've been in close contact with the investigators from Haukeland University Hospital in Bergen, Norway, led by Dr. Charalampos Tzoulis, we, together with Dr. Tzoulis, believe when it comes to Parkinson's, the benefit of NAD augmentation with NR may be best applied prior to disease and treatment onset. In other words, as a preventative. We plan to collaborate with Dr. Tzoulis to examine the preventative effects of NR and its mechanism related to Parkinson's, through a new partnership we will announce soon. In the meantime, Dr. Tzoulis is continuing his research on the therapeutic effects of NR in Parkinson's and other neurodegenerative conditions, including ALS and MS. In January, a clinical study published in the prestigious journal cell assess the pharmacokinetics and systemic and brain impact of oral supplementation of NAD precursors, including a head-to-head comparison of Niagen and NMN. One of the key findings was that Niagen produced approximately a twofold greater increase in blood NAD levels compared to NMN even after accounting for the molecular way difference, underscoring the superiority of Niagen. Another study released in January assessed the impact of NR supplementation and high-intensity interval exercise training on epigenetic age acceleration in human blood and skeletal muscle using a collection of different biological clocks. Interestingly, results showed that Niagen reduced epigenetic aging while high-intensity interval training resulted in increased epigenetic age metrics. The findings suggest that NR supplementation and exercise may differentially modulate the aging at the genome and that metabolic interventions and intense physical activity may have distinct impact on muscle aging biology. Two recent preclinical publications highlighted NR's positive effect on brain health. First, in November, a preclinical study investigated the impact of NR supplementation on cognition, neuroinflammation and microglial cell metabolism in groups of young and old mice. Results showed NR supplementation in the old mice prevented cognitive decline, improved memory, reduced neuroinflammation and shifted microglial metabolism toward that of a young mouse. A second preclinical study published in February in the Journal Brain used both nematode and mouse Alzheimer's models to assess the upregulation and activation of an important transcription factor linked to Alzheimer's disease progression known as REST. The study found that increasing NAD levels through NR administration, increased rest expression and activity, which led to improved mitophagy and synaptic function and in the case of the nematode models, extended lifespan. Collectively, these preclinical studies help to elucidate the mechanisms behind the therapeutic effect of boosting NAD through NR in the brain. In February, a study demonstrated that maternal supplementation improved gestation, litter weaning weight, weight gain and improved milk yield and composition among other beneficial effects in [ mouse ]. These findings are remarkably consistent with those first published in 2019 by Dr. Brenner, our Chief Science Adviser, who showed similar effects in rats. We eagerly await the results of an ongoing clinical study being conducted at UC Davis examining the effect of Niagen supplementation on lactation in mothers who have given premature birth. In preparation for the launch of Niagen injection, we've just completed a clinical trial investigating the safety and efficacy of intramuscular and subcutaneous injection. Both modes of administration were demonstrated to be safe and were associated with reduced fatigue improved quality of life, trends toward improved sleep and lower oxidative stress. Another recent clinical study conducted by our partners at Restore Hyper Wellness compared Niagen IV and NAD IV in a head-to-head study to assess infusion time, tolerability, safety markers and metabolic outcomes. The study published in the Journal Frontiers in aging revealed that Niagen IV was far better tolerated and required only 1/3 of the infusion time versus NAD IV, findings consistent with our own Niagen IV versus NAD IV clinical study. Furthermore, Niagen IV resulted in a small but statistically significant reduction in HbA1c, the biomarker of diabetes, whereas the NAD IV group showed a small but significant reduction in HDL or good cholesterol. With now two independent head-to-head studies, the results are clear. Niagen IV is far superior to NAD IV. Nonetheless, we will continue to expand the evidence base around Niagen Plus and plan to conduct larger, longer-term studies to replicate and expand upon these results. In summary, Biogen Bioscience continues to advance NR and NAD research, and doing so with responsibility and integrity. The growing body of clinical research supports the potential therapeutic benefits of NR administration, and I look forward to potentially sharing more results in future updates. With that, I'll pass the call over to Ozan. Ozan? Ozan Pamir: Thank you, Andrew, and thank you to our investors, partners and team members for joining us today. It is a pleasure to speak with you and to present yet another quarter of outstanding results. As Rob highlighted, 2025 was another strong year for Niagen Bioscience, as the company delivered on its latest financial outlook across all metrics. The results of the fourth quarter and the full year is a reflection of our team's dedication to delivering shareholder value by advancing strategic initiatives, and maintaining Niagen Bioscience's position as the gold standard in NAD science. For the full year, we delivered $129.4 million in net sales, up 30% year-over-year, which is well ahead of the 18% growth we guided to at the start of the year. Gross margin came in at 64.3%, reflecting improvements in operational efficiency. On the expense side, we continue to scale with discipline. Selling and marketing expense improved by approximately 220 basis points as a percentage of net sales year-over-year, while R&D investments increased by $300,000. General and administrative expense was up $8.7 million year-over-year, primarily driven by an increase in employee-related expense and stock-based compensation of $3.8 million, increase in consulting fees of $1.5 million and higher royalty expense of $2.9 million due to the absence of a $3.5 million reversal of previously accrued royalties and license maintenance fees which occurred in the prior year. Under operating income, we also recognized a $2 million gain on settlement of royalty obligations in connection with our agreement with Queen's University Belfast. Net income for the year was $17.4 million compared to $8.6 million in fiscal year 2024, and we generated $13.5 million of cash from operations. Lastly, adjusted EBITDA for the year was $20.4 million, an $11.9 million improvement compared to fiscal year 2024. Our revenues in the fourth quarter of 2025 were $33.8 million, a $4.7 million or a 16% increase from the same period last year. That growth was led by Tru Niagen where revenue grew by 21% to $27.5 million, a $4.8 million increase. The primary driver was e-commerce, which generated $20.2 million, up 17% or $2.9 million. On the ingredient side, Niagen ingredient revenue was $5.6 million, up 5% or $300,000 year-over-year. And within that, we delivered $4.7 million in food grade Niagen sales along with $900,000 in pharma-grade Niagen sales. In the fourth quarter of 2025, revenue from our B2B distribution partners totaled $7.3 million, driven by contributions from existing and newly established strategic partnerships such as the one Rob mentioned earlier. Although we continue to anticipate quarterly fluctuations in sales to Watsons, we expect the partnership to remain an important component of our broader distribution network as we partner closely with Watsons on strengthening Tru Niagen's brand presence in Hong Kong and expanding into additional Asia Pacific markets. Gross margin improved to 64.1% in the fourth quarter, up 160 basis points compared to 62.5% a year ago. That expansion was driven mainly by a more favorable product mix, along with the benefit of selling through lower cost inventory. Selling and marketing expense was 30.8% of sales in the fourth quarter compared to 29.9% in Q4 2024. This reflects our continued targeted investments to build global brand awareness while staying disciplined and focused on operational efficiency. Research and development expense was $1.7 million, up $400,000 year-over-year. Scientific integrity remains the cornerstone of our company, and we continue to invest strategically to deepen the clinical evidence behind Niagen and support innovation in the NAD industry. General and administrative expense was $7.5 million, an increase of $6.4 million versus last year. The primary drivers were the absence of a $3.5 million reversal of previously accrued royalties and license maintenance fees, along with higher share-based compensation expense. And finally, our net income for the quarter was $4.1 million or $0.05 per share, another profitable quarter to close out the year and a clear reflection of our continued focus on disciplined execution. Turning to the balance sheet and cash flow. Our balance sheet continues to strengthen. On the back of this year's growth, we ended the year with $64.8 million in cash and no debt, reinforcing the financial flexibility and stability of our business. For full year 2025, net cash provided by operations was $13.5 million compared to $12.1 million in the prior year. The year-over-year improvement was mostly driven by an $8.8 million improvement in net income along with several favorable shifts in operating activities compared to the prior year period. Specifically, we saw higher accounts payable and prepaid expenses, improved collections on trade receivables, higher share-based compensation and the absence of last year's reversal of previously accrued royalties and license maintenance fees. Those benefits were largely offset by growing inventory levels to support the scaling of our business, which were significantly depleted at the beginning of 2025. As Rob mentioned earlier, last week, we announced the sale of the ChromaDex reference standard business in a $6 million all-cash transaction adjusted for working capital. This was a non-core legacy business that generated approximately $3 million in 2025 and was not a profit center. This divestiture is a meaningful step for Niagen Bioscience to streamline and focus operations on advancing NAV science, which should result in efficiencies in our resources and capital allocation and a boost in our cash reserves. Finally, I will close with our full year 2026 outlook. Detailed information on key financial metrics can be found in our earnings press release and presentation. Starting with net sales, for full year 2026, we're projecting between 10% to 15% growth year-over-year, excluding revenue attributable to the Analytical Reference Standards & Services segment. This outlook reflects continued scaling of our e-commerce business, growth from our established partnerships and additional upside from new partnerships and sales channels. We anticipate a slight improvement in gross margin as we continue to benefit from improvements in our supply chain and product mix. Selling and marketing expenses are expected to increase in absolute dollars but remained stable as a percentage of net sales, which was 27.4% in 2025. This demonstrates our continued focus on strategic investments to drive brand awareness and support the launch of new channels and verticals while maintaining optimized and efficient spend in customer acquisition. R&D expenses are also expected to increase in absolute dollars driven by incremental investments in pharmaceutical development and external and research initiatives to advance product development and innovation. And lastly, general and administrative expenses are expected to increase by approximately $4 million to $5 million in absolute dollars year-over-year. This increase is primarily driven by investments in infrastructure to support scalable growth and increased share-based compensation expense. To conclude, 2025 marked another year of disciplined execution and meaningful progress. I am proud of the focus and dedication our team showed in delivering on key initiatives, work that continues to strengthen Niagen Biosciences position as the leader in the rapidly expanding global NAD market. Their efforts reinforced our operational foundation advanced strategic priorities and positioned us for long-term success. With this momentum, we're entering 2026 with confidence as we continue executing our vision and deliver lasting value to our stakeholders. Operator, we're now ready to take questions. Operator: [Operator Instructions] Your first question comes from the line of Jeffrey Cohen with Ladenburg Thalmann. Jeffrey Cohen: So I guess, firstly, to jump into the injections. So I think you have one SKU now for the IV bags and injections to come. What are you expecting on number of SKUs? Or would that be just one? And initially on your own telehealth platform? And then on the back half of the year, you're expecting to get on to other platforms? And talk about the audience there as well being the overlap with the current clinics? Robert Fried: We will initially have just one SKU. We think that the market, the audience as it were, for the product will initially be the biohacker community, the people that are especially excited about longevity interventions, people that are presently doing peptides. We think it will grow to expand to include some people who are doing presently GLP-1 agonists. We think there's a market out there for people who are interested in self-injecting for -- to stay thinner, might also be interested in self-injecting to stay younger. The initial product will be a syringe and we'd be separating the powder from the liquid. So it's a slightly complicated process. So the more sophisticated people that are more used to this process will be the early adopters. Eventually, it will be in a pure liquid form and will be a much simpler process. And even after that will be a pen that looks much more like the GLP-1 pens. In terms of the overlap with the clinics, well, the price point is significantly different and the dosage is significantly different. The clinics are mostly giving 500 milligrams to a full gram in one session. These will be 100-milligram injections initially and people will do it a few days or 3 days per week. So we think it's slightly different audience in terms of dosage. And then in terms of price point, we expect that the injections, the shops will be less than half the price as the current -- than the IV. Now on the other hand, the IVs in some ways, because it doesn't -- because it's not subcu, it's directly into the blood stream are even more effective. So that's how we differentiate those two products. Andrew, is there anything else you want to add to that? Andrew Shao: I think you covered it, Rob. Jeffrey Cohen: And then just one follow-up. Could you talk about your guidance, I guess, briefly, right, you did call out last year that your guidance started out in the high teens and literally double as the year went on. So is this kind of cautionary guidance to get started on the year subject to revisions down the road? Or is this something that you feel pretty strong about the full year? Robert Fried: I would say the former more than the latter. I think we've been pretty consistent over the years. We don't want to hype the company or hype the stock. We want to be conservative in our approach and circle revenue that we have a high degree of confidence in. Remember, a big part of our business also is B2B, where we supply the ingredients, and that's far less predictable than the straight e-commerce business as it were. Operator: Your next question comes from the line of Susan Anderson with Canaccord Genuity. Susan Anderson: Maybe if you could kind of parcel out, I guess, what you're seeing as the growth drivers for this year between, I guess, the original in our supplement and also the IV and then also the new products that you're rolling out, such as like the beauty supplement. Robert Fried: In terms of growth? Susan Anderson: Correct. Yes. And then also just any new channel distribution you're expecting to go into? Robert Fried: Yes. We do -- the latter portion first. We do expect to expand the distribution channels. We will be expanding into certain selective retail channels and even by the end of the year, we might even broaden that further. We are expanding also internationally into some territories, particularly in Asia and perhaps in the EU. In terms of the growth products, of course, awareness for Niagen and Tru Niagen continues to grow. So we think there's just basic organic growth. As more and more people write about Niagen Bioscience as a company and Tru Niagen as the products and we continue to conduct these studies and go on podcasts. And there seems to be a general acceptance amongst those that do the research that we are the reliable brand, the reliable company and the experts in the space. So we do see just steady consistent growth in our -- with the existing Tru Niagen products in the existing channels. But it's difficult to know how much the cosmetics products and the IV and the injection products will grow, so we're endeavoring to give conservative assumptions there. Until we're out there and we see how the market reacts to it, we don't really know yet. But of course, the upside potential is fairly significant, we think. And we just don't really yet know how it's going to break down. Susan Anderson: Okay. Great. That's helpful. And then maybe you mentioned just increased competition in the space with NMN now. I guess, what do you guys -- you talked about getting out there on podcast and stuff. I guess what are you guys doing this year to kind of get the message out there to consumers, maybe getting them to switch over to your product versus a different product that they're taking right now? Robert Fried: Well, of course, we have the best product. I mean, the ingredient that we sell is the most effective. Our quality team is the best quality team, the way we operate the business, and we have a high degree of confidence as do most people in the industry know that the best way, safest way, the most tested way, the most informed company to elevate NAD levels is to take Niagen or Tru Niagen. We do see increased competition. NMN did get reversed by the FDA, their ruling. We think there's a good chance they're going to re-reverse that decision in the coming year. And of course, all those NMN products are infringing on patents. So the only companies you're seeing selling NMN are companies who never really cared about the FDA ruling in the first place and now don't really care much about the patent rules. But it is increased advertising that you're seeing. Most of that NMN is cannibalizing NAD itself. These are companies that were selling NAD as a molecule in a bottle, which doesn't work at all. It's not bioavailable, doesn't elevate NAD. So what we're seeing is transfers from NAD selling over to NMN zone. But our view on it is pretty much the same as it was when NAD was growing, which is it only helps increase the market. We'd rather have 20% of $10 billion than 50% of $500 million. They're advertising it. Many of them get it wrong, they make false claims, but many of them get it right, and they're explaining to people that elevating NAD is good for your health, especially as you age or as you heal. And the more you research, the more you realize that the best way to manage it is with Niagen or Tru Niagen. Yes. We think what we've seen is that when people sometimes they'll start out by taking NAD or NMN or NMNH or something that the low price version of a product that markets NAD. And if eventually they come around to read in the science or reading our market materials, they come around to Tru Niagen. And then the first part of your question. Yes, it's -- there's a very good chance that sometime during 2026, we will launch a more aggressive awareness brands type campaign for the company. especially if we expand into certain retail outlets to increase awareness and brand familiarity. We're working on that presence. Operator: Your next question comes from the line of Ram Selvaraju with H.C. Wainwright. Raghuram Selvaraju: I was just wondering if you could comment at this point regarding what you anticipate the next steps to be in the lawsuit filed against the FDA and the associated parties regarding the influx of NMN products? And also, if you could give us a sense of what percentage of prosecution of that legal initiatives is represented in your overall legal expenses anticipated for 2026? Also, if you could please comment on how you are thinking about future evolution of your share repurchase strategy? Robert Fried: Ram, we don't think it's going to be a significant expense. We think that this is going to be a summary judgment case. We think both the FDA and we would prefer a summary judgment. So it's likely to go that way. They've selected a judge. They will have a chance to respond to our claim, and then we will respond to that. There will be a hearing or two. We think it will take a year, maybe slightly more than a year for a judge to make his decision. We think the case is pretty good. I think that the decision that the FDA made was hard to substantiate why they made it. We don't know what the factors were that led to that decision, but we think it was harmful to the general public. So we think there's a good chance that, that decision will be reversed once again. And no, I don't think it will have a meaningful impact on our costs or expenses for the year. What was the other one again? Ozan Pamir: What was the other question? Raghuram Selvaraju: I just wanted to ask about share repurchases, what's kind of impacting the evolution of your strategy there? Robert Fried: Right. So as you know, we announced a $10 million buyback. We used $250,000 of it to date. We expect -- we will be using the rest of it under the guidelines that we set forth in that buyback provision. We would have used more of it before, but we got blocked out because of the timing of the announcement to earnings, among other material inside information. But we do expect to be using it more and buying back shares. We think it's a great investment at this price. Raghuram Selvaraju: And then just very quickly, can you comment on any near-term plans you have to advance clinical exploration of NR in Parkinson's disease at this time? Robert Fried: Well, we're waiting for the final manuscript and discussion with Tzoulis. He's very bullish on this idea that it's a preventative before the standard care of L-Dopa and the diagnosis of Parkinson's and he has a fair amount of data to support that idea. But at this point, we're waiting to hear from him on that. Andrew, is there anything more you want to contribute to that? Andrew Shao: Just like you said, Rob, the manuscript be submitted for publication shortly here. And so we can't divulge any of those details. But we will be collaborating with Dr. Tzoulis, as I mentioned in my remarks, with a focus more toward looking at prevention. Operator: Your next question comes from the line of Sean McGowan with ROTH Capital. Sean McGowan: In terms of looking for a little bit more color on the guidance, can you give us a sense of whether the phasing of the revenue growth in '26 is expected to be materially different from what we saw last year? Is it more front half or back half? And also a little bit more color on the gross margin guidance, where would you see that gross margin uptick coming from, the slight increase? Is it -- are we going to see slight improvements in Consumer and Ingredients? Or is it going to be more focused in one or the other of those segments? Ozan Pamir: Sean, Ozan here. So with regards to the pacing of the sales, we're expecting it to be more back loaded compared to previous years. And with regards to gross margin, we expect a slight improvement, but it's not -- it's driven by supply chain efficiencies and also the changing of the product mix. We're seeing our 1,000 milligram SKU perform well, and e-commerce is also performing well. Sean McGowan: Okay. And similarly, looking for color on the -- does your sales and marketing guidance anticipate the kind of step-up in brand marketing that you referred to earlier? Or is that -- would that be additional? I think Rob said you might see some additional promotion -- I mean, advertising around. Is that anticipated in that already? Ozan Pamir: It's not anticipated in that. It would be an addition. Operator: That concludes our question-and-answer session. I will now turn the call back over to Lauren for closing remarks. Lauren Rittman-Borzansky: Thank you, Tiffany. There will be a replay of this call beginning at 7:30 p.m. Eastern Time today. The replay number is 1 (800) 770-2030, and the replay ID is 8584242. Thank you, everyone, for joining us today and for your continued support of Niagen Bioscience. Operator: Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Good day, and welcome to the Smith Micro Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, today's event is being recorded. I would now like to turn the conference over to Charles Messman, Vice President of Marketing. Please go ahead. Charles Messman: Thank you, operator. We appreciate you joining us today to discuss Smith Micro Software's financial results for the fourth quarter and year ended December 31, 2025. By now, you should have received a copy of our press release with the financial results. If you do not have a copy and would like one, please visit the Investor Relations section of our website at www.smithmicro.com. On today's call, we have Bill Smith, our Chairman of the Board, President and Chief Executive Officer; and Tim Huffmyer, our Chief Operating Officer and Chief Financial Officer. Please note that some of the information you will hear during today's discussion consist of forward-looking statements, including, without limitations, those regarding the company's future revenue and profitability, our plans and expectations, new products, development and availability, new and expanded market opportunities, future product deployments, growth by new and existing customers, operating expenses and company cash reserves. Forward-looking statements involve risks and uncertainties, which could cause actual results or trends to differ materially from those expressed or implied by our forward-looking statements. For more information, please refer to the risk factors included in our most recently filed Form 10-K. Smith Micro assumes no obligation to update any forward-looking statements, which speak to the management's beliefs and assumptions only as of the date they are made. I want to point out that in our forthcoming prepared remarks, we will refer to specific non-GAAP financial measures. Please refer to our press release disseminated earlier today for a reconciliation of these non-GAAP financial measures. With that said, I'll turn the call over to Bill. Bill? William Smith: Thanks, Charlie. Thank you for joining us today for our fourth quarter and year-end 2025 conference call. As we move 2025 to the history books, I believe the company continues to make great strides on our return path to growth and profitability. Much of the work completed in 2025 has contributed to our progress. We have strengthened our product lineup with a strategic focus on phones in our SafePath OS solutions for kids and seniors. The senior-focused solution alone more than doubles our total addressable market. SafePath OS provides carriers with a tool to grow the subscriber base with the highest quality subscribers available in the market, the family subs. While we redirected our product strategy, we also continue to rationalize our cost structure. As we said during our last call, we are building a culture of continuous improvement and operational efficiency. We will continue to assess and optimize our spending while we continue to invest in strategic areas that support innovation. Our substantially reduced cost structure results in a reduced loss in the fourth quarter of 2025. And we believe it will support an even further reduced loss in Q1 of 2026 and most importantly, non-GAAP profit in Q2 and beyond. To reinforce this outlook, we plan to bring two new carrier customers to the market by midyear 2026. Both customer wins are the result of our SafePath OS product offerings. Our new product strategy is working and will drive the growth that we believe is ahead for Smith Micro. Our existing customer base is also showing signs of growth as recruiting new family subs has become an important topic of discussion. Beyond all of this positivity, we are seeing a strong sales pipeline that should provide even more new opportunities in the back half of 2026. In other exciting news, I am sure many of you have seen our press release issued earlier today that announced the implementation of our executive succession plan for Smith Micro. After 44 years at the helm, I will step down from the CEO role and will move to a new role as Executive Chairman for Smith Micro Software. This transition has been in the works for some time, and I believe that the timing is ideal. I am also pleased to announce that Tim Huffmyer, will be taking over as our new President and CEO at the close of the quarter on March 31. Tim is a proven leader with the experience and judgment to guide the company forward, and I am confident in his ability to lead the company through the exciting return to profitability and growth ahead. I look forward to working alongside Tim to ensure a seamless transition and continued momentum as Smith Micro returns to a role of leadership in providing cutting-edge software for wireless carriers. As you can see, I am very bullish about the future of this company that I cofounded so many years ago. And as a result, my wife, Dieva, and I have decided to provide an additional $4 million in funding. This will provide Smith Micro the time needed to return to profitability and the organic creation of cash to fund and grow the business going forward. Later in the call, I will provide more details around the status of our customer base and additional thoughts about our path forward in 2026. Let me turn the call over to Tim to discuss further the results of the fourth quarter and fiscal 2025. Tim? Timothy Huffmyer: Thank you, Bill. Good afternoon, everyone. First, I'd like to thank you, Bill, for your leadership over the last 4 decades as President and CEO of Smith Micro. We all know how much you've sacrificed over this time during all the peaks and valleys of Smith Micro's success. I look forward to our continued strong partnership as we continue the transition and both of us settle into our new roles. Next, I'd like to thank Bill and the Board for the trust that they have instilled in me during the succession discussions. I'm honored and truly excited to lead the dedicated Smith Micro team as we continue our turnaround to profitability. Our employees are just amazing and extremely dedicated to building the best family safety application for our customers. Last quarter, I had an opportunity to travel to our offices and spend time with most of our employees. This dedication is unique and provides me with significant motivation to lead with purpose and intention. As Bill and I continue to work on the transition activity over this month, I'd like to also announce my plan for the Chief Financial Officer role. Coinciding with the changes to the Chief Executive role at the end of this month, I'm pleased to share with great confidence that Bethany Braund will serve as our new Chief Financial Officer. Bethany has been with Smith Micro for over 4 years as our Senior Director of Financial Reporting, where she has spearheaded all company SEC reporting obligations, all advanced technical accounting matters in support of numerous financing transactions, all financial audit and internal control activities plus many other visible projects. She has provided steady support and leadership to the Chief Financial Officer role and the executive team over her tenure here. Prior to joining Smith Micro, she spent 11 years at EY, serving in advancing roles within the Assurance team. She is a CPA and very well qualified for this role. I'm excited to partner with Bethany as we lead Smith Micro on the next phase. I look forward to sharing more information around our vision and strategy as we complete these transitions. Now let's turn to the financial overview. We have recently completed several funding transactions. During the fourth quarter, the company received approximately $2.7 million of cash from a registered direct offering and private placement transaction. As Bill indicated, we have signed an agreement for a convertible note transaction with Bill and Dieva Smith and other investors. In this new transaction, the Smiths will invest approximately $4 million and will also roll $585,000 of their previously outstanding notes originally due on March 31, 2026, into this same convertible note. Additionally, we had an additional $485,000 of short-term notes due on March 31, 2026. Of that amount, approximately half will be repaid on the due date and the other half will roll into this new convertible note transaction along the Smiths. The new convertible note issued in this transaction will be due in March of 2029. We expect to close this transaction in the next few days. As a reminder and to provide an update, in October of last year, we announced strategic cost reductions, primarily comprised of workforce reorganization, which resulted in cost savings of approximately $1.8 million per quarter as compared to the second quarter of 2025, or a $7.2 million reduction in the cost run rate, excluding employee separation costs of approximately $600,000. We are generally on track to achieve these savings in 2026. These efforts are part of our broader initiative to realign the company's cost structure with long-term business goals, strengthen the company's financial foundation and accelerate our path to profitability. Now let's cover the financial results of the fourth quarter of 2025. For the fourth quarter, we posted revenue of $4 million compared to $5 million for the same quarter of 2024, a decrease of 20%. When compared to the third quarter of 2025, revenue decreased by $300,000 or 7%. We were just short of our expectations for the quarter as a result of a couple of assumptions that did not materialize. First, a new feature launch did not occur as we expected. And second, we experienced a one-time event with one of our existing deployments that resulted in an unanticipated decrease in Q4 revenue from that customer. All revenue associated with this event has resumed to normal levels during the first quarter of 2026, and I am proud of the way that our team worked together to support our customer during this time. Fiscal 2025 revenue was $17.4 million compared to $20.6 million for 2024, a decrease of $3.2 million or 16%. During the fourth quarter of 2025, Family Safety revenue was $3.2 million, which decreased by $600,000 or 16% compared to the fourth quarter of the prior year. Family Safety revenue decreased by approximately $400,000 or 11% compared to the third quarter of 2025. This revenue reduction was primarily due to the one-time event I just described. During the fourth quarter of 2025, CommSuite revenue was $800,000, which decreased by approximately $300,000 compared to the fourth quarter of 2024. Revenue from CommSuite was flat compared to the third quarter of 2025. As previously mentioned, we sold our ViewSpot product for $1.3 million on June 3, and we will no longer have any future revenue from this product. ViewSpot revenue was nominal for the fourth quarter of 2024. In the first quarter of 2026, we are expecting consolidated revenues to be in the range of approximately $4.2 million to $4.5 million. For the fourth quarter of 2025, gross profit was $3 million compared to $3.8 million during the same period of the prior year, a decrease of $800,000, primarily due to the period-over-period decline in revenue, combined with our emphasis on continued cost optimization. Gross margin was 76.4% for the quarter, which was within the guidance range previously provided, compared to 75.6% realized in the fourth quarter of 2024. The gross profit of $3 million in the fourth quarter of 2025 declined by $200,000 compared to the gross profit realized in the third quarter of 2025. In the first quarter of 2026, we expect gross margin to be in the range of 76% to 78%. Once we realize a full quarter of the previously announced cost benefits in 2026, we expect our margin percentage to be between 78% to 80%. Our long-term gross margin target is 85%, which we will continue to work towards. For the year ended December 31, 2025, gross profit was $12.9 million compared to $14.4 million for the year ended December 31, 2024. Gross margin was 74.1% for fiscal 2025 as compared to the 70.2% for 2024. GAAP operating expenses for the fourth quarter of 2025 were $7.4 million, a decrease of $800,000 or 10% compared to the fourth quarter of 2024. The difference was a result of changes in personnel, stock compensation costs and other cost reduction activities. GAAP operating expenses for the full year of 2025 were $41.9 million compared to $63.8 million in 2024, a decrease of $21.9 million or 34%. This period-over-period decrease was primarily attributable to the goodwill impairment charge of $24 million recorded in 2024 as compared to the goodwill impairment charge of $11.1 million in 2025, coupled with the cost reduction activities, which have exceeded $10 million annually. Non-GAAP operating expense for the fourth quarter of 2025 were $4.7 million compared to $5.8 million in the fourth quarter of 2024, a decrease of approximately $1.1 million or 19%. Sequentially, non-GAAP operating expenses decreased by approximately $1 million or 17% from the third quarter of 2025, which exceeded the guidance previously provided. We anticipate a further decline in non-GAAP operating expenses of 5% in the first quarter of 2026 as compared to the fourth quarter of 2025 as we continue to realize the impact of our most recent workforce reorganization and cost rationalization, which Bill has mentioned, is based on our focus of continuous improvement and operational efficiency. Non-GAAP operating expenses for fiscal 2025 were $22.5 million compared to $28.3 million in 2024, a decrease of $5.8 million or 20% compared to last year. The GAAP net loss attributable to common stockholders for the fourth quarter of 2025 was $4.7 million or $0.20 loss per share, compared to the loss of $4.4 million or $0.25 loss per share in the fourth quarter of 2024. GAAP net loss attributable to common stockholders for the year ended December 31, 2025, was $30 million or $1.46 loss per share, compared to a loss of $48.7 million or $3.94 loss per share for 2024. The non-GAAP net loss attributable to common stockholders for the fourth quarter of 2025 was $2.1 million or $0.09 loss per share, compared to the non-GAAP net loss of $1.9 million or $0.11 loss per share in the fourth quarter of 2024. Non-GAAP net loss attributable to common stockholders for the year ended December 31, 2025, was $10.9 million or $0.53 loss per share, compared to the non-GAAP net loss of $13.7 million or $1.11 loss per share for the prior year. Within today's press release, we have provided a reconciliation of our non-GAAP metrics to the most comparable GAAP metric. For the fourth quarter of 2025, the reconciliation includes adjustments for intangible asset amortization of $1.3 million, stock compensation expense of $800,000, restructuring costs of $500,000, depreciation expense of $77,000, changes to fair value of warrants of $43,000 and deemed dividends of $133,000. For the full year of 2025, the non-GAAP reconciliation includes adjustments for intangible asset amortization of $5.1 million, stock compensation expense of $3.6 million, goodwill impairment of $11.1 million, restructuring costs of $600,000, depreciation expense of $300,000, changes to fair value of warrants of $200,000, deemed dividends of $800,000, partially offset by the ViewSpot sale of $1.3 million. Due to our accumulated net losses over the past few years, our GAAP tax expense is primarily due to certain state and foreign income taxes. For non-GAAP purposes, we utilize a 0% tax rate for 2025 and 2024. The resulting non-GAAP tax expense reflects the actual income tax expense during each period. From a balance sheet perspective, we reported $1.5 million of cash and cash equivalents as of December 31, 2025. This now concludes my financial review. Back to you, Bill. William Smith: Thanks, Tim. As you can see from my introduction and Tim's report, we have been fully engaged in a strategic redesign to maximize our talent and resources. Our strategy to focus on phones with SafePath OS for kids and seniors is working as evidenced by new customer wins and a strong growing pipeline. With that, let's look at where we are with our customers. AT&T was a strong contributor this quarter and continues to be an important strategic partner for Smith Micro. The fourth quarter 2025 marked the first full quarter in which AT&T expanded the addressable market for Secure Family, enabling AT&T to deliver a more compelling marketing message for the holiday season and setting the stage to strengthen their overall security offering. To help drive visibility, stronger alignment and improved engagement during the key selling period, we took advantage of cross-promotion opportunities across their broader security portfolio, further reinforcing Secure Family as part of an integrated digital safety experience for families. Looking ahead to 2026, we are encouraged by emerging strategic opportunities that extend beyond the Secure Family over-the-top application. AT&T's increased focus on the family space is creating innovative opportunities to further enhance and deliver our core solutions to reach a significantly larger audience. Boost continues to be a solid and collaborative partner for us. We are working closely with them to expand our SafePath solution, including progress on new platform capabilities. These initiatives are aimed at strengthening SafePath's role within Boost's broader value proposition and positioning the platform to support future growth and innovation in the family safety space. In addition, our Visual Voicemail solution delivered encouraging results with a positive trend in new subscriber additions during the quarter. Looking ahead, we are aligned with Boost on opportunities to enhance the product through future upgrades and refresh customer messaging, which we believe can further improve engagement and growth. I am encouraged by our ongoing collaboration as we look to build on this momentum in future quarters. Looking ahead, we see more opportunity with T-Mobile. We are aligned on plans for enhanced product features and are exploring new revenue opportunities as these capabilities come to market. I believe this momentum positions our T-Mobile partnership well and creates a strong foundation for growth as T-Mobile continues to invest in serving the family segment. We continue to work closely with Orange, both at the group level as well as in Spain to deepen our partnership and to maximize our joint potential in the family safety market. Our most recent engagement confirms our belief that we are on the cusp of meaningful growth with their customer base. Elsewhere in Europe, we remain in talks with several carriers, and we anticipate deeper dive in-person meetings with a number of prospects in Europe later this month. Additionally, we have a full calendar of meetings at Mobile World Congress as we continue to seek viable opportunities to expand our presence through other carriers around the globe. In conclusion, I am more than excited and extremely confident as I look ahead to 2026 and beyond. Everyone at Smith Micro is embracing transformative change and ready to conquer new horizons. I am as bullish as I have ever been about our future. Throughout these past 44 years at Smith Micro, we have experienced many different technology cycles as well as ongoing changes in the market, where timing is extremely important and having the right solutions at the right time is paramount. I believe that is exactly where we are right now, and we plan to capitalize on that fact. With that said, operator, we can open the call for questions. Operator: [Operator Instructions] And today's first question comes from Matthew Harrigan with Benchmark. Matthew Harrigan: Do you have any thoughts on what -- kind of the annual revenues, I mean you can kind of figure out where your margin is going to lay out, but the value of a normalized revenues with a major mobile carrier in the U.S., I mean, if you perform optimally. And I know with Orange and the European carriers, it's very different because you've got a central organization, you've got different countries and all that. But what do you think the prospective revenue opportunity is, kind of brushing it with kind of a VC painting brush, if you will? Timothy Huffmyer: Matthew, thanks for the question. We've often guided investors on this question to think about the number of subs that are available or family subs that are available at the carrier, so depending on how large the carrier is. And then we've often guided on a fee or our revenue per unit as a couple of dollars per family unit. So for instance, at a $10 million family opportunity, if we were to get 50% or 30% of those, you would take that and multiply it by a couple of dollars per month, and you could kind of run out that from a modeling standpoint. I hope that's helpful in thinking about how we believe the addressable market is at the carriers. Matthew Harrigan: And then given all you have to do is turn on CNN and you can see all the issues with family safety, both for children and for seniors right now. But you don't talk too much about competition. Clearly, a former customer of yours, a large carrier, tried to do it in-house maybe with mixed success. But I mean, given that this is a crying need, I mean, people must be doing something to -- even on a [ password ] basis to try to satisfy the situation. I mean, do you see things kind of added ad-hoc to other software solutions? Or what are people doing who aren't using you because it's hard to believe that this void on the need continues to persist as much as it does. William Smith: Yes, Matthew, I think that's really the power of SafePath OS. And why we became so active around the phones. We think that selling phones is something carriers know how to do very well. We also think it's a very easy way to bring users on to family safety solutions. From a kids point of view, one of the largest issues with family safety software are kids deleting the app. When it's on the phone like this, it's part of the OS, that can't be deleted. So I think in general, I think we have put ourselves in an excellent spot where we can really bring added value. I mean you mentioned a carrier that went out and developed their own software. Well, the market moves pretty fast. So they are -- they now have their software up and they've got a lot of the kinks out of it. And guess what, now they've got to figure out how they got to bring phones to the market, not just phones for kids standpoint, but phones for the senior standpoint as well. So this is the real advantage we have. We pushed the envelope. We're in a leadership role, and that means everybody else has to run like crazy to catch up. And that's what it's all about. I think that's why I think we're going to be very, very successful going forward. And I think that the phones are going to be the major differentiator. Matthew Harrigan: And clearly, at MWC, I mean, you've got a lot of people there other than just the fairly concentrated U.S. market. Are you seeing actual pull demand from new guys who've heard about the solution? Or is it kind of checking in annually with some familiar faces. Hopefully, they finally come over. But are you seeing any better awareness of your product? William Smith: Yes. I think that, as I said, we are looking forward to launching two new carrier customers midyear. Both are being driven by SafePath OS. They will be selling phones as part of that overall offering. Part of the reason that carriers are excited about the phone is the onboarding process is so simple. And it's just a totally different animal than what we have done traditionally in the past with over-the-top applications. And I think that's opening up this market. When we look at Europe, Europe is more of a greenfield opportunity for us. There isn't a lot of history there with carriers offering family safety offerings. And with the phone now, this makes the decision process by those carriers that much easier. So I'm very, very bullish on where we're headed. I think we are in the driver's seat. And only time will tell, but I look forward to -- if I'm not on these calls, I look forward to listening to Tim talk about all the wins coming up in the future. Matthew Harrigan: Congratulations to both of you, and I hope you have an enjoyable and productive MWC coming up shortly. Operator: [Operator Instructions] And that does conclude our question-and-answer session. I'd like to turn the conference back over to Charles Messman for any closing remarks. Charles Messman: I just want to thank everybody for joining. Thank you, Bill. And Tim, we're really excited about having you on board. For those that are going to happen to be in town, we're going to be at the ROTH Conference in a few weeks. So please stop by and say hello, and have a great day. Thanks, everybody. Operator: Thank you. That concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.
Operator: Good day, and thank you for standing by. Welcome to Capital Power's Fourth Quarter and Year-end 2025 Results Conference Call. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Roy Arthur at Capital Power, you may begin. Roy Arthur: Good morning, everyone. My name is Roy Arthur, Vice President, Investor Relations and investment partnerships. Thank you for joining us today to review Capital Power's fourth quarter and year-end 2025 results, which we published earlier today. Our integrated annual report and presentation for this conference call are available on our website. During today's call, our President and CEO, Avik Dey, will provide an update on our business. Following that, Scott Manson, our Interim CFO, will present a review of the quarter and our year-end financials for the company. Avik will then conclude the formal part of the presentation before we open the floor to questions from analysts in our interactive Q&A. In the spirit of reconciliation, Capital Power perspectively acknowledges that we operate within the ancestral home lands, traditional and treaty territories of the indigenous people of Turtle Island or North America. We acknowledge the diverse indigenous communities located in these areas and whose presence continues to enrich the community. Before we start, I would like to remind everyone that certain statements about future events made on the call are forward-looking in nature and are based on certain assumptions and analysis made by the company. Actual results could differ materially from the company's expectations due to various risks and uncertainties associated with our business. Please refer to the cautionary statement on forward-looking information or our regulatory filings on SEDAR+. In today's discussion, we will be referring to various non-GAAP financial measures and ratios also noted on the same slide. These measures are not defined financial measures according to GAAP and do not have standardized meaning prescribed by GAAP, and therefore, are unlikely to be comparable to other similar measures used in other enterprises. These measures are provided to complement the GAAP measures that are included in the analysis of the company's results from management's perspective. The reconciliations of these non-GAAP measures to their nearest GAAP measures can be found in our integrated annual report. With that, I will hand it over to Avik. Avik Dey: Thank you, Roy. Good morning, everyone, and thank you for joining us. Relentless execution is core to who we are. It's what sets the Capital Power team apart and underpins our ability to deliver on our strategic priorities with excellence as we did in 2025 and sets us up for continued success in 2026 and beyond. With precision and passion, our team has executed on our strategic priorities. We have acquired 2.2 gigawatts of generation capacity through our PJM acquisition. We've optimized contracts across 2 gigawatts of contracted capacity, upgraded and expanded 385 megawatts across our fleet, extending asset life and maximizing value and advanced or completed 300 megawatts of new capacity, growing our renewable power portfolio, acquire, optimize develop. These are the pathways by which we create value. Our strategy is straightforward, but how we execute is our competitive advantage. 2025 was an exceptional year for Capital Power. Our results perfectly highlight our strategy in action. Deliberate growth and durable performance driving superior returns. In addition to the strategic wins I just highlighted, our operations team also delivered with excellence in 2025. Specifically, we generated a record 45 terawatt hours of power across our portfolio, with 52% of total generation coming from our U.S. portfolio, underscoring the successful strategic diversification of our generation portfolio. These achievements are driven by our people. The dedicated experts, innovators and professionals who are passionately powering North America 24/7, 365. Our 2025 performance demonstrates our team's ability to consistently deliver, diversify our portfolio and relentlessly execute to drive long-term shareholder value. At our 2025 Investor Day, we outlined our disciplined approach to value creation through growth and clearly defined optimization pathways. When we acquire assets, we take a strategic approach to value creation. We systematically add value through three optimization pathways. First, we focus on operating and optimizing the assets themselves, driving reliability, availability and performance across the fleet. Second, we enhance value commercially through contracting and hedging using our market expertise to improve cash flow, visibility and risk-adjusted returns. And third, we create value at the enterprise level leveraging our differentiated funding model to lower our cost of capital and improve overall returns. Together, these three pillars enable us to consistently unlock value beyond the initial acquisition, positioning us to meet or exceed our return target of 13% to 15%. Our 2025 performance is a clear example of this strategy in action. As we look to build on our performance in 2026, our approach to growth through acquisitions remains purpose-driven. We acquire assets in high demand markets that enhance our strategic position and diversify our portfolio. Why does that matter? By buying the right assets, we are increasing our scale, allowing us to optimize a large complementary flexible generation fleet diversing our footprint, increasing our exposure to multifaceted demand growth across North America. And finally, enhancing fleet efficiency, lowering the age and heat rates of our assets positions us to create value on a merchant basis and for long-term contracts. The operation, optimization and integration of our PJM assets demonstrate another clear example of our disciplined growth and ability to execute. In the first two quarters under Capital Power ownership, the Hummel and Rolling Hills facilities delivered strong adjusted EBITDA contribution, performing ahead of expectations with higher dispatch and strong pricing. That transaction increased diversification of our cash flows and lowered market-specific risks, with no single market representing more than 30% of our total flexible generation capacity. At the fleet level, we continue to apply our industry-leading expertise to optimize our assets. Asset optimization is core to Capital Power's DNA we deliberately acquire assets with strong optimization potential and apply disciplined operating maintenance and risk management practices to deliver reliable megawatts and enhance value. We have added or are in the process of adding 385 megawatts to our fleet from asset optimization, including 170 megawatts through our two battery energy storage facilities in Ontario. 110 megawatts in capacity upgrades across three facilities, York, Goreway and Arlington Valley, and advanced 105 megawatts in expansion capacity at East Windsor. As we continue to grow through acquisition, this sets us apart from other buyers in the market, enabling us to identify and deliver values others cannot. It's our competitive advantage compared to other IPPs. The returns associated with optimizing existing capacity are strong and reinforce our focus on existing generation as a way to address society's need for more power. At a portfolio level, our approach to commercial optimization is fundamental to driving incremental value. We have been very deliberate in constructing a portfolio of assets in regions with strong supply-demand fundamentals. In the regions where we operate, we see customers looking to contract supply much earlier than in the past, owing to growing demand. These discussions are anchored in cost of replacement rather than recovery of costs as they have been in the past. As a result, Capital Power's contracted portfolio is poised to see significant growth in contracted EBITDA through recontracting, enhancing margins, reducing volatility and improving returns for longer duration. Our new contract for MCV announced last fall is a prime example of the strategy in action extending in 2040, this new long-term contract provided 10 years of incremental contracted cash flow. The contract is expected to generate a full year increase in adjusted EBITDA for the facility of approximately $100 million annually, representing an 85% increase over current contract pricing for the whole facility. To kick off 2026, we also completed the recontracting of Arlington Valley. The extension of the summer tolling agreement through 2038 secures 13 years of contracted revenue includes a 35-megawatt up rate and reset pricing at 140% above the existing contract, positioning us for continued growth and value creation in the U.S. Southwest. Commercial optimization is about maximizing the value of our capacity with a continued focus on contracting longer duration at better pricing. Our North American portfolio includes 12 gigawatts of total capacity with 4.8 gigawatts long-term contracted between 2032 and 2047, 2.4 gigawatts medium-term contracts expiring in the '26 to '31 window and 4.8 gigawatts of merchant primarily in Alberta and PJM. Looking forward, our focus is the merchant and medium-term portfolio where we can extend duration when pricing is attractive. As always, we will continue to hedge our merchant generation to manage risk near term, but preserve the ability to realize long-term upside. I'll now hand it over to Scott to discuss the enterprise optimization and financial performance. Scott Manson: Thanks, Avik. Our proven return-driven model forms the foundation of how we optimize at an enterprise level. It underpins all that we do, improving efficiency and strengthening organizational resilience. We are focused on maintaining our investment-grade balance sheet, which enables us to acquire high-value assets, secure low-cost capital and become the counterparty of choice for utilities and other high credit quality counterparties, driving a clear competitive advantage and stronger returns. Disciplined capital allocation, allowing us to offer a rise on dividend while most of our cash flow will be reinvested to fund our strategic fleet expansion. Enhancing our differentiated funding model positions us to accelerate our growth pathways through partnerships like our MOU with Apollo. Enterprise optimization creates resilient, long-term shareholder value. It drives cost discipline, process improvements and enables disciplined growth without proportional increases in overhead. Our full year 2025 results reflect the execution we outlined throughout the year and underscores the strength of our increasingly diversified portfolio. We delivered adjusted EBITDA of $1.58 billion, an increase of $237 million or 18% compared to 2024, and AFFO of $1.07 billion, up $242 million or 29% year-over-year. The increase in adjusted EBITDA was driven primarily by higher contributions from our U.S. flexible generation segment, reflecting the acquisition of Hummel and Rolling Hills in June 2025 and the full year contribution from La Paloma and Harquahala, which were acquired in February 2024. Results were further supported by lower emission costs in Canada following the repowering of Genesee in late 2024 and lower corporate expenses following the 2024 reorganization. These gains were partially offset by lower contributions from our Canadian Renewables segment following the sell-down transaction we executed in December 2024. The AFFO increase reflects higher EBITDA and lower current income tax expense, partially offset by higher finance expense associated with increased borrowings to fund growth. While net income for the year was lower than 2024, this primarily reflects noncash items, including unfavorable changes in unrealized fair value adjustments on commodity derivatives and emission credits, higher depreciation and amortization related to assets acquired or placed into service and the absence of prior year divestiture gains. Importantly, these items do not detract from the underlying cash generation strength of the business. Overall, 2025 was a transformative year that strengthened our platform, expanded our U.S. flexible generation footprint and materially increased cash flow positioning the company well for sustained long-term value creation. Our performance in 2025 reinforces that our people, processes and strategy are aligned and built for this moment. We see three fundamentals clearly. Power demand growth is strong. Natural gas is critical and Capital Power is well positioned to win. We have a proven platform, deep expertise and a track record of disciplined execution that differentiates us as we move into 2026. We are reaffirming our 2026 guidance for the year that we laid out at Investor Day. Our outlook reflects the strength of the platform we've built, a larger, more diversified fleet, increased exposure to U.S. flexible generation and more stable, predictable cash flows. The guidance is supported by three factors: full year contributions from 2025 acquisitions, structural improvements that carry forward and conservative market assumptions supported by disciplined hedging and capital allocation. As discussed at Investor Day, sustaining capital in 2026 will be higher than historical levels. This increase is planned and deliberate, reflecting the scale and composition of today's portfolio. Is not catch-up spending or related to asset performance, but proactive investment to maintain reliability, protect cash flows and support long-term earnings durability. Our MCV recontract is a great example. We've secured a contract that extends through the facilities 50th year of operation. Executing commercial optimizations like this is only possible with the requisite investment needed to ensure extension of the life of the facility. Even with higher sustaining CapEx, we continue to generate strong AFFO and support the dividend within our targeted payout ratio. We remain focused on disciplined growth supporting the dividend and maintaining balance sheet strength exactly as outlined at Investor Day. At Investor Day, we highlighted something really important. We have multiple opportunities on our existing asset base that require little to no growth capital that can grow adjusted EBITDA by up to $1 billion per year. That growth primarily comes from two levers: resetting contracts with superior pricing for longer duration and capturing rising merchant power prices in Alberta and PJM. This is embedded upside in our existing fleet. And importantly, we're already executing. We've recontracted MCV in Arlington Valley, extending duration and materially improving economics. This materially derisks a significant portion of the $1 billion of potential. That's why we see existing capacity represents the most compelling opportunity for growth. The assets are already built, operating and positioned to capture higher value. Our 2030 targets remain unchanged and continue to frame our long-term strategy with capital allocation decisions, explicitly prioritized towards opportunities that drive AFFO per share growth, support disciplined U.S. expansion and maintain balance sheet strength. Our 2026 strategic priorities will set the foundation for meeting our 2030 targets. Avik Dey: Thanks, Scott. Before we begin Q&A, I would like to highlight our recent announcement regarding our leadership. We are pleased to have Kevin MacIntosh join Capital Power as our incoming CFO. Kevin has over 30 years of experience as a finance leader working in large complex organizations within the global energy industry and brings expertise across multi-jurisdictional operations, cross-border transactions, energy trading, and diverse regulatory landscapes. On behalf of the Board, the executive team and all of Capital Power, I would like to extend our gratitude to Scott Manson for his strong leadership and expertise and a service across many parts of the organization and as interim CFO. Scott will continue to support the onboarding process and transition until the end of April 2026. With that, I will hand the call back over to Roy. Roy Arthur: Thanks, Avik. This concludes the formal part of the presentation. Operator, you can now begin Q&A portion of the meeting. Operator: [Operator Instructions] And our first question comes from Nick Amicucci of Evercore ISI. Nicholas Amicucci: I just wanted to touch quickly, Avik, on the -- I'm just kind of -- it's something that you guys outlined in the annual report here. The ASO and just the ability and kind of ongoing negotiations at Genesee units 1, 2 and 3 to kind of upgrade those. Just -- is there any kind of sense of timing or any clarity to be gleaned surrounding any of those, like the potential increase in generation? Avik Dey: Yes. And to be clear, it's not an uprate. We have volumes that are already available and subject to a maximum capacity limit on the grid. And so we've got an engineering solution to try and unlock those in our 2026 plan, we're expecting those volumes to be unlocked towards the back end of the year. But just to reiterate, we do have significant expansion capacity at the Genesee site. We see it as probably one of the most attractive generation sites anywhere in North America with access to land, access to water, access to transmission. Nicholas Amicucci: Right. Okay. Great. Perfect. And then just as we think about -- just because we know the -- I guess, some of the Calpine assets are going to be hitting the market soon within the PJM, the ones that need to be divested and everything. As we think about kind of the right way or the right asset and kind of portfolio allocation between PJM and Alberta. Any kind of -- and since we're at kind of that 60% that was previously conveyed. Any kind of direction that we should be looking or kind of threshold that we should be seeking when we think of it from a -- to the portfolio competition perspective? Avik Dey: Sure. We are deeply committed to maintaining our investment grade rating. Our contracted for 60% were near 75% today. As you think about our portfolio, we are currently not evaluating any acquisition opportunities in Alberta. Our acquisition effort is heavily focused on U.S. generation or generation that can increase overall contractedness. So we will maintain being above that floor of 60%, but we're comfortable with where we are with regard to our ratings. But that is a strategic barrier and threshold that we wouldn't expect to fall below . Operator: And our next question comes from Robert Hope of Scotiabank. Robert Hope: Hoping you can add a little bit of color on the conversations that are ongoing at MCV regarding the 250-megawatt data center I'll take. Have you opened up that process to other parties as I see it's no longer exclusive? Avik Dey: We have not, Rob. We continue to work with our partners there and continue to advance it. Robert Hope: All right. And then in your prepared remarks, you mentioned that recontracting pricing is now moving to cost of replacement versus a cost recovery model. And in the annual report, you do highlight that recontracting is a focus for 2026. Can you provide an update on how those discussions are going? And you've already announced one recontracting in 2026. Should we assume that there could be some incremental recontracting announcements for the balance of 2026. Avik Dey: I think it's safe to assume that we are actively evaluating multiple recontracting opportunities in the U.S. We've got multiple plants that have -- that are expiring between '29 and '31 between [ Freddie ], La Paloma and Decatur. So -- and I think if you reflect back to our Investor Day, we've got $1 billion of adjusted EBITDA opportunity to go capture. And within that or over and above that, we've got incremental recontracting opportunities. So I won't pinpoint a specific outcome in a specific period of time. But I think we've delivered on that already between the announcements that MCV in Arlington Valley and continue to explore other opportunities. We feel confident about the opportunity set though. Operator: And our next question comes from John Mould of TD Cowen. John Mould: Maybe just starting with the environment or gas-fired M&A. Could you just maybe give us a sense of how that's evolving relative to the last time we dug in this a bit at the Investor Day and maybe initial progress on the MOU with Apollo and your discussions there? Scott Manson: Sure. Thanks for the question, John. I'd say it's a robust market for M&A, and there are a lot -- there's a number of opportunities in the marketplace for us. As Avik mentioned earlier, it's a focus on finding the right opportunities, ensuring that it fits within our mix and ensures we remain investment grade. And for us, the ability to partner with someone like Apollo opens up the aperture of opportunities for us to ensure that we remain investment grade and on-site or 60% contracted mix. So it gives us a number of incremental opportunities to look at as a result of that. We continue to work through to agreements with Apollo and we'll update once we have something to update on that front, but making some progress there. Avik Dey: I would just add to that, John, just a general market commentary. We're seeing increasing focus from market participants on the value of contractedness which we think the market is coming towards us in terms of capabilities. And overall, I think we're seeing a broader opportunity set of acquisition opportunities that extend beyond PJM. I think last year, it was heavily focused on PJM and ERCOT. And I think we're seeing a broader opportunity set than that now. So we're encouraged. John Mould: Okay. And then maybe just turning to Alberta. Thoughts on your progress on the overall regulatory framework for additional data center load. And I can appreciate you can get into the leads on how the Phase 2 process is going, but I'm thinking more just bigger picture, how are you feeling about the progress in creating the right conditions in Alberta to attract additional data center load beyond the initial 1.2 gigawatts from ASO Phase 1 that's making its way through FID processes right now. Avik Dey: I'd just go back to my comment to the next question, John. We feel really good about the value of Genesee. I could not be more emphatic about the fact that we think we've got a world class site that can materially increase generation. And I think from the DC perspective, between the government into Phase 1 now into the Phase 2 process, the market environment is increasingly becoming more attractive for Alberta. The pace at which the announcements are coming out, may not be at the pace that the market is expecting. But I think below the surface, the work that's being done to facilitate new generation coming in, the work around contracting and how that will work and then the general market environment of Alberta, where prices are, where transmission distribution is. And the upfront work that I think the ministry, the regulator has put in place to allow for new load coming in, I think, has been, in some ways, leading North America. So when you compare and contrast that against PJM, who just recently announced, the special auction in many ways, Alberta's move on Phase 1 front run, what other markets are looking to do in the U.S. So I think we continue to be excited about it, frankly, more excited today than I've been at any other point in time, but it's not changing our disciplined approach to monetizing what we think is the best site in North America. And I recognize the boldness of that statement, but I think the facts support just how high quality Genesee is. Operator: And our next question comes from Maurice Choy of RBC Capital Markets. Maurice Choy: Thank you, and good morning, everyone. I just wanted to first touch on the statement of principles by the White House and certain PJM governors. What do you see as being the biggest risk to what's being recommended? And what PJM or FERC do to avoid that risk. Avik Dey: Maurice. Yes. I think the biggest risk we as generators see is somehow bifurcating the market in PJM between existing gen and new gen and the risk of somehow new gen being supported by a different pricing regime. That's the conversation we and all the generators are having. And I think from a supply and demand perspective, the good news is if you're a state governor looking at increasing reliability and affordability issues, the incentive through the existing auction process to provide incentives to the existing BRA process for existing generators is still there. What I find incredibly interesting through that exercise is the call to action 4, 12 gigawatts through the RBA process was coupled with a call for extension of the existing cap and floor. So I think that's the single biggest risk. I think we and all generators in PJM take a great deal of comfort in two key facts, which is the existing cap and 4 is not clearing the market currently. So it's showing that existing short- to medium-term demand is in excess -- well in excess of what existing supply can take but also secondly, the spread between cone and existing generation at, call it, $60 a megawatt is a wide enough spread that you're still going to need to encourage new generation and existing generation to increase capacity through the existing BRA process. Maurice Choy: Does the 12-gig RBA motivate someone like yourself to want to partake it from a new gen perspective? Or do you think the extension of the collars of 2030 as far as you want to go in this market. Avik Dey: No, I think like any generator when you have the opportunity to capture 15-year PPAs with what would notionally be investment-grade counterparties, you have to look at that. So now whether that is for new build or expansions at existing sites, that remains to be seen and negotiated. But we feel I shouldn't say we feel confident, but we're hopeful that we will have opportunities to do that as well. But the short answer and clear answer is, yes, we are evaluating it and we'll look at it. . Maurice Choy: That's great color. And if I could finish off with the revised social objectives agreement, SOA with the City of Edmonton. From your perspective, what flexibilities were you trying to achieve or perhaps any risks that you are trying to avoid with this new agreement? And I'm hoping that you could focus your comments on the two things that special limited voting share as well as the head office location. . Avik Dey: So the head office location, I'll start with that secondly. There was no objective there other than to reaffirm our commitment to the city of Edmonton through this agreement. Edmonton is our home. It's been our head office. It's where the company was created. And frankly, it's a huge advantage. The core that we have built in Edmonton. It's probably one of the best cities in North America to build out technical, engineering, construction, project management expertise anywhere in North America. And our track record has demonstrated the formidable team that we've built from Edmonton in that regard. So I would say that the SOA piece of this was really about our reaffirming and extending our commitment to the city, which is what the agreement provided for. The real key for this was the special voting share what others would refer to as the golden share. And when the company spun off in 2009, there was a special golden share that gave certain and specific rights to the city to in effect have a veto over the organization. And so it was important for us to have full governance control and be in full alignment with our shareholders. And so it was an opportunity that we took and brought to the city to say look, the company has been incredibly successful. We're growing. We've emerged as a leading IPP in North America, and that and as a result, having flexibility around our governance commensurate with other large publicly traded companies was the right thing to do and the city supported us in that. Operator: Our next question comes from Mark Jarvi of CIBC. Mark Jarvi: I just want to go back to PJM. Avik, just in terms of the comments about the RBA. Just where are you with conversations with clients? Is there a bit of an impasse until there's clarity on how this kind of comes out with the government in the White House proposal? Just interested in terms of conversations you're having right now with potential customers? Avik Dey: We are not having active conversations yet with customers. The ball is in the PJM's court in terms of -- in response to the governors and National Energy Defense Council. So they've responded in kind with -- they've received the recommendation and are now evaluating it. We and other generators are in consultation with PJM on what the framework for that could be. And I think I'm sure some of us are having conversations, but we're focused on ensuring that the framework works for us and all generators currently. And then in due course, we'll prepare. But what I would say separate and aside from that, since closing the acquisition last year, we've been actively marketing our capacity from a wholesale perspective. So it's not like we're not actively marketing it, but I would say we have not specifically responded to the RBA with an outreach tied to the RBA yet. Mark Jarvi: Can you just clarify what that means in terms of the wholesale marketing efforts? Avik Dey: It's -- we're talking to any and all potential wholesale customers on long-term offtakes for capacity and energy . Mark Jarvi: And they're willing to contract before like the range of customers until there's clarity on the RBA? Avik Dey: Yes. That hasn't changed in the market. Mark Jarvi: Okay. And just going back to the... Avik Dey: I'll just clarify that. And the reason is that when you look at the RBA process, that RBA processes specifically for hyperscalers for 15-year PPAs that are looking at CODs that are 2030 or later. So if I'm in the market now, then your needs haven't changed, which is why I think this is important as investors consider this RBA auction, because it's a one-to-one, but we're sitting here today in the BRA process, and we're not clearing the auctions. So short, medium-term demand isn't exclusively being driven by data center demand. But the RBA process is explicitly focused for long-term data center demand. Mark Jarvi: Okay. And just go back to the comments on the Apollo partnership. It's still at the MOU stage, would that limit your ability to do any larger transactions until you turn that into a definitive deal? Or do you think that can get ironed out in the next couple of weeks or months, and that keeps you having all that sort of ample opportunity and breadth that Scott mentioned in terms of M&A potential? Scott Manson: What I would say, Mark, simply is we've been advancing the MOU with Apollo. They've been a great partner to date and we can walk in to government at the same time. Mark Jarvi: Got it. And then just with the Alberta Fed MOU starting to get closer to us here in April, just updated views in terms of where you think there's making progress in terms of how [ tier ] gets revisited and whether or not the CR goes away? Avik Dey: We expect it to go away. The negotiations are ongoing. We participated in the outreaches for consultation as requested. I don't have a further update than that, but we expect it to get ratified as was stated by the Prime Minister in the premier back in December. . Mark Jarvi: Any possibility there's an extension just given, obviously, there's a lot of different things that have to get solved here? Avik Dey: I don't have visibility on that today. . Operator: And our next question comes from Benjamin Pham of BMO. Benjamin Pham: I wanted to first start off with the ASO Phase 2 large load allocation. Can you comment on what you or the industry expect to see from that to get the DC in actually continuing to go forward? Avik Dey: Yes. The Phase 2, Ben, Phase 2, we'll expect to see bring your own generation result in deals and data center announcements. I think we're explicitly focused on monetizing Genesee, as I've stated a few times today. And what that means for us is we're in the business of selling power and getting PPAs with strong counterparties. So that's going to be our focus. I think the continuing focus across North America on reliability and understanding how additional transmission distribution affects affordability for consumers, particularly in the U.S. as we're in an election year, running up until midterms is continuing to draw interest in Alberta. So relative to last year to the year before, I would say there's more interest in Alberta today than there ever has been. And I think Phase 2, we're focused on investment-grade counterparties that can sign long-term PPAs. I think the broader universe of opportunities, there will be others that come in that will look more like merchant data centers, I think rising tides lift all boats. So I think any and all activity in the province is going to support increased demand and closing that supply, closing that supply/demand gap. But our attention, if it's not clear, is on large customers that can find long-term PPAs that are credit worthy. Benjamin Pham: And maybe to follow up on that a bit more. I mean the bring-on generation, that's been discussed for some time. You had the Phase 1 where it was a prorated allocation. Do you expect Phase 2, it's more in the vein of X megawatts each year over a set period of time, RFP like style allocation? Or is it something totally different than that? Avik Dey: No. I think our indications are is the government means what they've said, which is they will work with parties so long as they're not unduly burdening consumers with that solution. So I think the trick will be not can you go do a deal if you have behind the fence generation, I think the province has been incredibly clear that they welcome that. I think the trick becomes is if you need a grid connect, what does that mean, how are those costs borne and that's the distinction between Phase 1 and Phase 2. So I think Phase 2 will result in transactions coming forward. I think the question is going to be, and how do you support? And by the way, this is the same issue that is in the U.S. There's a pipeline of over 50 gigs in ERCOT of development deals that have been announced. But the next phase of that is how do you convert that into a revenue model between long-term contract and potential energy exposure. So we're not in a position to say, I'll just be very blunt for us as Capital Power, would I go do a greenfield power plant in Alberta with a 15-year PPA in a merchant market unlikely, unless it had full contract coverage or material contract coverage that allowed us to make our rate of return. Now do we have more flexibility to do a lot more on what I think is North America's leading site at Genesee? Yes, which is why I'm able to speak with such confidence around our positioning in the market. So at the end of the day, for me, the opportunity in Alberta because the market structure affords us the ability to go sell power flexibly with duration, pricing and shape. It allows us to meet whatever the customer needs, whether it's on the energy side, selling energy or it's through co-location or building a site. So we feel really good about the opportunity set. It's just taking -- it will take time to get the right deal. We could go do any deal tomorrow, we're going to do the right deal. And I think I've been consistent in that messaging for the last two years. Benjamin Pham: Okay. Got it. And then maybe one more topic from me the Genesee 1, 2, 3 MSCC. Let's say you get the clearance this year is 500 megawatts of additional supply. I know you spent the CapEx, it makes a lot of sense for that. I'm just wondering -- I'm not too sure the market wants [indiscernible] supply in the silver supply market right now. Is that MSCC? Is that more of a bridge to the MOU you may be working on or Phase 2 opportunity? Avik Dey: I wouldn't read anything into that, whether it's a bridge or a subsequent negotiation. It's a technical requirement, the 466 of the ASO for a single node limit. I think we're committed to unlocking those megawatts for the grid, which we think is net beneficial because we are effectively baseload for the province given our efficiency and heat rate on those plants. So in any scenario where you look at the merit curve having more efficient megawatts is net beneficial to the grid and then even within our own complex when you look at G1, G2 versus G3, it's a net benefit to have more from G1 and G2 versus G3. So I think in the context of how the province and the ISO look at overall megawatts, I think all of us are collectively aligned in the interest of the consumers to unlock those volumes. We've just got to get through the permitting process and the testing process. Operator: And our next question comes from Patrick Kenny of NBCM. Patrick Kenny: Just maybe back on the PJM market and the RBA. Wondering if you could dive a little bit deeper into the opportunity for Rolling Hills just in terms of what a balance of plant investment opportunity could look like in terms of potential size and scope. I know your team is still working on the technical aspects, but just wondering if you had some ballpark figures that you can throw out there. Avik Dey: Pat, I don't have ballpark figures that I can refer to on Rolling Hills other than to say it was a plant that we acquired that was running at a 20% capacity factor. We're doing materially better than that. We've got permits that are air permits that give us capacity of almost twice that. And then we've got land available on transmission available that would allow for potential expansion that would allow for a potential repowering. So we are excited about the opportunity set around Rolling Hills, but I'm not in a position to quantify CapEx or timing or capacity at this point. Patrick Kenny: Okay. Fair enough. And I guess now that we have clarity on capacity prices through 2028 and the pricing cap is being held in place there through the end of the decade. I wondering if you can get an update for us on your financial outlook from Hummel and Rolling Hills now that things have changed since you initially announced the transaction last year relative to your initial capacity price and utilization assumptions. Avik Dey: Thanks for the question, Patrick. I'd say overall, to date, the assets have performed better than expected from a cash flow perspective. And as we look out into the future capacity auctions, including the couple of expected ones that are coming as a result of the RBA. The price expectation that we had is very low relative to where we've seen the auction settled to date and also the relative shortfall that we're seeing coming into the two upcoming auctions here. So it is a case for our cash flows were more conservative and the expectation is that it is going to outperform through that 2030 period. Patrick Kenny: Okay. That's great. Last one, if I could, just on -- just a follow-up on the Alberta Phase 2 process. The 2% levy on new data center investments, I guess, 0% is fully off the grid, 1% somewhere in the middle. Can you just provide us with any feedback, if you have any on how potential customers are viewing this in terms of competitiveness of the legislation and whether or not you see this as helping or impeding the development of large-scale projects in the province. [Technical Difficulty] Operator: I'm able to hear you now. Avik Dey: Thank you. Well, if there are no more questions, at this point we [indiscernible] to conclude the call. So we do thank everyone for joining and listening today and continue to follow the Capital Power story. Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect.
Operator: Ladies and gentlemen, welcome to the adidas AG Full Year 2025 Conference Call and Live Webcast. I am Maura, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Sebastian Steffen, Senior Vice President, Investor Relations, Corporate Communications and Corporate Strategy. Please go ahead. Sebastian Steffen: We just realize it's a long title. Thanks very much, Maura. Good evening, good afternoon, good morning, everyone, wherever you're joining us today, and welcome to our full year 2025 conference call. Our presenters today are our CEO, Bjorn Gulden; and our CFO, Harm Ohlmeyer. I know that there's a lot to talk about today, and we will kick it off in a second with Bjorn and Harm, who will provide the details for 2025. They will be sharing with you our operational and financial highlights for last year, present our outlook for 2026 and of course, also talk about our outlook for '27 and '28. [Operator Instructions] And now before I hand over to Bjorn, we will, of course, kick it off with a video. [Presentation] Bjorn Gulden: Yes. Hello also from my side. I'm sure you have spent some time looking at our numbers already. But I think in the interest of all of us, I'll take you through the story that I think we have achieved in '25, and then we will talk '26 and even a little bit further as we go ahead. As a sports romantic, I have to remind you again that in a very complicated world with many negative things, there are also great sports events. And I do think that the Winter Olympics in Italy was one of them. And we felt that our athletes and our teams did very well. And don't forget that I'm a Norwegian, so I have to remind you all the time who's on the top. And I also tell you that I'm extremely proud of being Norwegian when it gets to sport. I also remind you that the Paralympics is starting in 2 days, which is also a very important sports event, and I hope all of you have a chance also to support that. Which then links into our plan, you remember that '25 is the third year that we work together. We promised you that we would be a good company in '25. And to be very honest with you, when I look back, I think actually '25 was a fantastic year for us, not only in the numbers that we will get to, but more with what the brand achieved for visibility, performance, product and actually showing that we are a good company. And I think this is what adidas has always been when you look from the outside in and you look what people are looking at, adidas has been and is a very, very good company to work for. And I think you see that when we achieve a lot of prizes from the outside and not prizes that you can buy, but actually prizes where people look at you in competition with other companies. And I can also say that at my age, looking at all the young people who wants to work for us, it's obvious that we currently are an attractive company to actually be associated with. And it is also important for us that although there is a focus on, of course, the numbers and there is a focus on many things, we also want to be -- continue to be a good citizen. And we look at that for what we do for the planet environment and also, of course, how we work on the human rights side. And you've probably seen from the targets that we are achieving them, we will continue to do things as a good citizen that will make the planet and the world a better place because I do think that's still important in a, as I said, pretty complicated world. It's also important to look at that we actually have 64,000 employees that works for us directly. And if you then take into account suppliers and everything, you talk about more than 1 million people. So of course, we have a great responsibility as a company. And when you know that we have 180 nationalities employed, then you also know the task with different culture and different backgrounds, we have a huge responsibility. I'm also proud of knowing that we now have 52% of our workforce being female to 48% male. And not because it's a target, but actually it showcases the evolution of this business. And again, I think I can say that the female consumer is now more important than the male consumer, and it's good to see that the company is also moving in that direction. And although in some parts of the world, gender equality is not something to be measured and talked about, we actually do and it's nice to see that 41% of our leadership are now women. And we do believe that in the next years, that will increase. And if it's 50% or 48% or 52%, it doesn't really matter, but we should be a company that has gender balance, not necessarily because we have to, but actually because it makes sense to be a good company making the right products and concepts for our consumer. If you then go into what you are interested in the numbers, again, I'm probably just repeating what you already know, but Q4 was also better than we had expected. And as you can see, we grew 11% currency neutral for the adidas brand in Q4. And remember that we're also comparing against the year before when we had YEEZY and there's a 1 percentage difference in those numbers. Especially proud is, of course, that we had more than 50 -- almost 51% gross margin in Q4, which is normally a quarter where you lose margin. And that showcases again that the quality of our sales was very high in a pretty, I would say, discounted and volatile market. That gave us a profit of the EUR 164 million. That is almost up 3x what we had last year. Remember that Q4 is always from a profitability in our industry, especially for us, but also for other company, almost a breakeven quarter. And again, that's why we are very happy with that result. That gave us a 13% growth when you look to the adidas brand, the 3% difference to the 10% is, of course, the old YEEZY, and that's a sale of almost EUR 25 billion and gross margin approaching 52%, which I think is all-time high without YEEZY. And then a profitability on an EBIT level of EUR 2.056 billion, which is up 54%. And to be honest with you, higher than what we would have expected both 1, 2 and 3 years ago. When you look at where the growth is coming from, the left side is Q4 and the right side is the full year. And you see that even in North America, we grew 10%. And yes, I think we've said it many times, our focus going forward is, of course, to improve our business in the U.S. We are not by far where we should be, and that's not necessarily due to the American team, but more us as a company, and we will talk more about that as we move ahead. Europe, after 2 fantastic years with growth, another one at 10%. Of course, Europe, we have much higher market share, and we are market leader in many markets. So the growth here going forward will probably not be at the level that in other regions, but a very, very strong performance. And again, it should be like that since we have our headquarters sitting in the middle of Europe. Greater China, another year, up 13%, very happy with the development of the business and the team. And I think you'll also start to see a lot of influence actually of the Chinese organization in other parts of the world, and we will get back to that when we talk about the product. Japan and South Korea, the same, growing at 14%. We used to be market leader in those markets, and we are gaining share. Same thing here, very, very happy with the development. LatAm has been on fire for the last 3 years. We are a market leader in the region and in most other countries and again, growing at 22%. Emerging markets, which again are in a very, very tough situation. Remember that they are responsible, I think, for 72 different countries. And right now sitting in Dubai as an organization and looking into the terrible conflict that we have in the area. Happy to report that no one is injured, but of course, they're having a terrible situation, many of them sitting in shelters. And we also had one franchise stores actually being hit by a rocket and destroyed. So again, I am very proud of the team and also, of course, maybe not so important now, but the performance in '25 being up 17%, very impressive. That gives us then an 11% growth in Q4 for the brand and then 13% for the full year. We talked about the channels every time we speak. You see here a very balanced, what should I say, growth in wholesale on retail, which is brick-and-mortar and e-com. I'm happy to report that we comped in our full price stores and in our factory outlets. And we added around 90 net stores during the year. I think we opened 247 new ones, and we closed 158. So growth both on the like-for-like, which is important, but also expanding into better stores. And you see the e-com, very, very good development. And again, our global e-com team working very well with the markets, we are slowly becoming a very good e-com operator again, which I think adidas used to be. That gives us the famous 60% wholesale and 40% D2C. I think we told you about that already 3 years ago. And on retail, meaning brick-and-mortar at 23% and e-com at 17%. There's not a goal in itself to be 60-40, but that's actually mathematically what happens with the geographical mix we have. And as I said before, there are markets that will be more e-com because that's the distribution. There will be markets that will have more D2C. And again, depending on the growth rate we have in the different parts of the world, this -- what should I say ratio might change, but we actually do believe that 60-40 is very healthy currently. Same thing here. You know because we repeat it again and again that our markets should adopt retail concepts that fits into their market, both from a cultural and architectural point of view. And you see here stores around the world where the storefronts are not the same because we don't want to have all the stores look the same. We want to look great in the market. And that's also what we feel the teams are doing. And the same thing goes actually, believe it or not, for e-com. The pipes are global, meaning that the buildup of the sites are the same. They have access to all the same content, but it probably makes sense as you see here that we're using different celebrities or different culture relevant persons to market the same things in the different markets. And the local teams again adopt them to optimize the performance of the sites in the different markets. So exactly the same logic in the digital world as we do in the physical world. When it gets to the divisions, we have said in the 3 years that we need growth and lead in footwear. You can see here, again, growing 12%. But we also said that there is a time when apparel needs to get into the lead because the visibility of the brand and the chances to actually build brand heat and apparel has been around the corner. And you have seen an accelerated growth in apparel during the year. I'm very happy then to showcase that we actually grew apparel during the full year at 15%. Accessories building the growth. Remember, we told you that we had some issues in sourcing for the U.S. market, meaning that we were negative in the last quarter. The U.S. business is now flattish. So we have sorted out some of the problems. And then globally, especially accessories that are linked to soccer World Cup, especially balls, are highly, highly up. And you should expect this number to continue to actually be positive during the quarters of '26. That gives us the 58% footwear, 35% apparel and 7% accessories. Again, a very healthy growth where, then, what should I say, most of the business then being in footwear. But you should expect that apparel growth rate could be actually higher than footwear for a period, and that is probably also what will be best for our P&L, at least short term. Our performance business now growing at 15%. So mathematically, you will then understand that performance grows quicker than lifestyle, which again is positive. And sometimes lifestyle will grow quicker and sometimes performance. But in the long run, it is, of course, important that we establish a very solid performance business in all categories being both the global ones and the local ones. Important here, football, our DNA, growing at 12%. I think it's fair to say that wherever you research, you will probably agree that we now are the market leader again in football. Running coming, of course, from a lower base, but accelerating the growth. I think the Q4 quarter had a growth of 36%. So that means 29% for the full year. Training becoming a real growth vehicle again at 13% Basketball, negative through the first 3 quarters, but then positive in Q4. So now that is also growing. Outdoor, a little bit better than flattish. Golf, slightly down. And I think that's following the market. Specialist sports, which also are there for sports marketing visibility growing at 12% and the U.S. sports then being up 9% following the growth in the U.S. market. A very solid, I would say, pattern for our performance business. We told you, I think, since a year that the 4 categories we need to win in globally is football. It's our DNA. Running because it's the biggest category. Training because it's important because globally, every, what should I say, consumer trains, it might be a different way of doing it, but very important for us. And then basketball, of course, because of the cultural relevance in the U.S., but also globally. I hope and think you agree that our football business did extremely well in '25, not only from the 12% growth, but also from the visibility and the way we looked and of course, also the way our teams and players, what should I say, performed. I am very proud to say that adidas is back again as a leader in where adidas was probably the pioneer in the industry. Running for 3 years, we've said it has a priority. We spent a lot of time establishing credibility again, signing athletes, developing the best performance shoes that exist. We are winning a lot of races because we have the best athletes and the best shoes. Extremely proud of what we did in the majors. You know there are 6 majors, so you can win 12 times in the 2 genders. We won more than half of them. And not only did we win, we were on the podium, I think, in all of the majors. And it wasn't only in '25. It started now also in '26. The first marathon was now in Tokyo and our male runners were 1 and 3 with Tadese and Alex. And in women, we were 2 and 3. So we took 4 out of 6 podium places, again, showcasing that our product is really, really, really good. In running, again, the adizero range is for those people who like to run fast, and it's been the credit builder -- credibility builder. We then said that we will take the look and bring it into a normal runner, and we did that with Evo SL, maybe the most seen running shoes in the market right now. The volume on the shoe is approaching 10 million pairs. So it's been a very successful, what should I say, launch and execution. We have then gone further with the everyday runner with Supernova, modern version, a really, really good franchise for normal people like myself. And then where we have not been competitive is in what we call comfort running, which we will talk about later, but that's where we're launching Hyperboost in the next couple of weeks and months as the most comfortable foam that you can find in the industry. We talked about training. As I said, there's many versions of training and people train differently in different regions. We have seen a huge development in so-called hybrid training. And therefore, we have signed a lot of athletes, and we have built special product for hybrid training. And hybrid is, of course, where you combine running cardio with strength. And it is then logic that we take a running shoe and we combine it with a strength shoe, and that's what we've done with the adizero Dropset, which has tested fantastic and has a huge order book for the next, what should I say, season. As an example of how serious we take this, we actually, what should I say, almost build a hybrid, what should I say, stadium in our brand center. And last week, we had both the world-class athletes, many world champions together with our own employees, then doing a full, what should I say, competition in our facilities. And again, it showcases how great it is to work for a sports company like ours when you can do these things, great engagement and many of our people were really exhausted, which was cool to see. We also see a clear, what should I say, development in the training fitness area for her, where there is a blend of lifestyle, fashion and sports, and you have seen many collabs happening in the market. We do, of course, also do collabs, but I think the best collab we do is that we actually are now doing original sport where we take the Trefoil, the Three stripes and the original, what should I say, fashion direction and we do it with the functional performance fabrics. The pictures you see here as examples of it. And I don't need to tell you that the reaction from the trade actually globally has been extremely positive, and we see this as a game changer for us in the women's training area. And it might be that we will also see similar development on the men's side. And then basketball, yes, we know that we have not been competitive compared to our biggest competitor, and there's a huge way to go. But again, the new team who has been in place for around 12 months have been a game changer. We have built a lot of new products. We have an innovation pipeline. And when you look at the players at the All-Star weekend, Anthony Edwards was named MVP. VJ Edgecombe won the Rookie MVP and Damian, although he's injured, even won the 3-point contest. So again, the visibility of adidas in AllStar was great. And I know that both on the performance shoes, the signature shoes and the lifestyle, there is a lot of good expectations in the market about our product. Motorsport, we have 1 year behind us with the relationship with Mercedes, AMG PETRONAS, successful both the way we look, the way we produce content. And actually, the commercial side of it is more than EUR 100 million. So we achieved all what should I say, the targets we have and are very, very close to the 2 drivers and the team in developing new products for the future. You know that we added our neighbor. I mean, the Audi headquarter is 100 kilometers from here. So when they went into Formula 1, it was a natural thing that we do it together. They debut in Formula 1 next week. And again, the reaction to the range has been great and the 2 drivers, they've been here many, many times. And we will then have 2, I would call them German-rooted teams together with adidas and Three stripes in the Formula 1 circuits, and we really look forward to that, knowing that the merchandise, the fan base is increasing and it's a good, good thing for our brand, both from an image and from a commercial point of view. And then in the, what should I say, footsteps of adidas, we are back again focusing on many, many local sports and also smaller sports, both to get credibility and visibility. And that also goes into the U.S. Yes, we have a long way to go to be a real, real, real sports brand in the U.S. And of course, we would like to have more college teams, and we would like to have more athletes and we would like to have leagues, but it takes a while. But I think it's extremely cool to see that we had both teams in the NCAA final, when Indiana beat Miami, all the players in adidas, that was a great feeling. But it wasn't only there. We also won the volleyball tournament, and we won the NCAA soccer. And again, this showcases again that our sports marketing people in U.S. now have the freedom and the resources to do what is right for the American market. And that will, of course, continue, although we all know that it will take time to get the visibility and credibility that we need to be fully competitive in that market. This page is probably the one I'm mostly proud of because 2 years ago, people said that adidas didn't have the right product and they didn't have performance product. I would say that we are more than competitive in all sports we compete, and you will see that on this page. Our product people, our development, design and innovation people are as good as anybody else, if not better. And I'm very, very happy with the pipeline of product that is currently hitting the market and actually a little bit proud of it, which I think is in line with what Adi Dassler would have wished from us. Same thing in apparel. It is important for us that our athletes look good, feel good and perform well. And it's the same thing there. We are innovating and investing in product development in all the sports we are in. And I would say in 99% of the, what should I say, situation, we also look good. There was a couple of things that wasn't that good, but that will always happen. And then back to innovation. Innovation is, of course, an investment where people are allowed to try things that haven't existed before. We have quite some innovation when it gets to foam, when it gets to carbon, when it gets to how to treat it. You see it here actually with oxygen and with Colas. We are working a lot on additive or printed, and we are very, very close to actually launching performance shoes that are printed. We are working both with heating and with Climacool systems. And there are some really interesting, what should I say, technologies now coming out also in apparel when it gets to fit compression and also Climacool. So again, same thing here, a lot of very, very energetic innovators that we give the freedom also to bring people or bring product to the market. And sometimes, like you see here, we were able to take together with Mercedes AMG product to the, what should I say, to real activities and set world record. Sibusiso running 5:59:20 in a 100k in a very, very good documented, what should I say, event, an enormous effort from, of course, the athletes, but also from our own people and from Mercedes AMG, again, showcasing something that you can see online. It's a very, very emotional project. And out of that, you will see many products that will also go commercial. And then I mentioned comfort. I personally believe that comfort is something that we and other sports brand maybe haven't focused enough on. We do know that some brands have had tremendous success focusing on comfort. And now we are at the point where we also focus on it. On this slide, you see a lot of footwear models that has been designed and developed with comfort in mind. And the most important thing there is, of course, the new Boost foam, which is Hyperboost. You remember probably that Boost was the most comfortable foam in the industry, shoes like NMD and Ultraboost, but also the most successful YEEZY shoes all had Boost in them. Boost had one problem. It was too heavy. And that's why our innovation team had the brief since 3 years to develop Boost, but to be much lighter. And the answer is HyperBoost, 40% lighter than the old Boost and therefore, a performance foam extremely comfortable and light. And you see here some of the silhouettes that are on the way of hitting the market, both in performance, but also in lifestyle. Adidas Performance growing at 15%, Lifestyle growing at 12%, and you see both Originals and Sportswear growing double digit. I think that you would agree that we have partners that are extremely relevant on a global scale. You see some of them here. I mean, newly signed Kendall Jenner. I mean we know about Grace and the other ones I probably don't need to present. I hope that you saw Bad Bunny at Super Bowl halftime. I think it's the first time in the history where the halftime show was dominated by one brand, not only him wearing his own shoe, the BadBo 1 but also the dances being in Three stripes. And again, very, very proud to see that halftime show, but also proud to see that the shoes blew out very quickly. And of course, there will be releases now in different colors around the world that you can actually buy. Same with our, what should I say, a very close relationship to Pharrell. He's on development with us the Jellyfish was Shoe of the Year in the U.S. And you will see his design direction, both on the high end and the more commercial rolling out in different versions and colors. And here, you see the XLG, which is already doing very well in the U.S. And again, lifestyle, yes, there has been a lot of talk about our Terrace, the Samba, Gazelle and Spezial. But I think you now have to widen it because all the shoes you see here from the Samba all the way down to running and actually soccer culture shoes are selling at quite some high volumes everywhere. And I think right now, it is important to extend the range globally and not forget that the Terrace product is actually continuing to be very, very strong. I would remind you that the Stan Smith is a look that you will see more and more of at the back end of '26. And I don't think I'm wrong if I believe that you and maybe your kids would like to wear Stan Smith in '27. There are very clear indications that, that is going to be a big shoe. But of course, you're also allowed to carry any of the other shoes. Apparel, we did talk about the need 3 years ago to innovate in apparel. 3 years ago, most of our lifestyle product, both in Originals and in Sportswear were Fleece, fleece, fleece. Now you see denim, you see satin, you see knit and you see completely new design elements. A great job from our apparel team, and I don't need to tell you that right now, many of these products are really flying off the shelf and especially online, where some of the good online players are really, really able to showcase newness and freshness all the time. So we continue to see Three stripes dominating the Sportswear side. And again, Three stripes, maybe the most known element of any sports brand in the world. And it's fair to say that we now have a run on Three stripes, and we try also, of course, to do that in a very, very, what should I say, adidas-like way, taking care of it with not overdoing a bit, but at the same time, showing it in many innovative way. So I think with that, I've tried to tell you the story of what's going on with the brand. And then I'll hand over to Harm that Harm can actually do the details of the numbers. Harm Ohlmeyer: Thank you, Bjorn, and ready to have break now for a couple of minutes as I go through the financial update. So good morning, good afternoon from my side as well. And as always, I want to shed some light into the P&L, the balance sheet, but also an update on the share buyback, where we are. So starting with the P&L, as always, Bjorn alluded to some of these numbers already. The most important one is the 13% currency neutral growth for the adidas brand. I want to highlight that again, we can't say it often enough. I mean the total company grew currency neutral, including the YEEZY impact, 10% and reported 5%. So there's a 5 percentage point difference between currency neutral and reported. That is around EUR 1 billion. I'll come back to that in a second because that's an important number to remember in '25 when it comes to the operational performance versus the reported performance. Gross profit, very solid. I give some details, to double-click on that as well. And the operating profit, as Bjorn mentioned, EUR 2.056 billion, 54% up in a very difficult market. So definitely very proud of what we have achieved. When you look at the guidance and how we started, we started March 5 last year with double digit for the adidas brand. We have always been very confident on that one. We said high single digit currency neutral on the reported, including the YEEZY impact from '24, where we had around EUR 700 million of YEEZY sales and an operating profit of EUR 1.7 billion to EUR 1.8 billion. I know at some stage, I got criticized that we changed the guidance 4 times in '24. So we told you that we're not going to change it 4 times again, but we did once on October 21. And what we changed there is not the double digit for the adidas brand, but we still had the high single-digit net sales growth, but improved the operating profit to EUR 2 billion. And now finally, we came in, as you read this morning and actually in the pre-release already, 30% growth for the adidas brand, 10% reported currency neutral, including the YEEZY impact and an operating profit of EUR 2.056 billion. Now I think what's important coming back to the currency impact and the YEEZY sales. You see the quarterly breakdown and the growth percentages in the first quarter, second, third and fourth, 17%, 12%, 12% and 11%, overall 13%, pretty significant. And then when you look at the quarterly breakdown, I think it's important, something you get lost into the percentages, it's important and probably even going forward even more so that we talk about absolute growth. And when you see the quarters, pretty much every quarter is growing absolutely in the amount that On is growing, which is, of course, celebrated quite a bit and rightfully so. But this absolute amount shows you the progress that we have done. And for the full year, would have been -- or it was actually EUR 2.8 billion on operational growth for the adidas brand. And then, yes, part of the truth is that we couldn't comp the YEEZY sales from '24, which is EUR 700 million. And as I just mentioned, the 5 percentage points has a negative FX of around EUR 1 billion. That's why in the books, you only see the EUR 1.1 billion growth. But I think the most important number here is the EUR 2.8 billion that we grew operationally, credit to all the marketing and sales teams around the world. Talking about the fourth quarter very quick. Again, great trajectory with 11% growth for the adidas brand. There, again, it's a big gap between currency neutral and reported 8 percentage points. The main reason for that is not just FX overall, but it's also hyperinflation when it comes to Argentina and Turkey. As you guys in the investor community know, when it comes to hyperinflation, we always need to use the spot rate at the last month to apply it for the full year. That's why the impact in Q4 is always a little bigger than the previous quarters. And that's why it is 8 percentage points in Q4. Bjorn mentioned already the improvement on the bottom line, so I don't need to repeat that again. From the top line, going to gross profit, and I want to double-click on that one right away because it's more important to dissect that a little bit. So again, coming from 50.8% in '24. Now underlying, again, similar to the EUR 2.8 billion growth that we have on the top line, we also made good progress to improve our gross margin product costs, not just because the volume is growing and we are doing a good job in sourcing, but we are also the brand or meaningful brand that gives our suppliers margin because we are growing the business. Not every brand can say that nowadays. And that's why we have an improvement there. The freight costs have more than normalized. It's normal course of business in a volatile environment, of course. Business mix, Bjorn mentioned the 60-40. We still made some improvements from a D2C point of view. So that's a positive business mix and also across the categories. And then pricing and discounting, we have remained very disciplined. It's a neutral element in that underlying driving as other brands are much more discounting and being promotional, not just in Q4 in '25. Of course, here, you have an FX again. And again, the FX is not just a U.S. dollar topic. It's definitely your other currencies as well, whether it's the Argentinian peso, Japanese yen, Korean won, it's Turkish lira. And even nowadays, it's British pound. So -- and I come back to that when it comes to '26, what that really means. The tariffs, we talked about a lot since April. But also here, you see the gross effect and then the mitigation that we have, which is primarily in '25, the discounts that we get from our suppliers. So there's a net impact of roughly 50 basis points. And again, when we promised a healthy company in '26, we also said, ideally, we get to a 52% margin. As Bjorn said, we are probably even ahead of it if the tariffs haven't been hit us, and it would have been 50 basis points on top of the 51.6%. So we would have exceeded the 52% already and would have called out being a healthy company. Now going into '26, what is the first indication for the gross margin driver to be transparent to all of you? We believe we have done a great job on the product cost. So we are considering that as being neutral. The same on freight, whatever is happening in the Middle East, I think we can manage it. We are on top of it. We built a lot of resilience when it comes to our supply chain and logistics. So probably more neutral effect. The same on the business mix. We always talked about the 60-40 wholesale and D2C, but also the categories as performance is now even growing faster than lifestyle. It's probably a neutral one as well. Still opportunities on pricing and discounting. It differences by market. But overall, we still believe there are opportunities unlike other brands, and we see that as a slight positive. But then I have to talk about FX and tariffs a little bit, which is a negative, which is again, on the FX, on the transactional side, we have a positive on the euro to the U.S. dollar. It's not as positive as you all might hope for in '26. But rest assured, as we are moving into '27 and Bjorn will talk about it later on, we have significant benefits coming towards us in '27 because don't forget, just 14 months ago, the euro to the U.S. dollar was around 1.03. Then we had times of 1.20. We are very comfortably hedged going into '27, but there's already some benefits in '26. But unfortunately, we have other currencies and very significant markets as well like Turkey, Argentina, Japan, Korea, Brazil, Mexico, but also the U.K. These are significant markets. They are all significantly above EUR 500 million in size, and they weigh on our transactional FX as well. That's what you will see later on, in the bridge. This roughly is EUR 100 million, and then there's another EUR 100 million on the FX that we get on the translation again. You will see that later on in the bridge, but very much looking forward to '27 as well when we get some of the benefits of the currencies. Going further down the line, it's a story of investing into marketing. We always said the last 3 years, we are going to saving ourselves to profitability through saving on marketing. even as a percentage, 12.4%. That is probably close to the highest we have ever done. And you see it in the trajectory on the top line as well that we are very well invested from a marketing point of view. And what's even important, and you all want to see that tremendous leverage on the operating overheads coming from 34.2% to 31.4%, so 280 basis points or 4% down. Yes, some help with currencies. Yes, some help with onetime in '24. But overall, definitely going in the right direction. And without that, we couldn't have grown our operating profit by 54%. Then, of course, we looked critically at Q3 when we came from operating profit to net income, but also here for the full year and with help in Q4, you see that we are translating the 54% growth in operating profit to a 67% net income growth. How did we do that? The net financial expenses went up by 10%. That is on the one hand, because we carry less cash on the balance sheet. And because of that, we have less interest income. And primarily because of Turkey, the hyperinflation weighs on financial expenses. That is the main reason why we are slightly up compared to '24, but also that is normalizing in '26. And you see that we have a good trajectory on the income taxes. We went down from 26.5% to 24.3%. We always said as we become a normal and healthy company, you will see the benefits in our tax rate as well as we become more profitable. And you should assume also in '26 that we will play around 24% to 25% of tax rate as you start updating your financial models. So overall, very, very good net income growth of 67% and even more so on basic earnings per share of 76%. Now that's the P&L. Now moving to the balance sheet. Inventories up 70% or currency neutral 23%. I want to deep dive into that one right away. You might remember that we started '23 with a challenge in inventories with EUR 6 billion coming out of '22. In hindsight, we believe we have been too disciplined on the inventory in '23, coming down to EUR 4.5 billion. One reason was, yes, very disciplined because it was a problem. Secondly, our top line grew faster than we would have expected, and that's why we went too low. It normalized in '24, and now we have some special effects in '25. On the one hand, of course, we are preparing for further top line growth in '26, and this is the real volume growth, not just what you see reported because there's FX impacts. We have some early product purchases to secure availability for our World Cup because that's important. You all know it's not just a significant event for the brand, but also commercially significant for us. And after some challenges with supply chain hiccups here and there for the industry, we actually managed to have some earlier inbounds at year-end. So rest assured that for the quarters to come, we will bring that further down. And you should assume that we make progress in the first half of '26. And you can take me serious at year-end '26, you will see a number that is below the EUR 5.8 billion. Now what's even more important and testament to a good inventory position, what is the goods on hand and goods in transit and what is actually current inventory. You see that the goods on hand, that is what we have in our DCs around the world is actually 72% and only 7% of the total inventory is not current season. These are things that are sitting in factory outlets. That's what we say again, we have good full price sell-through. We have current inventory and 28% is actually goods in transit. So on the ship somewhere around the world or on a train or on a truck, wherever we are around the world. So very, very current, and it's the most current inventory we have seen for many, many years. Really quick, the rest of the balance sheet. Accounts receivables, of course, up as we are growing with our retail partners. That's normal, especially in Q4 as we have shipped in quite a bit with the growth that we had. Accounts payable are slightly down. That is, as you know, what we need to pay to our suppliers in Asia as we get the shipments going. And then the operating working capital is, of course, up as well, but that is mainly attributable to the inventories that I just explained. And also there, when we go to the deep dive, we came from not so good average working capital over net sales in '22 and '23. We went probably too low in '24 with 19.7%. I always said if you get below 20%, you're an excellent company, but we are definitely a healthy company if you're anywhere between 21% to 22%. So we are slightly up given the reasons that I explained around the inventory, but I'm pretty sure we will get that to the range of 21% to 22% in '26. Now talking about capital expenditures as well, another piece where we have been very disciplined. So we spent less in '25 and where do we spend it? It's most importantly that we spent more than half of it in areas where the consumer will see it. It's either new retail stores. As Bjorn mentioned, there's 90 net openings. We have renovated or upgraded some retail stores around the world. We are investing into shop-in-shop. That's where the majority of the CapEx is going into where the consumer sees it. We are investing into our IT infrastructure, whether it's S/4HANA that we are rolling out around the world, but definitely also in our digital ecosystem, which will always be updated and will never be finished, and that's where the investment is going into and also there, the consumer will see it. And on logistics, you see it's pretty small. Why? We always said we have an infrastructure that can cater towards the EUR 30 billion business. The truth is also that there will be some markets where we are by far the market leader in Latin America, some of the emerging markets where we need to invest in one or the other DC. But you see from a CapEx point of view, it's not dramatic. So we have the infrastructure that we need for the future. Of course, the working capital, especially the inventory led to less cash than we originally had planned. It's EUR 1.6 billion at year-end. It's down from last year, but it's also important that we put that in correlation to what is our cash overall, what is our adjusted net borrowings and most importantly, what are our net leverage ratios, and that is important for our credit agencies as well. So we are very, very strong from a leverage ratio. We have an internal policy of being below 2.0x. We are still coming from above 3x to now 1.4x in '25. And that's why it's important to mention, even given the cash that we have on the balance sheet, we have a strong investment-grade rating from both S&P with A and stable outlook and also Moody's and A3 and a stable outlook because we've made a lot of progress in the last couple of years and is being recognized by them with the efforts that we have done. Because we have a strong balance sheet, we also propose an increase of 40% of the dividend. So going from EUR 2 per share to EUR 2.80. We believe that's the right amount. The shares outstanding, of course, is the number that was at year-end that is changing as we do the share buyback, but that would amount without the share buyback to EUR 500 million dividend. It's a payout ratio of 36%. We believe that's around right amount, absolute and also ratio considering our share buyback of up to EUR 1 billion in '26. And you know that we had a first tranche that is finishing latest by March 18 of EUR 500 million. You see here as of yesterday evening, we have already bought back the amount of EUR 400 million or 2.6 million shares. So definitely, the banks have accelerated in the last couple of days. but also well progressed, and you will see the benefit of that in the future. So overall, when you see the return to shareholders, which, of course, all of you are interested in, we had EUR 357 million in the year '24 only through dividends. And you see now the combination of dividend and the share buyback in '26 will return EUR 1.5 billion, around EUR 1.5 billion to shareholders, and we believe that's pretty significant. And we also believe we can only do that if you carry a strong balance sheet and if you're a healthy company, which we believe we are, and you will see further on that we will strengthen that one with our midterm plan. With that, I'm happy to hand over to Bjorn again. Bjorn Gulden: Thanks, Harm. And then you probably remember our road map that we started talking about 4 years ago that said '25, we should be a good company. And then in '26, we wanted to define ourselves to be a healthy company. And I think we have now added successful because with the numbers we're showing you and the evolution we've had over the 4 years, we think adidas is then healthy and successful. I want to again, although I do it many, many, many times, again, repeat the way we look at our business model. And I hope you agree that it all has to start with the consumer and the athlete because that's in the end, our customer. And the closer you are to the consumer or the athlete, the better decisions will you do. And that's why we believe in a world that is getting more and more complicated and more and more diversified, we need to be closer to the consumer. And that means that the markets will have to take more responsibility in the decisions whatever we define a market to be, it can be a country or it can be a region. But important is that we define where we want to go to make what decisions. And that's not sitting in a central office and believing that we know what's happening all over the world. And this is important because if you want to be EUR 25 billion, EUR 30 billion, EUR 35 billion, EUR 40 billion, you need to make good decisions when it gets to what kind of product are you bringing, developing and sourcing where and not try to believe that you can do the same all over the world. So global will always exist and headquarter will stay here in Herzo and we will, of course, develop systems, processes and frames and also innovation and even run some of the categories very stringent, but we will be more and more local in the way we actually make decisions because there is no alternative at this size. And that means, again, that we will make decisions as close as we can to the consumer, and we need very, very good people, not only in headquarter, but also in the local market. And I am extremely proud to see the energy we have now all over the world and the positivity our management in the market show how they think they can reach growth in the future. And when you then look at it, living this kind of world means that not everything looks the same. There are stores that look different. There are products that are hot in one market and not exist in others. And this is the way the world currently is. And I know there are different opinion about this, but I think we all agree here that there is no alternative. And it could look like when we do a Superstar campaign, and don't forget Superstar is not only a shoe, Superstar is also an apparel word and it is an expression of a consumer, then the frame of the campaign will look the same, but how we execute it, where we execute it can actually be then different from market to market, and you see some examples of it here. It is also true that creativity doesn't only happen in Herzo, in our headquarter, but it happens all over the world. And I assume if you are on social media, you see in the tank jacket. And this China design that was meant to be for the Chinese New Year went viral all over the world, and now we have a demand in every market around the globe. And that showcases again the creativity power that we have and that we can exploit when we have the right attitude and the right systems. It is also true that there are local developments and local fashion shows and local relevance that we do only for the market like you see here. And that's not only in China, it is, of course, also in other markets. It is also true that to be a sports brand, we need to make sure we are in the sports that are relevant. And I don't need to tell you that part of the problem we had in the U.S. of not being what we should be is, of course, that we haven't been visible in American sports the way we should for many, many years. And again, I can assure you that we are doing everything we can to build that over time. But of course, we also have to admit that it takes time. You can't sign the biggest colleges or sign any leagues or the biggest players unless they are free or unless you identify them early. But our sports marketing teams, both globally and especially now in the U.S. are, of course, very, very active, making sure that we can build a base that we can grow from. But it's not only in the U.S. This is a topic we have talked about many times, the cricket in India or the Rugby in New Zealand or even rugby in France. I mean, the cultural relevance of that is very important. It could also be netball for the women in Australia or winter sport for that sake in my country in Norway. We want to be like Adi Dassler made it the sports brand that are in the relevant sports, both commercially and non-commercially, so we can have the ambition of being the #1 sports brand in all the markets. We do know that we will not be the #1 in all markets. We should have the ambition, except for in the U.S., where I think the distance to Nike is so big that we should first have a target of actually doubling our business. All other responsible people in the market should have the ambition of being #1. That doesn't mean we will be it, but it means that they have to identify what they would need to theoretically be #1. And then it is a priority for global then in what markets we have the resources to do it and where the priorities sit. And again, there is no doubt that from the global point of view, it is mostly important now that we keep the leadership where we have it, that we ambition in all markets. And then in addition to that, specifically target the American consumer from America. And again, for the people that are afraid that we will lose the control of the brand, you shouldn't be, because an adidas employee sitting in China or sitting in India or sitting in America is absolutely as much worth and should be as knowledgeable as a Norwegian sitting here in Germany. And then we have to, and unfortunately, we see it again, we are in a very, very fast-changing environment. And you have seen all these headlines, there are jobs being cut in Germany. There are conflicts that are terrible. And that, of course, means again that we need an extremely agile organization with people that are, a, allowed to make decisions and have the attitude of making decisions. And again, being a global brand with a local mindset is easy to say, but it also has to do with the people and the culture. And I hope you agree that over the last 3 years, we have created brand heat and credibility in all our divisions, and we have connected much better with our consumer. We have taken leadership in many markets and in many categories. But of course, we are not where we think we should be at the end. We still have many things to improve. But if you look at the sales increases of the adidas brand, you see that we have grown now twice 13%. And if you really look at the real growth of the adidas brand, it's even much higher. The brand growth of adidas was EUR 5.5 billion because then you have to remember that we lost EUR 1.3 billion of the YEEZY business and we had an FX impact on our top line of almost EUR 2 billion. And that, of course, then reduces this growth to be then only EUR 2.3 billion when the original growth was actually EUR 5.5 billion. I think it's important that you don't forget that. And it is the same on the profit side. We went from EUR 268 million up to EUR 2.056 billion, so more than EUR 2 billion in profit. But again, if you look at the adidas brand's operating profit growth, it's even EUR 2.3 billion on top of the EUR 669 million. The YEEZY business we lost, contributed to EUR 700 million. The FX impact on the bottom line was EUR 300 million. And then the tariffs that hit us in '25 were also EUR 100 million, and that gives you then the reduction in the profit from what we really created. And I think you need to give us some credibility for this because it's reality and it's not really in our control. So again, I'm not saying that everything we do is great, but I'm saying we work for a fantastic company and a fantastic brand, and we have moved in the right direction, and we are very, very aware of what our challenges are. We believe in an operating model that empower more the markets. And of course, that has many, many, what should I say, tasks that we need to solve, but we think it's the only way. If you then look at '26, the underlying growth for the adidas brand is actually EUR 2 billion, and that is then the high single-digit growth that we talk about. But again, sitting in Europe, the FX impact will reduce the reported one by an estimate of around EUR 800 million to EUR 900 million that we currently see. And again, this is just because we're sitting in a euro land in Germany and it's not operational. If you then look at the profit bridge, it's the same. You started with the EUR 2.056 billion, which we rounded here to EUR 2.1 billion. The underlying development that we promised you is actually EUR 650 million improvement. But then there are non-mitigated tariffs of EUR 200 million and an FX impact of around EUR 200 million that actually reduces this then by EUR 400 million. It is a little bit strange, but if that hadn't happened, and again, these 2 things are outside of our thing, you would actually be at the 10% EBIT, which was the number we talked about 4 or 3.5 years ago. Again, not an excuse, but it is things that you have to have in our mind. When it gets to the tariffs, you could ask, so why can't you mitigate them all? Well, you cannot get the price increases through the market right now because of discounts. And it doesn't help if you put up the price on the shoe box if discount increases. And I think it's fair to say in the American market and actually also in the U.S. market, there's a lot of deals in the market from other brands that takes down the realized price. We also, in all these numbers that we talk about have not adjusted any tariffs for the changes that you see in the last 2 weeks. So the high court's or the Supreme Court's decision that all the tariffs were illegal, we are not taking any positive things into these numbers. And also the lower rate of the 10% and 15% that they issued compared to the 19%, 20% and other, this upside is also not in the numbers. If the Supreme Court's decision should be upheld and we could, what should I say, get back tariffs, you're talking about EUR 300 million, EUR 400 million that we have paid of so-called illegal tariffs. But I think we all know that there's a long way to get that back, and we are not accounting for it at this point in time, but there is an upside to it. So with all that, our official guidance is then high single-digit growth in local currencies and an operating profit or an EBIT of EUR 2.3 billion with all the considerations that we have talked about. And again, I then have to repeat again that in the 4-year plan, we said healthy company, it was a 10% EBIT with the 50%, 52%, the 12% and the 30%, which ironically is what we would actually hit if we didn't have the FX and the tariff thing in '26. So we actually believe that we have, from an operational point of view, delivered what we should do. And you know what, there is an upside after this in '27 and '28 that things will turn, and that's why we probably feel a little bit more comfortable than maybe some of you do. For '27 and '28, we want to stay a successful company. And to do that, we need to optimize our working model, and that means decreased complexity or increased simplicity, which is kind of the same thing and then optimize both processes systems and of course, the organization to also formally work towards this new goal because we have broken a lot of internal processes and systems to actually be where we are because we have focused so hard on the consumer that we have not been able to catch up to actually formalize that. And of course, that's a stress on both organization and systems and still with quite some dis-efficiencies. We think we have to do this to win in the new global real world short and long term because we don't believe that the world will go back again to be one global marketplace where everybody wants the same and the your supply chain can be one big systems that works on averages. We actually believe, unfortunately, that the complexity when it gets to consumer demand and supply chain will continue to be very complicated. And we think the brands that maneuver through that, the best way will actually win and we want to win. So when you look at then the period '25 through to '28, you know the results for '25. We told you that '26 is high single-digit growth for the brand, EUR 2.3 billion in EBIT. We will continue to add around EUR 2 billion on the top line, and that would then cause with everything that we are aware of around 10% EBIT in '27. We think we can continue to do EUR 2 billion in increase also in '28, and that would then with some leverage and actually be EBIT margin above 10%. And again, I think it's important that we don't only talk percentages because the percentage we don't sell, we actually sell money or gain money. And I think you agree that EUR 2 billion yearly growth is more important than a percentage number. That means that from an operating profit point of view, you are in the mid-teens CAGR. And that will, of course, if we execute properly and the world are somewhat stable, generate a very strong cash flow. And in addition to the share buyback we announced for '26, we have been authorized by the Supervisory Board to actually buy back shares up to EUR 1 billion each year. And I think that's also what you could expect should we be able to do what we think we should and of course, in a world that is somewhat working stable. We have not talked about the Capital Markets Day to showcase what we do because we have said we want to focus in the next months on really getting ready for the World Cup. Yes, the uncertainty currently in Middle East are asking some questions, but I'm pretty sure that it will be a very successful World Cup, and we have a lot of work to do to make sure that we will show up and that all our marketing that actually starts very soon are going to be as good as we want it to be. But we would then to showcase the confidence that we have after World Cup, invite you in September. I think the preliminary date is the 23 and 24 to actually show you the pipeline of innovation and product going forward because there's a lot of innovation, especially in the performance products, but of course, also in lifestyle that I think you will be interesting to see. So we will call it an Innovation Day and invite you, and I'm sure Sebastian will inform you about that in the near future. I think that's kind of the story. I think you saw in the announcement a couple of other, what should I say, announcement. One is that Thomas, which has been our Chairman for a long time and which I think we all have worked very well with, has told us that he will resign as a Chairman by the AGM. And again, I think we're all very thankful at least in the time that I've been here, we've had a very, very good and close relationship, and I wish him all the best. We have then been able to talk Nassef Sawiris to be our Chairman. I mean, he's been with the company for a long, long time. He's a big fan of the brand. He's interested in our industry, very knowledgeable and again, a person that we have worked with for a long time and look forward to. So we hope that he will be confirmed at the AGM. Ian Gallienne, we hope will be reelected, same profile and extremely close to the brand. And then as a new member, the proposal is Mathias Dopfner, who will bring a lot of expertise and a global knowledge that I think will do our Board well. And we all look forward to work with these people and at the same time, wish Thomas all the best. In addition to that, I think we're all extremely happy that Michelle agreed to extend her contract. She is a long-term adidas employee, knows the industry, has a great, great heart for our people and a really good understanding of what is needed and works very close with all of us. So not only congratulations, but thank you. And then, yes, you can't get rid of me again. I will stay around because I don't know what else to do, and I feel energized and I feel I can bring something. And again, it is an honor actually to sit with the Three stripes and be part of it also for the future. And I wouldn't do it if I didn't believe that we have a great future, and I can contribute at least for another, what should I say, time period. I think with that, I'll hand back again to you, Seb, and then we see where we go from there. Sebastian Steffen: Yes. Thanks very much, Bjorn and Harm. And of course, also congratulations to Bjorn. Mora, we are now ready to take questions. Operator: [Operator Instructions] The first question comes from the line of Edouard Aubin from Morgan Stanley. Edouard Aubin: Congratulations, Bjorn, for getting your contract extended. So two for me on the top line actually. The first one is on lifestyle, which was still up 3% year-over-year in the fourth quarter. You mentioned in the preliminary remarks that Terrace was still strong, if I understood correctly. But maybe it was strong, but negative year-over-year. If that's the case, which kind of other franchises more than offset this headwind? And looking ahead, how do you see the different lifestyle franchise evolving in '26? So that's question number one. And then question number two, and sorry to go into the maybe the granularities of the guidance, apologies. But if you look at the benefit from the World Cup. Bjorn, I think in the past, you had kind of commented the EUR 1 billion type of top line. I know you already had some in '25. But as for my calculation, it would help about the top line of 3% in '26. So if I'm right with the math, that would imply kind of a mid-single-digit ex World Cup in '26 and then reaccelerating in '27 and '28. And if that's the case, kind of what makes you confident that you will have a reacceleration in '27 and '28? Bjorn Gulden: I'll start with the second first. You know when you have EUR 1 billion in World Cup product, it doesn't mean that, that does cannibalize something else. In the merchandise, it's always like when you sell a lot of a national team, you will sell less of some clubs. So you have to be careful to believe that one sale is kind of just on top. If you think about a store that has 4 walls where there are World Cup products now, there will be other products next year. And last year, there were other products. So when we talk about the business, you can't just plug in that business and saying everything is equal. So we are very confident that, yes, the World Cup is part of it. And EUR 1 billion, you do the math and you say, it's 3%, yes. But it doesn't mean that the 3% is then missing when we get into '27 because it doesn't work like that. So we are confident that we can take any event or any merchandising team, and we can replace businesses as we go ahead. So there isn't any, what should I say, hole in the collection for '27 that doesn't give us the confidence. When it gets to your question about the headwind. I think it's a little bit tough to talk about headwinds. We have generated a lifestyle business that I think grew 12% for the full year. And I think everybody has been surprised by the longevity of Terrace. And we have, of course, not believed that we will grow Terrace double-digit every quarter for the next 10 years. We have said that we are launching newness in Terrace, and we're launching a lot of silhouettes in addition to it to grow the lifestyle business over time. And what we also told you was that when we have created the heat on footwear, there is a time when we were ready to also grow in apparel because you need to also grow in both areas, right, maybe with different timing. And with luck or good planning or execution in the second half accelerated the lifestyle part of apparel. I mean you know that footwear is almost 60% and apparel mid-30s, it is obvious for a while that you can grow then apparel quicker than footwear. When you look at the franchises, then Terrace is, of course, stagnating, but it's still at an extremely high level. I think you see it in the stores and you see it in the street. Then we said we were extending court into Campus, into Superstar and eventually, even into Stan Smith. And I think yes, many people will say, "Oh, Superstar is not working that well." Well, Superstar is not only a shoe. Superstar campaign is a look. So it's also an apparel collection that is doing excellent. And when you look at Kendall Jenner, the way she's dressing, that is a whole statement for the brand. So it might be that Superstar is not going to be the big issue in the next, I would say, quarters, but the court side of the business, if you add Terrace, if you add Superstar, and then the introduction of Stan Smith, you will see that the dominance of adidas on the court side will continue. And then what no one talks about more is that the low profile piece is an extension of that. And I don't need to tell you when the weather went warm now, I mean Ballerinas was going through the sky. So I'm not worried that we don't have the pipeline of Classics to actually continue to grow, especially on the court side. When it gets to the Running lifestyle side, then I have to admit that there has been other brands. I mean, New Balance with the retro, ASICS with the retro, and HOKA and On with their comfort that, of course, has been more dominant. We said that we need to bring newness and we didn't have the right silhouettes. We have done quite some business on retro, too. And that's why the whole Hyperboost is so important because that is the extension of performance into lifestyle that we've been looking for. And remember, again, I wasn't here so other people should take the success. But shoes like NMD, Ultraboost and everything we did with our friend at DC was clearly, clearly because also of the Boost foam. So we think we have engineered the products to be successful. And then again, not everything can grow higher than average. It doesn't work. And that's why we think that the growth we had during the year was very healthy. We see where we are now in Q1. So we feel, except for the circumstances right now when it gets to the terrible thing happening in the Middle East, we actually feel that the pipeline of product and what's going into market is very, very strong. So yes, we feel comfortable. Operator: Next question comes from the line of Erwan Rambourg from HSBC. Erwan Rambourg: I'd like to add my congrats to Bjorn for sticking around for longer, if I can put it that way. So I'll stick to two. China, very fast growing in Q4 last year. Does this continue? Are you seeing any change in the landscape vis-a-vis local competition? And is there a reason for China to continue to outperform other markets? Naively, I get the sense that football might be more relevant for LatAm in Europe than it might be for China, but I might be wrong on that. Any sense on whether China continues to outperform? And then second question, possibly more for Harm. In terms of margin expansion, if you look the 2, 3 years out that you detailed, if you look at gross margin expansion versus operating leverage, I suspect, given what you're mentioning about tariffs and FX, gross margin might not contribute that much this year, but maybe you have a more balanced contribution from gross margin expansion and operating leverage in the outer years. Is that the way to think about it? Maybe if you can help us think about the different buckets. Bjorn Gulden: I think you're right that football and the World Cup in China is not a game-changing thing. We see that the Chinese business is built on lifestyle. It's also built on Running, and it's based on silhouettes not necessarily linked to football, although the soccer culture is actually doing also pretty well in China. We are extremely confident with the development in China because our team has really found the business model where they both develop and design their own stuff, but they also tweak global stuff. And because you can produce in a local market in the factories. And as you know, the Chinese retail market is mono-branded where you control the space even if you don't own the stores, I think that's the business model where we have most of the tools to actually be successful. The local brands have made huge improvements when you go back to the time after COVID, you probably remember also that Western brands are struggling with all the conflict coming from the Xinjiang cotton issue. Since then, I would say that we have answered in a way that we have focused on the Chinese consumer to our Chinese organization, giving them freedom and support to actually compete on the same level. And remember, our management in China are Chinese. They are industry people that used to work for us that then left and worked for Chinese brands and then came back again so they understand the model. So I am actually -- if I should look at it probably most confident with the Chinese market compared to any of the markets because I'm not sure what negativity should actually hit China, to be honest. So I think that China will continue to outperform. And as you know, it's a pretty profitable market. And again, very, very happy with the development. And then I think I'm handing over to you, Harm. Harm Ohlmeyer: Erwan, a very good question. And I'll start probably with the gross margin. You're absolutely right. I mean '26, what we indicated earlier, we have EUR 200 million in tariffs that we have in the gross margin, and it's EUR 100 million more in '25. And we have EUR 100 million transactional FX impact in the margin. So that's why we look at '26 as being more stable compared to '25, that shows you already that operationally, we made good progress. And they're not going to go or entertain the discounting or promotions that other brands are doing. Otherwise, it can be done. But overall, rest assured, we know exactly how we have hedged for '27 already, especially for spring/summer, but we started early also in the -- dollar was pretty weak and weaker than today going into fall/winter '27 already, which is earlier than usual. So we know that we have a very, very good gross margin going into '27. That's the gross margin piece. So you're absolutely right, stable at '26, benefits in '27. And on the operating overhead leverage, you saw versus 31.4%, we are not yet where we want to be with the 30% or lower. So we'll definitely make progress year-end '26, and we'll continue to make progress into '27 as well to get eventually to that 30% or lower. You also need to see now it's becoming a ratio game. Of course, when you lose EUR 1 billion in top line, and you have a lot of operating overheads in euro, it's tougher to hit the ratio, right? So that's also part of the equation. But that also leads you to the third topic, as Bjorn indicated that we lost almost EUR 2 billion in translation impact on the top line. I mean this could also flip at some stage and then we have a different P&L, whether it's ratio absolute. So we become a much bigger net sales company all of a sudden, and that will definitely lead to absolute benefit, right, whatever the ratio will be. So that's pretty much where we are. So it's a very important question that we definitely don't take lightly. Operator: Next question comes from the line of Jurgen Kolb from Kepler Cheuvreux. Jurgen Kolb: Yes. And again, Bjorn, good that you don't have anything else to do and stay with us for some more years. Good to hear that. On the question side, on China, coming back to that. We know that China, there are 2 major trends Running, and Outdoor is actually quite strong. So I was wondering how TERREX is doing, especially in China? And if that is a real driving force for you guys maybe also go into other markets? And then coming back to the gross margin side again. In raw material maybe, how are you hedged there? How long can you kind of sustain the rising pressure from oil and oil derivatives? When would that become a nagging problem for the gross margin also going maybe into 2027? Bjorn Gulden: The China market is, of course, not only Running and Outdoor. But from an activity point of view, you're pretty spot on that Running is booming. And as you know, we have worked very hard to kind of build credibility and then take the credibility down in price. The Evo SL is currently our best-selling shoe. And then in China, we also built even products below that with technology. So the pipeline in Running, both from a visibility, having events and having runners and also answering that with an offer that is targeting, I think we are in very good control. When it gets to Outdoor, you are actually right. Although the Outdoor in China goes in the street and a little bit up the mountain, it's not on the top of the mountain. So it's a combination of lifestyle and Performance. And you're probably referring to some of our competitors, the Chinese that have bought Western brands and has done excellent in that area. And TERREX, which is our answer to it, has started to build the same thing. So we are building, I would call it, EUR 150 shoes and below with, I would say, full technology, but that goes in the street and a little bit up the mountain. We are building light down jackets. We are building fleece and we're building collections that goes both on the street and a little bit of the mountains, so let's put it this way. And it's actually doing very well. And it's probably going to be our strongest TERREX market quickly if it isn't already. So you have identified 2 areas that are right. And again, not a surprise to you probably, but the Chinese team are then building, tweaking products for local production to actually then achieve high margin and also targeting the specs that is needed for China. So that is correct. When it gets to the raw materials, we don't hedge raw materials. You have to remember that we develop materials together with the suppliers, and the suppliers give us prices normally for a season. So they actually, if at all, are hedging the materials. We don't see a price increase in materials currently. So when you look at the oil price and the short term thing, the only place where we see it right now is on airfreight because that has exploded for obvious reasons. And we don't know yet what will happen to materials prices, but we are okay in our pricing, I would say, through at least first quarter of '27 when it gets to the agreements we have with the suppliers. Should this conflict cause other areas, then I'm sure we will have areas in freight and maybe even in materials. But right now, we don't have anything in the pipeline that you need to worry about that, that would have a major impact. And again, I hope, both of us hope that there should be no rockets left, so they need to talk, right? I mean that would be the objective and the dream, to be honest. Operator: Next question comes from the line of Geoff Lowery from Rothschild & Co Redburn. Geoff Lowery: Just one question, please. You've referenced a few times a promotional environment. I was just interested in your perspective on what sat behind that. Is that particular brands with particular product issues or inventory issues that they'll gradually work through? Or do you think this is a new cost of doing business more generally in terms of activating consumers? Bjorn Gulden: No, I do think that especially in Europe and America, these are issues to keep the space in distribution and of course, also inventory issues, and also retailers that are nervous, so they're buying these. It's a combination of many things. I think if you've been in the stores over the last 6 months, I think you've seen a lot of red marked product that normally wouldn't be red marked. So I think it's a combination of those 2 things. I don't think this is a long-term sustainable way because it doesn't make any sense for any of the brands or retail. So we are counting on that this will disappear over time. Operator: Next question comes from the line of Warwick Okines from BNP Paribas. Alexander Richard Okines: I wanted to ask the sort of same outlook question you've had already, but in millions of euros rather than percentages. The profit bridge you've given are very helpful. But in '25, you grew operating profits by EUR 700 million despite EUR 300 million headwinds of YEEZY and tariffs. And in '26, the headwinds are a bit bigger, EUR 400 million, but you're only expecting a EUR 250 million increase this year. So what is that bridge, please? And then second question is what would the EUR 200 million tariff headwind in '26 be if you were to take into account the news of the last 2 weeks? Bjorn Gulden: You have to remember that the tariffs that has happened since he installed them, this part of those that he just installed, that has been deemed illegal, right? And then there are agreements between nations that are bilateral that are not illegal because if you make an agreement with a country like you did with India, that is not illegal. So there are different, what should I say, topics. If we calculate through all this, which is not easy because there are markets like China that have 5 different duty rates for 12 months receipt. Then the impact of the changes that he did, the 10% and the 15% after the Supreme Court compared to what it used to be, I would say it's probably EUR 30 million, EUR 40 million, but it's not really that relevant. If you look at all the duties or the tariffs that we have paid for the period that could be illegal, you are speaking close to EUR 400 million. So there is a big variance here between the different things. And I don't think any brand right now knows what we can expect, right? But it cannot be anything negative other than what you have seen. What you see is the worst case, right? It is the duties that were there before the Supreme Court said it was illegal. And there is no, what should I say, positivity on maybe claiming back paid duties. I think that's the only thing that I can tell you. On your first question, I'm not 100% sure what you asked, but the improvement in the profitability, everything being equal, it's actually EUR 650 million. And then you have the duty and the FX that takes you back EUR 400 million, right? So that's the only bridge I can do. The EUR 650 million is, of course, leverage and gross margin on the growth that you're having. So I don't know how else to answer it. Harm Ohlmeyer: Just real quick, Warwick, I understand that you compare like the improvement that we did in '25 with the improvement that we plan to do in '26, right? But the detail is that is in the FX, where the FX impact is coming from the respective countries. And if the FX is primarily coming from the U.S. dollar, it's less of an impact, what we saw in '25. It's across many countries. And when it comes to Argentina, Turkey and Japan and Korea, what I just said, it's across countries that are more profitable, and that's part of the answer. So again, it's complex with all the countries that we're operating in. So there's not an easy bridge that we normally have in gross margin when it comes across all these countries and the currency impacts of all the detailed currencies. But I'm happy to do that in a one-on-one when we see each other on a roadshow. Operator: The next question comes from the line of Robert Krankowski from UBS. Robert Krankowski: Two questions for me, please. We talked about the gross margin that is going to be stable, and then there is a big benefit from the hedging of FX in 2027. But could you talk a bit about what kind of gross margin level you're assuming for by 2028? Previously, we talked about 50% to 52% to get to 10% EBIT margin, 12% marketing spend. Is it the same? And also, what kind of impact does performance, I guess, do to the growth at the beginning versus lifestyle. I mean, like what kind of gross margin gap are we talking about? Is it now better than it was historically, given assumptions that you did? And maybe secondly, if you could touch on like what has been the performance year-to-date. I guess, the environment is very volatile. But are we talking about the growth above high single digit? And what is the shape of the order book, if you could comment? Bjorn Gulden: That was many questions and many difficult ones. I'll start with the last one is that the start of the year has been good. I think I'll leave it like that in a very volatile marketplace. That's both for retail and wholesale. So we are happy with where we are end of February. I think on all the other, when you start talking about margin in '28, you're jumping a little bit ahead. I do think that if we bring EUR 2 billion every year on the top line, there should be leverage on every cost line that you can think about. We know that we can improve our processes and systems, and we do know there's something called AI that we haven't even priced into the leverage. So I think we should continue to say that we think we can take market share that the growth in absolute terms that we talk about realistically is around EUR 2 billion a year. And then I think how far we get then on the EBIT margin then depends on all the other elements. And I think it will be very crazy for us now to start to define those bridges for '28 because I wouldn't know other than there should be improvements on many levels that then should please you as an investor. I don't know, Harm, if you want to add something to that. Harm Ohlmeyer: No, absolutely. Now mapping out '28 gross margin. I mean, it's probably the most difficult KPI to manage even on a quarterly basis. But I mean whether it's the hedging, and it's not just the U.S. dollar, it's many currencies that we're hedging or not actually hedging because it's too expensive. There's footwear apparel, there's categories, there is country mix. I mean lot of things are happening. But looking forward, why we're so confident about where we are heading and that we are going beyond the 10% EBIT margin is definitely coming out of the cost leverage. We will be a more sizable company. There's no question. And again, if we're getting to a 52% margin or better, the key is that we leverage our infrastructure, right? And we will be a much bigger company. And the key to watch is how we leverage our infrastructure and our cost overall. And that's where we can do a lot, whether it's AI or other things where we can run the company differently. That is definitely the element that will bring us beyond the 10% EBIT. Operator: Next question comes from the line of Aneesha Sherman from Bernstein Societe Generale. Aneesha Sherman: I have two, please. Bjorn, the first one is when you first joined, you inherited a very early-stage Samba launch in early 2023. And you were able to grow it and make Terrace such a powerful driver over the last 3 years. You're now looking at the next stage, and rather than one kind of blockbuster product, you've got a wide range of products in Performance, lifestyle, apparel, et cetera. How do you think about that ramp-up in brand heat that you saw with Terrace playing out across a wider range of products? Do you need to have those 1 to 3 blockbuster products that really carry the brand? Or is it possible with a much wider range of products where each individual franchise is not as powerful? Just curious about your philosophy. And then a second one for Harm, please. When you think about costs, the cost base for 2026. You just said on the prior answer that you should have leverage on every item. If you can get to that EUR 2 billion incremental sales. For overheads, you've been at about EUR 7.8 billion for the last 2 years, if I take out those one-off costs for 2024. Is that a pretty steady state level you think you can stay at, in which case, you should see more leverage on the overhead line item? I'm just trying to bridge your operating margin guidance and see where the leverage could come from versus where there could be some deleverage. That would be helpful. Bjorn Gulden: Well, I can tell you that I feel a lot better having many franchises doing well, both performance and lifestyle and both footwear and apparel doing well than putting my destiny on one franchise. I think we have to be very honest that at the beginning of '23, when the negativity and the performance of the company was not that great, it was a gift from heaven to see that we had a Samba that actually was in high demand. And I think we then did a great job scaling it and it ended up not being only the Samba, but what we later teach people that it's called Terrace. And it included Gazelle and Spezial and then later Campus and more shoes. So the risk we took at that point in time, I think for us, for many outsiders, "Are you crazy?" but we did what we felt we had to do. And of course, the portfolio of product we have now is much, much more healthy. I think many companies today, without mentioning names, are now hanging on one franchise or actually hanging on one look which, of course, is not very pleasant. So it is a clear tier goal for us to have a wider portfolio product and to always have the possibility to also create brand heat on apparel because let's face it, footwear has a much more narrow, what should I say, platform, and there's not that many trends. If you do apparel well, in addition to your performance and your lifestyle footwear business, you have a much, much bigger, what should I say, area to play in. And I think you agree that on apparel, the regional differences from a Tang jacket in Japan to a soccer culture item in U.K. that there are many, many variables that you are much, much, much more easier to play on, to be honest, to get business going. So very, very proud of what the product teams have done to expand the ranges. So we're not dependent on only the Samba, which for maybe 12 months was very unpleasant because if that hadn't worked, I might not have extended my contract. Let's put it that way. Harm? Harm Ohlmeyer: Yes. When it comes to the cost base, you listened very well in the past. We indeed, excluding the one-offs, we are around the EUR 7.8 billion. Of course, there's some FX impact on that one as well, especially in '25. But on the other hand, I mean, when you're growing high single digit in '26 or the years to come, of course, you drive more volumes, it is not just done through pricing. And so you need to see that the absolute increase that we might have in cost is coming from freight cost, either you bring the product into the markets or you ship out to the retailers or to the consumers because you move more volume. Secondly, we said earlier that we have net 90 more retail stores. You got to pay rent, you have depreciation. You have people running these retail stores as well. There's some annualization effect. When it comes to all of the overall personnel expenses that we have, we try to keep it where it is because there's an expectation of salary increases, not just here in Europe but also in some markets where you have inflation, so it's going up, more than here probably in the headquarter. But of course, through some programs, we have fewer people. We can become more efficient over time, and that's what we're working through. So we definitely can do better. And then the leverage really comes from our DC infrastructure, it comes through our IT infrastructure, it comes through normal office costs that we have or less depreciation because we invest more disciplined on CapEx. But just staying flat on the EUR 7.8 billion is not that easy if you're growing the volume as well. But again, there's focus on it. We are, first and foremost, looking at the ratio and the leverage, but we can definitely do better, not even bringing out the big word of AI, but there are a lot of things that we can do better to become more efficient, but it's not always the same absolute number, right? The leverage is what we are focusing on. Operator: Next question comes from the line of James Grzinic from Jefferies. James Grzinic: Just a quick one really for Bjorn, a follow-up, I guess, to your answer to Geoff's question in terms of over inventory position in the industry, especially in North America and Europe. Do you feel that more broadly for the industry, we are in a bigger over inventory situation now compared to a year or 2 years ago? I'm just curious about hearing your thoughts on that. And perhaps if you can comment specifically even in big parts of the world like the U.S. and China, for instance. Bjorn Gulden: No. I don't think I even said over inventory. I would say that I think brands are fighting to keep their sales by making deals with retailers. That doesn't necessarily have to be old inventory. So I don't think there is a huge inventory problem as such, like we had coming if you go 3 years back, especially in China and the U.S., there was a lot of inventory, including ourselves. I think if people are uncertain and to make sure that their wholesale business is holding up, people are making deals and the retailers are nervous, so they are asking for deals. So I think it's the right -- the special attitude that the business is currently having more than there is a lot of inventory hanging around them. I would describe it like that. I'm sure there are some inventory for certain brands who are negative in the top line in certain markets like in China, and I want to get rid of that inventory. But I think the issue is more that people are afraid of losing top line and therefore, making deals. I think that's the description I would give. Operator: Next question comes from the line of Andreas Riemann from ODDO BHF. Andreas Riemann: Two questions also on the brand. So Bjorn, you are broadening the range with more categories. You had more wholesale partners every year. So how do you make sure that you don't stretch the adidas brand too far? Or from a different perspective, what are the things that you don't do to keep the brand hot? So any insight here would be appreciated. And the second one is related to takedown versions. You're not talking about takedown versions anymore. So are those products still growing? And then what categories are you offering these products if you do that? These would be my two questions. Bjorn Gulden: Well, first of all, adding retail partners, I don't think I ever said that. What I've said is that we are servicing retail partners better in the sense that we take care of them and we have a much tighter dialogue with them, what kind of product we can build together, and that's both in Performance and in lifestyle, and it also includes in many areas, what you call takedowns in sportswear. I don't feel that we have an issue of controlling the brand because the people that are dealing with the retail in China and developing products in the U.S. or here are all adidas employees. And we all have the same interest. We have the same creative direction. We have the same calling card. We have the same technologies. But the point is that if you decide that China should have a lot of local in running shoes at price points between EUR 50 and EUR 100, I think the Chinese team knows that better than global product managers sitting in Germany. So it's not necessarily that we are widening neither distribution, which we're not, nor widening the categories that you said, it is more that we make much better decisions where the consumer is. Don't forget that the biggest mistake you can do in this industry is essentially push concepts out in the markets that no one wants because then they get discounted. And I think you agree that product that are heavily discounted does not bring, a, brand heat and, b, it does not bring you any margin. And I think if you go to the P&L, so many brands right now, you can measure the brand heat and assortment on the gross margin. And I think when you look at our gross margin build over the last 3 years, knowing that YEEZY is not there and we're approaching 52%, I don't think anybody can raise the question if we have the right range or if we're stretching the range. And so I don't think -- I don't know who told you this, but I don't agree with you that this is the case. What was the other one? Andreas Riemann: Yes. What about the takedowns? Bjorn Gulden: Yes, the takedown is, again, if you look at footwear, I mean, let's face it, every brand are doing takedowns. There aren't gazillions of variations. So if you look at our competitors, you will see that you see the same look in many price points. If you look at Nike Vomero you will see that in 5 different price points. If you look at New Balance, you will see the same look in all kinds of price points. So I think takedowns, we could call them something else, but taking a trend and multiply the offer to different distribution and price points has always been in this industry. So I don't see that as an issue either. What has been good for us or you can say negative is that the growth in originals has been higher than in Sportswear, which would tell you that the higher end has actually been more in demand where we have supplied it more than we have on the lower end. So people tend to say we are -- or I am to commercial and they try to build that story. I don't know if that's maybe to, what should I say, to less focus on themselves. I would measure the gross margin on the different brands. And then when they say they don't want to distribute where maybe we are distributing, I don't know any place where we distribute our product that our competitors are not. And it's very easy if you go to a store to see what brands are there, and I have never gone into a distribution where I'm the only brand, not in my previous jobs or on this job. So I think the brands that end up in the wrong channels are maybe because what they try to do in the right channels didn't work and then they have to clear it, right. So again, I don't agree with stretching distribution because I don't think you will find us in any distribution that you will say is wrong. If you do, then please call me because then, I would like to know about it myself. Andreas Riemann: No, I only made the point because the number of wholesale partners, if I'm not mistaken, was growing from 100-plus to 200-plus in the last 3 years, if I'm not mistaken, right? That's why my question. Bjorn Gulden: I don't know the number you're talking about. You're talking about visiting headquarter? That number you're referring to is that we double the amount of customers that can see our range here in Herzo. But that's the same. It's just, yes, but it's just better service. That doesn't mean that the new customers. We don't have more customers now as partners than we had 3 years ago. But it is true that they're all allowed, or not all, but many of them are allowed to actually come here to Herzo because that's why we have the campus. It's not secret place. This is a place where the adidas family, both our partners, our athletes, customers can come. So that's where you have the number from. But we don't have more distribution points and weaker quality distribution points now that we had 3 year -- I would say it's the opposite because we have a lot of clearance back in '23. So there might have been products in the wrong channels. And I don't think you'll find that now. Sebastian Steffen: Maura, we have time for one more question. Operator: So our last question for today comes from the line of Monique Pollard from Citi. Monique Pollard: Just two from me. The first question was just given your commentary about being conservative on the wholesale sell-in for Europe and North America and also your comments on the level of discounting by some of the retailers in those markets. Just wondered if you have continued being so conservative that the wholesale sellers in regions into the first quarter or whether you've been a bit more bullish on the selling there? And then the final question, obviously, I understand that the situation at the moment, is very volatile. But just wondered within your EM segment, whether you could break out sort of MENA exposure for the key countries that have been impacted? Bjorn Gulden: Well, I'll start with Emerging Markets and the situation. You know that we have 6 subsidiaries that are affected by this that are run out of the Dubai office. And of course, they are in a terrible situation and most of them sitting in lockdowns. And also from time to time, sitting in shelters. So the only focus in those markets the last couple of days has been the safety of our people. Business issues is not really relevant. When it gets to other markets in the regions, there are stores that are actually open and in certain of the markets, the government are asking us to keep them open. And if our people are then willing or want to keep them open, we do. So it's again the local decision on how we or how they, what should I say, behave in a very difficult situation, and our job from headquarters is just to support them. We even offered to charter planes and fly people out if that's what they want. And there's no financial limitation on anything that they can do. But as always in these situations, the people that are used to living in a volatile world have a different attitude than us and are extremely strong. And again, are doing fantastic things. The impact on the business, it's impossible to say right now, and it's not even something we look at, to be honest. When it gets to the global business, we don't see any impact short term on this. And there's no, what should I say, other means than being very close to everything that we can. There is an area where we'll see problems, that's on airfreight because of the situation in the airspace and a lot of planes being grounded that we will have delays on certain, what should I say, products that means air freight, that could be samples that we need for meetings. It could be special products for special events. But also that there is no impact right now that would adjust any numbers, to be honest. Same thing on the cost base, it's like, yes we see oil going up, but we currently don't have any guesstimates or estimates of what impact that could have. And in freight and all that, we currently have long-term contracts that also does react short term. So it's too early to say. And I think you agree, we all hope that as I said, that some of these countries will run out of rockets so that people will talk instead shooting at each other. And then the hope is, of course, talking will cause some kind of peace. I think that's the only thing that I can say. When it gets to the conservative selling in the wholesale, I think there is -- the quarter is more coming from that we have clearly not been willing to do these deals that we talked about. A lot of retailers, and I can understand them, are looking for deals, if it's clearance or if it is even production if they commit to bigger volumes where they will get a higher discount. And then that allows them again to sell discount. And I think if you follow the retail environment, especially in Europe and the U.S., you will see that there a lot of products that used to be full price are now discounted. And we have -- I mean, Mathieu is not here, but our Commercial Director has so far avoided to do these deals because it's your own business. As soon as you start to do it, it's like a drug, right? I mean if you are on to it, it's hard to get off it. And I think you see that in our gross margin that we have been able to kind of, at least in our own business and also the wholesale business, to avoid it, that our product has been discounted is, of course, there because if a retailer does 20% in the window or there's vouchers online, it also affect us, but it doesn't take our margin down because then it's the cost of the retailer, right? So again, we are looking at it. But we know running after every sale by making deals and are hoping and believing that the market will dry up in the sense that this is not necessary. And we hope that all the companies in our industry have the help that we can actually avoid it because it, of course, takes the profit pool in the industry down. Sebastian Steffen: Thanks, Monique. Thanks, Maura. Thanks very much to Bjorn and Harm. And of course, as always, thanks very much to all of you for participating in our call today. As always, if you have any follow-up questions, please feel free to reach out to Adrian, Philipp, Chiara or myself. We very much look forward to speaking with you. In fact, we're actually looking forward to meeting with you as we will be on the road quite a bit, both here in Europe and also in the U.S. And lastly, you've heard it from Bjorn. We, of course, hope to welcome all of you here on our beautiful campus later this year for our Innovation Day. The details about this and the detailed timing at the end of September will follow soon. So thanks again for your participation. Speak soon. All the best. Bye-bye.
Operator: Good afternoon, and welcome to Verastem Oncology's Fourth Quarter and Full Year 2025 Earnings Conference Call. My name is Desiree, and I will be your call operator today. Please note this event is being recorded. [Operator Instructions] I will now turn the call over to Julissa Viana, Vice President of Corporate Communications, Investor Relations and Patient Advocacy at Verastem Oncology. Please go ahead. Julissa Viana: Thank you, operator. Welcome, everyone, and thank you for joining us today to discuss Verastem's Fourth Quarter and Full Year 2025 financial results and recent business updates. This afternoon, we issued a press release detailing these results along with a slide presentation that we will reference during our call today. Both are available on the Investor Relations section of our website. Before we begin, let me point out that we'll be making forward-looking statements that are based on our current expectations and beliefs. These statements are subject to certain risks and uncertainties, and actual results may differ materially. We encourage you to consult the risk factors discussed in our SEC filings for additional detail. Additionally, today, we will be discussing certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP measures are provided in the press release we issued today. Joining me on today's call to deliver prepared remarks and take your questions are Dan Paterson, President and Chief Executive Officer; Mike Crowther, Chief Commercial Officer; Dr. Michael Kauffman, President of Development; and Dan Calkins, Chief Financial Officer. I will now turn the call over to Dan. Daniel Paterson: Thank you, Julissa. Good afternoon, and thanks for joining our call today. 2025 was a truly transformative year for Verastem as we transition to a commercial stage company following our FDA approval of the first treatment specifically for KRAS-mutated recurrent low-grade serous ovarian cancer, nearly two months ahead of our PDUFA date. For the launch period of May through December 2025, we delivered $30.9 million of net product revenue and $17.5 million for the fourth quarter. I'm pleased to report that the strategies we put in place to guide our commercial launch continue to yield meaningful results. We continue to see steady growth driven by consistent adoption among both academic centers and community oncologists. Before I continue, I want to address the updated NCCN ovarian cancer guidelines that were released last week and mentioned in our press release today. The guidelines did not expand the recommendation for avutometinib plus defactinib to include patients with the recurrent LGSOC, without a KRAS mutation. This does not change our launch trajectory. Everything we've been doing for the launch has been based on the guidelines that include the combination as a category 2A recommendation for KRAS-mutated recurrent LGSOC. We're disappointed for the patients with KRAS wild-type recurrent LGSOC, who currently have no targeted FDA-approved treatment options specifically for their disease and face a particularly poor prognosis. Across three separate clinical trials, the FRAME study, RAMP 201 and RAMP 201J, we've observed what we believe are robust objective response rates for patients with recurrent LGSOC, with and without KRAS mutations. We remain committed to advancing the clinical evidence through longer-term follow-up analyses from the RAMP 201 study in 2026 and completing our ongoing confirmatory RAMP 301 Phase III clinical trial, which includes patients with and without KRAS mutations and look forward to sharing these data next year with the NCCN and the medical community to support future guideline consideration. This clinical conviction and our confidence in our data is what underpins our commercial execution. As Mike will share with you shortly, we have an opportunity to continue to drive more growth through the expansion of our prescriber base and increasing their comfort to use AVMAPKI FAKZYNJA CO-PACK at first recurrence. With this approval, we've proven that precision targeting of RAS/MAPK pathway with the combination of avutometinib and plus defactinib can deliver meaningful outcomes for patients. Cancer is highly dependent on this pathway for its growth and approaches [ that block ] just a single node in this pathway are generally insufficient for deep and durable anticancer activity. The cancer will compensate by activating other signaling proteins within the RAS pathway or in parallel pathways. This is what differentiates avutometinib plus defactinib and is defining our success in the market in the clinic. The team's execution through the early phases of the launch has enabled us to quickly deliver this medicine to patients living with a rare ovarian cancer who previously had no approved treatment options specifically for their disease. Likewise, our R&D team has made great strides in advancing key strategic clinical trials. As with LGSOC, the combination of avutometinib plus defactinib has shown promising antitumor activity in pancreatic cancer, a highly KRAS-driven cancer and our RAMP 205 trial in first-line metastatic pancreatic cancer where combining avutometinib and defactinib with standard of care chemotherapy to improve response rates and other outcomes. Avutometinib can help to inhibit tumor growth while defactinib works to inhibit FAP to reduce the stromal density in the pancreatic cancer tumor and address adaptive resistance to avutometinib. The updated data we shared at ASCO last year demonstrates the potential for this combination in treating one of the most challenging cancers. In addition to the avutometinib defactinib combination, we're targeting RAS-driven cancers with other novel therapies. This includes our other exciting pipeline program VS-7375 which has the potential best-in-class oral KRAS G12D ON/OFF inhibitor. Building on the unprecedented data from our partner in China, we moved VS-7375 into the clinic last year with a multi-indication trial strategy. Recent feedback from the FDA has given us a clear strategic path forward for clinical development. As a result, we'll be amending our existing VS-7375-101 trial protocol and separating our disease-specific Phase II registration-directed trials. This added clarity will help us move this program towards a potential accelerated approval pathway. Given the early results, we believe VS-7375 has the strong potential to be the preferred agent in treating KRAS G12D driven cancers on pancreatic, lung and colorectal. Michael will provide a more fulsome update shortly. With all our clinical studies, we've made disciplined data-driven decisions to prioritize those with the greatest potential impact for patients living with RAS-driven cancers. This was demonstrated in our decision to accelerate the VS-7375 program towards registration-directed studies and with the discontinuation of avutometinib plus defactinib program in lung cancer in light of an evolving treatment like landscape despite an interesting clinical signal. We have a wealth of opportunity but limits to our resources, and we'll continue to prioritize the opportunities with the highest value. We'll continue to closely manage our expenses and with our last financing and the exercise of the remaining cash warrants, we've extended our cash runway into the first half of 2027, giving us what we need to advance our near-term milestones. In fact, we believe the LGSOC franchise will be self-sustaining in the second half of this year with CO-PACK revenues funding both the commercial operations and any ongoing clinical trials for [ A+D ]. Our focus remains on identifying value-creating non-dilutive opportunities in this challenging environment as we advance our clinical programs and deliver for patients and shareholders alike. With that, I'll turn the call over to Mike. Mike? Michael Crowther: Thank you, Dan. I'll cover our commercial performance for the quarter, our launch progress in 2025 since our FDA approval in May and some perspective on how we see the launch progressing in 2026. As we have shared, a diagnosis of LGSOC is a life-changing event. LGSOC can affect women as young as in their 20s and the vast majority of these women about 80% to 90% experienced recurrence highlighting the urgent need for more effective therapies. In May of 2025, AVMAPKI FAKZYNJA CO-PACK became the first ever treatment specifically approved for KRAS-mutated recurrent LGSOC, forever changing the treatment landscape for this disease. Let me give you an example of the impact of the CO-PACK therapy. Recently, we learned of a patient in her early 40s who had been diagnosed with LGSOC at age 30 and for several years, tried other systemic therapies, including chemotherapy. Following her second recurrence 4 months ago, she started in the CO-PACK and her most recent scans has shown a complete response to treatment. This incredible outcome underscores the benefit of using the CO-PACK. This is just one of many stories we are hearing from physicians treating people with this disease when other treatments were ineffective or a patient who experienced a recurrence, the doctor would give the difficult news that they have no other treatment to offer. This has all changed with the introduction of AVMAPKI FAKZYNJA CO-PACK. For the fourth quarter, we delivered a solid finish to 2025. The steady growth momentum since our launch speaks to the demand we continue to see. The team is executing well against all 3 key strategic launch imperatives, effectively reaching health care providers, ensuring seamless access to coverage and engaging and supporting patients throughout the journey. Consistent with Q3, we saw encouraging signals in Q4 in both the breadth and depth of prescribing. The number of active prescribers continues to expand. And through February, there have been nearly 300 prescribers of the CO-PACK. Let me walk you through some of the launch dynamics we saw in the fourth quarter and have continued so far through the first quarter. More than half of total prescriptions are coming from the academic setting, and we are seeing repeat prescribers write scripts for new patients. We are making good progress with our top accounts. Our top target institutions include both academic and community centers, about 75% of these organizations have either introduced or adopted AVMAPKI FAKZYNJA CO-PACK into their ecosystems, reflecting growing penetration across prescribers. The split of prescriptions between GynOncs and MedOncs remains roughly at 60-40 consistent with previous quarters. Our GPO accounts have started to incorporate the therapy second-line use into their internal EMR pathways, and we are actively partnering with their leadership on data analytics to find eligible patients within their networks. Payer coverage continues to be strong across all LGSOC prescribed patients regardless of mutational status. The tactical prescriptions continues to be in the range of 12 to 14 days due to rapid prior authorization approval and our payer mix remains consistent with previous quarters. Our Verastem Cares program has been effective in helping patients manage through insurance processes. Approximately 60% of commercially eligible patients are using our co-pay program. In our medical educational efforts, our medical science liaisons and oncology nurse educators have engaged in approximately 1,800 scientific exchanges and well over 700 educational engagements with health care providers through year-end. We saw high participation in multiple expert-led educational programs we supported for physicians to improve physicians' understanding of our treatment in the disease state. We provided a variety of tools to side effect management to help both prescribers and patients stay on the treatment and realize the benefits of the CO-PACK. This includes providing more education to prescribers as they gain experience and get more comfortable with the treatment. These resources are especially important where many community-based medical oncologists may see relatively few patients of LGSOC and appreciate support for patient management. From a patient perspective, we continue to see high engagement in our branded website. Patients are opting in to receive more information about the CO-PACK to facilitate further discussions with their doctor. This brings me to our plans for 2026. As the first company to develop and launch a treatment specifically for KRAS-mutated recurrent LGSOC, there were no well-established support systems in place for these patients and we have been working to build these systems, including providing education about the disease, increased awareness of our Verastem Cares program for insurance support and supporting patients as they learn about this new treatment option. As expected, while many physician's first experience with the CO-PACK is often in later lines, we will continue to focus on driving use of first recurrence that patients can receive the full benefits of AVMAPKI FAKZYNJA CO-PACK. In the next quarter, we will be launching a new promotional campaign to offer physicians and patients to help them reimagine how this disease can be treated. The campaign will be supported by a comprehensive digital ad campaign to generate awareness about the availability of first ever treatment specifically for KRAS-mutated recurrent LGSOC and drive traffic to our product website to access more tools. We are expanding our educational plans with additional peer-to-peer programs, including a new program that directly connects physicians with an expert in LGSOC to feel confident caring for patients with LGSOC and driving optimal outcomes. In addition, we will share support tools designed to increase depth within our active accounts while continuing to expand our reach in new patient starts. We are deploying our sales reps and those educators whenever a doctor prescribes the therapy to help them understand what to expect and use the tools we have created to manage through any adverse events. We have been focused on a fit-for-purpose launch, and as such, we've added a few additional field staff, including some sales reps, nurse educates and MSLs. Due to the nature of this disease as a slow-growing cancer where patients stay on their first treatment for several years, we know it will take time to achieve peak share of first recurrence. We remain focused on our core launch priorities and sustaining steady growth. We're encouraged by the progress we have made, and we will continue building on our momentum throughout the year. I'll now turn the call over to Michael. Michael Glen Kauffman: Thank you, Mike. When I moved from Lead Director on the Board to Head of Development at Verastem last year, it was because I see significant promise in our pipeline and specifically believe that what we're building here with VS-7375 as the potential to significantly change outcomes for people living with KRAS-C12D-driven cancers. I'm proud of the progress our team has made in such a short amount of time. Let me start by recapping where we ended the year with avutometinib plus defactinib because 2025 was a defining year across our portfolio. Our team completed enrollment ahead of schedule in our two avutometinib and defactinib clinical trials, RAMP 301 in LGSOC and RAMP 205 in pancreatic cancer. This positions us well for the catalysts ahead. On RAMP 301, because we completed enrollment early, we expect to report the top line primary analysis in mid-2027. As a reminder, this is our randomized international Phase III trial of avutometinib plus defactinib against standard therapy in recurrent LGSOC, with or without a KRAS mutation. It will serve as a confirmatory study for the initial indication and has the potential to expand the indication regardless of KRAS mutational status and to support future regulatory filings outside of the United States. Turning now to some of our progress. For our Japan-specific RAMP 201J study in LGSOC, in collaboration with Japan's GOG, we shared an update of all 16 patients enrolled by investigator assessment that demonstrated a 57% overall response rate with KRAS mutant and a 22% overall response rate with KRAS wild-type recurrent LGSOC. This is the first ever study conducted in Japan for this disease. We look forward to sharing more data from that trial in the future. And in Europe, we received growth in drug designation in ovarian cancer last year from the European Commission. We continue working through the steps needed for our future regulatory application once we have the RAMP 301 results in hand. For RAMP 205, our first-line metastatic pancreatic cancer study of avutometinib plus defactinib in combination with [ GEM ABRAXANE ]. At ASCO last year, recall we reported a confirmed response rate in 10 of 12 patients for an overall response of 83%. We completed enrollment of the expansion cohort and expect to share an update on the additional patients enrolled in the trial in Q2 of this year. We're excited with the progress we've made with our avutometinib plus defactinib combination trials which we believe has the potential to expand the franchise into new and larger markets. Now turning to VS-7375. We moved quickly after licensing the product to secure FDA IND clearance and Fast Track designation, and we dosed our first patient in June of 2025, following the very promising early results from our partner in their trial in China and we've continued to build momentum since. Here's why the program matters so much. KRAS G12D is an important mutation in pancreatic, colorectal and lung cancers along with lower prevalences in a variety of other difficult-to-treat cancers. There are no FDA-approved therapies targeting this mutation. We have taken a broad approach to generate data not only in these larger tumor types but also across other KRAS G12D cancers, such as biliary tract cancer. We've made some exciting progress in a short time. We recently cleared the oral dose of 900 milligrams once daily in our dose escalation phase, and we're evaluating the 1,200-milligram daily dose. Our partner GenFleet selected the 600-milligram daily dose as their go-forward dose in China due to a strong efficacy signal. While we are advancing some of our cohorts using the 600-milligram dose, we're continuing on our dose escalation to the 1,200-milligram dose level to further interrogate the dose range and characterize the safety, tolerability and efficacy profile of our agent. In addition, based on a preclinical synergy with dual RAS EGFR blockade, we are evaluating the combination of VS-7375 with cetuximab. We recently cleared 600-milligram daily dose level in combination with [ secure ] dose cetuximab, and we'll continue to evaluate higher doses in this combination. I'm also pleased to share that the FDA recently provided feedback on our Phase I/II protocol. Per the agency's request, we are changing our initial Phase I/II trial, which had multiple expansion cohorts and breaking out several disease-specific Phase II registration-directed trials for KRAS G12D mutated cancers, including second-line pancreatic ductal carcinoma, second and third-line non-small cell lung cancer and with VS-7375 in combination with cetuximab in second line plus colorectal cancer. Now let me move to discuss our recent PK analysis that we did. Doses of 600-milligrams daily and above with feeding and antiemetic prophylaxis yielded similar exposures to that observed in China with faster patients. And exposures achieved cover the exposures to preclinical models necessary for maximal antitumor efficacy. From a safety perspective, we continue to be pleased with the profile we see emerging. We have the benefit of hindsight of our partners' trials in China, and we adjusted our protocols to directly address some of the tolerability issues that our partner has seen early on. As noted, the overall tolerability of VS-7375 in the United States appears to be better than that which was observed in China as we're able to escalate beyond 600-milligrams and now beyond 900-milligrams. No drug-related liver function test abnormalities have been reported in any patient across any of the dose levels to date. No drug-related neutropenia in Grade 2 has been reported. And we included in the protocol strong recommendations for standard prophylactic anti-nausea agents and rapid institution of over-the-counter antidiarrheal agents as needed. As a result, rates of nausea, vomiting and diarrhea are lower than those reported by our partner in China. The differentiation we are seeing from the data and our partner in China as well as early signals from our own trial give us strong confidence that potential of this asset to treat multiple difficult-to-treat cancers where there's a high end of medical need with a highly targeted once-a-day oral agent. Looking ahead to this year, our goal is to generate a meaningful data set in each of these tumor types, both as single agents as well as in selective cancers in combination with other treatments. Initially, we plan to share an update on preliminary data in the first half of 2026. But as I said, because of our success to date, we're able to continue with the dose escalation and also enrollment into our various tumor cohorts. And this is really important, getting the optimal dose, of course, matters greatly. We plan to share a more fulsome data at our go-forward dose in the second half of this year. Now I'll turn the call over to Dan Calkins. Daniel Calkins: Thank you, Michael. Our full financial results are included in our press release, so I'll focus on the highlights here. I'm also pleased to reiterate that we reported $17.5 million in net product revenue for the fourth quarter of 2025 and $30.9 million for the full year, which includes the launch period of May through December. Cost of sales were $2.6 million for the fourth quarter of 2025 and $4.6 million for the full year 2025 period. Cost of sales increased in the fourth quarter in line with the increase in net product revenue for the quarter. As we've previously communicated, we're not providing detail on gross to net other than to say that expectations should be consistent with other oncology small molecule therapeutics. Turning to Research and Development expenses. They were $31.7 million for the fourth quarter of 2025 and $114.6 million for the full year. R&D expenses were driven by both the ongoing global confirmatory Phase III or RAMP 301 clinical trial and the ongoing VS-7375 Phase I/II clinical trial as well as higher costs associated with drug substance production activities related to 7375. SG&A expenses were $24.4 million for the fourth quarter and $81.1 million for the full year. The expenses were driven by commercial activities and operations, including personnel-related costs to support the ongoing CO-PACK launch. Directionally, for 2026, we would expect SG&A expenses to remain roughly the same on a quarterly basis as we continue to be disciplined in our expense management, making the right investments at the right time to support the ongoing commercial launch efforts while simultaneously advancing our pipeline. For the fourth quarter of 2025, non-GAAP adjusted net loss was $39.8 million or $0.48 per share diluted compared to non-GAAP adjusted net loss of $29.3 million or $0.60 per share diluted for the fourth quarter of 2024. For the full year, non-GAAP adjusted net loss in 2025 was $163.1 million or $2.35 per share diluted compared to non-GAAP adjusted net loss in 2024 of $107.4 million or $3.01 per share diluted. Please see our press release for a full reconciliation of GAAP to non-GAAP measures. Moving to the balance sheet. We ended the fourth quarter of 2025 with cash, cash equivalents and investments of $205 million including the proceeds of the expiring cash warrants, which were exercised in January of 2026, our pro forma cash balance as of December 2025 was $234.4 million. We believe our current cash, combined with the future revenues from AVMAPKI FAKZYNJA CO-PACK sales will provide cash runway into the first half of 2027. We are very encouraged by the initial launch and look forward to building on the CO-PACK growth into 2026. Given our current trajectory, I'm pleased to reiterate that we believe the LGSOC franchise will be self-sustaining in the second half of the year, with CO-PACK revenues funding both the commercial operations and any of our avutometinib plus defactinib clinical trials. With that, let me turn the call back over to Dan. Daniel Paterson: Thanks, Dan. Before we open the call to Q&A, I'll spend a few minutes on 2026 priorities. 2025 has given us a solid foundation for the remainder of 2026, we'll stay laser-focused on 4 key strategies: first, maximize the commercial launch execution of AVMAPKI FAKZYNJA CO-PACK for broad adoption. Second, generate monotherapy and combination data with VS-7375 to expedite the execution of our registration path in major KRAS G12D solid tumors. Third, continued execution of the RAMP 301 confirmatory Phase III trial in recurrent LGSOC. And fourth, maintain prudent capital management through our key catalysts and a strong balance sheet. In support of these strategies, we set several goals in which to measure our success. We want to maximize adoption of the CO-PACK to ensure every appropriate patient benefits from this novel treatment at their first reoccurrence. For our first-line PDAC study, RAMP 205, we plan to share an update on the expansion cohort in Q2. Finally, as we push to accelerate our VS-7375 trial, we expect to further demonstrate the breadth of our RAS/MAPK pathway driven approach and lay the path for expansion of our commercial product line. We plan to share an update on the 101 trial in the first half of this year. With the FDA's feedback in hand, we are creating Phase II registration-directed protocols for pancreatic, lung and colorectal cancers. Enrollment in the 101 trial is going well, and we anticipate being able to enroll the Phase II trials quickly. Our goal is to move forward quickly and efficiently to hopefully bring this treatment to patients who currently have no FDA-approved treatments to their KRAS G12D mutated cancers. But having said that, while speed is important, we're always cognizant that bringing the best therapy to market is more important. We're privileged to have a commercial product with growing revenue and a robust clinical pipeline that addresses larger market opportunities. We're building a sustainable multi-asset oncology company to address important unmet needs in RAS/MAPK driven cancers. As we enter 2026, we're well positioned to continue to deliver on our milestones. With that, we'll open up the call for questions. Operator? Operator: [Operator Instructions] Our first question comes from the line of Eric Schmidt with Cantor. Eric Schmidt: Congrats on all the progress. Maybe on the NCCN non update, do you guys have any visibility into the thought process behind why wild-type patients weren't included? And then if you could comment on your confidence that wild-type patients can continue to gain reimbursement? I know they've been a meaningful cohort for you in the commercial setting to date. Daniel Paterson: Eric, thanks for your question. Look, we were -- it was disappointing, and we're a little surprised. We've not gotten any direct feedback. We're not really going to speculate. We suspect it might have had something to do with the imminent Phase III readout coming. We know they don't like to change things once they do add something. We don't see any difference to how we've been running our business and to the trajectory. I've said a number of times, it would be nice to have NCCN because it's kind of like air coverage and we're fighting a ground war right now on the reimbursement side. But our team has been doing a wonderful job securing reimbursement regardless of KRAS mutation status, and we'll continue to do the same thing. So our message to our team to physicians and to patients is we're going to continue to do what we've been doing before. Ultimate adoption likely to be very much driven by the results of the confirmatory study because then we can actively promote, which even with the NCCN guidelines, we can't actively promote although we are allowed to share the publications that we have and both the FRAME study and the RAMP 201 study have results in both wild-type and mutated that we believe show benefit to patients, and we'll continue to share those publications. Operator: The next question comes from the line of Michael Schmidt with Guggenheim Partners. Michael Schmidt: I had a couple on 7375. Obviously, the safety now looks very good in the U.S. study based on the detailed table that's included in the slide deck this quarter. Could you comment on what you've seen or if you have seen any dose modifications or perhaps discontinuations? So I'm just curious if you've seen any of those? And then question on how you're approaching dose selection. I believe you've been enrolling patients and expansion cohorts at 600 mg QD, but obviously escalating further up to 1,200 now. So how do you think about dose selection for these planned Phase II studies? And then lastly, just thinking about your combination strategy, maybe just comment on how you're thinking about the longer-term positioning of 7375 in the landscape -- in the RAS space. I know you've planned combination cohorts with approved center of care and various indications, but would it make sense perhaps to also consider combining with other novel agents, for example, pan-RAS inhibitors or other agents that are out there? Daniel Paterson: Michael, thanks for your question. I'll let Michael Kauffman address the questions for you. Michael Glen Kauffman: Sure. I'll try to remember all of them and come back to me if I missed something. I think -- first of all, the number of dose modifications is low and slower than typically that I expect in various trials. And remember, these are heavily pretreated refractory tumors and the patients are doing well, the drug. So the tolerability is consistent with the data you saw on the table and then consistent with any modifications, the dropout rate is very low for the patients. So we're really pleased with what we're seeing. And that includes both the 600 and the 900-milligram cohort. The second issue is how we think about escalation and evaluation of these doses because what we're really doing is kind of a 2-dimensional matrix here with dose escalation where we're increasing the dose now up to 900 and now beyond that. At the same time, we have to determine longer-term tolerability because that's the name of the game now with chronic cancer medicines and longer-term disease control and responses where we're looking for durable antitumor responses. So it's a 2-dimensional matrix for sure. We believe we can identify the proper doses evaluating 10 to 15 patients in each of these areas. And this is not going to be a long-term commitment. I mean these drugs tend to work quickly. Our drug, in particular, works quickly. and we're able to discern a lot of this stuff in several months. But the other -- just to remember, it does take -- it still takes at least two CT scans to determine if someone has a confirmed response and sometimes the responses take more than the first CT scan. So we'll be looking at multiple months. The last point on that is that the important achievements really are after 6 months because in all cases, we need to see prolonged disease control. And as you all know, thankfully, the minimum kind of numbers that we all want to see now even in these difficult-to-treat tumors is north of 6 months. So that's -- it will just take 6 months at least to affect this and understand it better, but we think we're going to be there in the not-too-distant future. The last bit is the combination strategy. Yes, I mean, there's two goals here. One is regulatory, clearly, and the second goal is where is the puck going to sort of -- Wayne Gretzky quote of how to predict the future. And we'll be looking at both. But the primary goal here is to move these drugs initially into the second and third-line setting through these accelerated approval pathways, which the FDA has helped pave the way aggressively with us to do that and then to run into frontline studies with standard of care so that we can achieve regulatory approvals but then to start to investigate -- probably through investigator-sponsored trials, some of the novel combinations. Operator: Our next question comes from the line of Clara Dong with Jefferies. Yuxi Dong: Congrats on all the progress. Just on the NCCN guideline update, do you have any plan to maybe reengage with the NCCN in the future with longer term data, maybe RAMP 301 data or on additional Japan data as well. And then for the FDA feedback at G12D, can you walk us through what specifically trigger feedback to separate the study into disease-specific and registration directive Phase II trials for the three indications? Daniel Paterson: Clara, thanks for your questions. I'll take the NCCN one and then turn it over to Michael for the FDA question. Yes, we intend to continue to develop evidence on the use of this molecule in both wild-type and mutated. We have a number of activities ongoing that I won't get into details on right now. And then, obviously, as I mentioned, when we have the readout from 301, that's kind of the penultimate randomized readout that will help with both NCCN and hopefully, with the label expansion at the FDA. Michael, do you want to address the question on 7375? Michael Glen Kauffman: Sure. We modified our protocol, our initial 101 protocol based on initial results that we were quite pleased with to expand the cohorts in each of the three major diseases as well as in a sort of tumor-agnostic cohort basically taking a page from the playbook of KEYTRUDA, where they use the Phase I trial to expand into lots of different places. The FDA since then, since the KEYTRUDA really has split the solid tumor divisions into multiple divisions. And based on that, pretty much was the driver for the FDA is saying, "Hey, we like your plan. But in general, cohorts that are going to be used for marketing authorization should be included in separate protocols." We didn't explicitly ask them for the marketing authorization, but we got the answer very clear in black and white, which was really gratifying. I mean they knew what we were trying to do. And when you put 80 to 100 patients in an expansion cohort, they know where you're going with this. And I think they were extremely supportive with us and excited about the kinds of data that we have provided both from China and the initial safety data from the U.S. Operator: The next question comes from the line of Graig Suvannavejh with Mizuho. Graig Suvannavejh: Congrats on continued progress. I was hoping to get maybe some color on -- a little bit more color just on the prescribing dynamics for CO-PACK right now? I might have missed it in your prepared remarks, but usage between -- in the academic center versus the community setting and color on refills? And then the second question, if I could, is just a question on financing and I'm wondering with things at your disposal, how are you thinking about future financing for the company to extend the cash runway beyond first half of 2027? Daniel Paterson: Yes, Graig. Thanks for your question. I'll take the second one first and then ask Mike to address your question on uptake. As we've said, and we think this is really important. We believe that launch for the [ A+F ] franchise will be self-sustaining by the second half of the year and won't require additional fundraising. So any additional capital that we have to access will be based on good data coming out of the G12D program. We're looking very carefully at prioritizing what we need to do, looking at different vehicles to raise money. Obviously, going out and doing straight equity raises, creates dilution, and we like to avoid that as much as possible, especially at current stock prices and are looking at a number of different ways to stage things over time to make sure we've got enough runway, but we're being prudent in how we raise that money. Non-dilutive approaches are ones we're spending a lot of time looking at. We have had a lot of strategic interest, not saying that there's anything imminent or that we're going to go ahead and out-license the program, but there's a lot of flexibility when you have a lot of interest from folks. And I think there is a growing consensus that this is probably a best-in-class molecule, and I think that gives us a lot of degrees of freedom. And so we'll continue to look at different ways to fund it, and we'll be prudent in doing it over time. Mike, maybe if you want to address the other part of the question? Michael Glen Kauffman: Sure, Dan. Thanks for the question. We're not giving specific guidance on patient numbers or refill rate yet since we're still early in the launch. But I can certainly give some color about the prescribers and some other factors. So we've continued to grow the number of new prescribers through February. There have been nearly 300 total new prescribers. Month over month, our field team is making some really good headway with our top accounts. Our top institutions include both academic and community centers and around 75% of these organizations have either introduced or adopted the CO-PACK reflecting growing penetration across the providers. The split of prescriptions remains roughly 60-40 between GynOncs and MedOncs, which is consistent with our previous reports. More than half the prescriptions are coming from the academic center. We expect that split to be consistent with the community over time. And importantly, as we talked about our Verastem Cares program, has continued to perform incredibly well with short times for reimbursement and fills between 12 to 14 days and about 60% of our commercially eligible patients are using our co-pay program. Operator: The next question comes from the line of Leonid Timashev with RBC Capital Markets. Leonid Timashev: I want to ask on 7375's safety. Just to ask you guys to elaborate a little bit more on that. I've got three questions, but hopefully, they're all related. I guess the new cut of data looked quite encouraging, but I was just trying to better understand how much we can lean on that versus what we saw coming out of China. I guess if you have any insights into what might be different across those two populations to lead to such a different safety profile. And then if you could also remind us on the kinetics of when some of these events might occur, particularly via the heme events or the liver signals just given that these patients have been followed for just -- only about 1.6 months, I think, it said. And then lastly, I know you guys were also working at some point on some potential formulation improvements that you were going to effect later on. I'm just curious how much further those could potentially improve some of the GI tolerability? Daniel Paterson: Michael, do you want to address those questions? Michael Glen Kauffman: Sure. The data that we provided to you that are all in the database and cleaned and all that, pretty clean, they're not completely clean, but they're representative for sure. and they're very consistent with what we're hearing ongoing now even -- these data were with a date cut off more than a month ago. So I think we've not heard of anything new and the drug is behaving very well, including at the higher dose of 900 milligrams. The cadence of these side effects are pretty straightforward. The nausea and diarrhea and vomiting, as you know, are all pretty fast, and we've really taken them down to pretty much Grade 1 and a lot of the Grade 1 goes away over the first week or two with the proper use of antinausea agents like standard Zofran or palonosetron or one of the other 5-HT3 agents. And sometimes, patients which is typical of any drug if they don't have complete cessation of nausea. I mean, nobody wants to have any nausea, then we'll -- the docs will add a second agent and really cleans it up. So those issues have been largely dealt with diarrhea is we don't prophylax against it, but we absolutely come in and the docs have been requested to come in very quickly with over-the-counter drugs to counter that, and it's very easy to get under control. We don't expect to see much in the way of emergent heme tox. We've not seen it. We have similar entry criteria to what they required in China to get onto the trial. So I don't think this is a baseline bone marrow, I should say, baseline to cell count issue. It's probably a health of the bone marrow issue. I suspect that we're using a lot more growth factors here in America than they do in China. And so when the patients who all got chemotherapy at least once and usually multiple times coming on to our trial are probably having better bone marrow support coming in. I suspect that's the major reason. I don't expect to see much in the way of liver function abnormalities. We haven't seen that. We are aware, and I think probably everybody is aware that patients in China tend to use a lot of natural products and a very inconsistent quality that have all kinds of liver abnormalities as well as other abnormalities associated with them. And we've really tried to make sure that our patients here tell their docs about any organic or general nutrition center kind of supplements they're using and really to limit all of that. So I don't know if that's the reason we're not seeing the liver signals, but we're really very comfortable with how this drug is behaving. Lastly, as far as formulation is concerned, we are looking into whether something like enteric coating could be helpful here or not. It's really important for us to get -- obviously figure out which dose we're going to use. And my gut feel is we're going to end up at the 900, but that's just a, no pun intended, my gut feel. Once we figure out the dose and we understand better the side effect profile in the setting of standard antinausea agents, we'll be able to make some decisions on formulation. But I think there is some room for a formulation to help things. Operator: The next question comes from the line of Yuan Zhi with B.Riley Securities. Yuan Zhi: Can you expand on the impact of this protocol update on your clinical development? What's the real impact or change there? Was it narrowed patient enrollment criteria or fewer doses to be tested there? Daniel Paterson: Thanks for the question. I I'll let Michael elaborate, but it's essentially an administrative change where we're just breaking out into separate protocols and working to streamline things to get the new protocols in place at our current institutions. Anything more you want to say, Michael? Michael Glen Kauffman: No, that's -- I don't think there's going to be a significant time line hit. We're going to be going -- we'll be sending the protocols in with a cover letter that basically explains is, as Dan said, this is administrative, there's no new safety change. There's no informed consent change. It's just a different protocol basically so that each of these can go to the proper part of the FDA. Yuan Zhi: Got it. On the dose selection part, do you see a possibility to do maybe a [ titration ] meaning starting at 900 or 1200 milligrams and then using 600-milligram as maintenance dose if needed? Daniel Paterson: Michael, do you want to address that? Michael Crowther: Sure. Look, it's -- one thing we've learned about most cancer therapies, not all, but most, over the years is that starting high and blasting the tumor because it's really a vicious war, getting it under control and shrinking it. And as you suggest, which is sort of an induction, if you will, followed by maintenance is probably okay. Honestly, we have any reason to believe yet that we're going to need to lower the dose. It's fairly early with our U.S. experience. And I'll remind folks that in China, they were not able to get to 900 milligrams. So we have a number of patients ongoing now with 900 milligrams over many, many weeks and there doesn't seem to be a major issue. That said, of course, there will be time for patients to reduce their dose. But I'm not sure it doesn't seem like it at this point that we're going to need to reduce the dose. Operator: [Operator Instructions] And we'll take our last question. It comes from the line of James Molloy with AGP, Alliance Global Partners. Matthew Venezia: Matt on for Jim today. Congrats again on the continued progress. So firstly, I wanted to ask about the RAMP 201J trial. The updated data look positive to us. But can you just take us through the next steps in Japan for the [ A+D ] combo? Daniel Paterson: Sure. There's a couple of things going on in parallel. One is all of the institutions that participated in the 201J study have now been converted over to the confirmatory study. Although we've completed accrual in the rest of the world, we do want to have enough Japanese patients on there so that we can have final approval in Japan. But the intent is to meet with the PMDA and discuss using the bridging study for conditional approval. And steps are underway for that right now. And I think we've guided that we'll probably file early next year when we have enough follow-up. Matthew Venezia: Got it. And then in terms of the U.S. launch, is there any specific insight into the payer coverage of KRAS wild-type patients? Do you have any number or like ballpark of how many of these cases have been covered since launch? Daniel Paterson: We don't have specific numbers on the number of cases. What I will say is our most common group of patients are of the KRAS mutant. The second biggest group is KRAS unspecified. We're seeing a lot of prior [ auths ] put in, where they're not putting the status, and those seems to be going through pretty smoothly. And then the third group is the KRAS wild type, where we've said a number of times, we're having really good success getting those paid for too. And I think it's an indication of the high unmet need. And then if you look at the totality of the data in the publications that we use and submit to the payers, these patients do appear to be benefiting where we have gotten some tightening in the last quarter or so is what I would call the totally off-label. So brain, lung, PDAC, we have seen a little pushback from payers on those. And that's not to be unexpected. I think in the early days, you sometimes get a bit of a honeymoon period. And in PDAC, we're talking the data set of 12 patients. And then in -- some of these other diseases that it was slipping through really not a lot of support. And so we're very pleased with what we're seeing to date. I think our specialty pharmacy and our hub are doing a great job, and we're hoping to see that continue. Operator: That concludes the question-and-answer session. Thank you all for joining in. You may now disconnect. Everyone, have a great day.
Operator: Good day, and thank you for standing by. Welcome to the Pulmonx Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's call is being recorded. I would now like to hand it over to your speaker today, Laine Morgan, Investor Relations. Please go ahead. Dorothy Morgan: Good afternoon, and thank you for participating in today's call. Joining me from Pulmonx are Glen French, President and Chief Executive Officer; and Derrick Sung, Chief Operating Officer and Chief Financial Officer. Earlier today, Pulmonx issued a press release announcing its financial results for the quarter ended December 31, 2025. A copy of the press release is available on the Pulmonx website. Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results or performance are forward-looking statements. All forward-looking statements, including, without limitation, those relating to our operating trends, commercial strategies and future financial performance, including long-term outlook and full year 2026 guidance, the timing and results of clinical trials, physician engagement, expense management, market opportunity, guidance for revenue, gross margin, operating expenses, cash usage, commercial expansion, and product demand, adoption and pipeline development are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please refer to the Risk Factors section of our filings with the Securities and Exchange Commission, including our quarterly report on Form 10-Q filed with the SEC on November 12, 2025. Also during this call, we will discuss certain non-GAAP financial measures. Reconciliations of those non-GAAP financial measures to the most directly comparable GAAP financial measures are provided in the press release, which is posted on our Investor Relations website. These non-GAAP measures are not intended to be a substitute for our GAAP results. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, March 4, 2026. Pulmonx disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events or otherwise. And with that, I will turn the call over to Glenn. Glendon French: Thank you, Laine. Good afternoon, everyone, and welcome to our Fourth Quarter and Full Year 2025 Earnings Call. Since returning as CEO, I have conducted a thorough review of our business, and I am both confident in the company's future and determined to accelerate its progress. During the past few months, Derrick and I have taken a deliberate bottom-up approach to assess the business, building on what's working, addressing what isn't and better aligning our spending with our strategic goals. We conducted a line-by-line review of all programs to identify and prioritize those with the highest returns on capital, with an emphasis on balancing growth with profitability. We have already taken significant steps to realign our cost structure, while preserving key commercial and clinical investments. Derrick will provide additional details on the impact of this prioritization along with our recently announced debt refinancing, which significantly strengthens our balance sheet and provides greater financial flexibility as we execute on our strategy. Our top 3 priorities are clear: first, reaccelerating U.S. sales growth; second, advancing our TAM expanding clinical initiatives; and third, aligning our spending to deliver continued financial leverage as we move predictably towards profitability. With this backdrop, I'd like to walk through our initial assessment of what drove our weaker-than-expected U.S. revenue performance last year. At a high level, we believe the underperformance was largely due to internal operational and executional challenges. First, the U.S. sales organization was stretched across too many competing initiatives, some of which were not fully tested, distracting our sales team from critical activities. This diluted operational focus and challenged efficient execution. Second, at the beginning of 2025, U.S. Territory Manager roles and responsibilities were materially altered in a way that later prove disruptive to the sales organization. And third, the 2025 U.S. sales incentive structure proved to be suboptimal in effectively directing and motivating our U.S. sales organization. Altogether, these issues resulted in significant turnover in our U.S. sales organization during 2025, disrupting customer continuity and account management. While our assessment is ongoing, these insights have meaningfully shaped the strategies we have already begun to implement. Our first area of focus has been on organizational alignment to optimize our resourcing and decision-making in critical areas. Derrick and I are leaning on talented leaders within the organization, allowing us each to have fewer direct reports so that we can dedicate substantial time and attention to the company's most important priorities. As a result, I have taken a more direct role in day-to-day operations of our U.S. sales organization and our 2 U.S. area Vice Presidents now report directly to me. We have also established new leadership of our clinical affairs organization in order to accelerate enrollment of our CONVERT II trial of AeriSeal, a critical step towards significantly expanding our addressable market. A cornerstone of our refined sales strategy is returning our attention to our customers' clinical and operational excellence and refocusing on what we know drives results. In 2025, our sales team was asked to manage an increasingly broad and prescriptive set of initiatives, including multiple new call points and services like LungTraX Detect, while well intentioned, this breadth of initiatives did not deliver the expected return on sales force time and came at the cost of focus on the foundational strategies that both built our U.S. and international markets and drove consistent growth over the years. We are now streamlining priorities of the U.S. sales team to a small set of high-impact mandates that we know drive results. Our commercial strategy follows a deliberate near to far approach where we are focused initially on those opportunities that are nearest to our critically important treating physician before shifting our attention to those opportunities, which might be farther away. This includes better supporting our treating physicians, engaging pulmonary service line directors within hospitals and prioritizing our COPD and patient education efforts in those areas closest to our well-established treating hospitals. That means 3 things: first, the strongest programs begin with the clinical performance of our Zephyr Valves and the confidence of our physician champions. These champions are essential in establishing clinical protocols, bringing colleagues along and ensuring that patients who need this therapy receive it in a timely manner. Our experience consistently shows that frontline clinical buy-in is the foundation of every high-performing center. We are now empowering our sales team to reengage with the clinical champions at their trading centers rather than diverting time to what have proven to be lower-return activities away from these physicians; second, when strong clinical leadership is matched with the right administrative support, it makes a significant difference in helping patients move through the funnel efficiently and scaling the program. With that in mind, we are prioritizing engagement with pulmonary service line administrators rather than initially trying to reach top level C-suite administrators who are typically less accessible. By focusing on administrators who are closest to the pulmonary and thoracic service lines, we ensure that our therapy is effectively protocolized into daily clinical workflows and that staffing is aligned to support them; third, we must ensure that there is a steady flow of patients to our treating centers and that each patient is supported through every step on their path to treatment. To ensure that patients are aware that valves may be an option, we are first focusing on physician education efforts within hospital systems that already offer valves before expanding outreach to the broader community. Similarly, we are concentrating our direct-to-patient efforts on geographies with established treating centers that have the capacity to accommodate interested patients rather than spreading those efforts broadly across the country. We expect this focus to meaningfully increase the return on invested time and resources. Taken together, these changes are designed to foster the right culture and consistency for a more stable, high-performing sales force with lower turnover. With the majority of our open U.S. sales positions now filled, we are encouraged by the early positive feedback from our team, which reinforces our confidence that these actions are resonating internally. That said, it will take time for our newly filled territories to ramp up in productivity, leading to our expectation that U.S. sales growth will resume in the back half of this year. Turning to our pipeline. Our AeriSeal program remains a key focus and represents our nearest term opportunity to expand our market. We continue to view AeriSeal as a way to reach a large number of severe COPD patients with collateral ventilation who are not candidates today for treatment with Zephyr Valves. Our CONVERT II pivotal trial is an important step to bringing this novel technology to market. The trial is designed to evaluate the safety and effectiveness of the AeriSeal system in limiting collateral ventilation in patients with severe emphysema. With our strengthened clinical leadership team now in place, we are pleased to see enrollment momentum accelerating. We continue to see strong potential for AeriSeal as both a revenue generator and a market expander for Zephyr Valves over the medium and long term. We expect enrollment in the trial to be completed in 2027, which would bring us one step closer to potentially growing our total addressable market by an estimated 20% globally. In conclusion, 2026 will be a year of focused execution at Pulmonx. We remain confident in the business and are excited to rebuild momentum through a clear operating plan that targets our highest impact initiatives. We have much greater visibility into what went wrong last year, and we have already begun taking decisive action to fix it. And we have the right strategy and the right people in place to execute. I returned to Pulmonx because I believe deeply in this technology and what it means for patients who have few treatment options. That conviction has only grown stronger over the past few months. We have work to do, and we are doing it. And we look forward to demonstrating that progress to you in the quarters ahead. With that, I will turn the call to Derrick to briefly review our fourth quarter and full year performance as well as our expectations for 2026. Derrick Sung: Thank you, Glen, and good afternoon, everyone. I'd like to start off by commenting on 2 significant developments that meaningfully strengthen our financial outlook and balance sheet as we position the company for profitable growth. First, we recently executed a cost restructuring initiative that reduced our ongoing operating expenses by over 10%. With this action, we believe we have achieved an appropriate balance between expense management and continued investment in our key growth initiatives. Second, we are very pleased to have recently closed on a $60 million credit facility with a 5-year interest-only structure that meaningfully strengthens our balance sheet by extending the maturity of our existing debt out to 2031 and by providing us with access to additional undrawn capital. The initial $40 million term loan drawn at closing refinances our previously existing loan and we now have an option to draw an incremental $20 million through the end of 2027, subject to the achievement of certain revenue milestones. Taken together, these 2 developments provide us with increased balance sheet flexibility and cash runway over the next few years as we focus on rebuilding momentum in our core business and advancing our clinical priorities. We are committed to demonstrating meaningful operating leverage and reducing our cash burn starting in 2026. As a case in point, we expect to significantly decrease our annual cash burn from $32 million in 2025 to $23 million in 2026, representing a reduction of nearly 30%. Now turning to our recent performance. Total worldwide revenue in the fourth quarter of 2025 was $22.6 million, a 5% decrease from $23.8 million in the same period last year and a decrease of 7% on a constant currency basis. Worldwide revenue for the full year ending December 31, 2025, was $90.5 million, an 8% increase over the prior year and a 7% increase on a constant currency basis. U.S. revenue in the fourth quarter was $14.1 million, an 11% decrease from $15.9 million during the same period of the prior year. We added 10 new U.S. treating centers during the quarter. U.S. revenue for the full year 2025 was $57 million, a 1% increase over the prior year. International revenue in the fourth quarter of 2025 was $8.5 million, an 8% increase from $7.9 million during the same period last year and an increase of 2% on a constant currency basis. International growth was driven by continued strength in our major European markets, offset by a lack of sales to our distributor in China. Our distributor continues to work through inventory from large orders placed in the first half of 2025 as we await the renewal of our Chinese registration certificate, which we expect in the second half of 2026. International revenue for the full year 2025 was $33.5 million, an increase of 23% over the prior year and a 19% increase on a constant currency basis. Gross margin for the fourth quarter of 2025 was 77.6% compared to 74% in the prior year. The year-over-year increase was driven primarily by the lower mix of distributor sales in our international markets. Gross margin for the full year 2025 was 74%. Total operating expenses for the fourth quarter of 2025 were $27.4 million, an 11% decrease from the same period last year. Noncash stock-based compensation expense was $3.9 million in the fourth quarter of 2025. Excluding stock-based compensation expense, Total operating expenses in the fourth quarter of 2025 decreased 10% from the same period of the prior year. Total operating expenses for the full year 2025 were $128.8 million, a 1% increase over the prior year. Noncash stock-based compensation expense was $19.3 million for the full year 2025. Excluding stock-based compensation expense, total operating expenses for the full year 2025 increased 3% over the prior year. R&D expenses for the fourth quarter of 2025 were $4.6 million compared to $4 million in the fourth quarter of 2024, reflecting increased clinical trial activity. Sales, general and administrative expenses for the fourth quarter of 2025 were $22.9 million compared to $27 million in the fourth quarter of 2024 as we began to implement cost controls during the quarter. Net loss for the fourth quarter of 2025 was $10.4 million, or a loss of $0.25 per share as compared to a net loss of $13.2 million or a loss of $0.33 per share for the same period of the prior year. An average weighted share count of 41.4 million shares was used to determine loss per share for the fourth quarter of 2025. Net loss for the full year 2025 was $54 million or $1.33 per share. Adjusted EBITDA loss for the fourth quarter of 2025 was $5.5 million as compared to $7.5 million in the fourth quarter of 2024. Adjusted EBITDA loss for the full year 2025 was $30.6 million. We ended December 31, 2025, with $69.8 million in cash, cash equivalents and marketable securities a decrease of $31.7 million from December 31, 2024. Now turning to our outlook for 2026. We expect to deliver full year 2026 revenue in the range of $90 million to $92 million. Our revenue guidance contemplates a return to year-over-year growth in both our U.S. and international businesses starting in the back half of the year. In the U.S. we expect our recently filled sales positions and our refocused commercial strategy to gradually drive improving sales productivity as the year progresses. Internationally, we expect revenue growth in the first half of 2026 to be negatively impacted by minimal sales to our distributor in China. Our guidance contemplates continued strength throughout the year from our European markets and we expect year-over-year sales growth in our international business to resume in the second half of the year. We expect gross margin for the full year 2026 to be approximately 75%, trending slightly higher in the first half of the year and lower towards the second half of the year as we increase our mix of distributor sales. We are committed to demonstrating meaningful operating leverage this year. We expect full year 2026 operating expenses to fall between $113 million and $115 million, inclusive of approximately $21 million of noncash stock-based compensation expense. Excluding stock-based compensation expense, our guidance implies a 7% to 9% decrease in operating expenses from 2025, reflecting our cost realignment efforts, while maintaining investments in key growth initiatives. To conclude, we remain confident in the fundamentals of our business. We are operating with financial discipline and focus, and we are taking decisive actions to refine our strategy, regain sales momentum and position the company to deliver sustainable and profitable growth over time. With that, I'd like to thank you for your attention. We will now open up the call for questions. Operator? Operator: [Operator Instructions] Our first question will come from the line of John Young from Canaccord. John Young: It's nice to see the operating level you guys are starting to demonstrate here. I wanted to ask on your comments on the sales force, particularly the comment that you filled all the new physicians. Could you just tell us the percentage of the sales force overall that turned over in Q4? And when did you start hiring and complete that hiring of the new reps? Glendon French: So John, nice to hear your voice. The turnover was really across the entire year, so it wasn't in the fourth quarter. The magnitude was directionally on the order of half of the sales organization across the year. When we got here some number of those territories had been filled. So we have some folks who joined in the middle to back part of the year. And we've been about the task of filling additional openings since then. And we find ourselves now with nearly all of those openings filled. John Young: Got it. And just as a follow-up, you spoke a bit about the incentives not being aligned with the sales force last year. Can you talk about maybe some color on how you're incentivizing sales now? And what are the focused sales strategies now in the U.S. that you guys are really focused on with these new reps to get them up to speed? Glendon French: Yes. So the incentives that we have in place aren't fundamentally different. I think the way that we had set things up at the beginning of last year, was a bit of a challenge for many of our folks. One of the big questions, there's essentially 2 elements. One is the design of a compensation plan, and the second is the allocation of quota to each of the territories and then how you do that is important. And we embraced a new approach to the allocation of quotas which involved a couple of things that both the amount of the quota that we allocated out and how we allocated it out across our sales organization together conspired to create a situation where there were some number of reps who felt like it was going to be difficult for them to make the kind of money they were looking to make. And by the time we realized that this new system was not being constructive we had started some movement that impacted us across the year. As it relates to this year, we have been very careful, both on the design of the sales incentive plan and with the allocation of those quotas and the amount of the quota that we're allocating at the initial point. So we basically looked at where we stubbed our toe in 2025 and simply made the changes, went back to those things that we knew had worked in the past that were well received and well understood and embraced many of those elements. So we're quite confident that we have in place a plan that is both viewed as quite reasonable as well as a design that I think people can get their heads around and get behind. So -- and it's been -- it's been tested over time. Last year was the anomaly in terms of the construct, and frankly, we paid a price for that. Operator: Our next question will come from the line of Jason Bednar from Piper Sandler. Jason Bednar: I want to start here on the U.S. business, if I could. I fully appreciate there isn't a silver bullet in reversing the slide that the business has been through, but you've already taken a lot of actions. You talked about, Glen, a lot of initiatives that are underway. You talked about the sales force just in the prior question as being a big one. I guess my question here is, though, is why wouldn't the growth come back sooner now that, that sales force is fully in place and addressed. You had captive accounts that lost their covering rep or saw their rep change. I would think there shouldn't be new education with physicians that's necessary. You should need to really prime the referral pump with patients into those treating accounts. So I guess, why -- again, very simply, why wouldn't that come back quicker in the U.S.? Glendon French: Well, I think we've got a couple of reactions to your question. One is that as you saw across the year relative to prior year, we were in fairly steep decline. I think we had 11% growth year-over-year in the first quarter, 6% growth in the second quarter, 1% growth in the third quarter, and we just announced on the order of a negative 10% year-over-year situation. So we're springing off of somewhat spongy ground to begin with, if you look at the shape of that curve. And we have, in many cases, some folks that are just coming up to speed. We feel great about the team that we have in place. We have a construct where most of our sales folks are sort of doubled up in geographies with sort of a senior/junior rep alignment. So that's a design that allows people to come up to speed very quickly. But we want to be careful given sort of the soft ground that we're springing off of here coming off of the fourth quarter and the average tenure of the sales force being quite a bit different at this point this year as it was last year. So with that integrated in, that explains our sort of back half projection. Jason Bednar: Okay. All right. Fair enough. Appreciate that. Derrick, I know you said you reduced the cost structure by 10%, something on the order of that number. Can you expand upon what changed? Where did you source those savings from? Is that a gross number or is the net savings lower since you've had the add back some spending on the sales force side. And then -- sorry, it's a multi-parter. But with these changes that you made, can you give us a sense of what your fixed versus variable cost structure looks like now, just so we can have an idea of how much torque you have in the P&L once that top line starts to hum later this year? Derrick Sung: Yes. Jason, thanks for the question. So we clearly got out in front of our SKUs over the last couple of years in terms of spending in anticipation of sales growth that just didn't materialize in the time frame that we we thought it would. So we did take the difficult, but necessary steps to realign our cost structure to our current growth profile. The kind of the 10% reduction that I spoke of is kind of roughly 10% of kind of recurring costs across the board that we took out. There's some puts and takes. There's obviously some restructuring costs that we incur that we're actually incurring this year. And so when you look at the numbers, the guide that we're providing is kind of like 7% to 9% guide, incorporates some of that relative to where we were last year. The majority of the costs that we took out, and we were very careful to ensure that we kept our sights on continuing to invest in our key growth initiatives, namely on the sales side, as Glen mentioned, we're continuing to invest there. The sales force was not directly impacted by the cost restructuring. And on the R&D side, we're continuing to invest in long-term future growth drivers, namely AeriSeal this year and into future years. So most of the expense reduction came from G&A and marketing. And we believe that with those expense reductions that we've made, which are recurring, we're in a strong position now to demonstrate operating leverage, not only as you see this year, but as you see moving forward. Operator: Our next question will come from the line of Rick Wise from Stifel. Unknown Analyst: It's Annie on for Rick. So I heard you call out AeriSeal in the CONVERT II trial as a key priority here for 2026. Obviously, there's some investment required to ramp up enrollment and move toward commercialization, eventually. So I'm hoping you can talk about kind of how you plan to balance that out with your U.S. sales organization investments and your plans to extend the cash runway. Glendon French: Yes. The -- so first of all, the CONVERT trial we came in, we spent -- I looked around, make sure we had the right people in the right places. And one of the key things that we looked at was ensuring that that we had the proper alignment within our U.S. sales organization. And the other area that I looked at immediately was making sure that we had the best possible alignment within our clinical function given the role of AeriSeal in our future. And the CONVERT II trial, we were not enrolling in the CONVERT II trial as fast as I felt we should be. And -- so we made some realignments, we brought in a number of people who had been involved directly in the execution of our pivotal trial or our LIBERATE trial. One individual was here running another function and took over, once again, had formally run clinical and is now running it again. So I'm thankful that he agreed to do that. And we brought in 2 folks underneath him who were very much involved in the execution of that trial. So in some ways, from a burn perspective, as you think about the execution of that trial, first of all, it's not all that spectacular, a proportional amount of our annual burn. And number two, we're trying to get things optimized and aligned to deliver on, I think, what we had hoped we would be doing from a rate of clinical enrollment. So I also don't think that, that's going to have a meaningful impact on the overall spend of the company and certainly will not touch or pressure in any way the appropriate spending on our commercial operations. Unknown Analyst: Got it. Got it. And then just one more for me. Just thinking about longer term, appreciating that 2026 is more of a transition year for Pulmonx as your new commercial focus kind of takes hold? So I'm curious just how you're thinking about the company's longer-term growth potential? How would you sort of frame your longer-term growth aspirations now based on your time back into your respective roles. Glendon French: Yes. Maybe I'll start, and if Derrick wants to add to that. I'll encourage him to do so. We came back -- when I departed, we had put up 5 quarters of 40% growth in the U.S. And as a company, we're growing 30%, and then things slipped and they slipped quite a bit. And it got a lot of people's attention and had everything to do with my coming back. I think without a question, our intention is to take our growth profile to a much better place exactly where that is. I think we'll learn a lot about that as we go through the year and we see the kind of traction that we get from the programs that we're initiating. And the types of things that we'll continue to refine and adopt as we go forward. So I don't really think we're in a position to be telling you much more than we expect us to get substantially better and we're about that task, and I'm very confident we're headed in the right direction. Derrick Sung: Yes. And Annie, this is Derrick. I'll just add, even within -- with the full year 2026, our guidance implies, obviously, that we will sort of step up in growth through the year. And we expect that by the end of this year, we'll be moving on a global basis to double-digit growth. So again, I don't want to sort of give guidance beyond 2026, but even within this year, by the end of this year, our guidance implies that we will be growing double digits by the fourth quarter. Operator: [Operator Instructions] Next question comes from the line of Frank Takkinen from Lake Street Capital Markets. Unknown Analyst: This is Nelson on for Frank. Comprehensive overview. I guess maybe just you've described 2025 underperformance is largely internal wrong roll structure, wrong incentives, maybe too many incentives. But anything out there maybe fundamental from a market perspective -- market penetration perspective that surprised you that maybe more challenging? Or just anything there that could be interesting. Glendon French: The market is becoming increasingly active, which is, I think, a net positive. There are broader investments in the pulmonary space. Intuitive has a nice and growing business in the cancer side of our business. So these service line directors in hospitals are -- they're managing many more procedures and a lot more -- the economics, I think, have gotten them moved up the hierarchy within hospitals. So I think that's sort of a net positive. Again, in the short term, there have been moments along the way where there have been certain pressure on resources, but that's fairly easy to respond to. These procedures aren't done in operating rooms. So the procedure rooms are much more plentiful around the hospital. So we'll be able to flex in that regard and pick up the resources necessary to set up and execute these programs. So I think in general, the macro elements, whether you're talking about reimbursement, whether you're talking about places to do the procedure, people to execute the procedure. We just have to have the fundamentals in place. And as folks become increasingly invested in pulmonary, be that cancer or emphysema or COPD those are good things for us. So I think from a macro perspective, that feels like a net positive over time. Unknown Analyst: Got it. And then you had mentioned like you specifically called out LungTraX Detect being a lower return activity that pulled sales force retention away? And maybe I missed it, but is that program being shelved or deprioritized, handed off? Or how are you thinking about just that in general. Glendon French: We set off at the beginning of last year with the hypothesis that, that was a technology that would be useful potentially in most of our accounts. It is a great technology. It does all that we've said it does. One of the challenges, though, is that it's really optimal for a certain subset of some of our larger systems at sites where all the elements are in place. And in any case, it's something that is not -- it doesn't fit well in every single hospital. It took us some time to figure that out. I think that my review of prior updates indicated that there was a lot of discussion about it taking more time than we had thought it might take to set up think in properly selected hospitals that sort of have an appropriate profile, there's an absolute place for LungTraX Detect. So it's not being deemphasized, I think, is being focused in certain types of situations as a real positive, potential positive. We have a number of accounts that are underway, and we're keeping a close eye on them. But the initial feedback is that it is being helpful in terms of identifying patients that otherwise wouldn't have gotten picked up. Operator: Our next question will come from the line of Larry Biegelsen from Wells Fargo. Unknown Analyst: This is Simran on for Larry. Maybe just another follow-up question on the U.S. sales force. I mean I would be curious to maybe understand how are you thinking about the ramp in terms of months to productivity and what early indicators should we be watching for to confirm that the ramp is tracking to plan. Derrick Sung: Simran, this is Derrick. I'll jump in and Glen can add some color here. I mean in general, it obviously differs territory to territory depending on what state the territory is when it was filled and when and how long it was open. But we normally look at kind of 6 to 9 months for a new rep or a new territory to get up the productivity curve. Now as Glen mentioned, it wasn't like everybody left all at once and everybody came in all at once. So there's a kind of -- there's a time frame here and for the new territories to ramp up to productivity. And so that is embedded in our guidance. So specifically, when we think about kind of U.S. sales growth, we kind of look at it as a gradual ramp from, say, mid- to high single-digit declines in the first quarter moving towards high single-digit growth in Q4, and I would think of it as kind of a sort of a linear-ish step-up. And I think the best metric to look at, honestly, is just sort of being able to deliver on those sales because in aggregate, it will all be obviously reflected in our U.S. sales performance. Glendon French: Yes, I would absolutely -- I'm sorry, I would absolutely agree with what Derrick said. I would however -- and I was -- I hesitated when you asked the question because I thought it was a little bit of a smart a** response to say, look at the revenue number. But I do agree with Derrick, that, that is really what the -- what's going to be reflective of these folks coming up to speed. I will say that one of the most meaningful positive changes within our sales organization, since I departed was the adoption of this sort of senior rep, junior rep combination. The majority of our territories in general and certainly virtually every single one of our larger territories has this combination. And one of the real benefits of the combination is not only the ongoing ability to have one plus one equals something greater than 2. But also, it facilitates, I believe, and I can see with the number of combinations of more tenured and newer folks together. It really facilitates the training process and bringing new people up to speed when they can be working with somebody who's got a little bit more tenure, a little bit more ability to bring them up to speed. So anyway, that's a real positive about the new construct. The new as defined as since I left a couple of years ago. Unknown Analyst: Got it. That's very helpful. And maybe just on the OUS side, and apologies if I missed this, but I guess just Japan, how do we think about contribution from that geography? I know the previous management team talked about enrollment in that post-approval study really kind of occurring in the back half of 2025, I believe, or maybe early 2026. So maybe just -- is that a contributor to 2026 international sales? And just kind of what's the status in that geography? Glendon French: Well, it is a contributor because these are revenue-generating patients that are going into that trial. So it's essentially -- as a post-approval study. We are continuing to enroll the patients. And they -- the enrollment is accelerating. So cases are increasing. That's -- it's about all I'm prepared to say about that... Derrick Sung: Yes. I mean it's not a meaningful -- I would say that it is not a meaningful growth driver in 2026 as we contemplate within our guidance versus 2025. We -- as Glen said, we expect to continue through the post-market study in 2026. And true commercialization, I think, comes the following year. So it's not a huge key to our guidance in 2026. Unknown Analyst: Got it. That's helpful. And sorry, for China as well, is that also the case? I know you talked about you're awaiting the renewal certificate in the second half. So should we assume China sales are relatively kind of flattish to the prior year? Or are they depressed, I guess, just help me understand the China piece. Derrick Sung: Yes. And thank you for asking because the China piece is a bit nuanced and does impact the year-over-year growth rates from an optics perspective, so I think it is important to clarify that. So -- just to put this in context, China sales were less than 5% of our global revenue last year. But the majority of those sales into our China distributor last year, we realized in the first half of 2025. And so our guidance -- in our guidance, we don't contemplate much of a meaningful contribution from China at all in the first half of the year. And we do expect China to resume -- our shipments to resume into China and sales to resume into China in the back half of the year. So there's this mismatch in timing with tough comps, if you will, from the first half of 2025 relative to the first half of 2026, where we're contemplating minimal sales. And then the back half of 2026, where we expect our China sales to resume. And so that results in a -- from a year-over-year growth perspective kind of double-digit declines year-over-year in the first half, and then that will flip to double-digit growth in the back half of the year. So we do get a bit of this sort of mismatch in timing that will result in some of this sort of funky optical year-over-year growth dynamics that you should be aware of. Operator: This concludes the question-and-answer session. I will now turn it back over to Glen French for any closing remarks. Glendon French: Thank you very much I just want to summarize by reinforcing that we remain confident in the business, and we're really excited to rebuild momentum through a clear operating plan that targets our highest impact initiatives. I am confident that we have the right strategy and the right people in place to execute and we look forward to demonstrating our progress to you in the quarters ahead. Thank you very much for your time and your questions, and thank you very much to all the Pulmonx employees who work every day so hard on behalf of our patients. Have a good day. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.
Operator: Welcome to Broadcom Inc.'s First Quarter Fiscal Year 2026 Financial Results Conference Call. At this time, for opening remarks and introductions, I would like to turn the call over to Ji Yoo, Head of Investor Relations of Broadcom Inc. Ji Yoo: Thank you, operator, and good afternoon, everyone. Joining me on today's call are Hock Tan, President and CEO; Kirsten Spears, Chief Financial Officer; Charlie Kawwas, President, Semiconductor Solutions Group; and Ram Velaga, President, Infrastructure Software Group. Broadcom distributed a press release and financial tables after the market closed, describing our financial performance for the first quarter fiscal year 2026. If you did not receive a copy, you may obtain the information from the Investor section of Broadcom's website at broadcom.com. This conference call is being webcast live, and an audio replay of the call can be accessed for 1 year through the Investors section of Broadcom's website. During the prepared comments, Hock and Kirsten will be providing details of our first quarter fiscal year 2026 results, guidance for our second quarter of fiscal year 2026 as well as commentary regarding the business environment. We'll take questions after the end of our prepared comments. Please refer to our press release today and our recent filings with the SEC for information on the specific risk factors that could cause our actual results to differ materially from the forward-looking statements made on this call. In addition to U.S. GAAP reporting, Broadcom reports certain financial measures on a non-GAAP basis. A reconciliation between GAAP and non-GAAP measures is included in the tables attached to today's press release. Comments made during today's call will primarily refer to our non-GAAP financial results. I will now turn the call over to Hock. Hock Tan: Thank you, Ji, and thank you, everyone, for joining us today. In our fiscal Q1 2026, total revenue reached a record $19.3 billion, and that's up 29% year-on-year and exceeding our guidance on the back of better-than-expected growth in AI semiconductors. This top line strength translated into exceptional profitability with Q1 consolidated adjusted EBITDA hitting a record $13.1 billion, which is 68% of revenue. These figures demonstrate that our scale continues to drive significant operating leverage. Now we expect this momentum to accelerate as our custom AI XPUs hit their next phase of deployment among our 5 customers. So looking ahead to next quarter Q2 '26, we're guiding for consolidated revenue of approximately $22 billion, which represents 47% year-on-year growth. Let me now give you more color on our semiconductor business. In Q1, revenue was a record $12.5 billion as year-on-year growth accelerated to 52%. This robust growth was driven by AI semiconductor revenue, which grew 106% year-on-year to $8.4 billion, way above our outlook. In Q2, this momentum accelerates, and we expect semiconductor revenue to be $14.8 billion, up 76% year-on-year. Driving this is AI revenue growth, which will accelerate very sharply to 140% year-on-year to $10.7 billion. Now our custom accelerator business grew 140% year-on-year in Q1. This momentum continues in Q2. The ramp of custom AI accelerators across all our 5 customers is progressing very well. For Google, we continue our trajectory of growth in '26 with strong demand for the seventh-generation Ironwood TPU. In 2027 and beyond, we expect to see even stronger demand from next generations of TPU. For Anthropic, we are off to a very good start in 2026 for 1 gigawatt of TPU compute. And for '27, this demand is expected to surge in excess of 3 gigawatts of compute. Our XPU franchise, I should add, extends beyond TPUs. Now contrary to recent analyst reports, Meta's custom accelerator MTIA road map is alive and well. We're shipping now. And in fact, for the next-generation XPUs, we will scale to multiple gigawatts in '27 and beyond. Rounding off for customers 4 and 5, we see strong shipments this year and which we expect to more than double in 2027. We also now have a sixth customer. We expect OpenAI deploying in volume their first-generation XPU in 2027 at over 1 gigawatt of compute capacity. Let me take a second to emphasize our collaboration with these 6 customers to develop AI XPUs is deep, strategic and multiyear. We bring to the partnerships, each of them, unmatched technology in SerDes, silicon design, process technology, advanced packaging and networking to enable each of these customers to achieve optimal performance for their differentiated LLM workloads. We have the track record to deliver these XPUs and high volumes at an accelerated time to market with very high yields. And beyond technology, we provide multiyear supply agreements as our customers scale-up deployment of their compute infrastructure. Our ability to assure supply in these times of constrained capacity in leading-edge wafers, in high-bandwidth memory and substrates ensures the durability of our partnerships, and we have fully secured capacity of these components for '26 through '28. Consistent now with the strong outlook for our XPUs, demand for AI networking is accelerating. Q1 AI networking revenue grew 60% year-on-year and represented 1/3 of total AI revenue. In Q2, we project AI networking to accelerate a lot more and grow to 40% of total AI revenue. We are clearly gaining share in networking. Let me explain. In scale-out, our first-to-market Tomahawk 6 switch at 100 terabit per second as well as our 200G SerDes are capturing demand from hyperscalers, whether they use XPUs or GPUs this year. This lead will extend in '27 with our next-generation Tomahawk 7 featuring double performance. Meanwhile, in scale-up, as cluster sizes and our customers expand, we are uniquely positioned to enable these customers to stay on direct attached copper through our 200G SerDes. As we next step up to 400G SerDes in 2028, our XPU customers will likely continue to stay on direct attached copper. And this is a huge advantage as the alternative of going to optical is more expensive and requires significantly more power, reflecting the foregoing factors. Our visibility in 2027 has dramatically improved. Today, in fact, we have line of sight to achieve AI revenue from chips, just chips, in excess of $100 billion in 2027. We have also secured the supply chain required to achieve this. Now turning to non-AI semiconductors. Q1 revenue of $4.1 billion was flat year-on-year, in line with guidance. Enterprise networking, broadband, server storage revenues were up year-on-year, offset by a seasonal decline in wireless. In Q2, we forecast non-AI semiconductor revenue to be approximately $4.1 billion, up 4% from a year ago. Let me now talk about our Infrastructure Software segment. Q1 Infrastructure Software revenue of $6.8 billion was in line with our guidance, up 1% year-on-year. For Q2, we forecast Infrastructure Software revenue to be approximately $7.2 billion, up 9% year-on-year. VMware revenue grew 13% year-on-year. Bookings continue to be strong and total contract value booked in Q1 exceeded $9.2 billion, sustaining an ARR, which is annual recurring revenue growth of 19% year-upon-year. Let me reinforce that this growth in our Infrastructure Software business reflects our focus and investments in foundational infrastructure, and our Infrastructure Software is not disrupted by AI. In fact, VMware Cloud Foundation, VCF, is the essential software layer in data centers integrating CPUs, GPUs, storage and networking into a common high-performance private cloud environment. As the permanent abstraction layer between AI software and physical chips, silicon, VCF cannot be disintermediated or replaced. It allows enterprises, in fact, to scale complex generative AI workloads effectively with agility that hardware alone cannot provide. We are confident that the growth in generative and agentic AI will create the need for more VMware, not less. So in summary, let me put it all together for Q2 2026, we expect consolidated revenue growth to accelerate to 47% year-on-year and reach approximately $22 billion, and we expect adjusted EBITDA to be approximately 68% of revenue. So with that, let me turn the call over to Kirsten. Kirsten Spears: Thank you, Hock. Let me now provide additional detail on our Q1 financial performance. Consolidated revenue was a record $19.3 billion for the quarter, up 29% from a year ago. Gross margin was 77% of revenue in the quarter. Consolidated operating expenses were $2 billion, of which $1.5 billion was R&D. Q1 operating income was a record $12.8 billion, up 31% from a year ago. Operating margin increased 50 basis points year-over-year to 66.4% on favorable operating leverage. Adjusted EBITDA of $13.1 billion or 68% of revenue was above our guidance of 67%. Now let's go into detail for our 2 segments. Starting with semiconductors. Revenue for our Semiconductor Solutions segment was a record $12.5 billion, with growth accelerating to 52% year-on-year, driven by AI. Semiconductor revenue represented 65% of total revenue in the quarter. Gross margin for our Semiconductor Solutions segment was up 30 basis points year-on-year to approximately 68%. Operating expenses of $1.1 billion reflected increased investment in R&D for leading-edge AI semiconductors and represented 8% of revenue. Semiconductor operating margin of 60% was up 260 basis points year-on-year, reflecting strong operating leverage. Now moving on to Infrastructure Software. Revenue for Infrastructure Software of $6.8 billion was up 1% year-on-year and represented 35% of revenue. Gross margin for Infrastructure Software was 93% in the quarter and operating expenses were $979 million in the quarter. Q1 software operating margin was up 190 basis points year-on-year to 78%. Moving on to cash flow. Free cash flow in the quarter was $8 billion and represented 41% of revenue. We spent $250 million on capital expenditures. We ended the first quarter with inventory of $3 billion as we continue to secure components to support strong AI demand. Our days of inventory on hand were 68 days in Q1 compared to 58 days in Q4 in anticipation of accelerating AI semiconductor growth. Turning to capital allocation. In Q1, we paid stockholders $3.1 billion of cash dividends based on a quarterly common stock cash dividend of $0.65 per share. During the quarter, we repurchased $7.8 billion or approximately 23 million shares of common stock. In total, in Q1, we returned $10.9 billion to shareholders through dividends and share repurchases. In Q2, we expect the non-GAAP diluted share count to be approximately 4.94 billion shares, excluding the impact of potential share repurchases. We ended the first quarter with $14.2 billion of cash. Today, we are announcing our Board of Directors has authorized an additional $10 billion for our share repurchase program effective through the end of calendar year 2026. Now moving on to guidance. Our guidance for Q2 is for consolidated revenue of $22 billion, up 47% year-on-year. We forecast semiconductor revenue of approximately $14.8 billion, up 76% year-on-year. Within this, we expect Q2 AI semiconductor revenue of $10.7 billion, up approximately 140% year-on-year. We expect Infrastructure Software revenue of approximately $7.2 billion, up 9% year-on-year. For your modeling purposes, we expect consolidated gross margin to be flat sequentially at 77%. We expect Q2 adjusted EBITDA to be approximately 68%. We expect the non-GAAP tax rate for Q2 in fiscal year 2026 to be approximately 16.5% due to the impact of the global minimum tax and the geographic mix of income compared to that of fiscal year '25. That concludes my prepared remarks. Operator, please open up the call for questions. Operator: [Operator Instructions] And our first question will come from the line of Blayne Curtis with Jefferies. Blayne Curtis: Just a clarification and a question. Just clarification, Hock, on the greater than $100 billion. I think you said AI chips. I just want to make sure you're clarifying the difference between the ASICs and networking, and didn't know how rack revenue fits in there. And then the question, I think the biggest overhang on the group here is that you grew roughly double in the quarter AI. I think that's what kind of cloud CapEx is growing this year. I'm just kind of curious your perspective, I think given the outlook that you have for '27, you should be a share gainer. I'm just kind of curious your perspective in terms of the pessimism that investors kind of think of that the hyperscalers need to get a return on investment in this year or next year or if not, the year after. I'm just kind of curious your perspective, how you factor that into your outlook. Hock Tan: Well, what we see -- what we have seen over the last few months and continue to see even more is -- and it's really not so much talking about hyperscalers. Our customers, Blayne, is limited to those few players out there. And some of them are hyperscalers, some of them are not hyperscalers, but they all have one thing in common, which is to create LLMs, productize it and generate platforms, be it for enterprise consumption in code assistance or agentic AI or be it for consumer subscription that we know about, whatever it is, is that few prospects, and many of whom are customers now who are creating this -- whether it's generative AI, agentic AI, but creating a platform. That's our customer. And with respect to each of those guys, we are seeing stronger and stronger demand for compute capacity, for training, which is something they do need constantly. But what is very, very interesting and surprising too to us is very much for inference in order to productize the LLMs, their latest LLMs they create and monetize it. And that inference is driving a substantial amount of compute capacity, which is great for us because these -- all these players, these 5, 6 customers of ours are on the path to creating their own custom accelerators. And beyond that, their own design architecture of networking clusters of those custom accelerators. So I think we're going to see demand keeps picking up as we have heard announcements in the past 6 months. Now to clarify your first part, Blayne, when I say we forecast, we have a line of sight that our revenue in '27 will be significantly in excess of $100 billion. I'm focusing on the fact that these are pretty much all based on chips, whether they are XPUs, whether they are switch chips, DSPs, these are silicon content we're talking about. Operator: One moment for our next question, and that will come from the line of Harlan Sur with JPMorgan. Harlan Sur: Congratulations to the team on the strong results. Hock, there's been a lot of noise around CSPs and hyperscalers embarking on their own internal XPU, TPU design efforts, right? We call it COT, or customer-owned tooling. This is not a new dynamic with ASICs, right? I think the Broadcom team has been through this COT competitive dynamic before over the 30 years, right, that you've been a leader in the ASIC industry. And very few of these COT initiatives have ever been successful. Now on AI, some of these COT initiatives are coming to the market now, but it looks like they're at least 2x less performant than your current generation solutions, 2x less complex in terms of chip design complexity, packaging complexity, IP. So maybe just a quick 2-part question. Hock, one for you is, given your visibility into next year, do you see these COT science projects taking any meaningful TPU, XPU share from Broadcom? And then maybe the second quick question for either you or Charlie is, given that Broadcom's TPU, XPU programs from a performance complexity IP perspective are 12 to 18 months ahead of any of these COT programs, how does the Broadcom team widen this gap further? Hock Tan: Well, that's a great question. And it fits into that I purposely took the time in my opening remarks to say that when any of our -- any, I guess, hyperscaler or LLM developer tries to create -- become self-sufficient entirely in creating what you call a customer-owned tooling, or COT model, they face tremendous challenges. One is technology, which is technology as it relates to creating the silicon chips and particularly in XPUs that they need to do the computing and that is needed to optimize and run the -- train and inference on the workloads they produce out their LLM. It's -- that technology we talked about comes from -- comes in from different dimensions. You need the best silicon design team around. You need cutting edge, really cutting-edge SerDes, very advanced packaging and most -- and just as much, you need to understand how to network clusters of them together. We've been doing this for 20 years, more than 20 years in silicon. And in this particular space today in generative AI, if you're trying to, as an LLM player, to do your own chip, you cannot afford to have a chip that is just good enough. You need the best chips that is around because you're competing against other LLM players. And most of all, you're also competing against NVIDIA, who is by no means letting down their guard. They are producing better and better chips with every passing generation. So you have to -- as an LLM trying to establish your platform in the world, have to create chips that are better than, if not competitive with, not just NVIDIA, but all the other platform players that you're competing against. And for that, you really need our belief, and we see that firsthand, a partner in silicon with the best technology, IP and execution around. And very modestly, I would say we are by far way out there. And we will not see competition in COT for many years to come. It will come eventually, but we're still a long way off because the race which we see continues. And one thing I add in there that is particularly unique to us, when you create a silicon, you really have to get it up and running in high volume in production very quickly, time to market. We are very, very experienced in doing that. Anybody can design a chip in a lab that works well. Can you produce 100,000 of those chips quickly at yields that you can afford? And we don't see too many players in the world that can do that. Charlie? Charlie Kawwas: I think you covered it very well, Hock. Operator: One moment for our next question, and that will come from the line of Ross Seymore with Deutsche Bank. Ross Seymore: Hock, in your script, you leaned a little bit more into the networking differentiation than you have in the past. So I guess kind of a short-term and a longer-term question. The short term is, what's driving that up to 40% of the AI revenues? And the longer-term question is, is that going -- that percentage mix in that $100 billion plus, is that changing now? What sort of leadership do you expect to maintain in that business, whether it's scale-out or scale-up? And is your leadership position there helping on your XPU side as you can optimize across both the compute and the networking sides? Hock Tan: Well, let's address the first part of that fairly complex question first, Ross. Yes, in networking, especially with the new generation of GPUs, XPUs that are coming out there, we're running at 200 gigabit SerDes out there in terms of bandwidth. And the Tomahawk 6 that we introduced over 6 months ago -- or in fact, closer to 9 months ago, we're the only one out there. And our customers and the hyperscalers wants to run with the best networking and with the most bandwidth out there for their clusters. So we are seeing huge demand for this only 100 terabit per second switch out there. So that's driving a lot of demand. And couple that with running bandwidth on scaling out optical transceivers at 1.6 terabit. We are again the only player out there doing DSP at 1.6 terabit. That combination is driving, I would say, the growth of our networking components even faster than our XPUs are growing, which is already pretty remarkable. So that's what you're seeing. But at some point, I would think these things will settle down, though we're not slowing down the pace because, as I said, next year in '27, we'll launch next-generation Tomahawk 7, 2x the performance and we'll probably be by far the first out there, and that will continue to sustain that momentum. And -- but at the end of the day, to answer your question, yes, I expect as a composition of our total AI revenue in any quarter that will be ranging between probably 33% to 40% AI networking components. Operator: One moment for our next question, and that will come from the line of C.J. Muse with Cantor Fitzgerald. Christopher Muse: I'm curious, how are you thinking about the move to disaggregate prefill and decode from the GPU ecosystem and the impact to custom silicon demand? Are you seeing any potential changes in sort of the relative mix between GPUs and customer silicon? Hock Tan: I'm not sure I fully understand your question, C.J., could you clarify what do you mean disaggregate? Christopher Muse: Sure. Pushing off workloads to CPX for prefill and working off a Groq for decode and having that disaggregated kind of world. And does that put any pressure in terms of the demand for custom versus going with a full GPU stack? Hock Tan: Okay. I get what you mean, that word disaggregation kind of threw me off. What you're -- in a way, what you're really saying is what -- how is the architecture of AI accelerator, be it GPU or XPU evolving as workloads starts to evolve. And that's what we are seeing very much in particular. The one size fits all of a general purpose GPU gets you only that far. It can still keep going on because you can still run different workloads, like you run mixture of experts, even though you have -- you want to run mixture of experts with [ sparse costs ] to be very effective, you hear the term, but in a GPU, you're designed for dense matrix multiplication. So you do it with software kernels, but it's not as effective as you'd hardcode it in silicon and make those XPUs purposely designed to be much more performing for mixture of expert workloads, say. The same applies for inference. And what that drives down to is you start to see designs of XPUs become much more customized for particular workloads of particular LLM customers of ours. And the design starts to depart from what is the traditional standard GPU design, which is why, as we always indicated before, XPUs will eventually be more the choice simply because it will allow flexibility in making designs that work with particular workloads, one for training even and one for inference. And as you say, one perhaps would be better at prefilling and one to be better at post-training or reinforce learning or test time scaling. You can tweak your TPUs towards the -- XPU, sorry, Freudian slip, to a particular kind of workload LLM that you want. And we're seeing that. We're seeing that road map in all our 5 customers. Operator: One moment for our next question, and that will come from the line of Timothy Arcuri with UBS. Timothy Arcuri: I had just a question on sort of the puts and takes on gross margin as you begin to ship these racks. I mean, obviously, it's going to pull the blended margin down, but I'm wondering if there's any guardrails you can give us on this. It seems like the racks are maybe 45%, 50% gross margin. So I guess, should we think about that pulling gross margin down like 500 basis points roughly as these racks begin to ship? And I guess part of that, Hock, is there some like floor to the gross margin below which you wouldn't be willing to do more racks? Hock Tan: Hate to tell you that you must be a bit hallucinating. Our gross margin is solidly at the number Kirsten report. We will not be affected by the gross margin and by more and more AI products going out. We have gotten our yields. We've gotten our cost to the point where the model we have in AI will be fairly consistent with the models we have in the rest of the semiconductor business. Kirsten? Kirsten Spears: I would agree with that. I think on further study relative to even comments that I did make last quarter, the impact relative to our overall mix is actually not going to be substantial at all. So I wouldn't worry about it. Operator: One moment for our next question, and that will come from the line of Stacy Rasgon with Bernstein. Stacy Rasgon: I don't know if this is for Hock or Kirsten, but I wanted to dig in a little more to this substantially more than $100 billion next year. I'm trying to just count up the gigawatts. I counted, I don't know, 8 or 9, you have 3 from Anthropic, 1 from OpenAI, so that's 4. You said Meta was multiple, so at least 2. That gets me to 6. Google, I figure, should be bigger than Meta, so like at least 3, that's 9 and then you got a few others. I had thought that your content per gigawatt was sort of, call it, in a $20 billion per gigawatt range. I guess what I'm asking is, is my math around the gigawatts you plan to ship in '27 correct? And how do I think about your content per gigawatt as that ships? Maybe it will be "substantially" more than $100 billion. Hock Tan: Stacy, you have a very interesting perspective and I got to admire you for that. But you're right, you can look at it, gigawatts, which is the right way to look at it instead of dollars because that's how we sell our chips to. You have to realize we -- depending on our LLM customer, our 6 customers now -- sorry, not 5, 6, 6, the dollars per gigawatt chip dollars varies, sometimes quite dramatically. It does vary. But you're right, it's not far from the dollars you're talking about. And if you look at it by gigawatt in '27, we are seeing it getting close to 10 gigawatts. Operator: And our next question that will come from the line of Ben Reitzes with Melius Research. Benjamin Reitzes: Hock, great to be speaking with you. Wanted to ask you about your commentary about supply visibility on those 4 major components through 2028. A, how'd you do it? This is probably the -- you're the first one to kind of go out through the '28 time frame. And secondly, after this astounding growth in 2027 for your AI business, do you have enough visibility to grow quite a bit in 2028 based on the supply that you see and that kind of commentary? Hock Tan: The best answer is, yes, you're right. We anticipate this sharp accelerated growth, now nobody could anticipate the rate of growth is showing, but we kind of anticipate a large part of it, I guess, for longer than 6 months. We were early in being able to lock up T-glass. It's the infamous T-glass you all heard about. We were very early. We've locked up substrates. We have worked on our good partners on the rest of the stuff we talked about. And so the answer to your question is, it's somewhat anticipation early and the fact that we have very good partners out there in these key components. What else can I say except that, yes. Charlie, you want to add anything. Charlie Kawwas: Yes, just maybe a couple of quick ones. I think you covered that piece really well. I think then the other piece that's really important, as Hock said, we build custom silicon for 6 customers. We have very deep strategic multiyear engagement with them. They share with us because of this custom capability exactly what they anticipate at least over the next 2 to 3 years, sometimes 4 years. And so because of that, that's exactly why we went and secured all the elements Hock talked about. And when we secure this, it requires investments with these partners, sometimes developing not just more capacity but the right technology and capacity for that. So we have to go secure it for multiple years and we're probably -- you're right, we're probably the first one to secure that up to '28 or beyond. Benjamin Reitzes: And can you grow in '28 with what you see in supply? Sorry to sneak that in. Charlie Kawwas: Yes. Operator: Our next question that will come from the line of Vivek Arya with Bank of America Securities. Vivek Arya: Hock, I just wanted to first clarify the Anthropic project you're doing, the $20 billion or so for 1 gigawatt this year, how much of that is chips and how much of that is kind of racks? I just wanted to understand when you say $100 billion in chips, is there a distinction between chips versus your rack scale projects because just that project is supposed to triple next year? And then my question is, your AI business is transitioning from kind of one large customer that was where you had kind of exclusive partnership to now multiple customers who are using multiple suppliers. So how do you get the visibility and the confidence about how your share will progress at these multiple customers? Because it's a very kind of fragmented engagement that they have across a whole range of cloud service providers and so on. So what are you doing to ensure that you have solid visibility and the right market share at this fragmented set of customers who are using multiple suppliers? Hock Tan: Vivek, you have to understand one thing about -- first, as Charlie correctly put out very nicely, we only have very few customers, to be precise, 6 for the volume we are driving, the revenue we're driving, we only have just 6. Prior to that, even less recently. And number two, also you have to understand with the dollars each of them spend and the criticality of the nature of what they're embarking on. And that's why I threw out this term, Meta has MTIA, that's their custom accelerator program. To them, as to every one of my customers in this space, it's a strategic play. It's not optionality. To them, long term, short term, medium term is strategic, extremely strategic. They don't stop and they are very clear, each of them, on where they want to position this custom silicon within the trajectory of the LLM development and the trajectory of how they develop inference for productizing those LLM. That part, we have very clear visibility. Anything else on GPU, using new cloud, using cloud business, these are all transactional and optionality. So you have to -- you point out very correctly, it seems very confusing. Trust me, not for us, nor those customers we have. They're very strategic. They're very targeted and they know exactly what they're building up and how much capacity they want to build up each year. And the only thing they think about is, can you do it faster? Otherwise, it's very strategic and targeted on a projected road map. Anything else you see in the mix is pure, I call it, opportunistic for these guys, the optionality. So it's very clear. Vivek Arya: And on the clarification, Hock, Anthropic racks versus chips. Hock Tan: I'd rather not answer that, but we're okay. As Kirsten said, we're good on our dollars and margin. Operator: Our next question that will come from the line of Tom O'Malley with Barclays. Thomas O'Malley: I have one for Hock and one for Charlie. So Hock, I know you're very specific and particular about what you put in the preamble, and you noted that customers are staying at direct attached copper through 400 gig SerDes. Is there any reason you're pointing that out in particular, especially as a leading pioneer in CPO? And then on Charlie's side, as you're adding more customers here, I would imagine customers that design ASICs with you are going to use scale-up Ethernet. Maybe talk about scale-up protocols and how you see Ethernet developing there as well. Hock Tan: Okay. No, unless -- I'm just highlighting the fact that we -- on networking, our technology is really very, very uniquely positioning us to help our customers and more than our customers, even customers using general purpose GPUs, not just XPUs, which is that if you are running -- trying to create LLMs and running -- creating your own AI data centers and designing it, architecting it, you truly want larger and larger domains or clusters for -- and you really want to connect XPUs to XPUs directly where you can. And the best way to do that is to use direct attach copper. That's the lowest latency, lowest power and lowest cost. So you want to keep doing that, especially in scale-up as long as possible. In scaling out, we're past that. We use optical. That's fine. But I'm talking about scaling up in a rack, in a cluster domain. You really want to use direct attach copper as long as you can. And we are still based on our technology that Broadcom has with -- especially on connecting XPU to XPU or even GPU to GPU. We can do it with copper, and we can push the envelope from 100G to 200G to even 400G. We have SerDes now running 400G that can drive distance on a rack to run copper. What all I'm trying to say is you don't need to go run into some bright shiny objects called CPO, even as we are the lead in CPOs. CPOs will come in its time, not this year, maybe not next year, but in its time. Charlie? Charlie Kawwas: Yes. No. Well said, Hock. And on the question of Ethernet, with the debut of the cloud, Ethernet became the de facto standard in every cloud for the last 2 decades. If you look at the debut of the back-end networks, as Hock articulated, there was 2 years ago, a big fight about what protocol should be used to achieve the latency, the scale necessary on scale-out. And the industry at the time, 24 months ago, was not clear. We were clear. We were very clear actually about what the answer should be. And again, because of the deep engagements with our partners, they made it very clear to all of us and the industry, GPU or XPU, that Ethernet is the scale-out of choice, checkmark. Today, everyone is talking about scaling out with Ethernet. Now when it comes to scale-up, yes, exactly like what happened 3, 4 years ago on scale-up now, what's the right answer for this. And what we're hearing consistently and what we're seeing is the right answer is Ethernet. And as you know, last year, we've announced with multiple hyperscalers and many of our peers in the semiconductor industry that Ethernet scale-up is the right choice. That's what we believe will happen. Time will tell, but a lot of the XPU designs we're doing, we're being asked to scale-up through Ethernet, and we're happy to enable that. Operator: And our next question that will come from the line of Jim Schneider with Goldman Sachs. James Schneider: Hock, it was helpful to hear you discuss the progress of your other full custom XPU engagements outside of TPUs. As we look into next year, is it fair to assume that those are mostly targeting inference applications or not? And then could you maybe qualitatively speak to either the performance or cost advantages relative to GPUs that is giving those customers the ability to forecast in such a large scale? Hock Tan: Thanks. It's -- most of our customers begin with inference simply because that tends to be the easiest path to start on, not necessarily from anything else than the fact that, when you do inference, it's much -- it's less compute. But also then the question is, do you need this general purpose, massive dense matrix multiplication GPUs when you can do it more efficiently, effectively with customs inference silicon XPUs that do the job better or just as well, much cheaper cost, lower power. And that's what we find these customers starting with. But they are now in training and many of our XPUs are used both in training as well as inference. And by the way, they are interchangeable. Just a GPU can be used not just for training, which they are perhaps more perfectly suited to, but it can be used for inference. What we're seeing is our XPUs are used for both. And we are seeing that going on, but we're also seeing very rapidly more for those customers who are much more matured in the progression I talked about in their journey towards complete XPU, that they will start to develop 2 chips each year simultaneously, one for training, one for inference to be specialized. Why? Because what we're seeing very clearly for this player -- LLM players, is you do the training to get -- to achieve a higher level of intelligence, smarts for your LLM. So great, you get yourself a great LLM state-of-the-art or more. Now you've got to productize it, which means inference. Well, you can then decide at that time you got your model going as the best because if you decide then to do your inference productization, it'll take you a year at least to productize at which time somebody else is going to create an LLM better than yours. So you -- there's a leap of faith here that when you do training to create the next level of super intelligence in your LLM, you have to be investing simultaneously in inference, both in terms of the chip and the capacity. So our visibility is really coming out better and better as we find those 6 customers get more matured in their progression towards better and better LLMs. So yes, it's -- that is the trend we are seeing. It's not happening to all our 6 customers yet, but we are seeing a majority of them headed in that way right now. Operator: One moment for our next question, and that will come from the line of Joshua Buchalter with TD Cowen. Joshua Buchalter: Congrats on the results. Appreciate all the details on the expectations for deployments at specific customers. I was hoping you could just maybe reflect on how visibility has changed over the last 1 to 2 quarters that gave you the confidence to give us more details. And then on a specific one, you mentioned greater than 1 gigawatt for OpenAI in 2027. With that deal being for 10 gigawatts through 2029, that implies a pretty sharp inflection, I guess, in 2028. Is that the right way to think about it? And was that sort of always the plan? Hock Tan: Yes. Well, yes, this -- as you all seen and we all know in this generative AI race that we are in now, and I shouldn't use the word race, let's call it progression among the few players we see here. I mean, it's a competition, each is trying to create an LLM better than the other and more tailored for specific purpose, be they enterprise, be they consumer, be they search, each one is trying to create it more and more. And all of that requires not just training, which is important to keep improving your LLM models, but inference for productization and monetization of your LLMs. And we are -- and probably call it the fact that we've been engaged with some of them now for more than a couple years, we're getting better and better visibility as they have more and more confidence that the XPUs they are working on with us is achieving what they're getting at. As they get a sense that the XPUs they are working on with the software, with the algorithms they needed, that they are having more confidence that this XPU silicon is what they need, and they work and it gets better and better. And it gets better, we get more visibility, as Charlie puts up perfectly. Because at the end of the day, we only have 6 guys to work on. And these 6 guys are all, as I said, look at XPUs and AI in a very strategic manner. They don't think one generation at a time. They think multiple generation, multiple years. And in spite of all the hubris noise out there on what's available, they think very long term on how they deploy the XPUs they develop with us, how they deploy in achieving better and better LLMs that they want to create. And more than that, how they deploy in monetizing. So it's -- we are part of their strategic road map. We are not in just optionality of, oh, shall I use a GPU, shall I use it in the cloud because I need to train for 6 months? No, this is more than that. The investment these guys are making are long term, and it's great to be part of that long-term road map as opposed to a transactional road map. And the noise, as I answered an earlier question from a -- is there's a lot of noise that makes up short-term transactions with what is long-term strategic positioning of our business and our product. And to sum it all, I think our business in XPUs is a strategic sustainable play for all the 6 customers we have today. Operator: That is all the time we have for Q&A today. I would now like to turn the call back over to Ji Yoo for any closing remarks. Ji Yoo: Thank you, Sherry. Broadcom currently plans to report its earnings for the second quarter of fiscal year 2026 after the close of market on Wednesday, June 3, 2026. A public webcast of Broadcom's earnings conference call will follow at 2:00 p.m. Pacific. That will conclude our earnings call today. Thank you all for joining. Sherry, you may end the call. Operator: This concludes today's program. Thank you all for participating. You may now disconnect.