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Operator: Good day, and thank you for standing by. Welcome to the fourth quarter 2025 L.B. Foster Company earnings conference call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during this session, you will then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Lisa Durante. Please go ahead, ma'am. Lisa Durante: Thank you, operator. Good morning, everyone, and welcome to L.B. Foster Company's 2025 earnings call. My name is Lisa Durante, the company's Director of Financial Reporting and Investor Relations. Our President and CEO, John F. Kasel, and our Chief Financial Officer, William M. Thalman, will be presenting our fourth quarter operating results, market outlook, and business developments this morning. We will start the call with John providing his perspective on the company's fourth quarter and full year 2025 performance. Bill will then review the company's fourth quarter financial results. Some statements we are making are forward-looking and represent our current view of our markets and business today. These forward-looking statements reflect our opinions only as of the date of this presentation, and we undertake no obligation to revise or publicly release the results of any revisions to these statements in light of new information, except as required by securities law. For more detailed risks, uncertainties, and assumptions relating to our forward-looking statements, please see the disclosures in our earnings release and presentation. We will also discuss non-GAAP financial metrics and encourage you to carefully read our disclosures and reconciliation tables provided within today's earnings release and presentation as you consider these metrics. So with that, let me turn the call over to John. John F. Kasel: Thanks, Lisa. Hello, everybody. Thank you for joining us today for our fourth quarter earnings call. I will begin my comments on Slide 5, covering the highlights of the quarter. During last year's quarter's reporting cycle, we indicated that our increased backlog should deliver a strong fourth quarter, and I am pleased to report we wrapped up 2025 with exceptional sales growth, robust profitability expansion, and strong cash generation. Truly a fantastic finish to the year. Net sales of $160.4 million were up 25.1% over last year. This was the highest fourth quarter sales since 2018. Both segments delivered significant sales growth in Q4 with Rail up 23.7% and Infrastructure up 27.3%. Gross profit was up 10.6%, while gross margin of 19.7% was down 260 basis points due to weaker Rail margins primarily related to our TS& S business in the UK. Coupled with greater volume of Rail products, we delivered strong leverage of SG&A expenses, which were down $1.3 million or 5.2% from last year's quarter. The Q4 SG&A percentage of sales improved 470 basis points to 14.4%. Adjusted EBITDA of $13.7 million was up a remarkable $6.4 million or 89%, with the increased gross profit and lower SG&A expenses delivering the improvement versus last year. In line with our seasonal working capital cycle, we also delivered a strong quarter of cash generation, with operating cash totaling $22.2 million. Cash was deployed with capital expenditures at $2.4 million, stock repurchases of $3.3 million, and further reduction in net debt of $16.9 million to end the quarter's balance at $38.4 million. As a result of lower debt levels and improved profitability, our gross leverage ratio improved to 1.0x, down from 1.6x at the start of the quarter and 1.2x last year. I will now turn to Slide 6 to cover some of the key highlights of the 2025 full year results. Sales of $540.0 million were up 1.7%, with the full-year growth achieved as a result of a strong fourth quarter. Infrastructure delivered a strong year with sales up 14.9%. However, Rail sales were down 6.5% due to Doge-related U.S. Government funding impact at the start of 2025, and we continued our proactive scale-down measures with our business in the UK. Adjusted EBITDA of $39.1 million was up $5.5 million over last year and substantially lower SG&A expenses, partially offset by slightly lower adjusted margins. Operating cash flow also improved in 2025, totaling $35.6 million and up $13.0 million over last year. We deployed this cash to fund $10.4 million in CapEx, reduce net debt $6.1 million, and fund $14.4 million in stock repurchases under our stock buyback program, which reduced our outstanding shares 5.4% in 2025. New orders net of $540.9 million were up 6.8% year over year, and overall backlog increased 1.8% to $189.3 million with substantial improvements realized across our Rail business. I am very proud of what our team has accomplished in 2025, especially the strong finish in the fourth quarter. Their disciplined execution of strategic playbook continues to manifest in improving profitability and returns, and is positioning us well for expected growth in 2026 and beyond. I will now turn it over to Bill to cover the financial details for the quarter and year. I will come back in the end with closing comments on our markets and outlook for 2026. Over to you, Bill. William M. Thalman: Thanks, John, and good morning, everyone. I will begin my comments covering the fourth quarter highlights on Slide 8. As always, the schedules in the appendix provide more information on our results, including the non-GAAP disclosure reconciliations. Fourth quarter net sales of $160.4 million increased 25.1%, with higher organic volumes realized in both Rail and Infrastructure. While gross profit grew 10.6%, gross margins declined 260 basis points to 19.7% due to the weaker results in the UK, coupled with unfavorable sales mix in the Rail segment, partially offset by improvements realized in Infrastructure. More to come on segment sales and margins in a minute. SG&A as a percentage of sales of 14.4% was down 470 basis points due to lower personnel and administrative costs, despite the substantially higher sales volume. I will mention here that we completed a further restructuring of our UK Rail business in the fourth quarter. The total restructuring charge in Q4 was $2.2 million, with $1.0 million recorded in gross margin and $1.2 million recorded in SG&A. We expect this program, including staff reductions and two facility closures, to deliver approximately $1.5 million to $2.0 million in run-rate savings in 2026. Adjusted EBITDA for the quarter was $13.7 million, up 89% versus last year due to the higher sales volumes and the resulting improved gross profit, coupled with the lower SG&A expenses. I will cover cash flow performance along with segment orders and backlog later in the presentation. We would like to remind everyone of the financial performance seasonality we typically see over the year, reflected on Slide 9. Our sales and profitability are typically strongest in the second and third quarters, with the first and fourth quarters a bit weaker. This is due to the construction season for our customers in the spring and summer months. The phasing was skewed a bit in 2025, with the abnormally soft Q1 start for the Rail business related to the Doge government funding impacts, with both segments having an exceptionally strong fourth quarter. As a result, combined Q2 and Q3 sales and profitability as a percentage of the full year are slightly lower than what we would typically see with the strong performance in Q4. And as we have seen over the last three years, free cash flow is strongest in the second half of the year, as working capital needs unwind in line with the end of the construction. I will next cover segment details starting with Rail on Slide 10. Rail fourth quarter revenues totaling $98.0 million were up 23.7% over last year. The increase was driven by higher volumes in Friction Management and Rail Products, up 41.6% and 31.1%, respectively. Softer demand in both the UK and North American markets. Rail margins of 17.8% were down 440 basis points due primarily to lower sales volumes, higher costs, unfavorable sales mix, and the $1.0 million restructuring costs associated with our downsizing efforts in the UK. Rail margins were also adversely impacted by the dilutive impact of higher Rail product sales volumes. While Rail orders were softer in the quarter, Rail backlog was up 55.3% year over year, with substantial gains realized across all three business units. Turning to Infrastructure Solutions on Slide 11. Segment revenue increased $13.4 million or 27.3%, with sales growth realized in both business units. Steel product sales were up 58.2% led by a 206.5% improvement in protective coatings. Precast concrete also continued its strong run with sales up 18.7% for the quarter and 19.9% for the year. Infrastructure gross margins were up 20 basis points to 22.8%, with gains in steel products offsetting lower precast margins. Higher sales volumes and improved business mix drove steel product margins up, while precast concrete margins were weaker due to unfavorable sales mix, coupled with a $600,000 increase in start-up costs related to our new facility in Florida. And finally, the lower Infrastructure backlog reflects the $19.0 million Summit order cancellation reported back in Q3, as well as lower open orders for both Bridgeforms and precast concrete. We started last year with an elevated backlog for Infrastructure, especially for precast concrete. This year reflects a normal level that we expect will increase in the coming months as we enter the construction season. I will briefly cover the full-year highlights on Slide 12. As John mentioned, 2025 sales were up 1.7%, with the strong Q4 results delivering sales growth for the full year. Infrastructure realized sales growth in every quarter in 2025, while Rail achieved growth in the fourth quarter only, due to the weaker start to 2025. 2025 adjusted EBITDA was $39.1 million, up $5.5 million compared to last year, driven by substantially lower SG&A expenses, partially offset by lower margins resulting from the weakness in Rail. It should be highlighted that 2025 results included approximately $2.2 million in start-up costs related to our new precast facility in. In addition, reported gross margins and SG&A reflect the costs and charges associated with the UK automated material handling product line exit announced in Q2 and the UK restructuring completed in Q4. Such costs totaled $1.4 million and $2.2 million, respectively. And finally, I will mention here that the year-over-year decline in net income was driven primarily by last year's federal valuation allowance release, coupled with a relatively higher effective tax rate this year due to higher UK pretax losses not being tax-effective. We expect our effective tax rate to be substantially lower in 2026 with an improved outlook for the UK, which John will touch on in his closing remarks. I will now cover our liquidity and leverage on Slide 13. We have successfully managed our leverage and levels in line with our business profitability and capital allocation priorities, and the chart on Slide 13 reflects a consistent pattern of steady improvement over time. In 2025, we generated $35.6 million in operating cash flow and $25.2 million in free cash flow. Over the last three years, our average free cash flow was approximately $28.0 million, excluding the Union Pacific settlement payments, which were completed at the end of 2024. As a result, we have maintained significant financial flexibility while also executing our capital allocation priorities. Our capital-light business model, along with the modest cash tax requirements provided by our federal NOL, further enhances our cash generation and financial flexibility to fund our capital allocation priorities, which I will now cover on Slide 14. Managing our debt and leverage levels remains our top capital allocation priority, and we maintain a disciplined, prudent approach to capital allocation with leverage in mind. At the end of 2025, the gross leverage ratio for our revolving credit facility was just under 1.0x, a low point in recent years and at the low end of our target range of 1.0x to 1.5x. Seasonal working capital needs are expected to elevate our debt and leverage somewhat in early 2026, but we should stay around our target range and realize improvements in the second half of the year in line with our normal cash cycle. Capital spending in 2025 totaled $10.4 million, or 1.9% of sales. We have several targeted organic growth programs within our Precast Concrete business that we expect will increase the CapEx rate of sales to 2.7% in 2026. Share repurchases are an important capital allocation priority for us, and we have $28.7 million remaining to spend on our buybacks under the most recent authorization approved in February 2025. We repurchased approximately 121,000 shares for $3.3 million in Q4, and we repurchased just over 1,000,000 shares, or approximately 9% of the shares outstanding, at an average price of just under $23 per share since restarting the program back three years ago. And finally, we also continue to evaluate tuck-in acquisitions to add breadth to our growth platforms, primarily in the precast concrete market space. My closing comments will refer to Slides 15 and 16 covering orders, revenues, and backlog trends by business. The trailing twelve-month book-to-bill ratio at the end of Q4 was 1:1, improved from Q4 last year but down from Q3 with the strong Q4 sales. Rail order rates have begun to recover with the TTM ratio at 1.11:1, and I will highlight that Friction Management orders were up 58.4% in Q4. Lower net orders in Infrastructure drove the lower trailing twelve-month ratio to 0.87:1; the Summit order cancellation reported in Q3 was the driver of the decline. And lastly, the consolidated backlog reflected on Slide 16 totaled $189.3 million, up $3.4 million over last year, with substantial improvements across all Rail businesses, partially offset by lower Infrastructure backlog. The shifts in the backlog suggest a stronger start for our Rail business in 2026 compared to last year, with Infrastructure growth developing later in the year after the strong results achieved in 2025. John will cover some additional backlog details and developments in his closing remarks. I will wrap up by saying we are very pleased with our financial performance in 2025 and excited about the prospects for further progress in 2026. Thanks for your time this morning. Back to you, John. John F. Kasel: Thanks, Bill. I will begin my closing remarks on Slide 18, reviewing developments in our key end markets. Starting with the Rail segment, we are seeing favorable trends in bidding activity that give us optimism that we will return to growth in 2026. The federal government programs that fund our customers' repair and maintenance projects are active and flowing, and we expect that this will provide a tailwind for demand for Rail in the U.S. for the foreseeable future. Of course, we will monitor developments in Washington and respond to any changes in funding should they occur. Turning to Rail Technologies, Friction Management had a phenomenal year in 2025 with 19% sales growth, noting that this growth was all organic, and we continue to invest in our commercial technology capabilities for this important growth platform and expect continuing long-term growth aligned with our customers' focus on safety, fuel savings, and operating performance. The total track monitoring product line was somewhat flat in 2025, but we are expecting improved demand in 2026 with the commercialization of some new technologies that improve rail safety and operating ratios. The UK market environment remains extremely challenging. We have taken significant actions in the last three years to reposition this business and expect it will lead to improved results in 2026. We also see some market trends worth mentioning for our Infrastructure segment. Starting with civil construction, activity remains robust, particularly in the southern part of the U.S., which is bolstering demand for precast concrete products. Demand for our environment keep for water management solution is increasing, with some large projects wins already in our backlog. These improvements are partially offsetting softer demand for our CXT buildings in the short term. This product line had a record year in 2025, and bidding activity is starting to pick back up. The softer residential real estate market has impacted demand for our Biocast wall system product line in our new Florida facility. We remain optimistic that a lower interest rate environment and a favorable population trend will improve demand in the future. Within steel, our protective coatings product line sales improved 42.7% in 2025, with the renewed interest in U.S. oil and gas production, and we expect these favorable trends to continue into 2026 as well. A quick comment on tariffs. As is the case for most domestic markets, impact of rising tariffs is being absorbed and managed by supply chain and commercial teams. I can confidently say that tariffs have had a minor impact on our business. In summary, we expect to start 2026 to be stronger than last year. And we believe we are well positioned to benefit from the infrastructure-based investment plans for years to come. Turning to Slide 19, I will wrap up today's call with an overview of 2026 financial guidance. I will start by highlighting the significant progress we have made since we launched our strategic transformation back in 2021. While last year's sales were up only 5% since 2021, adjusted EBITDA has more than doubled and free cash flow is up $30.0 million. The capital deployed in the business is also much lower, significantly improving financial results. Our 2026 guidance anticipates continuing sales growth, profitability expansion, and strong cash generation while investing in our growth platform. Bill mentioned earlier that our backlog was approximately $189.0 million at year end, up 1.8% versus last year. While the increase is modest, there are some important shifts in the bio that should be highlighted, and they support our optimism in 2026. Starting with the Rail backlog, which is up $34.5 million versus last year. The increase is driven in part by stronger North American demand for both Rail products and Friction Management. Rail Products backlog is up $10.6 million; Friction Management is up 7.6%. The balance of the increase was realized within our TS&NS, with the UK business securing a $20.0 million multi-year order last year. So the higher executable backlog for Rail should translate into a better start for 2026 versus last year's weaker first half when the pause in federal funding curtailed Rail customer project work. While Infrastructure backlog is down $31.1 million, the majority of the decline is due to the Summit order cancellation. In addition, the precast concrete backlog is down $5.4 million, with slightly lower CXT building backlog at the start of 2026 after a record year in 2025 for this product line. As a reminder, our precast business grew 19.9% in 2025. This impressive growth was all organic. I am pleased to report that project pipelines are robust and bidding activity is picking up in both segments. During the first two months of 2026, overall backlog is up about 15% from year end, with solid gains realized in both segments. Our 2026 guidance reflects 3.7% sales growth, with 11.1% to 10.3% growth in adjusted EBITDA, both at the midpoints of the range. Free cash flow is expected to remain robust at the midpoint of $20.0 million, with a slightly higher CapEx rate of 2.7% of sales as we invest in organic programs, primarily in precast concrete. In summary, our 2026 guidance reflects our expectation of another solid year and improvement in financial performance while investing for future growth along with strategic priorities. I will close today's call by thanking our team for a fantastic 2025. It was a challenging year in many ways, but our team was resilient, and we finished the year strong, in fact one of the strongest quarters we have seen in recent years, and we are carrying that positive momentum into 2026. I am coming up on my fifth-year anniversary as CEO in July. I look forward to greater accomplishments in 2026. I could not be more proud of what our team has achieved over those five years and beyond. Thank you for your time and continuing interest in L.B. Foster Company. I will turn it back to the operator for the Q&A session. Thank you. Operator: One moment for our first question. Our first question will come from the line of Liam Burke with B. Riley Securities. Your line is open. Please go ahead. Liam Burke: Thank you. Good morning, John. Good morning, Bill. John F. Kasel: Good morning, William. Liam Burke: John, it looks like with the orders in both Friction Management and Rail Products that the segment will look a little more normal than it did in 2025, based on the UK problems and Doge opening the year. The only thing we are seeing is maybe track monitoring flat, but that is project-based. Is there anything else that would keep you from having a more normal year in Rail Products this year? John F. Kasel: No. Well, thanks, Liam, for joining us today. I think you hit it on the head. You know, we finished the year down about $189.0 million, and the reason being we delivered. So we all the executable backlog with our channel partners, you know, we had our billings were fantastic. The bookings really picked up here, as I mentioned, up 15% since the end of the year, with equal weighting, I would say, throughout Rail Products and the Infrastructure precast business. So this is, as you mentioned, back to normal, we feel. In fact, we were closer back to normal in the fourth quarter last year. Bidding activity and the need is there today. So our team feels very good about the start to the year and our ability to see that guidance, you know, the increased revenue that we are looking for, profitability. It is kind of refreshing to have that now compared to where we were just a year ago. Liam Burke: Great. Thank you. And on concrete, you have the order cancellation. You have normal quarter-to-quarter variability anyway. You touched on order activity being pretty solid in the first quarter. Do you anticipate better cadence for concrete as we get into the third and fourth quarter this year, or second and third quarter this year? John F. Kasel: Yeah. Same, you know, same. We are starting to pick up some nice backlog, as well as on the entire Infrastructure side in steel as well, which had a very strong back end of the year. We are starting to see the energy business, our specific facilities down in Texas as well as Birmingham, starting to build a backlog. And then Precast is, we were a little light coming into the year because of the building side, but, you know, we pretty much shored that up in the first two months already. So, again, our facilities are basically running at capacity right now through at least the first half of the year, and we will see definitely a pickup to the second half here, especially in areas like Florida, with their new facility really coming online. We will be excited about that. Liam Burke: Great. Thank you, John. John F. Kasel: Thanks, Liam. Operator: Thank you. And as a reminder, to ask a question, please press. And our next question comes from the line of Julio Alberto Romero with Sidoti & Company. Your line is open. Please go ahead. Julio Alberto Romero: Bill, Lisa. Maybe to start with you. Morning. Hey, maybe to start on the 2026 guidance ranges that imply sales growth of about flattish to 7% on the sales line and then EBITDA growth of 5% to 18%, I believe. Just talk about what the puts and takes are that you think can get you to the high and the low end of those ranges? John F. Kasel: Yeah. Well, I think Liam hit it right there. It is about work and backlog and less disruption, and the need is, you know, we are an infrastructure company in the right market right now with industrials. So our customers need our product. So we are feeling, you know, much different about the start of the year than we were last year. And so order book is strong, and the bidding activity is as good as we have seen it in recent years. So we feel good about bringing the revenue in. Now we have to really shore up some things. We had some, you know, as we mentioned, some things in the UK that were, and we have done now three years of really rightsizing that business to protect the company, to protect the margins. But we feel good with what is going on specifically here on the Rail side. Our FM business, as I mentioned, I mean, you look at our growth platforms here, Julio. You look at Precast as well as Rail, you know, both of them up respectively, you know, 20% in the fourth quarter. And all the activity we talked about was all organic. So it really bodes well for the capital that we are bringing into the company. You know, as I mentioned that we took up the capital as a percent of sales a little higher this year, 2.7%, because we feel very, very good about the opportunities we have in front of us. And the reality is we have to increase capital now to stay up with the need specifically on the Rail side and precast side. And then we are backfilling some of the work that we need to do on the coating side as well. So, you know, right now, we are really focused on producing the backlog and executing well, coming into, you know, the first quarter and first half of the year. A much different position than we were just one year ago today. Julio Alberto Romero: Absolutely. Thank you for that answer. And I was just hoping to go a little bit deeper into the cadence of the quarter-to-quarter Rail revenues expected in 2026. Obviously, it is difficult to foresee any Doge-like events kind of driving delays for your customers, but absent an event like that, you know, you mentioned you feel better about Rail now than maybe this time one year ago. Just speak about, you know, the confidence of the quarter-to-quarter cadence on your top line. John F. Kasel: Well, remember, we are a construction seasonal company too. Right? So as far as Rail, they really do not get in and do much as far as refurbishments until the weather improves heading into, you know, second, third quarter. Right? So right now, it is about bringing us orders and when we are providing them the materials for them to get on track and do what they need to do to shore up things in the second, third quarter. So we are looking more of a typical bell curve, if you will, this year, with the highest revenues coming in Q2 and Q3, Julio. So, you know, unlike what we had to do this year, we will, you know, make it all happen in the fourth quarter, we are going to see quite a bit more work and activity in sales happen in the first half of the year, specifically in Q2 and then continuing in Q3 compared to what we had just last year. We are set up to do it. So when the customers come and the need is there, you know, we pivot and we do very well executing. But I think it is going to look like a much more normal year this year on the Rail side, including on the precast side. We feel very good about the performance we are having coming out of our concrete group. You know, we have done a good job of stabilizing our acquisition that we made back in 2023, and we are starting to really move product to the East Coast. And then we had a record year in our Hillsboro facility. Plant manager there, Jason Busby, has just done an outstanding job with record revenue coming out of that facility. So we feel very, very good about what we see specifically with our growth platforms and their ability to perform and do it more consistently this year than getting in the hole like we had last year and having to come out of it in the, you know, in fourth quarter like we did. And we communicated to the market. And I think the other thing that we are really focused on is our debt. You know, for us to be down to one time, to really manage the working capital that you see here today, as well as the cash generation. We are very pleased with the focus on, you know, bringing the cash back to the shareholders and getting our debt to something, well, we finished the year at 1.0x. So we are very proud of all those activities. Julio Alberto Romero: And fair point about the inherent seasonality of construction in your business. I guess I am just asking because you had such a, you know, funky, for lack of a better word, sales cadence in 2025 on the revenue line. Thinking about the year-over-year growth rates for Rail in 2026, I mean, is it fair to expect year-over-year sales growth in 2026? And would you expect the year-over-year growth rates to be more weighted year, or, you know, I guess, just help us think about that given how the fact that the 2025 comps are so skewed. John F. Kasel: So let me give you a little color, and then I will let Bill give you a few specifics. But last year, remember Doge. Right? So this time last year, the POs were curtailed because, basically, much of what we see, especially on the Rail Products side, 55% of what we have flows through the government. So there were just a number of projects that we were looking for that did not happen. So we were basically in a waiting game. The need was still there, but the funds as well as the POs were not flowing. So it really put us behind the eight ball, if you will, for the first half of the year. And we were able to make it up for the most part in the second half of the year because we have very good supply chain partners in our ability to flex our workforce and get the product out to the customer. The good news is that demand and requirement has continued now from the fourth quarter into the first quarter of this year. So that is where things are completely different. We are getting the POs, the bidding activity is there, and most importantly, the need is there. You know? We are in the maintenance and refurbishment part on the Rail side. So the needs to the market are there. And the good news is we are there to deliver. Maybe Bill can give a little more color on the phasing. William M. Thalman: Yeah. Julio, I guess the way I would look at it is if you just take, you know, what you would layer out as a run rate in terms of your outlook for Rail, you know, if you convert that to a normal seasonality that we would typically see, you are probably going to find that there is going to be some growth in Rail in Q1, and stronger growth in Q2 and Q3 just based on the normal seasonality. And then with an extraordinarily strong Q4, you know, the growth potentially may not be as strong there or potentially, you know, not covering the extraordinarily strong Q4 that we had. And then on the Infrastructure side, I would say, as John mentioned, the backlog is improving, but we started the year with a little lighter backlog. That is probably going to be more. So I would say that it is still going to be a solid year of growth towards the second, third, and fourth quarters of the year, as opposed to getting off to a strong start like we did last year. I think John mentioned our backlog was elevated at the beginning of the year with a strong Buildings backlog. We executed against that in last year's Q1. So Infrastructure may be a little lighter, but strong sales growth to start the year for Rail. Julio Alberto Romero: Super helpful. Thank you. Thank you, Bill and John, for that. And I guess just last one before I turn it over is just wanted to comment on, you know, you really did have a really extraordinarily strong free cash flow in the fourth quarter. If you could just speak to the drivers of that and how much of a function of that is kind of the structural things you have done as an organization. John F. Kasel: Well, if you look in the last couple years, we do that pretty frequently, that we manage the fourth quarter. Right? Because of the working cycle needs. We have a big lift in working cycle related to raw materials coming in Q2, Q3 because of the seasonality, and that is our largest sales. So we are bringing in materials. Then we do a good job of moving those materials out and then collecting on our bills in the fourth quarter. We have a really good team that makes those things come together and make those things happen. So we did the same thing last year, you know, 1.2x that we finished the year, and we finished this year, that last year being the year of 2024. And then, of course, we finished this year at 1.0x. So we are good at it. Now, you know, we want to make sure that we keep that focus. But at the end of the day, it is also about making sure that we are delivering to our customer. And so behind all this is, you know, it is good quality, systems, on-time deliveries, and making sure that we do not have customers that have reasons not to pay us. So there is also a very good performing part of this that makes sure that when we ship something, it does not come back. We have delighted customers. Julio Alberto Romero: Great. Thank you for all the color. I will pass it on. John F. Kasel: Thanks, Julio. Operator: Thank you. And one moment for our next question. Our next question comes from the line of Justin Bergner with Gabelli Funds. Your line is open. Please go ahead. Justin Bergner: Good morning. William M. Thalman: Hi, Justin. Lot's been covered. Justin Bergner: But I just want to delve into some areas that maybe would be great. Could you give some more clarity on, so the total track monitoring? Could you provide some, you know, just discussion as to the puts and takes there on the fourth quarter and looking forward? John F. Kasel: Alright. So we mentioned it was somewhat flat last year related to the activity. That is true. So we have been doing quite a bit of work behind the scenes and continue to work on technology innovation, which I mentioned in today's call. So we have some things that are coming to the market that help shore up what that business is, and keep bringing in next generation of product for condition monitoring to the marketplace. So our team was very active, and we had a significant job that we are working on abroad last year too. It took away a little bit of our time and attention to the North American market, but we feel very good about where we are at today. We have built up that team. We have spent our available SG&A to bring the technical resources here in the U.S., moving from the UK. So we are really set up well to deliver our Mark IV application, and then, as we have been talking about, this rockfall installation that we are seeing, pretty significant excitement in the marketplace today. So last year was really getting ourselves shored up to make this happen, to make sure we support it, make sure we had our operating centers ready to perform. So we are looking for big things out of that group in 2026 and beyond. Justin Bergner: Got it. And then secondly, the protective coatings business, I mean, we expect double-digit type growth there in 2026. John F. Kasel: Yeah. I think we are going to be right up to it. It is, you know? And I think what is going on right now in the world related to energy, and the need for more energy here in the U.S., is probably going to continue to put us in a better position as far as volume and activity for the balance of the year. So, again, we have spent some money in those facilities. We brought in some new equipment to make us more efficient, be able to produce more product. So as those orders come in, we are going to be ready to deliver in a big way that we have not done in years past. Justin Bergner: Okay. Great. And then lastly, the headwinds to EBITDA in the quarter, I mean, you mentioned the UK Rail business. I guess your adjusted EBITDA adds back a lot of the restructuring expenses. So in light of that, any clarity on sort of, even after adding back those restructuring expenses, you know, what caused the fourth quarter to be a little bit light versus your expectations? John F. Kasel: That is right. Yeah. So first of all, as far as the UK, I mean, this has been a three-year plan now. We are really getting ourselves aligned to the market needs over there because it has been changing. It has been dynamic. It was a big part of our growth initially, and as that market has changed, we have been pivoting and adapting our business to those needs. So I think we have done a very good job of rightsizing the business, and the materials handling part of that was the last step that we have done, getting ourselves in position to end the year strong, much stronger over there than where we were just a year ago. Bill, maybe you could give a little additional color, would you? Yeah. Would like us as Q4 other hit puts and takes. Yeah. William M. Thalman: Yeah. Justin, you know, as John mentioned, it has been three years of a restructuring and downsizing effort there. What we are seeing coming through in the fourth quarter is basically what I would call us wrapping up those final steps of those downsizing efforts. So the margin impacts were a result of the lower sales volume. There was definitely manufacturing deleveraging that occurred as a result of that, some higher costs that came through. And then we also had some longer-term, legacy commercial contracts that we resolved within the quarter. So that all resulted in a headwind for margins in the UK in the fourth quarter. I guess what I would like to highlight is we are seeing improvement on a run-rate basis moving into 2026 already, and we expect that to continue to improve as we go into the year. Justin Bergner: Got it. That is very helpful. If I could throw one last one, just the Infrastructure backlog, you mentioned it was up from the end of the year. Is it up modestly or is it up materially? I mean, you know, if, obviously, you are only one month away from the end of the quarter. I mean, should we expect to see a nice uptick in the backlog for Infrastructure? John F. Kasel: We are up 15% since the end of the year. Justin Bergner: Gotcha. Alright. Thanks so much for taking the questions. John F. Kasel: Yeah. Thanks, Justin. Thanks for joining us today. Operator: Thank you. And I am showing no further questions, and I would like to hand the conference back over to John F. Kasel for closing remarks. John F. Kasel: Thank you, Michelle, and thank you for joining us today. So I would like to leave you with one thing that, you know, we mention sometimes, but I think it is really, really important to the culture and fabric of our company. I mentioned that, you know, in July will be my fifth year as CEO of the company. One of the things that the leadership team here has really been focusing on is our culture. L.B. Foster Company is in our 124th year, and that really, you know, says something about the company, and a lot of people have worked here for, you know, their entire career. And what really makes us tick is our value system. And, first and foremost, is our focus on the people and safety. Our safety results the last two years have been, respectfully, the best years we have had in the 124 years as far as safety performance. You know, it is not just the number. It is all the activity and the focus and the attention to our people, the process, putting money back in the facilities, the yards, and letting people know that they are important. When you have all those things come together, you are a more profitable company, and you are really providing the value to shareholders, and I think that is something sustainable. So I would like to recognize Ben McClellan. So Ben started with the company just about 25 years ago. So in October, he will hit 25 years. Ben is the Director of Environmental Health and Safety. He has basically been in that role since he joined the company, and let us just say 25 years ago, this was not the L.B. Foster Company that it is today. We did not have great safety performance. There was a lot of effort and a lot of activities to make that happen, but the reality is it took time. It took dedication. It took focus. It brought in new skill sets. And, but Ben was always there, and he was always pulling the levers as well as, you know, keeping the pieces together. So I would just like to thank Ben for all your efforts, all your focus, all your drive, and really putting L.B. Foster Company at the forefront to being world class. World class in, you know, how we do things and to be an extension of our, not just the shareholders, but, you know, our customers as well. So thank you for your time today, and I look forward to meeting or hooking up with you after we finish Q1 results. Take care. Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect.
Operator: Good morning, and welcome to the Limbach Holdings, Inc. Fourth Quarter and Full Year 2025 Earnings Conference Call. At this time, participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I will now turn the conference over to your host, Lisa Fortuna of Financial Profiles. You may proceed. Lisa Fortuna: Good morning, and thank you for joining us today to discuss Limbach Holdings, Inc.’s financial results for the fourth quarter and full year 2025. Yesterday, Limbach Holdings, Inc. issued its earnings release and filed its Form 10-K for the period ended 12/31/2025. Both documents, as well as an updated investor presentation, are available on the Investor Relations section of the company’s website at limbachinc.com. Management may refer to select slides during today’s call and encourages you to review the presentation in its entirety. On today’s call are Michael McCann, President and Chief Executive Officer, and Jayme Brooks, Executive Vice President and Chief Financial Officer. We will begin with prepared remarks and then open the call to questions. Before we begin, I would like to remind you that today’s comments will include forward-looking statements under the federal securities laws. Forward-looking statements are identified by words such as “will,” “be,” “intend,” “believe,” “expect,” “anticipate,” or other comparable words and phrases. Statements that are not historical facts, such as those about expected financial performance, are also forward-looking statements. Actual results may differ materially from those contemplated by such forward-looking statements. A discussion of the factors that could cause a material difference in the company’s results compared to these forward-looking statements is contained in Limbach Holdings, Inc.’s SEC filings, including reports on Form 10-K and Form 10-Q. Please note on today’s call, we are referring to non-GAAP measures. You can find the reconciliation of these non-GAAP measures to the most directly comparable GAAP measures in our fourth quarter 2025 earnings release and in our investor presentation, both of which can be found on Limbach Holdings, Inc.’s Investor Relations website and have been furnished in the Form 8-K filed with the SEC. With that, I will now turn the call over to President and CEO, Michael McCann. Michael McCann: Good morning and welcome to our stockholders, analysts, and interested investors. We appreciate you joining us today. Yesterday, we reported our fourth quarter and full year 2025 results. Before I get into some of the business highlights, I want to recognize all the Limbach Holdings, Inc. team members who deliver safe, quality-driven customer solutions. Our strategy is built on the foundation of great people, and this team delivered a record-setting year. I also want to comment on our announcement yesterday that we will be relocating our headquarters to Tampa, Florida. Relocation of our headquarters to Tampa reflects the fact that a significant portion of our senior leadership team and nearly 40% of our corporate workforce are already based in Tampa, where our presence has grown substantially since establishing the corporate office in 2020. The move marks a milestone of the company’s 125th anniversary year, and we look forward to the future as we continue to grow and strengthen our presence in Tampa. Now turning to our strong results. 2025 marked a record year of significant total revenue growth of 24.7%. Notably, it is the first year our revenue has grown substantially since 2020, when we began executing our strategic shift to ODR. Our ODR/GCR mix for 2025 was 75% ODR and 25% GCR, right in the middle of our guidance range and a meaningful improvement from February mix of 67% ODR and 33% GCR. Total ODR revenue grew by 40.6% with organic ODR revenue growth of 17%, reinforcing organic growth as a major driver of our success. Total gross margin was 26.2% for 2025, and 28.2% when excluding all of our acquisitions since 2021, demonstrating the legacy business gross margins remained stable when compared to 2024. We reported record full-year adjusted EBITDA of $81.8 million within our guidance of $80 million to $86 million and a 28.4% increase from 2024. We generated $71.9 million in cash from operations excluding working capital in 2025, with $21.4 million generated in Q4, reflecting our high rate of cash flow conversion. In December, we authorized a $50 million share repurchase program. Finally, our balance sheet remains strong with only $24.6 million in net debt, or a net debt to adjusted EBITDA ratio of 0.3x. Turning to 2026, we are focused on three strategic core growth pillars, which include ODR and organic total revenue growth, margin expansion through REVOLVE customer solutions, and scaling the business through acquisitions. Our first pillar is to grow ODR organic total revenue. We expect our revenue mix between ODR and GCR to hold steady, while we focus on growing total revenue with ODR being the primary growth driver. Our strategy for growth is designed to combine national scale with local execution, allowing us to better serve mission-critical facilities. We are investing both at the local and national level to accelerate sales, leverage SG&A, and drive growth. We have supported both growth objectives by strategically positioning two seasoned senior executives on accelerating sales. One executive is focused on local sales, while the other is responsible for driving national relationships. We believe this strategy will be a key element in supporting our investments in driving growth. As we focus on growth, we continue to manage project risk and reward through careful selection based on project size and short life cycle. In Q3, we discussed in detail our various ODR revenue streams. As we mentioned, ODR revenue is broken down into two different categories. The first is fixed-price projects greater than $10,000, which represented 73% of total ODR revenue for 2025, with an average ODR project size of approximately $240,000. The second category is recurring, quick-burning revenue, which includes contracts, work orders for small fixed-price jobs less than $10,000, and time-and-material work. In full year 2025, our quick-burning revenue represented approximately 27% of total ODR revenue. We have also expanded our GCR gross profit by carefully managing the risk and reward profile as it relates to project size and scope. The average GCR project for 2025 was only $2.6 million. Our second pillar is margin expansion through REVOLVE customer solutions. We differentiate ourselves from the competition by being a single-source provider for building owners, capable of providing comprehensive life cycle engineered solutions. In 2026, we plan to continue to expand our offerings in six differentiated customer solutions including integrated facility planning, service maintenance, equipment replacements and retrofits, new equipment mechanical, electrical, plumbing, and control (MEPC) infrastructure upgrades, and energy efficiency and decarbonization analysis and projects. Our staff is being trained to bundle customer solutions and deliver long-term value to our clients. Each individual transaction may have a different margin profile, but the overall quantity of gross profit and the quality of blended margin are carefully managed. From 2020 through 2025, our total gross margin for the legacy branch business has grown from 14.3% to 28.2%. In total gross profit dollars, total gross profit has increased almost 50%, demonstrating that our teams are able to grow total gross profit while simultaneously enhancing margin. The third pillar is strategic M&A aimed at extending the reach of the Limbach Holdings, Inc. brand, strengthening our market presence, and expanding our capabilities. Through targeted acquisitions, we seek to diversify our vertical market exposure and broaden our geographic footprint while adding new offerings to enhance our customer solutions. In 2026, we remain selective as we would expect to pursue one to three acquisitions to meet our return thresholds by expanding our geographic footprint and increasing our local service capabilities. Additionally, we are looking for companies that expand our six core customer solutions. We are particularly focused on companies that expand our integrated facility planning solution. Due to their deep involvement in the capital-planning process, these companies tend to have national relationships in healthcare, data centers, and industrial manufacturing. We believe the synergies between these two types of deals will help us reach our long-term vision to be an indispensable building system solutions partner providing national reach with local presence. Turning to our last acquisition, Pioneer Power, where integration is well underway. We have largely completed the first phase of our value-creation process, centered around system integration. Next, we are focused on the second phase of our value creation, which is all about increased gross margin. Key strategic priorities in 2026 will include negotiating T&M contracts; measuring margins by revenue size and type while setting specific goals; introducing Limbach Holdings, Inc. sales training and sales enablement resources; identifying cross-selling opportunities by leveraging our respective national account relationships; and aligning resources to the most profitable accounts. We expect margin improvement at Pioneer to take shape throughout 2026, with exit margins higher than current levels, as we start the second phase of our value-creation process. We expect the gross margin improvement to continue over the next two to three years until Pioneer’s margins reach alignment with the current business. Our record for improving margins of acquired companies is best demonstrated by our acquisition of Jake Marshall in December 2021. At the time of purchase, the gross margin was approximately 13.4%. After four years of executing our value-creation model, from gross profit benchmarking to establishing account-focused teams, Jake Marshall’s gross margin increased to 28% for 2025. Today, Pioneer Power’s gross margin is below the level where Jake Marshall was at the time of the acquisition. This is an indication of the meaningful value-creation opportunity we have. Turning to the macro environment. We experienced positive demand improvement in the fourth quarter across all our verticals. Our institutional markets—healthcare, life science, and higher education—rebounded after softness in the middle of last year. The government shutdown and the D.C. policy changes caused many of our customers to temporarily pause activities. However, the subsequent recovery in these verticals allowed us to achieve 24% ODR organic revenue growth in Q4. I will now make some specific comments on several of our key verticals. In our healthcare vertical market, many customers were spending their leftover budgets while also preparing 2026 normalized spending patterns during the fourth quarter. Due to the uncertainty of economic conditions in 2025, several national customers have started to engage us much earlier in their planning process. Our unique combination of professional service and installation expertise creates both speed-to-market and cost-certainty advantages. As customers are planning their budgets now, and given our early involvement in the design and planning process, we anticipate a softer start in 2026 with revenue building throughout the year. As an example, in late December, one of our key national healthcare customers called us to help execute a critical infrastructure project. The engagement is worth approximately $15 million in contract value across three different hospitals in Florida. For this project, we are providing both program management and design-build services. They chose Limbach Holdings, Inc. because of our demonstrated ability to seamlessly procure, design, and execute a complex project swiftly, whereas the engineering firm that performed the original assessment was not able to execute the project fast enough. The project is expected to be designed in the first half of the year with work on site to begin in 2026. Shifting to data centers, where we have two very strong emerging relationships with hyperscale data center owners. These relationships have been developed due to our successful delivery of projects out of the Columbus, Ohio location over the past several years. Given the traction we have achieved and future opportunities with these owners, we have decided to dedicate resources towards building a national vertical market team focused on data center work. We believe we have the availability of resources and the unique skill set to position ourselves thoughtfully in this vertical. As an example of our traction in the data center vertical that took place in Q4, we were awarded a specialty infrastructure project worth approximately $10 million in contract value. The scope of the project is to provide fabricated piping systems directly to the owner. This is the fourth project of this scope, and the owner has expressed interest in further expanding our relationship. We believe we are well positioned to grow in this vertical in 2026 and beyond. In 2025, revenue in this vertical was less than 5% of total revenue. Our objective in 2026 is to increase vertical market diversity in the business; expanding our data center market contribution is critical to achieving that objective. We see the opportunity for this vertical to represent a meaningful portion of revenue over time. In 2025, our industrial manufacturing vertical produced strong and steady results and was less affected by the D.C. policy concerns. Our recent acquisitions of Pioneer Power and Consolidated Mechanical help provide us with diversity, both from a geographic footprint and vertical market standpoint. Our work here is conducted primarily via time-and-material shutdown work and small project work. We expect first-quarter revenue in this vertical to also be soft due to spending seasonality that traditionally kicks up in April. Our success in 2026 will be driven by our ability to accelerate sales and leverage our previous investments. We expect our revenue and earnings to be weighted to the second half of the year, with growing confidence in the sales growth demonstrated by fourth-quarter bookings of $225 million compared to $187 million in total revenue during the quarter, giving us visibility into 2026. Moving to our 2026 guidance, we expect revenue of between $730 million to $760 million, implying year-over-year growth of 13% to 17%, and adjusted EBITDA of $90 million to $94 million, implying year-over-year growth of 10% to 16%. Underlying that guidance, we have used the following assumptions: total organic revenue growth of 4% to 8%; ODR organic revenue growth of 9% to 12%; we expect ODR as a percent of total revenue in the range of 75% to 80%, reflecting the stabilization of the mix shift; total gross margin of 26% to 27%; SG&A expense as a percent of total revenue to be 15% to 17%; and free cash flow to be 75% of adjusted EBITDA for 2026, with significant cash from operations in Q1 due to the timing of incentive compensation, insurance, and tax payments, with strong cash generation building during the remaining quarters of the year. As investors and analysts model 2026, it is important to note that our first quarter tends to be the slowest quarter of the year due to seasonality and customer spending patterns. We expect first-quarter revenue to be similar to last year with lower adjusted EBITDA due to higher SG&A in 2026. Additionally, we do not expect 2026 to have the same gross margin write-ups of $900,000 that we had in 2025. As previously stated, we expect the second half of the year to be stronger than the first half. As our bookings momentum from last year converts into revenue, we expect revenue growth to accelerate in Q3 and Q4. With that, I will turn it over to Jayme to walk through the financials in more detail. Jayme? Jayme Brooks: Our Form 10-K and earnings press release, filed yesterday, provide comprehensive details of our financial results, so I will focus on the highlights of the fourth quarter and full year. All comparisons are for the fourth quarter and full year 2025 versus fourth quarter and full year 2024 unless otherwise noted. Starting with the fourth quarter, we generated total revenue of $186.9 million compared to $143.7 million in 2024. Total revenue growth was 30.1%, while ODR revenue grew 51.8% to $145 million. Of the total ODR revenue growth rate, 27.9% was from acquisitions and 23.9% was organic. GCR revenue decreased 13% to $41.9 million, of which 26.1% was a decrease in organic revenue, as designed, as we continued our mix shift towards ODR, offset by 13.1% growth in revenue from acquisitions. ODR revenue accounted for 77.6% of total revenue for the fourth quarter, up from 66.5% in 2024. Total gross profit for the quarter increased 10.4% from $43.6 million to $48.1 million, reflecting the ongoing growth of our ODR segment. Total gross margin on a consolidated basis was 25.7%, down from 30.3% in 2024, primarily driven by the impact of Pioneer Power. As we previously communicated, our acquisition integration strategy is focused on improving the acquired company’s gross margin to align with our broader operating model over multiple years. ODR gross profit comprised 76% of total gross profit dollars, or $36.4 million. ODR gross profit increased 19.1%, or $5.8 million, driven by higher sales volume, partially offset by lower ODR segment margin of 25.1% compared to 32.1% in the year-ago period. The decrease in segment margin was primarily attributable to Pioneer Power’s lower gross margin profile. GCR gross profit decreased 10.2%, or $1.3 million, due to lower revenues. Gross margin increased from 26.9% to 27.8%, driven by our ongoing focus on higher-quality projects. SG&A expense for the fourth quarter was $28 million, an increase of approximately 2.3% from $27.4 million. The increase was primarily attributable to incremental costs associated with Pioneer Power and Consolidated Mechanical. Consolidated Mechanical was part of the company for one month in the fourth quarter last year, and Pioneer Power was not part of the company during the fourth quarter last year. As a percentage of revenue, SG&A expense decreased to 15% of total revenue as compared to 19.1%, primarily due to the increased revenue from Pioneer Power. Interest expense increased $300,000 to $800,000 compared to $500,000 in the prior-year quarter, driven by higher borrowings under the company’s revolving credit facility to partially finance the Pioneer Power acquisition, as well as higher financing costs associated with the larger vehicle fleet. Net income for the quarter increased 25% from $9.8 million to $12.3 million, and earnings per diluted share grew 24.4% from $0.82 to $1.20. Adjusted net income grew 22.6% from $13.8 million to $16.9 million, and adjusted earnings per diluted share grew 21.7% from $1.15 to $1.40. Adjusted EBITDA for the quarter increased 30% to $27.2 million compared to $20.8 million. Adjusted EBITDA margin was 14.6% compared to 14.5% in Q4 last year. Turning to cash flow, our operating cash inflow during the fourth quarter was $28.1 million compared to $19.3 million in the year-ago period, driven by higher net income in 2025 along with slight improvement in working capital. Free cash flow, defined as cash flow from operating activities excluding changes in working capital minus capital expenditures, excluding our investment in additional rental equipment, was $21.1 million in the fourth quarter compared to $16.6 million in Q4 last year, representing a $4.5 million increase. The free cash flow conversion of adjusted EBITDA for the quarter was 77.5% versus 79.9% last year. Now turning to the full year 2025. Total revenue increased 24.7%, or $128 million, to $646.8 million from $518.8 million, primarily due to the acquisitions of Pioneer Power, Consolidated Mechanical, and Kent Island. Of the total percentage increase, acquisition-related revenue represented 21%, or $109.1 million, and organic revenue represented 3.6%, or $18.9 million. ODR revenue increased 40.6%, or $140.2 million, to $485.7 million, with acquisition-related revenue representing 23.6% of the increase, or $81.4 million, while organic revenue represented 17%, or $58.8 million. GCR revenue decreased 7%, or $12.2 million, to $161.1 million. Organic revenue represented 23% of the decrease, or a $39.9 million decline, as the company continued its strategic mix shift to ODR, offset by acquisition-related revenue growth of 16%, or $27.7 million. Total gross profit increased 17.4% to $169.3 million compared to $144.3 million. Total gross margin was 26.2%, a decrease from 27.8% in 2024, primarily due to the impact of Pioneer Power’s lower gross margin and total net project write-ups of $5.8 million recognized in 2024 compared to $1.0 million in 2025. ODR gross profit increased 20.5%, or $22.1 million, to $129.9 million from $107.8 million, while gross margin decreased to 26.7% from 31.2% primarily due to the impact of Pioneer Power’s lower margin profile and ODR-related project write-ups of $3.9 million recognized in 2024 that did not recur in 2025. GCR gross profit increased 8%, or $2.9 million, to $39.4 million from $36.5 million, and gross margin increased to 24.5% from 21.1%, driven by the company’s intentional focus on higher-quality projects. SG&A expense increased by approximately $12.3 million to $109.5 million compared to $97.2 million in the prior-year period. Of the increase, $9.3 million was attributable to incremental costs associated with Pioneer Power, Consolidated Mechanical, and Kent Island. Consolidated Mechanical was part of the company for only one month last year. Kent Island was part of the company for four months, and Pioneer Power was not part of the company during the entirety of last year. The remaining SG&A increase of $3 million is attributable to the existing business. SG&A expense increased primarily due to a $1.2 million increase in non-cash stock-based compensation expense and a $1.1 million increase in bad debt expense associated with the write-off of certain customer receivables that were deemed uncollectible. SG&A expense as a percentage of revenue decreased to 16.9% compared to 18.7%, primarily due to increased revenue resulting from the Pioneer Power acquisition. Interest expense increased $1.3 million from $1.9 million to $3.1 million due to higher borrowings under the company’s revolving credit facility to partially finance the Pioneer Power acquisition, as well as higher financing costs associated with our larger vehicle fleet. Net income increased 26.5% to $39.1 million from $30.9 million, and diluted earnings per share increased 25.7% to $3.23 compared to $2.57 in the prior year. Adjusted net income increased 26% to $54.5 million compared to $43.2 million, and adjusted diluted earnings per share increased 25.3% from $3.60 to $4.51. Adjusted EBITDA increased 28.4% to $81.8 million compared to $63.7 million, and adjusted EBITDA margin was 12.6% compared to 12.3%. Our operating cash flow for the full year was $45.7 million compared to $36.8 million in the prior year. Free cash flow, defined as cash flow from operating activities excluding changes in working capital minus capital expenditures, excluding our investment in additional rental equipment, was $70.1 million for 2025 compared to $52.3 million in 2024, representing a $17.8 million increase. The free cash flow conversion of adjusted EBITDA for the year was 85.7% versus 82.1% in 2024. As Mike mentioned, for full year 2026, we continue to target a free cash flow conversion rate of at least 75% of adjusted EBITDA and expect CapEx to have a run rate of approximately $5 million. At this time, we do not anticipate any additional investments in our rental fleet. Turning to our balance sheet, as of December 31, we had $11.3 million in cash and cash equivalents and total debt of $35.9 million, which includes $10 million borrowed on our revolving credit facility, hedged at a rate of approximately 5.37%. As a reminder, in June, we expanded our revolving credit facility from $50 million to $100 million in principal amount borrowings. On July 1, we used a combination of cash and revolver proceeds of approximately $40 million to fund the Pioneer Power acquisition. During the quarter, we paid down the revolving credit facility $24.5 million to the hedged amount of $10 million. As of December 31, our total liquidity, defined as cash and availability on our revolving credit facility, was $96.3 million. With this expanded facility and our expected strong cash generation, our balance sheet remains strong, and we believe we are well positioned to support our continued organic growth initiatives, strategic M&A, and opportunistic share repurchases. That concludes our prepared remarks. Operator, you may begin the Q&A. Michael McCann: Thank you. Operator: We will now be conducting a question-and-answer session. You may press 2 to remove yourself from the queue. Our first question comes from the line of Christopher Moore with CJS Securities. Please proceed with your question. Christopher Moore: Hey, good morning, guys. Thanks for taking a couple. So, Mike, I might have missed a little bit of it. Can you talk a little bit more about the investment or specific steps you are taking to take advantage of the data center opportunity? Michael McCann: Yes, absolutely. One thing that is going to be really important to our strategy—and we started this last year as well—is really building three national vertical market teams: healthcare—and in some sense that has been our proof point—industrial manufacturing, and data center. When we think about the way that customers buy, they buy some services locally, but from a national perspective and a capital planning perspective, it is advantageous for us, even from a resource perspective. From a data center market specifically, we have had some really good success in the Columbus, Ohio market with a few different customers. We always like to prove things out before we really make sure that we go all-in from an investment perspective, but as I referenced in the prepared remarks, it is our fourth project that we were recently awarded. That customer and a couple of customers are starting to tell us, based on our availability of resources and our unique combination of engineered solutions with our ability to install and fabricate, we are in a great position, not just in the Columbus market, but in other markets as well. Some of that will be overlap from a geographic footprint perspective, and some of that may be providing services—just like we do in healthcare—in other geographies as well. We think it is a really good opportunity. We have been patient, and I think we are at a point now where we want to dedicate some resources, and we hope this vertical becomes a meaningful portion of our revenue over time. Christopher Moore: Got it. You could see that potentially in a few years that could be your number two vertical? Michael McCann: We are going to see how it goes. We think there is a lot of potential. The spending of these customers—and we are really all-in on these three verticals: healthcare, industrial manufacturing, and data center—and we think it is an opportunity for diversity as well. We are pretty bullish on it. Christopher Moore: Got it. In terms of the ODR organic guide of 9% to 12%, Pioneer in terms of the 2026, is there any organic from Pioneer embedded in the 9% to 12%? Jayme Brooks: After the first half of the year, then it becomes part of our organics, because the acquisition date was July 1. Christopher Moore: Exactly. I was not sure if you are assuming much growth from Pioneer. I am just trying to get a sense of how that business is going and if you assume some growth there later in the year as part of your 9% to 12%? Michael McCann: Yes. A couple of things on Pioneer as well. Our focus for sure—obviously we want to see growth there—but I think the gross profit improvement is equally, if not more, important than really seeing growth from a revenue perspective. Several different things: we are moving past phase one, which is really system integration—people, process, getting the accounting system switched over—and we are really focused, especially in the back half of the year, from a profit perspective. A couple of things that we are going to focus on are, number one, our ability to push resources towards their best accounts; look at metrics from a year-over-year perspective; revenue types; getting on our accounting system allows us to do this; utilization of sales resources as well. We are looking to deploy the full breadth of our value-creation process, and that is really getting into phase two and implementation. In the back half of the year, that is going to be our focus. It is still going to take some time. You have to go back and renegotiate some contracts. You have to reintroduce yourself from a customer standpoint. We have seen some real positive things, and we are looking not just in 2026 but in 2027 and 2028 to really see that business get to the point where it matches the other legacy businesses from a margin perspective. We think it is a really good opportunity. Christopher Moore: Perfect. I will leave it there. Appreciate it, guys. Jayme Brooks: Thank you, Chris. Operator: Thank you. Our next question comes from the line of Robert Brown with Lake Street Capital Markets. Please proceed with your question. Robert Brown: Just following up on the organic growth. I know you gave guidance for the year. Longer term, do you see the organic growth in the ODR segment—once you get Pioneer integrated and the business is running—what sort of long-term organic growth is there? In the past, you said it is the teens to 20%. Michael McCann: Sure. Last year, we were at 17%. We had a strong finish in Q4, and this year we are guiding to 9% to 12%. I think we are really focusing on 2026 from that perspective, but we are also trying to think about what our real normalized growth rate from an organic revenue perspective is as well. I think about our growth trajectory as we look forward: our ability to still get really strong local results—we are going to continue to invest in and support our sellers that we have invested in over the last three years as well. The other thing is, from a national vertical market perspective, our access to capital and driving different decision makers and being a national provider—that is going to be an avenue as well. So we are really focused on 2026, but we are obviously looking forward to see what the normalized level is and what I would say also from an opportunity perspective. Robert Brown: Okay. Got it. And then you talked about pretty strong bookings in Q4, above the run rate. How does that compare to normal? It seems like the environment is getting better. Maybe a sense of how the bookings are coming in and what you see for the next? Michael McCann: One of the things that we have learned as we continue to transition the business: backlog is a factor, but sales bookings are really what we look at from a business perspective. In Q4, we booked $225 million versus $187 million of revenue in Q4. A 1.2 ratio—anything, in our opinion, above 1.0 obviously shows that there is some forward trajectory in the business. We like when the bookings are more than the revenue. We think we are starting to turn the corner from a sales perspective. We have learned a lot from a sales perspective, and I think we are really starting to turn the corner. The other thing that we saw a little bit in Q4 was our ability to get involved early. Sometimes that may be from customers that looked at strained budgets from 2025 and are really starting to plan effectively. I would say specifically in the healthcare vertical market we are definitely involved much more from a planning perspective. We are starting to understand where customers spend. I think probably the third different quarter in a row we reported a national healthcare provider giving us multiple projects that were born out of facility assessments. We think we are turning the corner and looking forward to continuing to look at that sales bookings versus revenue as a key indicator. Robert Brown: Thank you. I will turn it over. Michael McCann: Thank you. Operator: Our next question comes from the line of Gerard Sweeney with ROTH Capital Partners. Please proceed with your question. Gerard Sweeney: Good morning, Jayme and Mike. Thanks for taking my call. Just staying on the topic of growth, obviously earlier in January you announced two new positions—EVP of Sales and Head of National Customer. How does this play into the strategy of growth? It feels as though you are maybe maturing into a different position of growth. I wanted to see how this all plays together and maybe drives some opportunity down the line. Michael McCann: Yes, I think one thing that is really important from a messaging perspective: local and national are both really important to us. We thought the best way to make sure that we are going to get the results is to take two proven executives and make sure that they are assigned specifically to that task. One of them is going to be working on sales enablement—how do we support the roughly 100 to 120 salespeople we have invested in over the last three years with tools and training, and how do we help them actually deliver those sales. We are really excited to have that particular focus. The other individual is focused on national accounts. In some organizations, that may be two different roles. For us, it is so important that we want to make sure we have two different executives working on it. They have independent focus, but there are lots of synergies as well. It is important that we have people who understand the business. As we start to mature, having the ability to sell at the national level, and from a national reach perspective, as well as being able to deliver from a local geographic footprint perspective—we think that is going to differentiate us and really continue to elevate where we are from a customer experience perspective. Gerard Sweeney: How much of your sales has come from a national account opportunity, or has it been much more on the local front? Michael McCann: I would say the majority have been local. We have had lots of opportunities over the years from a national perspective, but we have not had that focus. At the end of the day, the national customers—whether it is data center, industrial manufacturing, or healthcare—want to see a seamless experience. When they see a seamless experience, they are more willing to allocate more capital. Sometimes even from a local perspective, we can only take it so far with the local team. The top person at one of these critical facilities could be the facility manager, and many of those corporate decisions get made at a headquarters office. We have had some success with healthcare that we feel like we can extend. I would say a lot of the sales have been local. Our opportunity is that we have a combination of local and national. Gerard Sweeney: Got you. And then just one more question on acquisitions. I think you are looking at maybe getting into different areas like integrated facilities opportunities, and there are a lot of companies out there that fit in that space that maybe even are purchased for higher multiples. One question with an A and B aspect: do you continue to go after these opportunities, or will you have to pay up for these opportunities? And secondarily, does it make sense to maybe shift away from the Pioneer Powers where it takes multiple years to integrate into your system and go after acquisitions that are more right down the middle—like a fully integrated facility-type acquisition? In other words, paying up a little bit for an opportunity right in your wheelhouse versus fixing one up? Michael McCann: We look at both as important. Our long-term objective is being an indispensable partner to building owners with national reach and local presence. When you think about national reach from an acquisition perspective, our ability to invest in companies from an integrated facility planning perspective—professional service companies—they are the ones that are going to have some of these relationships from a planning perspective. We think that is really important. When I think about the concept of local presence, you still need that geographic footprint as well. Do not think it is a question of one or the other; it is a question of combining the two together and making sure these acquisitions fit with that long-term objective. Obviously, from a geographic footprint perspective, the multiple may be different than from an integrated facility planning perspective, but our end game remains the same: buying great companies with great people that can ultimately achieve our long-term objective and making sure there is a really good fit. We are not just buying assets and compiling them. We are making sure that they are smartly integrated from a strategy perspective. Gerard Sweeney: Got it. I appreciate it. Thanks. Michael McCann: Thanks, Gerry. Thank you. Operator: Our next question comes from the line of Brian Roffey with Stifel. Please proceed with your question. Brian Roffey: Yes, thanks. Good morning, everybody. Just following up on the national account discussion here. In the past, you talked about going from 20 MSAs to 40 MSAs and then pursuing national accounts. Now it seems like you are leaning into it a little bit more heavily, but we have not hit that 40 MSA number. Can you talk about what is driving that change and your confidence level in being able to secure some of these despite not having a larger footprint? Michael McCann: We have looked at it and tested our paradigms on this. We have realized—especially in healthcare, and I think we are going to see the same thing in data centers—it is great that we are in a geographic location; it is almost an added benefit. But we can still provide a suite of services. As an example, we can still provide design-build services even if we are not in a geographic footprint. When we think about future MSAs, we are looking for overlap of national customers. Not only can we provide high-level program management and design-build, but we get an added benefit from an installation process as well. We are still going to need geographic footprint, but if we can get there via a national account presence, it is going to accelerate the opportunity within not only the acquisition that we purchased but also from a national vertical market perspective. We are going to be really strategic with those MSAs. Brian Roffey: Got it. That is helpful. Do you have a sense—or can you give us a sense—of how much of the growth in the guide is related to capitalizing on some of this national account opportunity, or should we expect to see more of these benefits in 2027? Michael McCann: For it to really take off, it is going to be 2027. There is some built in, but this year is focused on selling. Some of the items you asked about—the healthcare jobs that we sold last year—those are obviously going to revenue this year. We will see some of it in the back half of the year, but the real opportunity—from accessing capital to being able to burn the work—I think that is going to be as much a 2027, even more so than a 2026, perspective. Brian Roffey: Okay. That is helpful. Just one clarifying question on the data center opportunity. Are you still focused on existing buildings here, or are you starting to get into new construction at this point? Michael McCann: We are focused on existing buildings. There have been situations where we have been able to provide infrastructure from a carve-out perspective; a lot of the work is direct to owner. That is one thing we are very focused on. As we get into these relationships, we are going to make sure we are always getting the right risk-adjusted returns. We want to make the smart business decision. We are going to look at the opportunity and make sure that it makes sense with our strategy. Brian Roffey: Appreciate it. I will pass it on. Operator: Thank you. Our next question comes from the line of Tomo Saino with JPMorgan. Please proceed with your question. Tomo Saino: Good morning, Mike, Jayme. Michael McCann: Good morning. Thank you. Tomo Saino: Could you please provide an update on the integrations of Pioneer Power and share some concrete timelines and milestones for gross margin improvement? Additionally, what lessons have you learned from previous integrations such as Jake Marshall regarding driving a margin improvement to acquired businesses, please? Michael McCann: Absolutely. A couple of pieces of information that we provided—one was mentioned in the prepared remarks, and it is also in Slide 18 in our deck. We are at the point from a Pioneer Power perspective where we are really wrapping up phase one integration. We have learned from past deals that the sooner we can get through phase one, the better, and a lot of times that is directly related to the accounting system upgrade. We want to get that out of the way and accelerate that process. That allows us to see numbers, and it is a big change-management piece that we try to get through. At this point we are really focused on phase two implementation. We provided additional information to show the trajectory from a Jake Marshall perspective. Jake Marshall at approximately the time of purchase was 13.4% gross profit; by 2025 they were approximately 28.1%. So a tremendous increase in gross profit. One thing we learned from Jake Marshall is our phase one got pretty extended—we did not switch over the accounting system for 12 months—and we learned that we wanted to get that out of the way as quickly as possible. That is one of the lessons learned we applied. The second lesson learned is we want to be in front of the customers as soon as possible. We want to listen to customers. We want to have joint meetings. We already started that process with Pioneer Power last year, and we want that to build into additional opportunities. Part of the reason is we want to learn what their pain points are and what kind of value we are bringing, so we can then propose different solutions that can drive margins. Sometimes there is an opportunity to raise margins, but margins with value are far better from a long-term customer perspective. Our focus, especially at the beginning of the year—we hope to see impact in the second half of the year—is to get in front of customers, make sure we are focused on them, listen to what they want, and then propose solutions that can drive margins, hopefully in the back half of the year, and really start to impact 2027. When I look at the trajectory from a gross margin perspective, we have that Jake Marshall example. Our objective, of course, is how we can accelerate that timeline but still implement those lessons learned. Tomo Saino: Thank you, Mike. On gross margins, to achieve 26% to 27% gross margin guidance, what are the most material risks and uncertainties you are monitoring for 2026, and how are you preparing the business to navigate potential headwinds? Michael McCann: We are very focused on making sure that we are smart from a risk perspective. If you look at both our owner-direct fixed-price projects greater than $10,000, the average project size is $240,000, and GCR projects had an average project size in 2025 of $2.6 million. We really try to make sure that the projects have as short a duration as possible—that allows us to flex and ebb. That has always been very important from a strategy perspective. From a holistic perspective, a lot of our model comes down to our ability to sell. That is why from a Q4 perspective, our ability to sell $225 million worth of revenue versus $187 million of revenue is, to us, an important step. As we continue to sell work, we really want to evaluate it from a risk perspective as well. It is a careful balance, but those are probably the two things that we really look at, and we are always looking for opportunities to improve gross margin. Tomo Saino: Thank you. Appreciate it. Michael McCann: Thank you. Operator: Thank you. We have reached the end of the question-and-answer session. I will now turn the call back over to Michael McCann for closing remarks. Michael McCann: In closing, our strategic priorities for 2026 are the following: ODR organic revenue growth and total revenue growth, margin expansion through REVOLVE customer solutions, smart capital allocation, and scale through acquisitions. Over the past several years, the company has transitioned from a typical E&C contractor with single-digit EBITDA margins to a predominantly ODR-based platform with strong free cash flow conversion, operating with very minimal leverage. The structural shift is largely complete, and our focus is now on growth. Every acquisition since 2021—Jake Marshall, Acme Industrial, Industrial Air, Island Consolidated Mechanical, and Pioneer Power—was sourced on a proprietary basis and was strategically aligned with our specialized value approach, cultural fit, and niche expertise across our verticals. All of our acquisitions were underwritten at multiples of five to six times adjusted EBITDA. With the operational improvements we make, the ultimate multiple paid is lowered by the growth in EBITDA. Through a repeatable playbook, we improve margins and use the resulting cash generation to delever and redeploy capital. The company has expanded its adjusted EBITDA margin from 14.4% to 12.6% since 2020, and our leverage sits at just 0.3x. We maintain nearly $100 million of liquidity, all while meaningfully increasing the quality and margin of the business over time. At Limbach Holdings, Inc., we are building a long-term business model focused on delivering durable value, bringing a unique combination of engineered expertise and direct execution with building owners. Through long-term consultant relationships, we help deliver multi-year capital plans that extend beyond traditional backlog. We believe this differentiated approach positions us well for sustained growth and shareholder value creation. In March, we are attending the ROTH Conference in California. We hope to see some of you there. Thank you again for your interest in Limbach Holdings, Inc., and have a great day. Operator: This concludes today’s conference, and you may disconnect your lines at this time. We thank you for your participation. Have a great day.
Operator: Greetings, and welcome to the Helios Technologies, Inc. Fourth Quarter Fiscal Year 2025 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, as a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Tania Almond, Vice President, Investor Relations and Corporate Communications. Thank you. You may begin. Tania Almond: Thank you, operator, and good day, everyone. Welcome to the Helios Technologies, Inc. Fourth Quarter 2025 Financial Results Conference Call. We issued a press release announcing our results yesterday afternoon. If you do not have that release, it is available on our website at hlio.com. You will also find slides there that will accompany our conversation today as well as our prepared remarks. Joining me today are Sean Bagan, President and Chief Executive Officer, and Jeremy Evans, our Executive Vice President, Chief Financial Officer. Sean will start the call with highlights from the fourth quarter and the full year, then Jeremy will review our financial results in detail and establish our 2026 outlook. Sean will come back with some closing remarks, and then we will open the call to your questions. As an additional reminder, we have our upcoming Investor Day taking place in sunny Sarasota, Florida, on Friday, March 20 for institutional investors and analysts. We are excited to be sharing our longer-term outlook and will have colleagues from our flagship businesses on hand demonstrating some of our products. We are also offering an optional manufacturing facility tour of the original Sun Hydraulics production location. It is just three weeks away, and our leadership team is excited to see everyone in person. Please reach out to me if you would like to RSVP. Now turning to slide two, you will find our safe harbor statement. As you may be aware, we will make some forward-looking statements during this presentation and the Q&A session. These statements apply to future events that are subject to risks and uncertainties as well as other factors that could cause actual results to differ materially from those presented today. These risks and uncertainties and other factors can be found in our annual report on Form 10-K for 2024 along with the upcoming 10-Ks to be filed with the Securities and Exchange Commission. These documents are on our website or at sec.gov. I will also point out that during today’s call, we will discuss some non-GAAP financial measures which we believe are useful in evaluating our performance. You should not consider the presentation of this additional information in isolation or as a substitute for results prepared in accordance with GAAP. We have provided reconciliations of comparable GAAP with non-GAAP measures in the tables that accompany today’s slides. Please reference slides three through five now. With that, it is my pleasure to turn the call over to Sean. Sean Bagan: Thanks, Tania, and welcome, everyone. We truly appreciate you joining us today and are pleased to have this opportunity to share the sustained Helios Technologies, Inc. team made in the fourth quarter, capping off what became a true turnaround year in 2025. Results finished ahead of recent expectations, with all businesses reporting quarterly sales and earnings growth, leading to full year sales growth for the first time in three years, while also delivering record free cash flow. This is my favorite time of year, the NCAA March Madness Tournament is right around the corner. Teams are competing for higher seeds that reflect their full body of work, and I see a clear parallel to our fiscal 2025 performance. As the year progressed, we strengthened our position, finishing it off with back-to-back quarters of year-over-year profitable sales growth. That is the equivalent of winning the first two rounds of the NCAA tournament. It builds confidence and momentum, but championships require sustained excellence. Sales and orders accelerated in the second half of the year, reflecting the increasing impact of our go-to-market initiatives and our industry-leading innovative products. In conjunction with the CONEXPO trade show this week, we are excited to begin the rollout of our next wave of products, and our plans for 2026 will be to continue that at an elevated pace. Throughout 2025, we overcame numerous challenges. At a macroeconomic level, the two most meaningful indicators for our Hydraulics segment are PMI and Industrial Production, both showing extended contraction for much of the year, meaning weaker factory output conditions overall here in the U.S., while globally regional differences existed with pockets of expansion. We are encouraged by some of the initial 2026 readings with both sentiment and actual production improving together. However, 2025 can best be characterized as slow and uneven and certainly not sustained growth. Additionally, we managed through other macro challenges presented by global tariffs, geopolitical uncertainty, and a weak consumer market. Despite all that, the results were the same. We controlled the things we could control, and we executed. I could not be prouder of our team, and I extend my sincere gratitude to each one of my colleagues. Fourth quarter sales exceeded our expectations, up 17% to $211 million, resulting in 4% growth for the full year to $839 million. On a pro forma basis, excluding the Custom Fluid Power, or CFP, divestiture, sales for the fourth quarter were up 29% and for the full year, up 6%. Our margins are strengthening and benefiting from the higher volume along with our operational excellence efforts and cost control measures. We have had four consecutive quarters of gross margin expansion. Adjusted EBITDA in the quarter was 20.1%, our second quarter in a row back in the twenties. Operationally, we had numerous accomplishments in 2025. First, we returned to growth by executing on our customer-centric go-to-market strategic initiative. We redirected internal resources to more fully engage with our customers as well as accelerated the cadence of new product launches. This was reflected in the number of meaningful product launches in 2025 for both segments. We expanded our offerings with higher value solutions that complement existing products and represent a natural extension of our customers’ existing purchases. We believe our strategy to develop high-value, mission-critical, ruggedized solutions for our customers in niche applications gives us a competitive edge. Second, we took decisive action to optimize our portfolio. With the CFP divestiture, we removed Sun Hydraulics from owning the distribution business in Australia, reverting to our core and what we are best at: designing, developing, and manufacturing manifolds, cartridge valves, and integrated packages. Further, we are aligning our go-to-market approach in the Australian market with the rest of the business by leveraging an exclusive agreement with the buyer, Questus Group, to provide distribution and fulfillment services for Sun Hydraulics products in Australia. This fosters a partnership where each party’s success contributes to the other’s advancement. We also acted on our centralized engineering team, the Helios Center of Engineering Excellence operation, and reallocated engineering resources back into our core businesses. Continuous portfolio evaluation will be standard work for us moving forward. We introduced a new share repurchase program in 2025, and repurchased 1% of the company’s outstanding shares throughout the year. This share buyback model as a form of shareholder return marks the first for the company. Importantly, we continued our longstanding practice of paying cash dividends, which we have done for 116 consecutive quarters, or over 28 years. Finally, we fortified our leadership team in 2025. I was formally named President and CEO, Billy Aldridge was promoted to President of the Electronics segment, and Jeremy Evans was promoted to Chief Financial Officer. With Rick Martich and Matteo Arduini leading the two large businesses in the Hydraulics segment, supported by a fortified executive leadership team at the Helios Technologies, Inc. level, we now have our full leadership team in place to harness our collective energy and create the momentum to drive us forward. This makes us even more confident regarding our expectations for 2026 and beyond. Before I turn the call over to Jeremy to provide the details regarding our financial results, I want to share how pleased I am that he is now officially in the CFO seat. When Jeremy and I joined forces with the Helios Technologies, Inc. leadership team, we committed to building a predictable, performance-driven culture. Achieving or exceeding our forward quarterly guidance for nine consecutive quarters demonstrates the operational rigor and accountability that now define our team. Jeremy, over to you. Jeremy Evans: Thank you, Sean, and good day, everyone. It is an honor to report to you today in my new role as Chief Financial Officer. As many of you know, I have been with Helios Technologies, Inc. for the past two years in a finance leadership role. I am excited to continue partnering with Sean, Tania, our leadership team, our board, and the broader global Helios Technologies, Inc. family as we execute our strategy, build on our culture of accountability, and stay focused on delivering consistent and predictable performance. As I review our fourth quarter and full year results, please refer to slides six through nine. Fourth quarter sales were $211 million, up 17% compared with $180 million in the prior year period, and above the expectations we laid out on our third quarter call. We divested CFP at the September, so the fourth quarter is more comparable on a pro forma basis. Excluding the $16 million in CFP sales in last year’s fourth quarter, sales for the quarter were up 29% year over year. Growth was broad-based, driven by both segments, with Hydraulics sales up 10% and Electronics up 31%. On a pro forma basis, Hydraulics grew 27%. There was strength in all regions when normalizing APAC sales for the impact of the CFP divestiture. 2025 full year sales were $839 million, an increase of just over 4%. Sales were up 6% on a pro forma basis. As Sean mentioned, this marks our return to top-line growth after a multiyear period of declines and reflects the progress we have made on our go-to-market initiatives and the stabilization we have seen in some of our end markets. Higher sales and improved absorption drove gross profit up 31% in the quarter to $71 million, and gross margin expanded 350 basis points to 33.6%. In addition to higher volumes, we had the contributions of improved mix and ongoing productivity and cost actions, which were partially offset by residual tariff impacts. For the full year, gross profit also increased at a faster pace than sales, and was up 7.5% to $271 million. Gross margin was 32.3%, an increase of 100 basis points from 2024. Our margin profile also benefited from the CFP divestiture. While its profitability had been measurably improved over the years under Helios Technologies, Inc. ownership, it was nevertheless a drag on consolidated margins. Fourth quarter operating income nearly doubled over the prior year period, and operating margin expanded 480 basis points to 12.2%, demonstrating the operating leverage inherent in the business. For the year, operating income was down 19%, primarily as a result of the goodwill impairment charge taken in the third quarter related to iPROD product development. On a non-GAAP basis, adjusted operating margin in the quarter was 16.4%, up 310 basis points year over year. For the full year, non-GAAP operating margin was 15.4%, up 20 basis points over 2024. Our effective tax rates for the quarter and year were 22.7% and 22.5%, respectively, reflecting the income mix in our various tax jurisdictions. Diluted EPS in the quarter was $0.58, up over four times the prior year period. I should point out that we had a $5.4 million one-time benefit in net interest expense related to an interest rate swap that was originally due for maturity this quarter, dating back to our refinancing actions in June 2024. Diluted non-GAAP EPS was $0.81, an increase of 145%, reflecting our strong operating performance. For the full year, diluted EPS increased 24% to $1.45, and diluted non-GAAP EPS of $2.56 increased 22%. Adjusted EBITDA margin was 20.1% in the fourth quarter, up 270 basis points over the prior year. Improved profitability reflects the impact of the volume increase as well as the many actions taken during the year to streamline the business and focus on driving profitable sales. For the full year, adjusted EBITDA totaled $161 million, up 4% over the year-ago period, and EBITDA margin of 19.2% was flat with last year, net of the tariff impacts. Turning to the segments, please refer to slide 10. As I noted earlier, Hydraulics reported robust 27% sales growth for the quarter on a pro forma basis. By end market, we saw demand in mobile applications being driven by construction markets across all regions. Early signs of recovery in agriculture continue, as sales to the ag market were up from the prior year for the second quarter in a row. More robust activity in Europe and China is driving demand for faster ag-focused applications. Hydraulics gross profit in the quarter grew 27% year over year, and gross margin expanded 440 basis points to 34.1% driven by better fixed cost leverage on higher volume, lower direct cost as a percentage of sales due to ongoing productivity initiatives, and the impact of the CFP divestiture. Segment SG&A expenses in the quarter increased $1.3 million, or 7%, primarily reflecting higher wages and benefits as well as investments in R&D, but improved more than 50 basis points as a percentage of sales. Turning to Electronics on slide 11. Electronics sales in the quarter were up 31% year over year. We saw continued strength in the recreational space with a particular customer that is realizing meaningful growth in its market. Industrial and mobile end markets have also been solid with persistent demand for construction equipment to address the large amounts of infrastructure spend primarily in the U.S., but also in Europe. Health and wellness grew year over year as well. There are still pockets of volatility in consumer-exposed demand, particularly in the recreational marine markets. Electronics gross profit in the quarter was up 40% and gross margin expanded 220 basis points, primarily driven by higher volumes and a more favorable segment mix. SG&A expenses increased $3.3 million, mainly due to higher wages and benefits, but improved over 100 basis points as a percentage of sales. Operating income increased 76% to $9.5 million, and operating margin expanded 330 basis points on strong operating leverage. On slide 12, you will see that we had record cash generation from operations of $46 million for the quarter, delivering a record $127 million of cash from operations for the year. We had our second consecutive year of record free cash flow as well. It is worth noting that our working capital reduction efforts have paid off and contributed to the record cash flow. Our more structured approach to inventory management, receivables collection, and payables optimization have resulted in another year improving our cash conversion cycle. Flipping to slide 13, you will see we used the cash generated, along with the proceeds received from the divestiture of our CFP business at the end of the third quarter, to pay down $82 million in debt this year. As a result, we ended 2025 with a net debt to EBITDA leverage ratio of 1.8 times, a level that has not been achieved since 2022, on a reported pro forma basis. We hit another key milestone in the quarter: our available liquidity has surpassed our total debt. We have sufficient liquidity to execute on our growth plans and to return cash to our shareholders. We also continued our long history of returning capital to shareholders with our 116th consecutive quarterly dividend in January, and initiated repurchasing shares under our authorized buyback program that we established in 2025. We repurchased 80,000 shares during the quarter, increasing our year-to-date total to 330,000 shares at an aggregate cost of $13.6 million. Slide 14 summarizes my previous comments reflecting how we did on the financial priorities that we established for 2025. Across the board, our team successfully delivered results in each category. Slide 15 reflects our new financial priorities as we enter 2026 that align with how we plan to turn the opportunities we see in front of us into financial results. First, execute on our growth plan by winning share from our growing sales funnels through continued product innovation. Second, expand gross margins by driving productivity and leveraging our global footprint and capacity. Third, maintain earnings momentum by building on a strong foundation and aligning SG&A investments with our sales growth. Fourth, optimize capital allocation by investing in organic growth and driving sustainable shareholder returns. With these priorities guiding us, we are committed to focused execution to deliver expanded earnings and long-term value creation in 2026 and beyond. Turning to our outlook on slide sixteen and seventeen, for the first quarter of 2026, we expect sales to be in the range of $218 million to $223 million, up 22% over last year’s first quarter at the midpoint on a pro forma basis excluding the CFP divestiture. We expect consolidated adjusted EBITDA margin to be in the range of 19.5% to 20.5%, up over 250 basis points at the midpoint, and diluted non-GAAP EPS of $0.65 to $0.70 per share, up 53% at the midpoint. For the full year, we expect net sales will be in the range of $820 million to $860 million compared with $839 million as reported in 2025, or $792 million on a pro forma basis excluding the CFP divestiture. This implies 6% growth over 2025 on a pro forma basis at the midpoint, driven primarily by volume growth in our core platforms and the continued ramp of recent commercial wins. At the segment level for the full year, we expect Hydraulics net sales in the range of $510 million to $530 million, up approximately 5% at the midpoint on a pro forma basis. For Electronics, we project net sales in the range of $310 million to $330 million, up 7% at the midpoint. As you will notice, based on how we expect the year to start relative to our full year guide, we expect 2026 to have much stronger year-over-year growth rates in the first half based on the timing of the end market recoveries and our current visibility on customer order flow. We expect 2026 adjusted EBITDA margin will be in the range of 19.5% to 21%, reflecting continued gross margin expansion, operating expense discipline, and the full-year benefit of our portfolio and footprint actions. We expect diluted non-GAAP EPS in the range of $2.60 to $2.90, or 7% growth at the midpoint. As a reminder, fiscal year 2025 diluted non-GAAP EPS included a benefit from a $5.4 million interest rate swap. We believe we have a sound strategy built to drive sustainable growth, expand profitability, and unlock greater value for our shareholders. The resilience and execution of our global teams have positioned us well for what comes next, with slides eighteen and nineteen. With that, I will turn the call back to Sean for his closing remarks. Sean Bagan: Thanks, Jeremy. As I step back and reflect on where we have been and where we are headed, I am incredibly energized by the opportunities in front of us. We entered 2025 with a clear plan and a commitment to enhance discipline. Today, we are operating with greater precision, accountability, and focus. And it shows. Across our key focus areas, the Helios Technologies, Inc. team executed. We strengthened our go-to-market structure and institutionalized the cadence that drives funnel development, cross-selling, and pipeline management. We protected and grew our base business, capturing greater wallet share and driving organic growth. We improved profitability through prudent cost management and operational efficiencies. We continued investing in innovation and accelerated new product launches to support our long-term market leadership. We developed our talent, ensuring the right people are in the right seats to power our next chapter. And we sharpened our capital allocation strategy by divesting a non-core asset, reducing our debt, driving working capital improvement, and enacting a new share repurchase program. Simply put, we are building a stronger, more resilient, and more scalable Helios Technologies, Inc. The progress this year has been remarkable, but what excites me more is that we are just getting started. Investments we are making today are fueling the next chapter of performance. We are defining a new standard, and we intend to keep raising that bar. As we enter 2026, our key focus areas reflect the natural evolution of the foundation we built in 2025. We are advancing our strategic framework through focused execution of our plan while sharpening our go-to-market engine to convert funnel growth into consistent new business wins. We are institutionalizing innovation with more rigorous NPI processes, driving earlier and more impactful product launches. At the same time, we are deepening our commitment to operational excellence, strengthening organizational development, and embedding a return on invested capital mindset more rigorously into every capital allocation decision. Together, these priorities position Helios Technologies, Inc. to execute with discipline, scale with confidence, and elevate performance to the next level. In the NCAA March Madness tournament, you do not win championships in the first weekend, but you prove you belong. Two consecutive quarters of strong performance is our version of advancing to the Sweet 16. It reflects tenacity, resilience, and a team that knows how to perform under pressure. We like our momentum, and we are focused on sustaining it. I am more confident than ever in our strategy, our team, and our ability to deliver sustainable growth and increasing earnings power. The leadership team and I look forward to unveiling the CORE 2030 strategy on March 20. This strategy will define the next chapter of growth and outline our vision for Helios Technologies, Inc.’s future. We hope you can join us to hear more. The future for Helios Technologies, Inc. is bright, and we are deeply committed to long-term value creation for our shareholders. Thank you for your continued engagement and support. With that, let us open the lines for Q&A, please. Operator: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Thank you. Our first question comes from the line of Tomo Sano with J.P. Morgan. Proceed with your question. Tomo Sano: Hello, everyone. My first question is while full Q results were pretty strong and first quarter guidance is also strong, but the full year outlook appears more cautious for the second half. We understand there may be high comparables or conservativeness, but are the benefits from go-to-market initiatives or new product launches fully reflected in your guidance in the second half? And could you elaborate on the key assumptions for the second half and the potential for upside? Thank you. Sean Bagan: Good morning, Tomo. Thank you. Yes. And first, I want to thank you for learning more about our company and initiating coverage here in the fourth quarter of last year. We really appreciate it, and are very excited to partner with you moving forward, telling our company story. So when we set out our guidance for the full year, we put a range of $820 million to $860 million. That $860 million at the top end would be a plus 9%. We do believe carrying that momentum from 2025 into 2026 is real. We look at stronger order trends that we are seeing and our existing order backlog that help us inform Q1, particularly given that we released earnings so late here in the week in the fiscal year last year. And so we feel very good about the trajectory here to start the year. As we get to the back half, certainly as you referenced, we are going to lap tougher comps. We feel that 2025 is very strong. And so if we see sustained order volumes that we have seen for the last ten months of increasing orders year over year, we do believe we can get to that top end of the range. But there is certainly a lot of uncertainty as well in the world, and challenges that we are seeing brewing, whether it is with what is going on in the Middle East right now, some of the supply challenges, particularly on our Electronics side of the business with chips. So we are trying to really balance all of that, but clearly committing to continuing to drive growth, and believe that our go-to-market strategies and outcomes are going to give us the confidence to sustain that momentum. Tomo Sano: Thank you, Sean. And follow-up on the capital allocations. So under the new leadership, we have been seeing a notable improvement in cash flow, a higher CapEx as a percentage of sales, and introduction of a share repurchase. I think Jeremy already touched on a little bit, but could you give us more color on your key capital allocation priorities going forward, please? Jeremy Evans: Yeah. Thanks, Tomo. We have been very systematic about our capital, and we have been very focused on paying down debt over the last two years and, you know, ended the year with a net debt to adjusted EBITDA leverage ratio of 1.8, which was below our target of 2. And in the short term, we are going to continue to pay down debt. That is just going to naturally happen as we make our minimum debt payments and as our business grows, we get to higher EBITDA. We are going to see that leverage ratio come down a little bit. You did mention CapEx. We are projecting a bit higher CapEx in 2026 than we had in 2025. 2025 was a little bit low, sub 3%, and some of that is going to carry over to this year just due to the timing of how some equipment purchases and projects rolled in. But we do see opportunities to invest in ourselves and our internal capabilities, whether that be new equipment that gives us a little bit more productivity and automation, or investing in internal capabilities to meet some of the new product launches that we have in our roadmap. Tomo Sano: Thank you, and congrats on the quarter. Operator: Our next question comes from Nathan Jones with Stifel. Please proceed with your question. Nathan Jones: Good morning, everyone. Guess I will start with a couple comments that you guys made in your prepared remarks. You talked about recent commercial wins ramping up. Could you maybe provide a little bit more color around kind of products, markets, expected run rates, those kinds of things that we are looking at from those kinds of wins? Sean Bagan: Yes. So we will definitely dive a lot deeper into this at the Investor Day. But just at a very high level, as you know, our number one focus in 2025 was really reinvigorating our top line, and that required us to change sales leadership and put a lot more resources, put a lot more hunters into the business, and then just the process discipline around tracking the sales funnel. And really, as we get into this year in 2026, we have seen a tremendous amount of growth at the top side of the funnel, and so it is going to be about converting those into new business wins. But equally, we are very excited. We will show the progress we made in 2025 in generating new business wins well over $50 million that we will talk about again further at the Investor Day, but it is not as much on new markets in terms of areas that we have not been servicing already. It is with existing customers, more share of wallet. When you look at the product launches we have had throughout 2025, it is an extension of our product line of products and features that our existing customers would naturally be buying. And so we are trying to create those stickier solutions and catch some of that product. Now as we get into this year, as we announced today, we are going to continue that focus on launching new products into incremental revenue trends in those niche applications. So the one that we would call out that saw probably a lot of growth more so than others is aerospace. That is an area where we have been putting a lot of our energy and focus, and we think there is a tremendous opportunity there as well. And then as I said at Investor Day, we will be talking about some new markets and new adjacencies that we are pursuing and going to be launching products that we think can capitalize and even accelerate our growth further. Nathan Jones: Thanks for that. I guess my follow-up is around some commentary you made on the ag market and probably to the extent that this is relevant to other markets. You talked about, you know, significant improvement there, significant demand improvement. When you are talking about that, are you really talking about, you know, more stabilization of production levels rather than end customer actual demand levels, so it is kind of a bit more of end of destocking that leads to higher demand for Helios Technologies, Inc.? Or do you think you are actually seeing end sell-through in some of those markets improve? Thanks for taking the questions. Sean Bagan: No. Yeah, thanks, Nathan. The former, for sure. Definitely not seeing signs of any real strong market recoveries at the end market, but absolutely the channel inventory levels are way healthier. So as the retail environment improves, certainly we will benefit from that. But if I kind of look at our Sun Hydraulics business, that is through distribution, and our key indicator there is their distributor inventory levels of all those distributors that we go to market through. We continue to see that come down year over year, slightly down, sequentially down. The market is still being down, yet our Sun Hydraulics business grew, so it is a good sign that we are taking share. And, again, we would attribute that back to our go-to-market target account planning, closer to the customer, the products we are launching there. When you look at the Faster business indexed highly to the agriculture segment, totally spot on with your commentary that retail still is very choppy and down in most places globally. However, our Faster team has done a nice job to diversify and build a little bit steadier distribution business, but those channel inventory levels are definitely healthier, and we are starting to see signs of that in some of the guidance of the OEMs as well. We are going to feel that earlier as a supplier into those channels. When you go to the Electronics segment, that consumer market is still challenged. Interest rates have not come down as quickly as expected. A lot of the equipment that our product goes into is financed. And so that would be very helpful if we saw that. And, certainly, the dealer channel levels, whether it is marine or powersports, are healthier, but the end markets are not growing yet either. So overall, we feel as though we are taking share clearly, and a lot of that, again, is tied back to this targeted go-to-market focus. Jeremy, anything to add there? Jeremy Evans: Yeah. I think we have also seen some growth in health and wellness in the quarter, so that was another end market that came back in, and mobile, the construction piece is still pretty strong, if you look at the different infrastructure investments both in the U.S. and EMEA, so that is another, when we look at our end markets, that grew year over year. Nathan Jones: Thanks very much for taking the questions. Operator: Our next question comes from the line of Mig Dobre with Baird. Please proceed with your question. Mig Dobre: So for me, sticking with Hydraulics too, and, I mean, look, I appreciate that your approach has been to be fairly conservative with the outlooks that you are providing. But I just want to make sure that we all kind of parse out what is going on with the end market relative to, you know, the way you are kind of choosing to guide. If I look at the Q1 guide, and I think about normal seasonality, right, in this business, typically Q1 versus Q4, we see something like five to six percentage point sequential increase. You are guiding for a lot less than that. And when we are looking at the full year, 500 basis points of growth, that is frankly pretty modest in the context of that being in an early-cycle portion of an industrial recovery. You cited PMI earlier. And, of course, we know that a lot of your OEM customers are outright increasing production in 2026, whether that is construction equipment, earthmoving, aerials, even agriculture, as you just kind of discussed with Nathan a moment ago. So I guess my point here is it would be helpful to sort of delineate, you know, how you think about the end markets themselves relative to kind of how you are choosing to establish your outlook at this point? Sean Bagan: Thanks, Mig. So I agree with everything you said there. In terms of kind of the seasonality, Q1 ramp from Q4 typically. I think the first thing to highlight and point out is the impact that CFP is having. So roughly, from a year-over-year perspective, the run rate is roughly $15 million of revenue per quarter. But as you imply, in terms of our fourth quarter to first quarter, kind of flattish, and the CFP dynamic is not there. But I just want to remind that that is a year-over-year dynamic. When you get to the full year numbers that you were citing, roughly $45 million that will not repeat in 2026 that we had in 2025, all within the Hydraulics segment. So specific to the first quarter guide, we see the Hydraulics business still being up at a healthy clip year over year, 3% to 7% on a full year basis, and 19% to 21% on a pro forma basis, taking out CFP year over year for the first quarter. We feel real good about that first quarter number in terms of, like I said earlier, you know, we are already months into the quarter. We know what the order book is, so it just comes down to the execution. So we would not expect anything large to come in that we do not see in the first quarter. So that is tied back to, again, the current order book and the sales trajectory quarter to date. So, Jeremy, do you want to add some additional color on that? Jeremy Evans: Yeah. Maybe just add in the Hydraulics, you know, over half of the business goes through distribution, and so our visibility into the outward order book is a little bit more limited there than what we see through the OEMs. And when we look at, you know, the ag market, I would say what we have seen is more of a stabilization. It has flipped to growth for us, so it is a moderate growth back in Q3 and Q4. And, you know, early indications would imply that we would expect that to carry over, and that has been built into the guide. I would also say holistically that we are really trying to balance the visibility that we have in our order book over the first half over the volatility really around the current global trade situation and tariffs. That is still an unknown of, you know, how that is going to play out. There is also a rising demand for memory chips, and if you read a lot of the news, you know, a lot of these chip manufacturers are moving to the high-end chips, and, you know, we are potentially going to face some constrained supply. Now, we have done a good job already trying to lock in our supply for 2026, and, you know, taking somewhat of an inventory position on that to buffer against that, but I think that that is an unknown, as well as just what, you know, just recently happened here in the Middle East. And so we see a lot of volatility which, at this point, you know, we are trying to balance with what we see in that short-term order book through the distribution partners. Mig Dobre: Okay. My follow-up, since you brought up the topic of tariffs, is there a way to size the tariff impact on your business? What is incremental in 2026 versus 2025? And how should we think about pricing in both your segments as it relates to not just the tariffs themselves, but, you know, overall cost inflation? We have obviously seen material costs go up over the past few months. Thank you. Are you able to be price/cost neutral or better in 2026? Jeremy Evans: Yeah. This is Jeremy. Great question. So, you know, the tariff situation, a lot of unknowns right now just around what will be enforced, potential for refunds. I think we track that. We have good visibility. We are monitoring that situation very closely. As you mentioned, we were able to mitigate most of that through tariff avoidance by our “in the region for the region” strategy. But we did take pricing actions to offset that. And we had communicated back in 2025 that we expected our second half direct tariff cost to be about $8 million. We came in a little bit less than that, but as you point out, those tariff surcharges kind of ramped throughout the year, where Q1 was a bit light. So on a year-over-year compare, there will be higher tariff expansion in the first quarter. But most of that, again, is being recovered through pricing actions. And we would take a similar approach as it relates to, you know, cost inflation, definitely the situation around the memory chips, some of the price that, you know, we are seeing on those chips going up four or five times. And we will manage that in a similar situation and recoup as much as we can of that through pricing and obviously keeping those lines of communication open with our customers. Mig Dobre: Appreciate it. Thank you. Operator: Our next question comes from the line of Jeff Hammond with KeyBanc. Please proceed with your question. David Tarantino: Hey, good morning, everyone. This is David Tarantino on for Jeff. So you touched on the tariff pressures, but could you give us some greater detail on the margin expansion levers in 2026, particularly how you are thinking about margin growth between better volume absorption and the more internal initiative-driven productivity benefits? Sean Bagan: Yeah. So, David, I would answer that by saying we are going to continue to do what we did in 2025. What you would observe is, you know, starting the year at roughly 31% gross margin and adding a point every quarter. Now we think in the 2026 timeframe, we can get back to that mid-thirties, and, again, we are exiting at a 33.5% to 34% margin rate. So number one is volume. We have demonstrated that in 2025. We have a cost structure that will provide leverage to the bottom line as we continue to drive volume. We are not adding any capacity. We continue to optimize our facilities. But then within our focus within the plants and managing of our cost of goods sold, we take an SQDC approach to that—safety, quality, delivery, cost—where we focus most heavily because we think all of those are, one, tied to customer satisfaction and ensuring we are delivering timely product. Obviously, high quality is the number one focus there. But those drive measurable improvements in our margin rates as well, keeping our employees safe, limiting the, from a quality perspective, whether you are talking about rework or warranty or such. So that is the approach we are taking, and it is really on a rate-of-change perspective of driving that continuous improvement. So we have got initiatives in all of our centers of excellence, driven within our businesses. Jeremy Evans: Yeah, and we will talk more about the different operational initiatives we have within our businesses at our Investor Day, highlighting some of the things that we have done. One, within our Sun Hydraulics business, looking a lot at synchronous flow and how do we get the movement of product through our manufacturing system quicker. And that has actually driven some productivity, as well, helping us take down some of the inventory. We also are looking at how we, you know, configure the operations in the building and how do we make those more efficient, and we have undertaken some changes in lines and, again, reconfiguring that manufacturing process, which makes us more productive. But as Sean mentioned, the biggest driver remains just the volume. As the volume comes through, we get that leverage on our overhead cost and really see the incrementals flow through. David Tarantino: Okay. Great. That is helpful. And then maybe on the end markets, within Electronics, could you talk about what you are seeing in mobile and recreational end markets that informs the return to growth, particularly around recreational and how this is driven just between channel inventories being too low versus the recent tailwinds you noted from one specific customer? Sean Bagan: Yeah. On the end markets, if you take our two largest businesses, Balboa Water Group and Enovation Controls. And Balboa Water Group is all health and wellness predominantly targeted at the spa industry. And what we have seen there is the U.S. market still soft. Production continues to increase in China for export, particularly to the European region. But we did grow that business again last year on top of growth from the prior year in 2024. So we are not seeing a significant rebound, but typically that is a market that grows very sleepily, low single digits, and effectively, it is back to that pre-pandemic level, where we saw the spike, and for us, it was double the size it was pre-pandemic for our health and wellness business. And then it contracted more than half, and now it is kind of back to where it was at. And so we expect to see continued growth there, but we are going to outpace the market. And we have a whole line of new products coming that are much overdue. We have really been operating with the same product offering and portfolio of products since Helios Technologies, Inc. acquired Balboa. And given the R&D investment we have been making, we are very excited about what is coming to market. And we get early visibility to that because we are partnering with those OEMs to design in product into their new models. And so we are seeing a little bit of innovation there, and we are really excited about some of the things we are bringing to market as well. When you go to the Enovation business, as you highlighted, it is indexed more to that recreational market, but it is very diverse as well. So when you look at recreation and you look at marine versus more traditional recreational products—side-by-side ATVs, snowmobiles, motorcycles—first, starting with marine, there has been a little bit of consolidation. You have seen some M&A activity with some of our customers, and we see that as positive because that is going to bring in more opportunity for us to, again, sell more to our existing customer base. But we are also on the gas innovation-wise. If you look at all the products we launched last year and what we have coming, we will be showing some of this at CONEXPO this week. It really opens the aperture to the amount of markets we could serve. So we are going to be aggressively going after that. And we have a very strong sales force that is out hunting and, frankly, where we won over $50 million in new business wins, a lot of those new wins came in our Electronics business because we see that addressable market being very large. So overall, that marine market is now right-sized from a channel inventory level. Retail is still down. Early boat season sentiment is mixed. So we are not expecting significant growth out of that. When you do look at the more traditional recreational, the one customer that we highlighted is really taking a lot of share, and we are benefiting from that. In addition, we are trying to work with them in terms of selling them more of our existing products as well. So those would be the two big movers, but we certainly serve the construction and ag market as well on our Electronics side. David Tarantino: Okay. Great. Thanks, guys. Operator: Star 1 on your telephone keypad. Our next question comes from the line of Chris Moore with CJS Securities. Please proceed with your question. Will (for Chris Moore): Good morning. Fiscal year 2021 was an unusual year driven by Balboa, and adjusted EBITDA margin was 24.6%. What would it take over the next three to five years to get back to that level? Jeremy Evans: Yeah. Well, good callout. As Sean mentioned, 2022 really started in 2021 with the pandemic. We saw extreme growth, definitely in Balboa and that health and wellness, but also in the other end markets as well—rec, marine, the recreational off-road. And you are right. When we got the volumes, you saw the EBITDA and you saw the leverage there. Actually, Balboa in that period was one of the highest EBITDA margin businesses that we had. And so for us, it really comes back to our growth and leveraging the infrastructure that we have to drive that operating leverage. Now, that said, we have had acquisitions since that point in time. We had three in 2022 and 2023 that did not have the same margin profile as the remaining business. So, you know, getting back to that same level, you know, we are targeting definitely mid-twenties EBITDA. We think we can get to that over time, and we will go into a little bit more of that long-range plan at our Investor Day. Will (for Chris Moore): Thank you. And you have done a great job streamlining the organization and cost structure given some softer end markets. Is there any area where it would be difficult to ramp quickly? Jeremy Evans: Yeah. Great question. We actually have already started planning for that and saying, what happens if we see a market recovery? You know, how do we make sure that we have got the right resources in place, both people and, you know, I mentioned the supply using chips as an example, making sure that we have the components and the supply we need to deliver on that. So obviously, we will take a wait-and-see approach with some of the volume. We are managing, you know, leaning more towards overtime than, you know, just ramping up headcount. In fact, our headcount on a year-over-year basis, if you kind of adjust for the CFP divestiture, is actually down. So we are going to manage that tightly and push the productivity. But absolutely, we are having those conversations as we see the growth—how do we, you know, make sure that we are prepared and we deliver to our customers. Operator: We have no further questions at this time. I would like to turn the floor back over to Tania Almond for closing comments. Tania Almond: Great. Thank you, operator, and thank you, everyone, for joining us today. We look forward to seeing all of you in person at our upcoming Investor Day here on March 20. As we mentioned, we are also heading out to CONEXPO this week as well, so perhaps we will see some of you there as well, too. Feel free to reach out to me with any follow-up questions, and have a great day. Thank you. Operator: Ladies and gentlemen, this does conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Scholar Rock Holding Corporation Fourth Quarter 2025 Financial Results and Business Update Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. You would then hear an automated message advising your hand is raised, and to withdraw your question, please press 11 again. Please be advised that today's conference is being recorded. I would like now to turn the conference over to Scholar Rock Holding Corporation. Please go ahead. Laura Ekas: Good morning. I am Laura Ekas, Vice President of Investor Relations at Scholar Rock Holding Corporation. With me today are David Hallal, Chairman and Chief Executive Officer; Akshay Vaishnaw, President of R&D; R. Keith Woods, Chief Operating Officer; and Vikas Sinha, Chief Financial Officer. During today's call, David will provide introductory remarks and a business update, Akshay will review our R&D progress, Keith will provide an update on our commercial readiness activities, and Vikas will provide a financial update. We will then open the call for questions. Before we begin, I would like to remind you that during this call, we will be making various statements about Scholar Rock Holding Corporation's expectations, plans, and prospects that constitute forward-looking statements for the purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Any forward-looking statements represent our views only as of today, and should not be relied upon as representing our views as of any future date. I encourage you to go to the Investors & Media section of our website for our most up-to-date SEC statements and filings. With that, I would like to turn the call over to David. David? David Hallal: Thank you, Laura, and good morning. Thanks to everyone for joining our fourth quarter and full year 2025 earnings call. Scholar Rock Holding Corporation is poised for a transformative year in 2026. Our priorities are clear, and we are executing with focus, discipline, and urgency as we seek to deliver the world's first muscle-targeted therapy to children and adults living with SMA while also laying the foundation to realize our ambition to develop life-transforming therapies for patients with additional rare and severe neuromuscular diseases globally. Our highest priority is to bring upitigramab to the SMA community as quickly as possible. We remain relentless on behalf of patients, and we are grateful that important progress continues to be made at a steady and rapid pace. Let me briefly summarize the key events that have occurred since our constructive and collaborative in-person Type A meeting in November. First, a week following our Type A meeting, the FDA issued a warning letter to Catalent in Indiana. Next, Novo Nordisk rapidly responded to the FDA by mid-December. Then following Novo's response, FDA reached out prior to the holidays to schedule an early Q1 meeting. That meeting has since taken place, and importantly, at that meeting, the FDA had no additional requests to Novo's remediation plan. And most recently, following the meeting with Novo, we were encouraged that the FDA sent a field team to Catalent, Indiana. At the conclusion of the visit, the FDA once again did not have any additional requests to Novo's remediation plan and stated to Novo that it intends to conduct a site reinspection following routine manufacturing activities, which has since resumed in late February. The cadence of activity since our Type A meeting reflects the shared understanding between us, the FDA, and Novo of the high unmet need in the SMA community and a shared sense of urgency to bring up ipilimumab to children and adults living with SMA as rapidly as possible. We are pleased with FDA's continued level of engagement, and we expect this momentum to continue. Our team is prepared to resubmit the ipilimumab BLA following a successful FDA reinspection of the Catalent, Indiana facility. We are reaffirming our guidance of BLA resubmission and U.S. launch following approval in 2026. Also, I am pleased that progress with a second fill-finish facility is moving quickly to build redundancy into our supply chain. Engineering runs at the facility are now underway, with additional manufacturing runs to follow. We anticipate filing a supplemental BLA for the second filer later this year. As we advance the regulatory process for upitigromab toward approval for patients with SMA in the U.S., our MAA review continues in Europe, and we expect a decision from the European Medicines Agency in mid-2026. With anticipated regulatory approvals in the U.S. and Europe this year, I would like to now turn to our Scholar Rock Holding Corporation commercial launch preparations. In the U.S., our team is deployed in the field and is educating potential prescribers and payers on the unmet need in SMA and the importance of targeting muscle, the principal organ affected in SMA, while also broadening and deepening relationships with the community. In Europe, we are building momentum with launch readiness activities and engaging with the SMA community. We continue to plan for a launch in the second half of the year beginning with Germany. Keith will discuss substantial progress we are making with commercial preparations and our disease awareness initiatives shortly. We know it is not a matter of if but when epitigramab will be approved for children and adults with SMA. We are emboldened by the commitment we have made to the more than 35,000 patients globally living with SMA who have received an SMN-targeted therapy. We are working expeditiously to deliver on our ambition that globally, any patient with SMA who can benefit from abitigromab should have access to opitigromab. This is indeed what we know well and what we do well, and we are confident in the significant opportunity that we have to serve patients with SMA. We are ready now more than ever to usher in the next era of innovation for the SMA community. I would like to now turn to the progress we are making in advancing our world-leading anti-myostatin pipeline. Enrollment and dosing continued in our Phase 2 OVAL study evaluating ipilimumab in infants and toddlers with SMA. Our IND for upitigromab in FSHD is cleared, and we are on track to initiate a robust, randomized, placebo-controlled Phase 2 study later this year. With regards to our subQ formulation of epitromab, we shared the promising results of a Phase 1 study comparing subQ and IV epitogromab in January. We expect to share our clinical and regulatory strategy for the program later this year. And finally, we continue to enroll and dose participants in our Phase 1 study for our highly innovative SRK four thirty nine myostatin inhibitor. We expect to have top-line data from this study in the second half of this year. Turning now to our balance sheet. We were pleased to have added we we are pleased to have ended 2025 with $368,000,000 in cash and cash equivalents. This includes $60,400,000 from the exercise of warrants that were set to expire on December 31. We continue to strengthen our financial position to drive our commercial and R&D priorities. And this morning, we are pleased to announce that we have secured a new debt facility for up to $550,000,000, which Vikas will discuss later in the call. 2026 will be a transformative year for Scholar Rock Holding Corporation. We are ready to resubmit our BLA for epitigramab at any moment. Our U.S. commercial team is working with urgency to prepare the market for the launch of the world's first and only muscle-targeted therapy for children and adults living with SMA. Beyond the U.S., the build-out of our 50-country operating platform is underway in Europe, with other regions and countries to follow. And our highly innovative world-leading anti-myostatin pipeline with epitogromab and SRK-four thirty nine is progressing with strong momentum. The opportunity ahead of us to serve patients with SMA and additional rare and severe neuromuscular diseases is significant. We remain steadfast in our strategy, confident in the determination of our team, and energized by the transformative potential of upitikramap and our broader pipeline. The road ahead is one of purpose, progress, and extraordinary possibility. I will now turn the call over to Akshay for an R&D update. Akshay? Akshay Vaishnaw: Thank you, David, and good morning, everybody. As David noted, we remain focused on our apritamab BLA registration to bring this important therapy to children and adults with SMA as rapidly as possible. Since being joined by Cure SMA and Novo at our in-person five-day meeting with FDA leadership in November, I have been pleased by the ongoing level of engagement and progress made on the patients. We expect this momentum to continue, and our team is prepared to resubmit the ipilimumab BLA following a successful FDA reinspection of the Kaplan, Indiana facility. I would now like to provide an update on the status of our second drill finish facility, which will strengthen supply continuity and support future commercial demand. As we shared late last year, we are working with a world-class U.S.-based manufacturing facility that has a proven track record of successful FDA and EMA site inspections. Importantly, engineering runs are now underway with additional manufacturing runs planned in Q2, and we continue to expect to submit a supplemental PA BLA with this facility later in 2026. Outside of the U.S., our ipilimumab MAA is progressing through the review process with the EMA, and we continue to anticipate the decision in the middle of this year. Turning to our pipeline, let me start with the Phase 2 OVAL trial evaluating ipilimumab in infants and toddlers under the age two. This trial is enrolling participants who have been treated with an SMN1-targeted gene therapy or who are receiving ongoing treatment with an SNN2-targeted therapy. The study is important for two reasons in particular. First, it is anticipated to expand the impact of the ipilimumab to the full spectrum of patients currently being treated for SMA, as this is the first time we are evaluating the use of opicumab in the organza-treated patients in a clinical trial setting. Second, we believe early intervention with upivimab could support muscle during the critical early development phase, complementing SMN target therapy that aims to preserve motor neuron. By promoting muscle growth on both motor neurons and muscle, muscles are still maturing, apivolumab has a unique opportunity to improve motor outcomes in the youngest patients with SMA. To ensure that no patients are left behind, we continue to enroll patients in this study and dosing long ago. Turning now to our next indication for ipilimumab, parsioscapular humeral muscular dystrophy, or FSHD. FSHD is a rare, devastating neuromuscular disease with significant unmet need. More than thirty thousand patients are diagnosed in the U.S. with Europe alone, and there are no approved therapies. FSHD is caused by dysregulation of DUX4, a protein that can cause muscle damage when inappropriately expressed. Symptoms usually begin in adolescence or early adulthood, with muscle weakness in the face and upper body, but FSHD can impact any muscle in the body. An estimated 20% of patients will become wheelchair dependent. We are prioritizing FSHD as the next indication for ipilimumab for three key reasons. First, there is significant unmet need in this population for a safe and effective therapy. Second, we have preclinical data from the gold-standard FlexFlow four mouse model that provides mechanistic rationale for a cogumab in FSHD. Using this mouse model showed that mystatin inhibition can produce robust increase in muscle mass, significant improvements in muscle force, and consistent gains in endurance after 28 days. Third, there are randomized studies in FSHD that suggest muscle mass can increase in hypercapacities to show functional benefit. For example, in studies of either rigorous physical therapy or treatment with anabolic agents, patients with FSHD demonstrated increases in lean mass muscle function. These data suggest that the oprimumab as a monotherapy may have the potential bring important benefit to FSHD patients. The FSHD IND is clear, and our next step is to conduct a robust, randomized, double-blind, placebo-controlled Phase 2 study that is expected to enroll 60 patients. The study, or FORGE, is on track to initiate in the middle of this year. We also continue to advance two additional programs in our world-leading anti inflammatory pipeline, a subQ formulation of pipigimod, and s r p four twenty nine. In our s r pipilimumab program, we showed some very exciting data from a Phase 1 study earlier this year. In that study, healthy volunteers received ipilimumab v epiva 100 or 800 mg subQ or 800 mg IV. The data demonstrated that 800 mg subQ resulted in an overlap pharmacodynamic profile with 800 IV. Accordingly, sub qpigramat appears to have favorable bioavailability with the pharmacodynamic profile comparable to IV administration. Additional development activities with subcu efiblimab are underway. We are planning engagements with U.S. and European regulators. Turning after SRP four through nine, we discovered by leveraging our work work leading expertise in targeting mystatin. Four three nine is a subcutaneously administered mystatin inhibitor binding to both pro and latent mystatin with high affinity and selectivity. We recently presented data demonstrating that four twenty nine is 10 times more potent than epinephrine. We have shown in nonhuman primate that four three nine changes in whole body lean map at doses as low as 0.3 mg/kg. We are very excited about this program, and dosing in our Phase 1 healthy volunteer study is well underway. We expect to have top-line data on the study in the second half of this year. In closing, we are executing with focused urgency and bring upivimab to children and adults with SMA whilst in parallel investing with discipline to advance our world-leading anti mastectomy pipeline. The strength of our data and the sustained momentum of our programs underpins our confidence that we can shape the future of treatment for patients living with rare neuromuscular diseases. I will now turn the call over to Keith to discuss our commercial launch preparations. Keith? R. Keith Woods: Thanks, Akshay, and good morning, everyone. As David noted, our team continues to operate with urgency as we prepare for the launch of opitigramab. Our commercial organization remains focused and disciplined, advancing the critical capabilities required to deliver a seamless launch and support patients from day one. Nearly a decade after the introduction of SMN-targeted therapies, the market continues to grow and now represents nearly $5,000,000,000 in global annual sales. However, while SMN-targeted therapies have brought much needed innovation, muscle strength and motor function remain the top unmet need, with 95% of patients continuing to experience persistent and progressive muscle weakness that limits function and independence. Additionally, three-quarters of neurologists believe multiple modalities are necessary to optimally treat patients with SMA. This data underscores the significant opportunity we have with epitigramab, the world's first muscle-targeted therapy. To this end, our U.S. customer-facing team is active in the field, focused on disease education programs that reinforce a broader understanding of SMA as a disease of the motor unit consisting of both the motor neuron and the muscle, which is the principal organ impacted by the disease. We continue to engage across approximately 140 SMA treatment centers, 2,600 prescribing physicians, and their multidisciplinary care teams throughout the U.S., and our SMA disease education efforts remain a core component of our work in the field. In parallel, we are strengthening and advancing the key elements of our commercial capabilities to ensure launch readiness. We have expanded our specialty pharmacy network to enhance SMA patient and caregiver convenience. SMA patients currently receiving an SMN-targeted therapy from a specialty pharmacy will be able to access epitogromab through that same specialty pharmacy. In addition, through our patient access partners, we have established a home infusion network of more than 10,000 affiliated nurses nationwide. We are also working to ensure we mitigate reimbursement and access bottlenecks. This includes preparations to launch our patient services program, which we have named Scholar Rock Supports. This program is designed to provide comprehensive and individualized support to patients, caregivers, and providers. In addition, we remain focused on patient engagement and community activation. In January, we launched the next phase of our disease awareness campaign, called Life Takes Muscle, aligned with our objective to deepen community awareness of the importance of targeting muscle. And finally, we continue to engage with payers, advancing discussions with national and key regional payers as well as Medicare and Medicaid. At U.S. approval and launch, I look forward to discussing our comprehensive SMA Patient Access Support Program in more detail. While we make substantial progress in preparing for the launch in the U.S., we are also advancing launch readiness across key European markets in anticipation of a mid-2026 EMA decision. In Germany, we have established local leadership, initiated our compassionate use program, and are progressing reimbursement planning to enable rapid access following approval. Across the broader region, we are advancing reimbursement dossiers in multiple countries, strengthening our distributor relationship, and we are building out our EMEA infrastructure to support future commercialization. In closing, we have invested thoughtfully to build the commercial foundation necessary to support a world-class launch, and we believe epitogromab is well positioned to play a central role in the next era of SMA care. Our team is prepared to move quickly upon approval and to deliver on our commitment to the SMA community, one patient, one caregiver, and one family at a time. With that, I will turn the call over to Vikas. Vikas? Vikas Sinha: Thank you, Keith. Our financial objectives for 2026 remain consistent. We are focused on supporting our commercial build to deliver a strong epididymumab launch, funding R&D activity to advance our pipeline and expand our leadership in the myostatin and muscle space, and continuing to evaluate opportunities to strengthen our balance sheet in a way that supports long-term shareholder value. In keeping with these objectives, I am pleased to provide our fourth quarter and full year financial results. For the fourth quarter, we reported $91,900,000 in operating expenses, which included $19,400,000 in non-cash stock-based compensation. Excluding stock-based compensation, operating expenses were $72,500,000. For the year ended 2025, we reported $384,600,000 in operating expenses, which included $75,600,000 in non-cash stock-based compensation. Excluding stock-based compensation, operating expenses were $309,000,000 for the year ended 2025. Turning to our balance sheet, we ended 2025 with $368,000,000 in cash and cash equivalents. During the fourth quarter, we strengthened our cash position, adding $60,400,000 from the exercise of a warrant that was set to expire on December 31. We continue to spend on our balance sheet and are pleased to announce today that we secured a new debt facility for up to $550,000,000 with Blue Oak Capital. This debt facility consists of four elements. First, upon closing, $100,000,000 was immediately available to us, which we have used to repay our prior $100,000,000 debt facility with Oxford Finance. Second, an additional $100,000,000 is available to us this quarter, which we expect to draw down by March 31. Then, following FDA approval of apecigumab, we have the option to draw up to $150,000,000 in additional capital. And lastly, we have an option for an additional incremental facility of up to $200,000,000 at the mutual consent of Scholar Rock Holding Corporation and Blue Oak. With that, the facility provides us with additional flexibility as we transition towards a global commercial space company while investing in our pipeline. In addition to the $150,000,000 available from the debt facility upon FDA approval of apritamab, we will look to monetize a priority review voucher to further strengthen our balance. Looking ahead, we continue to operate with a tight financial plan. Our prioritized investments remain focused on our abalizumab commercial launch readiness in the U.S. and Europe, strengthening our supply chain to support the pipeline and commercial demand for our digital map, and advancing our highly innovative clinical programs that Akshay discussed earlier in the call. With that, I will turn the call back to David. David? David Hallal: Thanks, Vikas. In closing, we remain focused on bringing ofitigramab, the world's first and only muscle-targeted treatment to improve motor function, to children and adults living with SMA as rapidly as possible. We are encouraged by the progress that has been made and by the continued momentum across our regulatory, clinical, and commercial priorities. With a strong foundation, clear strategic priorities, and a world-class team, we are well positioned to make 2026 a transformative year for Scholar Rock Holding Corporation as we continue to work with urgency on behalf of children and adults living with SMA. We look forward to updating you on our continued progress throughout the year, and with that, we will now open the line for questions. Operator: Thank you. Star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. We ask you please limit to one question. Our first question is going to come from Eric Thomas Schmidt with Cantor. Your line is open. Eric Thomas Schmidt: Thanks for a very comprehensive update. David, just to put a pin in it, is Novo now ready for reinspection, open for reinspection? And then assuming the reinspection does go, quote, well, what would trigger your resubmission? What do you need to see from that reinspection to be able to push the button on the refiling? Thank you. David Hallal: Thanks, Eric. So you know, we are gratified really since our Type A meeting in November with the shared sense of urgency and high priority that both FDA and Novo has has has made the remediation of the Catalent Indiana facility, and you got a sense from the call just the drumbeat of progress week after week, month after month. We like the high engagement we continue to see. And given the constructive meeting in early Q1 and then the following sites that that really the gating item now just is a reinspection follows these routine manufacturing activities as Novo moves into full-scale production. As far as you know, our trigger we would look for, obviously, a successful reinspection as you noted, and we are assuming that given the progress that has been made. And that would then trigger. We are at the ready to submit our BLA submission very, very quickly. But it really would be with you know, some level of confidence that it was a successful rate. Operator: And our next question will come from Tazeen Ahmad with Bank of America. Your line is open. Tazeen Ahmad: Hi, guys. Good morning. Thanks for taking my question. Not to belabor the point on timing here, but I know you are confident about the ability of Novo to resolve the issue. But in the event that you do have to revert to your backup facility, you have guided to a supplemental filing in the second half of the year. What would happen to timelines if that needed to be the primary filing? David Hallal: Thanks, Tazeen, very much. As I noted on the call, we are we are gratified in the rapid and steady progress that has been made, you know, between FDA and Novo. And we do think of and the importance of ipilimumab for the SMA community is key driver in this. Not the sole driver, but a key driver in this. I would say that we are pleased with how rapidly we are moving forward with an additional filer, and our assumption is whether or not it were to be a supplemental BLA, which is our plan, or whether or not we had to fall back. We have always looked at that as an back. Important effort on our part no matter what because we cannot control everything in this process. And we do not really believe that that timing would be altered tremendously in terms of if it were not an SBLA. So we thought about it. It is our plan that it will be an SBLA. That is the level of insight, information, and confidence that we have. But, nonetheless, we would be prepared to pivot should need be, on behalf of children and adults living with SMA. Operator: Thank you. And our next question comes from Tessa Thomas Romero with JPMorgan. Your line is open. Tessa Thomas Romero: Hey, guys. Thanks so much for taking the question this morning. So first one is, can you elaborate on what it meant that the FDA sent a field team? What was the purpose of that? And is that routine? And then the second one, just to loop back on sort of better understanding the next procedural steps post the reinspection and what the timelines could be there, will you get verbal communication or is written documentation what you will see similar to a normal inspection? Thanks. David Hallal: Yeah. Thanks, Tessa. It is a good question because certainly nothing has been completely ordinary about this process. And I do think what has created some level of extraordinary behavior with kind of a constant drumbeat of progress I think it was really set off by that in-person Type A meeting that we held with FDA and where there really was, with CURE SMA in attendance, with Novo in attendance, there was a shared, you know, sense of urgency to bring opitogramab to patients. And so while I cannot really comment on, you know, what was the overall sort of objective, we do think what it shows is, you know, for just weeks after a really constructive meeting with Novo in early Q1, where there were no new requests by the FDA of Novo into their remediation plan, we think it just continues to show high priority by the FDA to send a field team out to interact with the site and to indicate that, you know, after routine manufacturing activities, which have since recommenced at the facility, they would be in line for a reinspection. So overall, we just feel good about the drumbeat of progress here, and we are quite pleased, and we would expect, given this, you know, sort of rapid and steady pace that we have seen over these last three months, that anything else that follows, the timing of a reinspection, the timing of resubmission, that review, you know, hopefully, it continues to follow sort of this commitment that has been made to rapidly progress the epitogromab file so that we can deliver this drug to children and adults living with SMA. And we will certainly keep you apprised on that progress. Thank you. Operator: Thank you. And our next question comes from Mani Foroohar with Leerink. Your line is open. Mani Foroohar: Hey, guys. You have Ryan on for Mani. Thanks for taking our question, congrats on the update. Maybe just one sticking with the review. Kind of based off your latest conversations with the FDA, I am curious what your expectations are for a turnaround time following BLA submission to eventual approval. Are there any details still need to be worked out, label, etcetera, with regulators? And then maybe just as a second one on the pipeline, can you talk about the strategy for April? Is this something that you plan to keep in house, look for broader strategic options? Is it best suited in rare neuromuscular diseases, or potential broader application? Thanks. David Hallal: Thanks, Thanks, Brian. Regarding the timing, again, just to remind, you know, everybody tuning in today, in our CRL that we received last year, the sole approvability issue was the state of compliance at the Catalent, Indiana facility. So we are certainly very focused on working with FDA and Novo on that. As I noted earlier in the call, we would and we are planning, and we are ready to rapidly resubmit our BLA following successful reinspection. And, again, we would just point to without really being able to comment on timing, we would just kind of point to, you know, the evidence of the progress over these last three months and how attentive the FDA has been to remediating this facility and how focused Novo has been to really working with urgency as well, and we will keep you apprised on that timing. Regarding the pipeline at $4.39 auction, Yeah. $4.39, obviously, is a very important, exciting drug. It is a high potency antimyostatin antibody. Appears to us at least in the preclinical work to be about tenfold more potent. So could be a very low volume, small volume, infrequent administration type drug. So I think that creates very interesting and exciting possibilities in the neuromuscular space for us that at least at the current time, we think this is a scholar of the bioreactor, and we have no intentions of harm right there. But we will share further development plans after we get the top-line Phase 1 data rate. Operator: Thank you. Operator: And our next question is going to come from Kripa Devarakonda with Truist. Your line is open. Srikripa Devarakonda: Hey, guys. Thank you so much for taking my question. Time lines wise, not to be over the point, you expect you continue to expect inspection, BLA resubmission, U.S. launch, everything to happen in 2026. For the launch to be in 2026, can it still happen with the Class 2 submission? Our due diligence suggests this is most likely going to be a Class 2 submission. And in any of your recent conversations with the FDA, was there any hint or for a potential CNPV for epitogromat? Thank you. David Hallal: I did not get the last part of that, Kripa. Could you say any indication of commissioners— Srikripa Devarakonda: Commissioner’s priority voucher. David Hallal: Oh. The national priority voucher. The these are all very good questions, Kripa. And as you might imagine, we have thought about it all. Right? And we, with all of the information that we have and the progress that is made, we were pleased and confident to reaffirm the guidance that we provided today of a 2026 BLA resubmission and U.S. launch upon approval. We would certainly point to sort of this steady FDA prioritization and progress with Novo, you know, over these past weeks and months, and it remains, you know, very steady. And I think, like, we have thought about Class 1 versus Class 2, and what we have seen actually in our own sort of analysis of this, even when Class 2s are sort of granted, oftentimes, the decision is taken up before that six-month timeline. And, again, I am just reminding you that the sole approvability, you know, issue for us has been the status of the Catalan Indiana facility. And, you know, we are pretty we are planning for the resubmission to be happening once we have indication that it was a successful reinspection. So we will keep you apprised at that, but we certainly are, you know, very, very comfortable with the guidance that we have provided. And then regarding, like, the commissioners, sort of, I would just say that we are just staying in close communication with the FDA on all of our different initiatives and just keeping in the forefront the very high priority that exists with the SMA community in the United States to gain access to the world's first and only muscle-targeted treatment. And we look forward to continuing to keep you guys apprised on our regulatory progress there with FDA. Operator: Great. Thank you so much. Operator: Thank you. And our next question will come from Michael Yee with UBS. Your line is open. Michael Yee: Hey, guys. Good morning. I am not going to ask a submission question. Can you talk a little bit about the expectations for the label as it relates to either ambulatory or nonambulatory and with no issues regarding age subgrouping, given that you had what sounds like a very successful review process and only CMC was the outstanding part? How should we think about a broad label? And then a follow-up, assuming approval, for Vakaast, can you just remind us, given that your drug is a weight-based drug, how to think about the comparable pricing relative to other drugs and if models should reflect anything philosophically as it relates to the differences in how the drugs are administered? Thank you. David Hallal: Thanks, Michael. Akshay, on the label and then, you know, Keith on the weight-based element of the drug and price action. Akshay Vaishnaw: Yeah. Michael, you know, we were gratified by all the progress made during the original cycle. He had gone to a very advanced stage with the draft label, and the FDA had really worked hard to get to that. So with the cabin issue being the only outstanding issue, we have to split that it. Relatively straightforward to get aligned with the FDA on the final label after a BLA resubmission. Now all of that being said, the details ultimately, that is up to the FDA. But we know from the conversation leading up to the September date that kind of the guiding principles are what—excuse me—what the FDA has shown before in the SMA space, the trial design that supports the approval, that is important. Now if you note that the totality of that package, we have experienced with both nonambulatory and abulatory. We have experience with children two years and older. They have experience in patients on this decline and this in medicine. And so I think that these are important guiding factors. James also previously tended to look at the full applicability or not of the therapy hypothesis and the next of action of the drug to try and maximize getting these drugs in the terrible disease as many patients as possible. Now those are the kind of guiding principle. I think we have to waive the ultimate BLA resubmission and see where we end up. But we have been pleased so far with how straightforward we can get this approach. R. Keith Woods: Yeah. And then on price, you know, I guess, first of all, it is not really appropriate for us to comment on specifics at this stage. But I do promise you when we have approval and we have our launch call, we will get very specific about the pricing. But, Mike, as you mentioned, because it is weight-based dosing, you are going to see a range. So it is not going to just be one set price for all. But, look, when we think about pricing of lopidogrelimab, we think about three key factors. And it is the rarity and the severity of SMA, it is the progressive nature of the disease, and, you know, in combination with SMN-targeted therapies, our data from both TOPAZ and SAPPHIRE have just demonstrated compelling clinical benefits. So we will get into all of the specifics on pricing on the launch call. Operator: Thank you. Operator: Thank you. And our next question is going to come from Amy Lee with Jefferies. Amy Lee: Hi. Thanks so much for taking our question. So looking ahead to launch, what commercial analogs would you point us to as we think about the initial uptake and launch trajectory? And then maybe another one on subcu api. Do you think approval will require a full clinical study in SMA, a smaller bridging study, or primarily human factor studies? And if you could give us a timeline to market, that would be awesome. David Hallal: Thanks very much, Amy, and yeah, what I would say is that, you know, for sure, we have been pleased in our engagement with the patient community, the caregiver community, as well as, as Keith noted, neurologists’ appreciation that not only addressing the motor neuron component of the disease, but for the first time, to really be able to address directly the muscle component of the disease, which is a principal organ that is clinically impacted and affected by this disease. We sense that there is a lot of interest in accessing the drug. And that in and of itself could support, like, a very nice uptake at launch. I think what Keith and I have looked at, though, is this is essentially a Q4 week infusion. It will have a miscellaneous J code for some period of time. We know that there are payers, for example, Medicaid, that could be a little sluggish at launch. We recognize payers in and of themselves it is not a matter of if they reimburse, but sometimes it takes time to reimburse. And so we believe robust demand, but we think that will be met with initially some access speed bumps that could impact our launch curve. But overall, the long term that we see for opiticlimab in the U.S. and beyond we feel like is quite significant for us, and we are really looking forward to the eventual approval and then Keith and team launching a pitogram to the SMA community. With respect to your question on subcu and clinical regulatory strategy, I will hand that over to Akshay. Akshay Vaishnaw: Yeah. Thanks, David. So for subQ berivimab, what we have is very interesting and supportive data that the subQ route is viable, shows excellent bioavailability, and a pharmacodynamic profile. Now we know a lot about afliberumab in terms of PK/PD from our prior work, clearly IV administration. Obviously want to leverage that by saying, you know, this is a drug that is well characterized and studied by different administration. But if we can mimic the appropriate PK/PD, then there is no reason why it cannot be equally safe and effective. Now those are all discussions that we need to have with the FDA. The initial approval of the drug, of course, is very important. But subsequent to that, hope to get aligned with regulators on that approach. So, ultimately, we cannot guide the timelines today, but we are hoping you have progressive regulators. Formulate our final time with them. Discuss the path forward. Amy Lee: Great. Thank you. Operator: Thank you. And our next question will come from Jeff Meacham with Citigroup. Your line is open. Jeff Meacham: Good morning, guys. This is Jarway on for Jeff. Maybe I was thinking about the second fill finish facility. If you guys were to switch over to that one, would it completely derisk the supply chain from a U.S. and EU launch perspective? And then on the launch, what specific leading indicators of payer and physician readiness are you guys tracking? Maybe if you guys can give some color on that, it would be helpful. Thanks. David Hallal: Absolutely. I will start with the second vial, and then, Keith, you might need clarification on the second. Yes. Can you repeat the second question, please? Jeff Meacham: Yeah. Sure. What specific leading indicators are you guys paying attention to to indicate, you know, payer and physician readiness that you are tracking? David Hallal: Great. So second fill finish. We are really pleased with the progress we have been making. As I mentioned, you know, tech transfer commenced in Q4. Engineering runs are underway, and there are additional manufacturing runs to follow here in the very near term. So we are working urgently. Again, our assumption is this is going to be our second filer. We are going to submit an FBLA. Should we rely on this facility solely, we are confident that we would be derisking as well our U.S. and EU commercial opportunities. So we wanted to be very thoughtful in selecting the right second partner for fill finish, and we are gratified that we have done that. And, also, as I noted, really pleased with the progress that is being made at a very rapid pace. Keith? R. Keith Woods: Yeah. So first of all, when it comes to the payers, you know, we have been really pleased with the access that our team has been able to get. As I stated in the prepared remarks, to not just the big national payers, but also now regional payers and even some Medicare and Medicaid. While we have had more time, we have been able to have in-depth discussions with them, and our medical team has been able to go through the SAPPHIRE clinical data with them. The bottom line is, just as we have research, just as what has been shared in a lot of the Cure SMA data in some of our own markets, you know, neurologists and patients, they want more, and they need more. And that is why we understand three-quarters of these physicians already believe in multiple modalities to treat this—to treat SMA. Operator: Thank you. And our next question will come from Salvator Caruso with TD Cowen. Salvator Caruso: Hi. This is Salvator Caruso on behalf of Marc Alan Frahm at TD. Thank you for taking my question. Just one quick question that kind of crossed some Ts and dotted some Is. Regarding the status of the MAA review, will that market also be served by the Novo Catalent Indiana facility? And if so, has the EMA taken any action in response to the FDA inspection findings? David Hallal: I will start, and then I can hand it over to Akshay. There is a mutual recognition between both FDA and EMA. And so this steady and rapid progress we are making with FDA actually serves us very well for the current MAA review with regulators. And so it is very important that we continue to make this progress forward. As I noted, the continued remediation and eventual, you know, successful reinspection will really support our EMA decision near midyear. And then as I noted, if for some reason we were to rely on the second filer, that would also be very important. But for now, we are very excited with the rapid and steady progress that has been made. Akshay, anything— Akshay Vaishnaw: Yeah. You covered it, David. I think the other piece that we can close touch with with doing the policy with the—so that is really what it is that is important, and we all await those additional this action by which will obviously not take approvals. Salvator Caruso: Thank you. Operator: You. The next question will come from Etzer Darout with Barclays. Your line is open. Etzer Darout: Great. Thanks for taking the question. Just a couple for me. Has the FDA requested or could they request additional safety data that could extend review of epitogromab? And then on FHSD, just wondered would you be looking at any functional endpoints in the Phase 2 study that you are planning? And could this be a more appropriate indication for SRK nine longer term? Thank you. David Hallal: Thanks, Etzer. Yeah. It is a great comment, and we can remind you that the BLA resubmission will be a fairly rapid and small resubmission, but there would be an update to sort of our safety database, which was called out in our response letter from the FDA. Akshay can comment on that for FSHD, and then talk about any sort of functional outcome measures. Akshay Vaishnaw: Okay. Yeah. So we are in line with the FDA. And the budget meeting was useful in many regards, including that and both the which aspect of the safe take place needs to be updated. So that is all agreed to, and so we are ready and prepared with this BLA resubmission. So I do not see any brain issues there, but it is a good question, and, obviously, we should always provide the FDA with a latest safety understanding about which we will do. With respect to the FORGE Phase 2 study in FSHD, the primary endpoint will focus on increasing lead muscle volume measure very sensitive with both imaging techniques. But we will have home state environment treatment, which is a validated approach in FSHD, to understand the functional impact of any potential change in muscle mass. And we look forward, obviously, to those data too. Operator: Thank you. Thank you. And our next question will come from Evan Seigerman with BMO Capital Markets. Your line is open. Evan Seigerman: Hi. Malcolm Hoffman on for Evan. Thanks for taking our here. Thinking about the financials of the business. I know you mentioned the new debt facility secured with approvals U.S. and Europe coming this year. I just wanted to ask, how are you thinking about expectations for time to profitability, whether you anticipate any additional need for financing ahead of that profitability hinge point. Thanks. David Hallal: Thanks, Malcolm. Vikas? Vikas Sinha: Yep. Hi, Malcolm. You know, we have not given forward-looking guidance at all here, but, you know, we will follow most likely the normal rare disease kind of revenue trajectory, which leads you into very similar levels of profitability time frames of two to three years from launch. But, you know, it also depends on how our pipeline progresses during that time, and we will weigh into profitability versus investing into the future. But overall, looking at a fundamental principle of creating long-term shareholder value. Akshay Vaishnaw: Thanks, Vikas. Thanks, Malcolm. Operator: And our next question comes from Allison Bratzel with Piper Sandler. Your line is open. Allison Bratzel: Hey, good morning, guys. Thanks for taking the question. Just drilling down on some of the prior discussion around review timing. I know you have talked a lot about FDA's sense of urgency on ipilimumab. I guess, is there good precedent for FDA spending less than six months to review a Class 2 resubmission, and can you just clarify, does your guidance for commercial launch in '26 assume a Class 2 resubmission and the full six-month review? And then separately, just on OPAL, could you talk to what you are seeing on enrollment trends there and just, you know, what that tells you about the underlying awareness of opitigimod in the SMA community. Thanks. David Hallal: Thanks, Allison. Maybe I will just, you know, point out one example on the Class 2 not taking the full time, and I think it is important that we have been mentioned occasionally here during this current journey, with Regeneron. In a CRL in 2023 at the same facility, Regeneron did have a resubmission. I believe it was a Class 2 resubmission, and yet it was approved within, you know, essentially a sort of a 60-day window. And so but we have more examples than that. I just point to that. It is a little bit relevant given the fact that it was CRL, and it was the same facility. And I think it had to do with some assessment of the facility post an inspection. So I would just point your attention to that. Akshay Vaishnaw: Yeah. So yeah. Following up on that is what is my treatment for. The—the enrollment's going very well. I mean, I think the first thing say actually is people who get enrollment that very, like, knowledge and appreciation for a muscle-based approach in the patient community and the prescriber community. And Keith has spoken about fact is startlingly high and patients, families, and physicians are waiting the approval of this drug. And consistent with that, the stroke throughout the entire patient. They see the, you know, the possibilities age range and disease severity range. As a community and we have verified by the very nice progress we have had. I am not going to share details today, but, yes, we are seeing a good clip of enrollment and, yeah, as we get later into the year, we will clarify, you know, if the sort of comes into sight. But exactly when we have data and so forth. But are fairly consistent with knowledge of the drug in its potential. It is very good in. David Hallal: And, Allison, I would just add, as Akshay noted in the prepared remarks, we have a deep commitment to the SMA community, and I am really, really pleased that we are making sure no patients are left behind by opening up this under two study. So we are super excited to be doing this work in the youngest of patients with SMA. Operator: And the next question will come from Kalpit Patel with Wolfe Research. Your line is open. Kalpit Patel: Hey. This is Dugan on for Kalpit. Previous myostatin inhibitors and FSH increased muscle mass without meaningful functional improvement. You give some color on how eptigramab aims to address this historical hurdle and what clinically meaning functional improvement might be in the planned Phase 2? Akshay Vaishnaw: Sure. Yeah. So I think you are pointing to either drug that did not have a very clear and well validated mechanism of action and potency safety profile. The earlier generations of adenosinemia have a potency, the selectivity. Of drug that has been in our opinion. More importantly, another one is the another point you raised is the Exelon example. I just suspect. Exelon did a study in FSHD, and they reject low fee in one isolated muscle. Now one cannot expect that to result in global, you know, functional improvement. But we do know separately that globally applied strategies like intense physical therapy, or anabolic agents that increase muscle mass, such as those—mastectomy—or rather growth hormone and testosterone and other similar agents, that those kinds of patients clearly show an increase in muscle mass and also increase in functional capacity. So we incorporated contact myometric testing into the Phase 2 to evaluate changing muscle function. The primary approach, or the primary endpoint, obviously, is to document change in the muscle volume. But we look forward to getting those data, and that is a validated approach to that patient. And we will share the data. David Hallal: Thanks, Akshay. Operator: Thank you. I am showing no further questions at this time. This will conclude today's conference call. Thank you so much for participating, and you may now disconnect.
Operator: Ladies and gentlemen, welcome to Best Buy Co., Inc.'s Fourth Quarter Fiscal 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. At that time, if you have a question, you will need to press star 1 on your phone. If you choose to be taken out of the question queue, please press star 1 again. As a reminder, this call is being recorded for playback and will be available by approximately 1 p.m. Eastern Time today. If you need assistance on the call at any time, please press star 0, and an operator will assist you. I will now turn the conference call over to Mollie O'Brien, Head of Investor Relations. Mollie O'Brien: Thank you, and good morning, everyone. Joining me on the call today are Corie Barry, our CEO, Matthew M. Bilunas, our Chief Financial and Strategy Officer, and Jason J. Bonfig, our Chief Customer, Product and Fulfillment Officer. During the call today, we will be discussing both GAAP and non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures, and an explanation of why these non-GAAP financial measures are used, can be found in this morning's earnings release, which is available on our website, investors.bestbuy.com. Some of the statements we will make today are considered forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may address the financial condition, business initiatives, growth plans, investments and expected performance of the company and are subject to risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. Please refer to the company's current earnings release and our most recent Form 10-Ks and subsequent 10-Qs for more information on these risks and uncertainties. The company undertakes no obligation to update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this call. I will now turn the call over to Corie. Corie Barry: Good morning, everyone, and thank you for joining us. Today, we are reporting better-than-expected profitability for the fourth quarter. On revenue of $13,800,000,000 we delivered an adjusted operating income rate of 5% and adjusted earnings per share of $2.61, both of which are slightly up to last year. Our Q4 comparable sales were down 0.8% versus last year, within our guidance range for the quarter. Our data sources show our market share was at least flat pointing to slightly softer consumer demand for our industry during the holiday quarter. Our holiday customer demand patterns were also different than modeled despite sales event timing that was very similar to last year's. We saw softer-than-expected sales in November and December. We then experienced strong sales in the last two weeks of December and the January week of the quarter. And sales were negatively impacted by weather-induced store closures during the last. We were prepared for a promotional holiday, and the environment was even a bit more than we factored heading into the quarter. I'm proud of how our team strategically pivoted throughout the quarter in terms of marketing, promotionality, and labor. From a product category perspective, we delivered our eighth consecutive quarter of positive comparable sales in computing, driven by laptops, desktops, and accessories. In mobile phones, we delivered our fourth consecutive quarter of growth driven by our expanded partnerships and in-store operating model improvements with large carriers. We grew our gaming category revenue, but at a much slower rate than the previous two quarters as expected. We also saw strong growth in newer and emerging categories, like AI glasses, 3D printers, collectibles and toys, health rings, and PC gaming handhelds. These positive growth categories were offset by declines in home theater and appliances. We are pleased with the progress we have made in our ads and marketplace and both delivered positive contributions to gross profit rate in the quarter. We are also pleased with our customer experience metrics. Our relationship NPS was up materially year over year and the highest it has been in 11 consecutive quarters. We delivered significant year-over-year gains across all five of our most attributes, including helpful, empathetic, meeting tech needs like no other company can, value and ease. As we exited the year, we saw continued Five Star customer satisfaction gains in associate availability, product availability, and store appearance. For our online customers, we reached our fastest-ever fulfillment speeds for our fourth quarter with 70% of online purchases fulfilled within two days. As I step back and look at the full year, I am proud of what we have accomplished. First, we returned to positive comps and stabilized our share position while navigating a complex and often evolving tariff environment. We successfully launched and scaled our U.S. digital marketplace, onboarding more vendors than originally expected, and drastically increasing our available SKU count for our customers. We grew Best Buy Co., Inc. ads, while almost doubling the number of ad partners compared to the prior year. We were able to both make the necessary investments in our marketplace and ads initiatives and expand our enterprise operating margin through a combination of disciplined expense management and efficiency optimization efforts. We leveraged the use of new technology in many areas to elevate customer experience and drive efficiencies, including faster online shipping and delivery speeds and better customer support capabilities. We further strengthened our in-store customer experience by partnering with multiple key vendors to expand their investment in immersive merchandising areas as well as expert labor. And we remain committed to being a best place to work and our most recent employee engagement survey improved year over year ahead of industry benchmarks and we continue to have industry-leading retail employee retention rates. Finally, we returned $1,100,000,000 to investors in the form of dividends and share repurchases. I'm incredibly grateful for the hard work, dedication, and resourcefulness of more than 80,000 employees to achieve these results. Moving forward to fiscal 2027, we are excited about the momentum in our business. We also expect to continue to navigate a mixed macro environment. For the year, we are guiding comparable sales growth in the range of down 1% to up 1%. I'll highlight some key assumptions. Consistent with the past several quarters, we continue to see a consumer who is still spending, but is value-focused and attracted to sales moments. Importantly, while customers continue to be thoughtful about big ticket purchases, they are willing to spend on high price point products when they need to, when there is technology innovation. We do expect consumers to spend a portion of their higher tax refunds at Best Buy Co., Inc. concentrated in the first quarter. From a product category perspective, we are planning for continued growth in computing driven by industry momentum from replacement cycles, the end of support for Windows 10, and innovation driven by AI. We expect continued growth in mobile phones from the new carrier labor models and system enhancements we have implemented over the past year. And we expect continued growth in our newer emerging categories that I referenced earlier like AI glasses, 3D printers, collectibles and toys, health rings, and PC gaming handhelds. And we see opportunities to improve the sales trends in home theater from expanded store experiences, increased expert labor, and our role as the national retail launch partner for an exciting new technology RGB, in the middle of the year. As you are aware, the significantly increased demand for memory components is driving cost inflation and supply uncertainty, particularly in computing. We are partnering with our vendors to mitigate impacts on the business. We are focused on five major navigation themes. One, we are bringing in as much inventory as we can. We are also providing our vendors with a longer forecast horizon to better plan allocations across commercial and consumer segments and collaborate more effectively with memory partners. Two, regarding terms, we want to ensure that business and operational terms are situated to make Best Buy Co., Inc. a preferred partner in the eyes of our vendors during a constrained environment. Three, we are using our ability in computing to specify configurations to hit price points that match consumer budgets. Four, we are narrowing assortments to improve in stock where there may be constraints. And five, we are focused on educating customers on why now is still a good time to buy. Their current device may not be performing optimally, we have quality options for every budget, and they can get a better device today on the same budget as their last purchase, which may have been years ago. We have a number of tools to highlight, including trade-in, financing, refurbished products, and easy upgrade with Geek Squad. As we think about the impact on our fiscal 2027 outlook, the high end of our comparable sales guide reflects a more neutral impact as higher prices are offset by lower unit sales. At the low end of the guide, inventory is more constrained across a number of categories. Now I will talk about our multiyear strategy, which is consistent. We will continue strengthening our position in retail as a leading omnichannel destination for technology, while at the same time, scaling new profit streams. Our priorities and resource allocation philosophy remain consistent as we build upon the momentum from fiscal 2026. These are, one, drive omnichannel experiences that resonate with our customers, two, scale Best Buy Co., Inc. ads and marketplace, and three, drive efficiencies and identify cost reductions that are crucial to help fund investment capacity and offset pressures in our business. Let me provide some key details on initiatives across stores, digital assets, and our services offerings. Last year, we provided multiple examples of store refreshes and upgrades we implemented in partnership with our vendors, including Meta, Breville, SharkNinja, TCL, Hisense, and LG. We are expanding these experiences to yet more additional stores this year, demonstrating the value these are driving for our vendors and our customers. In addition, we are continuing to improve our stores' look and feel by using our square footage more strategically. For example, in approximately 70 stores, we will move computing to the center of the store. Consolidate space, and allocate open spaces to value-generating initiatives. Many of these open spaces will be filled with a much larger and more comprehensive assortment from Meta. In other stores, we are piloting either outlet sections or outdoor furniture from our Yardbird brand. In these cases, we are shifting from stand-alone locations to leveraging the space and traffic we already have. This year, we expect to have new domestic Best Buy Co., Inc. store growth for the first time in more than a decade. We plan to open six new stores to better meet demand in markets that have grown, including areas where we have not previously had a physical presence. We have created and tested a smaller store model that drives incremental revenue in these types of markets. Like the Bozeman store we opened last year, we expect to close only two Best Buy Co., Inc. stores as a result of our ongoing review of leases as they come up for renewal. We are pleased with the investments we have made in customer-facing labor over the past couple of years. We plan to keep our labor flat as a percentage of revenue, balancing the growth in dedicated specialized labor with more flexible and multipurpose resources. We expect the level of vendor-provided labor hours to grow again this year after growing 20% in the second half of last year. Together with our vendors, we provide in-person expert CE experiences for our customers that are unmatched in today's retail world. As you would expect, we are also focused on our digital experience. We have already begun to activate on ways to bring our products to life through AI platforms this year. First, we are partnering with OpenAI to give our customers a new way to explore and discover our products. We are among the early retailers to make it easier for our product catalog to be displayed on ChatGPT, creating a more seamless path to product inspiration. We are also an early ads partner and exploring more opportunities to enhance our shopping experience with OpenAI. In addition, we support Google on its new universal commerce protocol, a cross-industry standard that helps create a more seamless agentic shopping journey across the web. Using this universal commerce protocol, we are working with Google to build a new way for customers to purchase directly in AI mode in Google Search, and the Gemini app. We are also the first retail partner to launch a native checkout integration with Wizard, an AI-powered commerce platform. As agentic commerce matures, we want to serve our customers in new ways both on and off of platforms. That includes evolving bestbuy.com to be more agentic-friendly, and ensuring our site is ready for AI agents to browse and discover on behalf of our customers. Other fiscal 2027 online priorities include strengthening customer recognition and personalization, increasing app adoption and engagement, enhancing our new invite-only capability, and driving online conversion for categories like major appliances and TVs. Now I will discuss our services offerings, which have long been a key differentiator for Best Buy Co., Inc. To sustain our leadership, a priority for us this year is to reassess our Geek Squad services by simplifying our portfolio, while at the same time making our services accessible to more customers. The good news is we are making progress in simplifying our range of offerings with different price points to create customer choice. We are also planning to move beyond break-fix and product installation services to dive into experiential solutions that cater to a variety of evolving customer needs. Whether it is a simple product upgrade, or a full premium home installation, we will be there for our customers with speed, expertise, and convenience. We are continuing to prioritize our renowned Geek Squad agent support in home, in store, and virtually. At the same time, we are enhancing our digital and AI experiences. This dual approach allows customers to choose how they want to receive service, whether it is through direct interaction with an agent, or more autonomous digital solutions, empowering customers to get the support they need on their own terms. Our services are also instrumental to the growth of our Best Buy Co., Inc. business arm. Here, we focus on business segments like education, hospitality, builders, health care, and corporate enterprises. Product sales are concentrated in computing, home theater, and major appliances, and often paired with services, such as field installation and end-to-end product support services like device life cycle management. Our Best Buy Co., Inc. business team generated more than $1,100,000,000 in revenue in fiscal 2026, and we expect to generate a mid-single-digit sales growth rate again in fiscal 2027. Now I'd like to provide an update on our Best Buy Co., Inc. marketplace. First, we have been very pleased with the outcome and performance. Our customers are responding favorably too as sales ramped through the back half and represented approximately $300,000,000 in domestic GMV in the fourth quarter. Furthermore, our five-star ratings for third-party purchase experiences are consistent with that of first-party purchases. This outcome affirms that the team adopted the appropriate design principles to deliver a seamless customer experience regardless of whether the product is 1P or 3P. And customer return rates for marketplace items continue to be lower than our 1P return rates. These customers are taking advantage of the convenient return-to-store option for more than 80% of product returns. Top unit categories in Q4 included mobile phone accessories, computer accessories, movies, and small kitchen appliances, illustrating momentum and opportunity in what have traditionally been lower share categories for Best Buy Co., Inc. As a result, marketplace is driving unit market share growth. While we are still early in our journey, our 3P seller community remains highly motivated and excited by the initial performance. To date, we have enlisted over 1,100 sellers on Best Buy Co., Inc. marketplace, and over 90% of our sellers with an open storefront are experiencing sales in any given week. I would add that our store employees are equipped with the right tools to help customers get what they want even if we do not carry it ourselves, and are contributing to the marketplace GMV. Moving to Best Buy Co., Inc. ads. In fiscal 2026, our gross advertising collections were just over $900,000,000. This is up more than 7% versus last year. Today, these collections show up mostly as an offset to our cost of goods sold with a small amount flowing through revenue. In fiscal 2027, we anticipate growth of approximately 10%. By the end of fiscal 2026, we had 750 advertising partners, nearly doubling the count from last year. Most of this growth stemmed from marketplace third-party partners following our August launch. Additionally, our first-party partners are investing more, with an average annual investment up 16% year over year. Our on-site inventory mix was just over 40% last year, lower than many other retail media networks. On-site inventory drives a higher margin than off-site. So as we continue to create more on-site inventory and grow this mix, there is significant margin growth potential over time. Both ads and marketplace positively contributed to our gross profit rate in Q4 and we expect continued gross profit rate contribution this year. From an operating income rate perspective, expect a slight contribution this year due to ongoing investments in our technology stack, marketing, and headcount across our sales, operations, and technology teams. We expect fiscal 2027 to be the last major investment year, with more material operating income rate contribution coming in fiscal 2028 and fiscal 2029. In order to invest in initiatives like these that will bring long-term value and offset pressures in the business, our third long-standing business priority is crucial, and that is driving efficiencies and identifying cost reductions. There are many ways we realize these efficiencies: with technology and analytics, through ongoing vendor partnerships and vendor selection throughout the enterprise, and by modifying existing processes or customer offerings. In fiscal 2027, our key opportunity areas are supply chain, customer care, reverse logistics, and continued optimization of our health business. In summary, I'm pleased with the progress we made in fiscal 2026 and excited about what we expect to accomplish in fiscal 2027 as it relates to our multiyear strategy. We are deepening customer relationships and successfully strengthening our position in retail as a leading omnichannel destination for technology, while at the same time scaling new profit streams that we expect provide considerable benefit over time. I will now turn the call over to Matt. Matthew M. Bilunas: Good morning. Let me start with our fourth quarter performance compared to the expectations we shared last quarter. Enterprise comparable sales declined 0.8% and were on the lower end of our guidance range. Despite the softer sales, our adjusted operating income rate of 5% was better than planned and included slightly favorable rates for both gross profit and SG&A. I will now talk about our fourth quarter results versus last year. Enterprise revenue of $13,800,000,000 decreased 1% versus last year. Our adjusted operating income rate increased 10 basis points compared to last year, and our adjusted diluted earnings per share increased 1% to $2.61. By month, our enterprise comparable sales were down approximately 3% in November, before improving to 0.2% in December and up 0.4% in January. Our domestic segment revenue decreased 1.1% to $12,600,000,000 driven by a comparable sales decline of 0.8%. From a category standpoint, the largest contributors to comparable sales decline were home theater and appliances, which were partially offset by growth in computing and mobile phones. Our online revenue of $4,900,000,000 decreased 2.3% on a comparable basis and represented 39% of our domestic revenue. Our online comparable sales growth includes the net commission revenue earned from our third-party marketplace sellers. From an organic standpoint, the blended average sales price of our products was approximately flat to last year. International revenue of $1,200,000,000 increased 0.5% versus last year. The revenue increase was primarily driven by the favorable impact of foreign exchange rates, which was partially offset by a comparable sales decline of 1.3%. Our domestic gross profit rate of 20.9% was flat to last year. During the quarter, our gross profit rate benefited from increased collections from Best Buy Co., Inc. ads and growth in marketplace commissions. These items were offset by lower product margin rates, which were primarily driven by an unfavorable sales mix and increased promotions. Our international gross profit rate decreased 90 basis points to 20.5%. The lower gross profit rate was primarily due to lower product margin rates. Moving to SG&A, where our domestic adjusted SG&A decreased $36,000,000. This decrease was primarily driven by reduced compensation expenses, which included incentive compensation, and lower Best Buy Co., Inc. Health expenses. These items were partially offset by increased expenses related to marketplace and Best Buy Co., Inc. ads, including higher advertising and technology expenses. During fiscal 2026, total capital expenditures of $704,000,000 were essentially flat to fiscal 2025. During fiscal 2026, we returned $1,100,000,000 to shareholders through share repurchases and dividends. We remain committed to being a premium dividend payer and this morning announced that we are increasing our quarterly dividend to $0.96 per share, which is a 1% increase. This increase represents the thirteenth straight year we have raised our regular quarterly dividend. Moving on to our full year fiscal 2027 financial guidance, which is the following: revenue in the range of $41,200,000,000 to $42,100,000,000, comparable sales of down 1% to up 1%, an adjusted operating income rate of approximately 4.3% to 4.4%, an adjusted effective income tax rate of approximately 25.5%, adjusted diluted earnings per share of $6.30 to $6.60, capital expenditures of approximately $750,000,000, and lastly, we expect to spend approximately $300,000,000 on share repurchases. From a phasing standpoint, the repurchases are planned to occur primarily during the fourth quarter, resulting in our weighted average share count remaining near the levels at fiscal 2026 year-end. Next, I will cover some of the key working assumptions that support our guidance. Earlier, Corie provided context on our fiscal 2027 top line assumptions, so let me spend more time on the profitability outlook. We expect our gross profit rate to improve by approximately 30 basis points compared to the prior year due to growth from Best Buy Co., Inc. ads and our U.S. marketplace. Now moving to adjusted SG&A expectations, include the following puts and takes. SG&A is planned to increase in support of ads and marketplace, which includes advertising, technology, and employee compensation expense. We expect higher incentive compensation as we reset our performance target for the next year, with the high end of our guidance assuming an increase of $30,000,000 compared to fiscal 2026. Store payroll expenses are expected to increase at the high end of our revenue guidance, with minimal impacts from a rate perspective. Partially offsetting the previous items are expected to lower Best Buy Co., Inc. Health expenses. Lastly, the low end of our guidance reflects our plans to further reduce our variable expenses, including incentive compensation, to align with sales trends. Before I close, let me share a couple of comments specific to the first quarter. We expect our first quarter comparable sales growth to be approximately 1%. From a monthly phasing perspective, comparable sales were down approximately 1% in February and expected to increase in March and April. We expect our first quarter adjusted operating income rate to be approximately 3.9% with gross profit rate expansion being the primary driver of the 10 basis points of year-over-year improvement. I will now turn the call over to the operator for questions. Operator: We will now open for questions. At this time, if you would like to ask a question, press star, then the number 1 on your telephone keypad. To withdraw your question, simply press 1 again. Your first question comes from the line of Katharine Amanda McShane with Goldman Sachs. Please go ahead. Katharine Amanda McShane: Hi. This is Grace on for Kate. Thank you so much for taking our question. We were wondering in the case that product prices do increase due to the higher memory pricing, what that could look like, and what do margins look like across the different computing categories, like good, better, and best? Thank you. Matthew M. Bilunas: So overall for next year, our guide for gross profit is about 30 basis points increase year over year, which is primarily driven by both ads business and marketplace growing. The remaining parts of the gross profit rate are pretty neutral, even inclusive of the product margin rate. So for the year, product margin rate is going to be assumed to be pretty flat year over year. So within that context, there could be some categories, some pressure on margins because of memory cost. But overall, we would expect to be able to navigate based on the list of things that we talked about in our prepared remarks. The ability to manage some of that pressure that might exist. So overall, pretty neutral impact to product margin rates in total, but there could be unique areas within computing that might have some impact. Operator: Your next question comes from the line of Scot Ciccarelli with Truist Securities. Please go ahead. Scot Ciccarelli: Good morning, guys. Hope you are well. Two questions. First, can you talk about what you saw in the fourth quarter in big screen TV sales, especially as a big competitor was really aggressive in that category from what we could tell. And then secondly, I guess, a bit more open-ended, how should we think about the growth opportunities around Meta and Google Glasses and any more details on how you are partnering with those vendors in that specific category? Thanks. Jason J. Bonfig: Okay. Thanks for the question. From a TV perspective, both revenue and units were below expectations in Q4 from an industry perspective. We are actually happy with the way that we showed up from a positioning perspective, but there just was a little bit more softness than expected. But we are excited and optimistic as we move into next year, and there is a new technology trend Corie mentioned, as we get into the middle of the year. With RGB technology across all of our major suppliers, we do think that is going to drive a lot of demand. It is going to drive a lot of interest in our store. It is really something that you need to see in person, and we will be there with our vendors to make sure that we put that on display in the best way possible. From a Meta perspective and just AI glasses in general, it is a significant growth trend for us. It does show up in gaming when we talk about it. We do think we have the best relationship with vendor partners, and our relationship with Meta is phenomenal. The way that they show up in our stores and the way we have been able to bring their new products to market, and then even locations that are even more of a showcase where the way that we were able to represent and partner with them on the display product and bring that to market. There are other things happening from an AI glass perspective. There is a lot of noise at CES and we expect that to be even more products not only from the partners that we already do, but probably also from new partners as this continues to be a growth category for us. Corie Barry: Scot, strategically, just to build on that a bit, I think the idea of AI for the consumer is kind of a long tail space where we will have a unique advantage. Some of that we have already been leaning into, which is think about, like, enhancing existing technology. That is like Copilot+; it is AI in computing. It is AI in phone. It is our ability to explain that and bring it to market. Some of it is what Jason is hitting on and what you asked about, that lifestyle tech example. There will be lots of different ways we will see that. Interactive gaming, we will see it in glasses. You are going to see probably some reinvigorated categories, things like smart home where it is actually just going to get a lot smarter. There is a lot more use cases that you are going to see for consumers. And then, ultimately, I think there is the question of what I would call always-on AI support. So what is right now OpenAI, connected TVs, talk about AirPods with cameras, kind of this idea of how do all these platforms start to show up actually in hardware and our experiences. And our goal is, and this is our sweet spot, as this technology comes to life, we want to be that key partner for our vendors to really help explain it to customers. Operator: Thank you. Your next question comes from the line of Michael Lasser with UBS. Please go ahead. Michael Lasser: Morning. Thank you so much for taking my question. Do you think you have appropriately embedded enough margin flexibility in your guidance in order to compete effectively in the year ahead? It seems like the industry just gets a little bit more competitive each day and 30 basis points of gross margin expansion may not be sufficient in order to drive the top line. Thank you. Matthew M. Bilunas: I mean, I think we will obviously navigate the year as we know more. Michael, I think a couple points. Our space is always very competitive. If you think about just FY 2026, it was already a very promotional year. And on top of a high promotion year, we had a sales mix impact from the margin rates as well. I think, as you think about next year, we are certainly not expecting to not be promotional—probably a similar level of promotionality, but maybe in some quarters, a little less sales mix pressure potentially, which helps mitigate some of the potential product margin rates that might come with memory cost adjustments. So we will clearly navigate as best we can, but I think right now, we feel like we have appropriately built in the product rate pressure that we need to be competitive. Corie Barry: Two things I would add, Michael. We have made it very clear that we want to position ourselves to make sure we are driving particularly unit share. And I can see that happening for us as we come out of Q4. You can imagine we are trying to build in enough flexibility to be able to do that. Matt also hit on it in his prepared remarks. I did as well. This is where ads and marketplace are also very helpful to our model, especially on the gross profit side of things, because this is the fuel we are looking for to continue to be able to reinvest in the base business. So you have to remember, it is all those things put together that shows up in that gross profit expectation. Michael Lasser: Understood. Thank you very much. And it seems like your message this morning is, listen, we expect 2026 to be a bit more challenging year because of these memory shortage challenges but you will navigate through it appropriately. Can you anchor the market to a longer-term expectation? Is 2026 just a transition year? The company can get back to positive same-store sales growth at the mid of whatever you would expect in the year after that? And what would be the key driver of that? Because presumably, if memory shortages are going to persist for an extended period of time, and the industry landscape is not going to get any easier. Thank you very much. Corie Barry: If we take a step back, this is an industry that, let us go pre-COVID, was, let us call it, flattish to up single digits pretty consistently. And what that relied on was also a pretty consistent kind of replacement behavior by consumers and a consistent innovation arm from our vendor partners. And as long as there was kind of the innovation and the replacement that really sustained a pretty decent growth trajectory for the industry, then our job was to continue to maintain our position, if not grow our share position, in that industry. Obviously, there have been lots of puts and takes over the last six years. Lots of pull forward. Now what we are getting back into is an interesting situation. You called out some of that kind of mixed macro that we had also called out, whether it is the ongoing situation or whether it is memory. On the flip side, though, we also are starting to see more innovation and more—I am going to call it—replacement behaviors, especially in computing and even mobile than we have seen in some time. So I think for our fiscal 2027, calendar 2026, what we are trying to do is put all of that together and say, for the coming year, here is what we see. And you are right. Some of that may persist. But the good news is there is also some of that innovation and that replacement behavior that is an interesting countervailing wind to some of the mixed macro impacts that we talked about. So I still believe over time, over the longer term, this is a great industry where, trust me, the world's biggest companies are innovating to bring new products to market, especially with AI coming to life the way that it is. I think it is just how do you navigate some of the challenges we see in front of us. And the last thing I would say is this is a team that has proven they are quite good at navigating in partnership with the vendors, if you just think about the year we went through. So I have a lot of confidence in our ability to do that. Matthew M. Bilunas: The only thing I would add would be, on the guide for next year, clearly at the high end of our guide, we are factoring some level of memory cost impacting units, but we also potentially get the benefit on the ASP side too so that ASP potentially mitigates some of the unit declines on the higher end of any sort of outcome. And the low end, obviously, there could be a situation where you have more constraints just broadly within the computing industry that could bring it to the bottom of the guide. I would also say during the last couple years, we have seen that we have price points across computing in all of our areas. So to the extent that there are cost increases, what we have learned is that people come in with a budget, they look to buy a certain product. We always have something in a range of products that that customer wants. And so we are seeing some of that mitigate the potential impact of cost increases. We just proved it out over the last couple years with the tariff situation. Michael Lasser: Thank you very much, and good luck. Matthew M. Bilunas: Thank you. Operator: Your next question comes from the line of Brian Nagel with Oppenheimer. Please go ahead. Brian Nagel: Hi, good morning. So my first question, I guess, shorter-term in nature. Just as we look at fiscal Q1. I want to make sure I heard this correctly. So you said comps were down 1% in February, but you are planning for a plus 1% for the full fiscal quarter. What underpins that expected acceleration here through the balance of the quarter? Matthew M. Bilunas: Yeah. Thank you. We are expecting the full quarter to be about a 1% comp for Q1. In the quarter, we expect to see continued growth in computing, in gaming, in mobile phones. We also expect to see improved trends within the TV based on the vendor pads that we have added in the specialty labor and just making sure we are priced in the right spot. From a phasing perspective, like I said, we are seeing February down approximately 1%. There are a few unique things that impact the monthly phasing. First, we are, as Corie talked about in prepared remarks, expecting the benefit of tax refund spending. More of that is weighted towards the month of March and April for us than it is February. Secondly, there are actually a couple of more material phone launches timing shift from February to March. Those actually have a pretty significant impact to a certain single month's comp. So that phasing can account for a lot of that start to the quarter. And we expect other more important launches to kind of hit in the back half of the quarter as well. So that really kind of accounts for the majority of the phasing between February, March, and April. Brian Nagel: That is very helpful. I appreciate it. Then my second question, I think you mentioned tariffs. This is in response to Michael's question previously. I just want to hit harder on tariffs. Where are we right now as far as dealing with tariffs, mitigation efforts? How does anything with tariffs and what Best Buy Co., Inc. is doing to deal with them affect or impact the guidance you laid out for the current fiscal year? Corie Barry: Brian, thanks for the question. I am just going to start with it, and I always start this way, but I think it is important. Our number one focus is always our customers and meeting their budgets wherever they are. And our approach has then been to deliver the right assortments to match the customer needs and the budgets while we partner with our vendors to make sure that there is a good outcome for all of us. And I have to say I am really proud of the way the team has been navigating. I think right now where we are, the recent Supreme Court ruling led to a lower effective tariff rate for our products at this point. And at this point, we have not modeled major impacts to our year based on that. I think there is still a lot, a lot of moving pieces, and there is still a lot to be figured out. But I think what is important here, and you can see it even in our results, we gave a lot of the reasons why our industry is a bit different. Things like, this is a really highly promotional category. It is relatively low frequency, so it is not like you are comparing prices week on week on week. It is an always changing assortment with different components and features. Innovation tends to drive price points up, while older price points kind of decline. It is a global supply chain, so vendors are making decisions across the entire globe. And we have this immense depth of product at all the different price points. So whatever your budget is, when you come in, we are going to have something for you. And so while there have been lots of moving pieces at the total company level, we are not seeing our ASP—has actually been relatively flat is what we saw in Q4. And so I think what that means too is customers are able to find what matches their budget, and we continue to work with our vendor partners to do that. So we know there will continue to be some changes in the space. Jason J. Bonfig: I think the team has done a really nice job working with our vendor partners to make sure we show up for our customers. Brian Nagel: I appreciate it. Thank you for all the detail. Corie Barry: You bet. Thank you. Operator: Your next question comes from the line of Steven Zaccone with Citigroup. Please go ahead. Steven Zaccone: Hey. Good morning. Thanks very much for taking my questions. First one I wanted to ask was just how should we be thinking about the same-store sales cadence for the year? Would we expect every quarter to kind of be within the range? And then you gave the commentary on the memory impact, which is very helpful. Is there a cadence to be mindful of when it comes to ASPs and unit volumes just given the disruption? Matthew M. Bilunas: Yeah. I think, broadly, if I look at the year, clearly talking about about a 1% comp for Q1. We clearly have not guided the rest of the quarters. But if you think about where maybe the more opportunity for us on a comp is probably in Q1 and Q4, some of our stronger quarters last year were in Q2 and Q3, so that might be a space where you might see a little bit of a little bit lower comp than maybe Q1 and Q4 as we are looking at it today. I think in terms of the memory, I think we are already starting to see some costs, some prices go up because of the memory in some small parts of categories. So it has begun a little bit. Imagine that continues to kind of roll through as we move into the future, into the upcoming quarters. Hard to say exactly at what pace does it change ASPs, but we are seeing signs that some spots are actually starting to increase. Steven Zaccone: Okay. Thanks. The follow-up I had was you have given a lot of detail on the marketplace and Best Buy Co., Inc. ads. Thanks for that. As we think about the opportunity for the contribution to EBIT margin in next year and the out year, can this be a material driver that the business can get back closer to a 5% operating margin in time? Matthew M. Bilunas: Yeah. I mean, I think as we think about past this year, clearly, we believe strongly in these two initiatives and we were talking about how this year is still an investment year for both of those two different areas. But they are scaling pretty materially, and they are beginning to—you are seeing signs of it—adding to the gross profit rate. It is just taking a bit of SG&A investment the last year and then FY 2027 to kind of build into the different new areas to scale it. As we look beyond this year, we do expect both of them to not only add operating dollars to the bottom line, but also help us generate a better rate as we look forward. Now exactly how much, and where and when we get to that type of OI rate in total, cannot really say at this point, but we do believe it will be a great contributor to our ability to expand our operating rate in the future. And we will keep focused on scaling those two things in the right, responsible way and then continue to invest as we see fit to unlock that growth in the future years. Steven Zaccone: Okay. Thanks for the detail. Operator: Your next question comes from the line of Steven Paul Forbes with Guggenheim. Please go ahead. Steven Paul Forbes: Corie, maybe just following up on Michael's comment from before. You mentioned average sales price flat, I think, in 2025. Then you also talked about configuration changes in conjunction with the vendors to meet certain price points. If it is not enough, maybe could you just baseline the outlook for average sales price for the company as a whole in 2026? And if you can maybe just talk about computing in particular as we marry together all these elasticity concerns. Corie Barry: Do not I wish I had the perfect organic forecast for you. To be clear, ASPs were flat in Q4. They were actually kind of down a bit in some of the other quarters, up a bit, but that was a Q4 quote. In terms of what we see going forward, we are not going to guide based on organic because, again, the goal here is have as many different price point opportunities available for the customer. That is true across our assortment, whether it is television—back to the earlier question where we continue to play really strongly in large screen—whether that is computing, whether that is mobile phones. The goal here is to have as many price points as possible and then have customers opt into what they want. So it is not even as easy as, alright, if all the SKUs go up X percent, that is probably not how it is going to work because the customer might come in with a budget and they are not going to look at a certain SKU. They are just going to look at how do I fulfill that budget. And so what we are focused on is less about exactly how much does the ASP per item go up. What we are focused on is how do we work with the vendor partners to make sure we have as many different price point items available with the right and best configurations possible so people can opt into what is most important to them. Steven Paul Forbes: That is helpful clarity. And then just, I guess, the second question around vendor support. You mentioned vendor-sponsored labor hours up, I believe, 20%, and I think there are some concerns out there around just promotional support. So I do not know if we can just talk about the various sort of components of vendor support and if there are any factors where you anticipate change, promotional support maybe being one of focus for investors? Jason J. Bonfig: Yes. So thanks for the question. There are a couple of things. Our vendors continue to make more investments in Best Buy Co., Inc. That is in physical experiences in our store. There was a long list of vendors that continue to contribute and want to grow that presence. There has also been a significant uptick in the amount of vendor labor that is supported, and that does not even include the training that they do throughout the year with our labor in total. From a promotionality perspective, we are not seeing a dramatic change there. I think there is one adjustment that you see naturally happen, and you are probably seeing it in computing first, which is price increases are not the first thing that happens. The first thing that happens is promotions are pulled back a little bit, and that is not that there is less of an impact or less of a funding of promotions. That is that there is less promotions. And in computing, you have actually seen less pure cost increases and more of a general slight pullback in promotions from computing vendors, which is the first thing they will do under this memory situation. The second thing is that the cost changes will come through. That is really the only area where we have seen any difference, and it is not a difference in level of support to Best Buy Co., Inc. It is actually an industry difference in level of promotional aggressiveness in a particular category. And just to be clear, the 20% reference was 20% growth in labor in the second part of last year. We would expect vendor-provided labor to grow this year as well, but that 20% reference was specific to the back half of last year. Steven Paul Forbes: Appreciate that. Thank you. Jason J. Bonfig: Thank you. Operator: Your next question comes from the line of Simeon Gutman with Morgan Stanley. Please go ahead. Simeon Gutman: Hey. Good morning, guys. I am going to ask questions in one. So first, the positive comp trends in the first quarter, can you talk about the complexion? Is there any difference from the way the year ended? Then if you can merge that into thinking about the comp outlook for fiscal 2027 in totality. And then Matt, I know you mentioned promotionality. When we saw you in December, you talked about reserving the right to be more promotional if need be. So can you talk about how that tone progressed through Q4 and then the position you enter fiscal 2027? Thank you. Matthew M. Bilunas: Sure. Yeah. So as we enter Q1, we do expect Q1 to see growth in areas that are pretty consistent to what we had been seeing. Places like computing and gaming, we have not quite lapped Switch launched in Q2 of last year. Mobile phones we would expect to be a growth area for us as we look here into Q1. We do expect improved TV trends. That would be something that we would carry through the remainder of the year as well. And then, like I said, we have some ED timing shifts between the months here in Q1 between the—from the mobile phone launch and other product launches. So those carry as you get into the latter part of the year. Continue to expect computing to grow at the high end of that guide. At the low end, it would assume a level of constraints that we cannot foresee at the moment. That is supported by continued end of support for Windows 10 and improved use cases for AI and just general replacement cycle continued need. The growth in mobile phones will continue to be fueled this year through the new carrier labor models and system enhancements that we have implemented last year. Interesting as you look into this year too, there are a lot of newer emerging categories that we have talked about like AI glasses, 3D printers, collectibles, toys, health rings. Those are all small individually, but collectively, they are about—they are even more—they are about a half a point or more of our growth next year. They will add up to something that is very nice that could support our business. And like I said, improved TV trends as the year progresses. Like Corie mentioned earlier, we have not contemplated any changes related to the tariff news that we have had. But I think, again, building on continued momentum, we do expect GTA in the back half of the year to help us in the back half. The other thing I would note is gaming, I would expect to see gaming growth in Q1. We will be lapping that Switch launch in the mid part of the year. So you would see a little bit of a difference in sequence growth there for the gaming category. Corie Barry: As it relates to promotionality, we have been pretty clear and pretty consistent. Customers have been drawn to key value events. And what we have also been clear about is we will lean into those places in partnership with our vendors and make sure that we are competitive. And so I think to Matt's point and when you heard him laugh, we know that these key moments, whether it is holiday, whether it is Fourth of July, whether it is Super Bowl, those are the moments where customers are really in the marketplace, and we are going to lean into those. But we have lots of tools also in our arsenal to lean into those. We have done a nice job really working hard on our more strategically personalized promotional levers as we can see signals now that we use to try to reengage customers back into the brand. Those have been very effective. And so I think what we are trying to do is make sure that when the customer is in the marketplace for good value, we are there, and we are competitive, and we are using other tools like trade-in and refurbished product and outlets and financing to make sure that we have the very best values there for them. And it seems to be resonating. Simeon Gutman: Great. Thank you. Operator: Your next question comes from the line of Unknown Analyst with Wells Fargo. Please go ahead. Unknown Analyst: Hey. Good morning. So with the SG&A moving parts around vendor labor as well as investments, could you update us on your leverage point in 2027? And then as the investment cadence dials back in 2028, how does that impact your leverage point and incremental margins going forward? Matthew M. Bilunas: Yeah. I mean, I think what you have seen us be able to do as sales, broadly speaking, move from positive to negative, we have been able to adjust our SG&A in a responsive way to kind of mitigate the impact of wire rate to continue to lever on a relatively big fixed cost base that we have. And so you see us in those situations, we responsibly—now we will always measure and look at customer experience to make sure we are not doing anything that is damaging—but we will scale back. First thing that scales back is incentive compensation as you move down on the scale of sales performance and ROI performance. You remove a level of incentive compensation within the year, and that is certainly representative in our guide. So at the bottom end of our guide, we will probably remove about $100,000,000 of incentive compensation at the minus 1% sales guide. We also will responsibly move down in terms of store labor, marketing, and other variable expenses to make sure that we are putting in the right amount of SG&A to support the sales outlook that we see. So those are a couple of examples, and then you see other changes to supply chain cost. If .com comes up and down, it can impact your parcel cost and bad debt expense. So there are things that just naturally flex down, and then there are things that you just responsibly move down because you are trying to match what you see in terms of demand. And you have seen us be able to manage our sales when sales do go down in a pretty responsible way and to deliver an operating income outcome that is actually as good in many cases as what it would have been at a higher end of sales. Unknown Analyst: Got it. And then on the appliance category, you have had some challenges there. Curious any thoughts on the game plan for fiscal 2027 to return to share gain? And how should we think about the glide path towards returning to positive comps? Jason J. Bonfig: Yep. Thank you for the question. Appliances continues to be a tough environment. Obviously, home sales and remodels are down. So the vast majority of the market continues to be duress and replacement of something that has, you know, broken. It also has been very promotional, not necessarily promotional that has led to an increase in business. So we are watching very carefully with our vendor partners around what promotions are actually doing to drive the business in total. Because the market is shifting to more duress and has been duress for a very high percentage, we are focused on a couple of things. Investments from our vendor partners in more specialty-specific labor to appliances, which we think will be helpful in investing in that experience. Investing in the ability for customers to take an appliance with them if they would like to do that, which is something that customers are showing more interest in doing in particular stores. And then we are really, really focused on delivery speed because it is around something broke, I need to have it replaced in a relatively short amount of time, and making sure we have that core set of SKUs that customers are able to get as quickly as possible, and we are able to actually get it to them as fast, if not faster than our competitors. And those are really the areas that teams are focused on as we move into next year just based on where the market is. And then when it flips, obviously, we will be very focused on the other part of the market, which is more experience driven, more bundle, more, you know, upgrading, but we will make sure that we serve both those segments of customers and be very, very focused in the first part of the year on that speed component. Unknown Analyst: Got it. Thanks for the time. Corie Barry: Thank you. Operator: Your next question comes from the line of Jonathan Matuszewski with Jefferies. Please go ahead. Jonathan Matuszewski: Great. Good morning, Corie and Matt. Two questions. First one, you are in top-to-top meetings with vendors frequently. Do your supplier conversations reveal plans to slow the pace of innovation and product launches in 2026, given the memory chip shortage distraction? And my second question, there is conjecture that recent computing and smartphone category performance could be aided by a pull-forward in demand with consumer awareness of potentially higher prices ahead. Are you seeing any evidence that would support a thesis of pull-forward? Thank you. Jason J. Bonfig: Great questions. On the first one, we are not seeing from our vendor partners that would slow down innovation. In fact, when you have something like we have in front of us with memory, there is actually a large push to try to find other things that are very valuable from a feature and benefit perspective to customers that will continue to drive the growth in the individual category. So looking at actually other parts of technology in computing, it could be size of screen, quality of screen, some of the AI features, but really other things that will drive interest into the category and make up for some of the pressure that we are going to see from a memory perspective in total. So there is absolutely nothing that would indicate that. And then as far as the pull-forward, where possible, we will pull in inventory. But from a demand perspective, we have actually seen continued stability and growth. We talked about computing. We have grown for the last eight quarters, and in mobile phones, we have grown for the last four quarters. There is not anything that is indicating that customers are actually trying to pull forward. It is actually just demand into categories that we are actually seeing customers want to upgrade. Corie Barry: There is one more thing that I would want to add to that before closing the call. And that is the concept of rising memory or component cost or shortages is not something that is new to the industry. It is something that we have dealt with in peaks many times over the last 25 years. So to reinforce some of what Jason said, our vendor partners are really excellent at pivoting and thinking differently. And by the way, there is no vendor partner out there that does not want to also drive consumer demand and continue to make sure their products are front and leading. And so this is not a brand-new space. It is just, you know, one more, I think, set of features that we need to work through with our vendor partners. And with that, I think that was our last question. We thank you for joining us this morning, and we look forward to updating you on our results and our progress on our next call in May. Mollie O'Brien: Thank you, everyone. Operator: Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Greetings. Welcome to BRC Inc. Fourth Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to Matthew McGinley, Head of Investor Relations. Thank you. You may begin. Matthew McGinley: Good morning, everyone, and thank you for joining BRC Inc.'s fourth quarter and fiscal year 2025 financial results conference call. We released our results yesterday, and the press release and related materials are available on our Investor Relations website at ir.blackriflecoffee.com. Before we begin, I would like to remind you of the company's Safe Harbor statement regarding forward-looking statements. During today's call, management may make forward-looking statements including guidance and the underlying assumptions. These statements are based on expectations that involve risks and uncertainties which could cause actual results to differ materially. Additionally, for a further discussion of these risks, please refer to our previous filings with the SEC. This call will include non-GAAP financial measures such as adjusted EBITDA. Whenever we refer to EBITDA, we mean adjusted EBITDA unless otherwise noted. Reconciliations of non-GAAP measures to the most directly comparable GAAP measures are included in our earnings release which was furnished to the SEC and is available on our Investor Relations website. Now please refer to the presentation on our Investor Relations website and turn to Slide 4. I would now like to turn the call over to Christopher Mondzelewski, CEO of BRC Inc. Chris? Christopher Mondzelewski: Thanks, Matt. Good morning, everyone. Joining me today are Evan Hafer, our Executive Chairman, Matthew Amigh, our Chief Financial Officer, and Matthew McGinley, our Head of Investor Relations. 2025 was a year of measurable operating progress for BRC Inc., led by strong performance in packaged coffee. For the year, packaged coffee grew 31.1%, approximately three times the broader category growth rate, with units up more than 22% and share up 60 basis points in bagged coffee. That momentum accelerated in the fourth quarter, as distribution expansion translated into measurable improvements in productivity and share with key retail partners. The combination of expanded doors and stronger per-SKU productivity materially strengthened our retail position as we exited the year. We also advanced our ready-to-drink and energy platforms, securing incremental distribution and broadening our presence in priority accounts. These gains reflect disciplined commercial execution and reinforce the strength of the brand. 2025 presented a challenging operating backdrop. Coffee markets remained volatile, and consumers faced ongoing pressure. Throughout the year, we remained disciplined on pricing, tightly managed expenses, and aligned resources with the highest-return opportunities across the portfolio. We also took meaningful steps to streamline our platform. Our asset base is leaner and more focused, with capital and talent directed towards initiatives that support durable, profitable growth. As we look ahead, the actions taken in 2025, combined with expanding distribution, improving shelf productivity, and moderating cost pressures, position us for a return to strong EBITDA growth in 2026. We are encouraged by the progress we have made and confident in the trajectory of the business as we enter the new year. Moving to Slide 7. Momentum in packaged coffee accelerated as we exited the year. In the fourth quarter, our packaged coffee business grew 34% compared to nearly 13% growth for the broader category. That performance translated into continued share gains. In bagged coffee, market share reached 3.3% nationally, up 60 basis points year over year, while pods increased to 2.2% nationally, up 40 basis points. Importantly, these gains were supported by improving shelf productivity, not just expanded distribution. Velocity strengthened throughout the year and reached parity with the overall bagged coffee category in grocery, despite pricing approximately 40% above the category average. We are seeing stronger consumer takeaway and repeat purchase, reinforcing sustained velocity improvement. Achieving category-level velocity at a premium price point reinforces the strength of consumer demand and the durability of our retail position as we enter 2026. Move to Slide 8, please. Our land-and-expand strategy continues to prove itself as a scalable and repeatable growth engine. We begin with a focused assortment, entering retailers with a concentrated set of high-performing items designed to demonstrate the value of the brand to the category. Once performance is established, we earn the right to broaden the assortment by adding incremental items to the shelf. On the land side, we delivered another year of retail expansion. Distribution reach increased nearly 8 points in 2025, bringing ACV to 54.9%. That steady expansion reflects continued success in adding new retail doors and strengthening our national presence. The expand component is working as well. Improving velocity translated to directly higher shelf productivity, which supported broader assortments and additional shelf space. On average, grocers added two incremental BRC Inc. items in 2025 alone. And since entering grocery three years ago, we have nearly tripled our shelf presence. This disciplined execution is translating into greater shelf visibility, stronger retail economics, and deeper long-term retailer commitment to the brand. Slide 9. Looking at the broader category, much of the reported growth continues to be price-led, while underlying unit trends remain muted, with higher shelf pricing driving dollar expansion across legacy brands. Our performance looks different. The majority of our growth is volume-driven. Units increased more than 22% in 2025, reflecting real consumer takeaway rather than pricing actions. That distinction matters. We are adding households, increasing purchase frequency, and expanding share within existing accounts. As distribution expands and repeat purchase strengthens, our growth is becoming broader and more sustainable. In a category heavily influenced by price, our gains are rooted in unit expansion, repeat purchase, and stronger shelf productivity. Those dynamics reinforce durable top-line momentum and operating leverage. As volume scales, we expand gross profit dollars and improve fixed cost absorption, while delivering strong productivity and economics to our retail partners. Packaged coffee is firmly established as the core economic engine of the business, and we see meaningful runway for continued growth. Turning to Slide 10. Our direct-to-consumer business stabilized in 2025 and returned to growth in the fourth quarter. While retail continues to be the primary driver of top-line growth, direct-to-consumer remains an important strategic channel. Our owned website allows us to engage directly with our most loyal customers, gather insight and feedback, and introduce new products and messaging. Our approach is not to force traffic to a single destination, but to ensure BRC Inc. products are available wherever consumers choose to shop. We saw improvement on our core website during the year, and at the same time continued growth across third-party marketplaces. Those platforms are extending our reach, supporting repeat purchase, and complementing retail distribution. Taken together, direct-to-consumer is operating from a more stable base and contributing positively to the broader business. Slide 11. In ready-to-drink coffee, performance in 2025 varied by channel. We expanded distribution, increasing ACV by 10 points to 55.9%. The strongest performance was in grocery, mass, and dollar. We outperformed the category for the full year. The category remained under pressure in convenience, which represents more than half of tracked ready-to-drink sales. As c-store trends weakened, fourth quarter results reflected that softness. We are not assuming a category recovery and are focused on the factors we can control. That means prioritizing our top retail partners, improving shelf productivity, and using innovation as a disciplined growth lever. New flavors in our cold brew platform are intended to drive incremental takeaway and improve velocity within our existing distribution footprint. Packaged coffee remains our core economic engine. RTD is an important adjacency, and we are scaling it deliberately with a focus on returns and disciplined execution. Slide 12. In energy, distribution expanded in line with our launch-year plan, reaching approximately 22% ACV across nearly 20,000 retail doors in 2025. As we move into 2026, the focus shifts from launch execution to scaling the business in the right markets, with the right partners, and with a clear emphasis on where we can win. That discipline continues to guide our approach. We are prioritizing geographies and channels where we can drive velocity and returns, rather than pursuing distribution for its own sake. This return-focused strategy positions the energy business to scale responsibly and contribute to the overall growth of the BRC Inc. brand. Before I hand it off to Matt, I want to briefly touch on how we continue to show up for the communities we serve. Last quarter, we committed to eliminate $25,000,000 in medical debt for veterans through Operation Debt of Gratitude, in partnership with Born Primitive and ForgiveCo. I am proud to say we exceeded that goal, wiping out more than $34,000,000 in medical debt and helping approximately 15,000 veterans enter 2026 free from that burden. We also helped feed more than 1,000 military families through Operation Homefront during the holidays and continued supporting the Special Operations Warrior Foundation and other veteran and first responder organizations across the country. With members of our community and even our families currently deployed in the Middle East and around the world, we remain committed to supporting them and those waiting for them at home. That same commitment will guide us as we move into 2026 and honor America's 250th birthday through initiatives that celebrate service and expand programs that create meaningful impact for veterans and their families. Supporting this community is not a campaign for us. It is foundational to who we are and how we grow. I will now turn it over to Matthew Amigh. Matthew Amigh: Thank you, Chris. I will begin my remarks on Slide 14. For the full year, net revenue increased 2% year over year. Excluding the impact of the 2024 loyalty rewards accrual change and other nonrecurring items in both periods, net revenue increased 8%, primarily driven by wholesale growth. Our wholesale segment, which sells packaged coffee and ready-to-drink beverages to retailers, grew 5% year over year, or 13% excluding nonrecurring items, reflecting stronger velocity, expanded distribution across both doors and items, and continued contribution from BRC Inc. Energy. Sales to mass merchants increased double digits and grocery sales more than doubled. Direct-to-consumer declined 5% for the year, but was slightly positive excluding the 2024 loyalty benefit. With the stabilization achieved in 2025, direct-to-consumer is no longer a material offset to growth elsewhere in the business, allowing wholesale performance to more clearly drive consolidated results. Moving down the P&L, operating efficiency gains in 2025 from restructuring actions and reallocating resources towards higher-return initiatives partially offset higher commodity costs and tariffs. For the year, gross margins declined 650 basis points and EBITDA declined more than 40%. As shown on Slide 15, the operating expense reductions we implemented combined with improving revenue limited the fourth quarter EBITDA decline to just 2%. In the fourth quarter, revenue increased 7% year over year, or 11% excluding nonrecurring revenue in both periods. Wholesale revenue increased 8% year over year, or 16% excluding nonrecurring items. Direct-to-consumer revenue increased 7%, marking the first quarter of growth in this segment in more than three years. Turning to Slide 16. We provide a detailed view of this year's gross margin drivers and the path forward. Gross margin was 32.1% in the fourth quarter, a decrease of 610 basis points year over year. One-time items, including startup costs associated with onboarding a new direct-to-consumer fulfillment provider and a noncash impairment of coffee extract related to a formulation change, pressured margins by 270 basis points, partially offset by 170 basis points of productivity and favorable mix. Coffee inflation and tariffs, net of pricing, were the single largest headwind, impacting gross margins by approximately 420 basis points in the fourth quarter and 350 basis points for the full year. Coffee prices nearly doubled from 2024 to 2025 and remain elevated due to weather-related yield declines and tariff-driven shifts in global supply. U.S. tariffs on coffee were fully removed in November, and improved harvest expectations have contributed to a recent price moderation. Arabica prices peaked near $3.75 in early January, and have since declined into the high $2 range, while the futures curve implies continued normalization through 2026 and 2027. We expect some residual impact from elevated coffee costs and previously capitalized tariffs to flow through inventory in 2026. However, pricing actions, productivity initiatives, and favorable mix are expected to offset those pressures and stabilize gross margins relative to 2025. Longer term, we remain confident in our ability to reach our 40% gross margin target. The path is driven primarily by structural levers within our control, including product and channel mix, trade efficiency, and supply chain productivity. The green coffee forward curve has recently shown downward pricing pressure which would accelerate progress. That said, reaching our long-term target does not rely on additional pricing action. Slide 17. Operating expenses increased 1% year over year on a reported basis. Excluding nonrecurring items related to our 2025 restructuring and certain legal expenses, operating expenses were lower by 7%. Marketing expense decreased 10%, reflecting lower nonworking spend and a reallocation towards programs more directly tied to revenue. Salaries, wages, and benefits were flat despite a 15% reduction in headcount, primarily due to the lapping of a $3,000,000 incentive compensation reduction in the prior year. General and administrative expenses increased 28% in the quarter and reflect a significant portion of these nonrecurring items. Excluding those items, general and administrative expenses decreased 25%. Fourth quarter performance demonstrates the operating leverage now embedded in the model as revenue improves against a more disciplined cost structure. Turning to the balance sheet. Through the equity offering completed in July, we repaid the outstanding balance of our asset-based lending facility and reduced total debt by more than $30,000,000 in 2025. We ended the year with $39,000,000 of debt outstanding, representing approximately 1.8 times net debt to 2025 adjusted EBITDA and approximately 1.4 times adjusted EBITDA based upon our 2026 guidance. At the end of the year, we had more than $50,000,000 of total liquidity, including cash on hand and available capacity under our credit facility. Cash used in operating activities was approximately $10,000,000 in 2025, with roughly $9,000,000 attributable to working capital normalization. We do not expect working capital to be a comparable use of cash in 2026. As previously disclosed, we received notice from the New York Stock Exchange regarding the minimum price requirement. The notice has no immediate impact on our listing, operations, or financial reporting obligations. We have the standard cure period and are focused on executing our business plan to regain compliance. Our focus remains on disciplined execution and driving long-term shareholder value. Moving to the outlook on Slide 19. In 2026, we expect revenue growth of at least 7% to approximately $425,000,000. This outlook reflects current visibility into demand trends, pricing already in market, and distribution gains that are secured and operationally in place while incorporating category volatility within our ready-to-drink portfolio. Our guidance is grounded in confirmed commercial drivers and does not assume incremental distribution wins or other actions that remain pending. As we continue executing against our 2026 priorities, we expect to incorporate incremental gains through our regular quarterly updates. From a quarterly cadence standpoint, we expect revenue dollars to build sequentially through the year, consistent with the progression experienced in 2025. In the first quarter, we expect revenue growth of at least 10% compared to 2025, reflecting current momentum in the business and the early year benefit of distribution gains implemented in late 2025. We expect gross margins in the range of 33% to 36% in 2026 compared to 34.6% in 2025. The range reflects continued execution progress and external variables that remain dynamic. We benefit from the annualized impact of pricing actions taken in 2025, continued productivity initiatives across our supply chain, and favorable channel and product mix. At the same time, coffee prices have moderated in recent months, but remain above the 2025 average cost, which limits the pace of our margin expansion. We also expect residual tariff impacts early in 2026 as inventory produced under prior tariff rates flows through cost of goods sold. In addition, we are making incremental trade and slotting investments to support distribution expansion, which will weigh modestly on gross margins as we scale into new doors. We expect at least 30% growth in EBITDA in 2026 compared to the $21,400,000 generated in 2025. The primary drivers of the growth are higher gross profit dollars from revenue expansion and a reduction in operating expenses. We expect operating expenses to decline year over year, driven largely by lower general and administrative expenses as cost savings actions implemented in 2025 continue to benefit us in 2026. Marketing expense is expected to grow in line with sales, while labor expense growth should remain muted. From a cadence standpoint, we expect EBITDA will remain second-half weighted. In 2025, approximately 15% of the full-year EBITDA was generated in the first half. In 2026, we expect the first half EBITDA to represent roughly one quarter to one third of the full year, with the balance generated in the back half of the year as revenue scales and leverage increases. While we are not providing formal cash flow guidance, converting revenue growth into higher profit margins and improved working capital efficiency is a core focus. We will continue to invest where appropriate to support growth, but at capital expenditure levels consistent with the prior year, we expect to be cash flow generative. We have simplified the model, strengthened our cost structure, and improved the underlying economics of our company. The actions we took in 2025 are translating to higher profitability, tighter expense discipline, and a stronger balance sheet entering 2026. We are carrying real momentum into the year, particularly in coffee. Pricing, distribution gains, and productivity initiatives are working together to expand gross profit dollars and improve returns on invested capital. At the same time, we are converting that growth into EBITDA expansion and operating cash flow, reinforcing financial flexibility. Our focus remains consistent: disciplined execution, operational efficiency across the entire income statement, structural efficiency within operating expenses, and thoughtful capital allocation. We believe that combination positions us to further strengthen the business and drive durable, profitable growth in 2026 and beyond. Operator, we are now ready for the Q&A session. Operator: Thank you. Our first question is from Sarang Vora with Telsey Advisory Group. Please proceed. Sarang Vora: Great. Thank you. And first of all, congratulations. It is good to see the business momentum coming back. My first question is on the coffee side. The land-and-expand strategy that you talked about seems to be really catching up. You are seeing the momentum in the business. One of the main drivers I feel is expansion of SKUs across your retail network. So can you help us understand, I see the average number of SKUs is about five to six right now across the retail doors. Can you help us understand where it is at some of the higher level, which retailers you see at the higher level penetration, and then any color you can share in terms of bagged coffee or some of the newer products like K-Cups or cold brew, how the performance of some of these other coffee products has been as well? Christopher Mondzelewski: Hey, Sarang. It is Chris. Thanks very much for the question. Yes, so our land-and-expand strategy is the core of our growth model, and it is working quite well. Just to reiterate, the strategy is to put two to three of our best items per segment, in bags and pods, and drive those to strong performance. Then as we move into that upper half of velocity with that particular retailer, generate shelf expansion off of that. To answer your question directly, we have absolutely seen the total number increase. We mentioned that in the upfront comments. We have nearly tripled our number. I am not going to give you specific retailer names, but if we think about a number of the retailers that launched well, our largest retailer, we have 20 items on shelf. That may not be a comparative across grocery, but in a number of our grocery retailers that launched shortly thereafter, we have 14 items, 12 items, and 8 items—those would be three examples of a national retailer and two large regional retailers. The reality is that we believe that continuing to drive items up into that 12 to 15 range is absolutely achievable for us. We have demonstrated that. To answer your final question on which items are performing well, it continues to be our core items that drive the highest velocities. We are going to continue to innovate and make sure that we provide items that go where we know consumers’ preferences are moving. We are not going to talk specifically about any of the innovation items that we are launching this year. They have not yet hit the shelf. But like every year, we are going to bring new news to our retailers. We believe heavily in driving new items in order to help drive that category expansion. Sarang Vora: That is great, and it is really good to see the momentum coming back on the coffee side. My second question is on the energy side. We are almost a year into the launch of the energy drinks. Can you share any lessons learned over the year, and also a little more color on the plans for 2026, like markets that you are trying to expand, flavor profiles, changes in SKUs? Any color you can share on the energy side would be helpful. Thank you. Christopher Mondzelewski: Sure. It was a great learning year for us. We were pleased with the first year of execution. As we have talked about, it was a regional launch position for us in the first year. We want to continue to be very careful that we do not put more resource against energy than our core coffee business with the kind of momentum we have in coffee. That is obviously the first dollar spent for us. We continue to believe in the potential of energy because of the size of that category and the dynamics of that category and, even more importantly, because nearly two thirds of our consumers are already drinking energy as part of their routine. So we know that it is a tight fit to our consumer base. To answer your question, in the first year we did a regional launch as we talked about. We had markets that were very successful for us where we were able to drive from three to five units on shelves at a time and see the velocities respond around that. We had other markets where we had less success. Not surprisingly, similar to any other CPG business, certainly businesses in the cold, where we get better placement, better distribution, and couple the marketing programs around that, we see the best success. The key piece for us is that we have seen markets with very high success and we have seen our retail chains with very high success. I am not going to say which ones; we have not given guidance on that. As we go into 2026, the plan very much revolves around that. Rather than saying we are going to continue to drive our ACV to a significantly higher level, which would cost us a lot more in marketing dollars to support that, we are going to keep a regional focus. We like to talk about the smile states of the U.S., which is where a lot of our brand strength is. I am not going to talk to the specific markets. We will continue to be in the regions that we do best in as BRC Inc., and we will focus with our partners KDP on very strong execution, building off of our learnings in 2025, and continue to evaluate what is the best overall model for us from a marketing and commercialization standpoint to drive success with that item. Again, we will be careful that we do not ever pull more resource than we want to from the coffee business. Coffee is core for us. Energy is an incredible opportunity for us that we want to continue to prepare for the future. Sarang Vora: That is great and good luck ahead. Thank you. Operator: Our next question is from Daniel Biolsi with Hedgeye. Please proceed. Daniel Biolsi: I was wondering if you could share what you expect lower coffee bean costs will impact for the industry prices on the shelf? What have you seen with your latest price increase? Matthew Amigh: Sure, Dan. This is Matt. What we are seeing right now is we are seeing that coffee nearly doubled over the last two years, and in 2025 we were sitting about $2.83, and in 2026 we expect it to increase slightly. We are seeing a pullback in the commodities over the last, I would say, 20 trading days, where the price per pound of coffee has gone down on average about 18% for the forward curve months. So we are seeing a moderation there. We have taken two price increases in 2025. One was in Q3 and then the second one just settled in late Q4, and both of those price increases were in the upper single-digit ranges. The consumer response to that is in line with expectations—relatively low elasticity, sitting less than a 0.5 elasticity factor. So everything is going according to plan with the price increases we see in market. We will continue to stay close to how the market forms, how our elasticities look, how trade promotion looks, and we will adjust as needed. Daniel Biolsi: Thank you. And then I know you guys think about this a lot more than most of us, but do the current actions by our military change your messaging or your priorities in terms of marketing during these times? Christopher Mondzelewski: No. The reality is that this brand, from its inception, when the founders first came up with Black Rifle, was always centered around veterans. They were at the time active in the military service, and we have always had veterans at the core of everything that we do when it comes to our give back to the community, which I talked about earlier, as well as how we market the brand. Obviously, all of the troops overseas are in our thoughts and prayers like every other out there, but it does not change anything we are doing. We have been focused on veterans from the very beginning, and times like this are just a great reminder to everyone in America as to why we need to be backing our veterans every single day because they are constantly put in harm's way. We all owe a real debt of gratitude to them for that. Daniel Biolsi: Thanks. Operator: There are no further questions at this time. I would like to hand the call back over to management for closing remarks. Christopher Mondzelewski: Let me close by saying we are focused on disciplined growth, continuing to expand our margins, and generating cash. The actions we have taken this year are foundational for the business as we enter 2026. We have very clear priorities, very measurable targets, and our brand is stronger than ever. Distribution is growing, and we have greater financial flexibility than at any other point in time in the company. Execution will continue to be our focus going forward. We appreciate everyone calling in, appreciate your continued support, and look forward to updating you next quarter. Operator: Thank you. This will conclude today's conference. You may disconnect at this time, and thank you for your participation.
Operator: Good morning, ladies and gentlemen. And welcome to the Strata Critical Medical, Inc. Fiscal Fourth Quarter 2025 Earnings Release Conference Call. At this time, participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, this call is being recorded. I would now like to turn the conference call over to Matthew Schneider, CFO of Clinical Services and Vice President of Finance and Investor Relations. Matthew, you may begin. Matthew Schneider: Thank you for standing by, and welcome to Strata Critical Medical, Inc.'s conference call and webcast for the quarter ended 12/31/2025. We appreciate everyone joining us today. Before we get started, I would like to remind you of the company's forward-looking statement and safe harbor language. Statements made in this conference call that are not historical facts, including statements about future time periods, may be deemed to constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties, and actual future results may differ materially from those expressed or implied by the forward-looking statements. We refer you to our SEC filings, including our annual report on Form 10-K and our quarterly report on Form 10-Q, each as filed with the SEC, for a more detailed discussion of the risk factors that could cause these differences. Any forward-looking statements provided during this conference call are made only as of the date of this call. As stated in our SEC filings, Strata Critical Medical, Inc. disclaims any intent or obligation to update or revise these forward-looking statements except as required by law. During today's call, we will also discuss certain non-GAAP financial measures, which we believe may be useful in evaluating our financial performance. Reconciliation of the most directly historical comparable consolidated GAAP financial measures to those historical non-GAAP financial measures is provided in our earnings press release and investor presentation. Our press release, investor presentation, and our Form 10-Q and 10-K filings are available on the Investor Relations section of our website at ir.serratacritical.com. These non-GAAP measures should not be considered in isolation or a substitute for financial results prepared in accordance with GAAP. Hosting today's call are our Co-CEOs, Melissa M. Tomkiel and William A. Heyburn. I will now turn the call over to Melissa. Melissa M. Tomkiel: Thank you, Matt, and good morning, everyone. This was a fantastic quarter for Strata Critical Medical, Inc. Delivering excellent results and supporting our strong confidence in the future. In Q4 specifically, our organic growth of 35% was well ahead of our expectations, and led us to a full-year result that beat the high end of our guidance on all fronts. Given the strength we saw in Q4, strong volumes have continued into 2026 and additional new customer wins, we are also raising our guidance for the full year 2026 on both revenue and adjusted EBITDA. Continued acquisitions of smaller businesses operating directly in our areas of expertise are a key part of our strategy to accelerate growth and geographically expand our network while they seamlessly integrate into our existing business platform. We have multiple additional active opportunities and believe that our continued successful execution of this M&A strategy will accelerate our annualized adjusted EBITDA growth at least 30% throughout the coming years. This period marks our first full quarter with a singular focus on medical and our first full quarter with Keystone, and I am happy to report that we are off to a great start. Importantly, we are capturing a larger share of logistics services for transplant clinical cases, and this contributed to the logistics strength in the quarter. More than 40% of our sequential logistics revenue growth in Q4 versus Q3 was generated from Keystone's legacy customers, demonstrating the value of our full-stack one-call offering. Operationally, the teams are working very well together and also taking on broader responsibility across the Strata Critical Medical, Inc. organization. To that end, we are excited to announce an expanded role for Dr. Scott Silvestri, who was Keystone's Surgical Director, as Strata Critical Medical, Inc.'s new Chief Medical. Dr. Silvestri brings decades of experience leading transplant and cardiac surgery programs and is an industry leader in the area normothermic regional perfusion. We are very lucky to have Scott on the Strata Critical Medical, Inc. team, and under his surgical leadership, we have already begun rolling out new capabilities to our customers, most importantly, our expanded abdominal organ recovery platform. On the regulatory front, we are encouraged by the actions taken by government agencies over the last few months. It is clear that our approach is aligned with the regulators' goals of restoring trust in the transplant system, improving patient safety, and increasing the number of transplants in the most efficient manner possible. Strata Critical Medical, Inc. is incredibly well positioned to help the industry accomplish these goals. For example, in proposed rules from the Centers for Medicare and Medicaid Services, OPOs would now be incentivized to pursue medically complex organs, particularly those resulting from DCD donors. Historically, only some OPOs have been hyper-focused on utilizing technology to increase yields and pursue DCD or marginal organs. Others have been slower to embrace these new opportunities. Rules designed to incentivize more DCD donors are a clear positive for Strata Critical Medical, Inc., given our reputation as a leader in the recovery and transportation of all organ types and our unique expertise in DCD recovery. We are also very well positioned from a regulatory perspective in terms of our customer base, which is over-indexed to larger, more sophisticated transplant centers and Tier 1 OPOs that are being held up as the gold standard under new and proposed regulations. Approximately 20% of Strata Critical Medical, Inc.'s revenue is generated from OPOs, with Tier 3 OPOs, the lowest ranked, which could potentially be absorbed by larger OPOs under proposed regulations, representing less than 5% of our revenue, while our Tier 1 OPO customers represent 2.4 times the revenue of our Tier 3 OPOs. In the past quarter, these regulations directly resulted in new business for us when an underperforming OPO was decertified and absorbed by one of our existing OPO customers. Importantly, the cost intensity of organ transplant is rising, as the transplant community has innovated to identify, recover, and transport organs from DCD donors, which naturally have a higher cost profile compared to organs from DBD donors. Strata Critical Medical, Inc. is incredibly well positioned to help the transplant community reduce costs in DCD donation via the utilization of our expanding regional network of logistics bases and organ recovery hubs, and through the use of normothermic regional perfusion, which offers substantial cost savings versus alternative recovery methods. NRP delivered locally, exactly the way we do, is the best answer to pursue DCD organs more aggressively and reduce costs. Before I hand it over to Will, I wanted to touch on our aircraft fleet. We ended the year with a fleet of approximately 30 dedicated or owned aircraft. During the quarter, we discovered corrosion on one of our owned aircraft and made the decision to part out the aircraft and utilize the engines to reduce future engine overhaul costs rather than invest in costly repairs. While the book loss on the aircraft was $1.7 million, we estimate the economic loss at approximately $400,000. We have completed comprehensive G inspections on two-thirds of the remaining owned fleet over the last two years and have not identified any similar issues. Looking forward, we are excited to report that we have won customers in some new geographies, which we expect to begin servicing in 2026. We expect to add around two new owned aircraft to our fleet this year to better support these new regions, both for the new accounts and for existing customers that might be flying in those areas. We already acquired one aircraft during the first quarter, which is now in the conformity process. We continue to believe that we have struck the right balance with regards to our asset-light strategy. The vast majority of our flying is on third-party aircraft and will remain that way. At the same time, owning a small portion of our capacity has unlocked new business, provided important leverage in negotiations for third-party aircraft, and enhanced margins. It also allows us to strategically build out our national footprint. With that, I will turn the call over to Will. Thank you, Melissa. William A. Heyburn: We continue to demonstrate our ability to achieve and exceed the ambitious goals we set for ourselves, both for organic growth, which at 35.3% this quarter was well ahead of our targets, as well as for our M&A platform. And we are just getting started. We are working diligently towards closing several additional opportunities currently under exclusivity that are operating directly in our core competency areas and are actionable at mid-single-digit multiples of adjusted EBITDA. We expect that our successful continued execution on these acquisition opportunities will significantly accelerate our growth trajectory, enabling us to maintain an average annualized adjusted EBITDA growth rate of at least 30% over the coming years. This is a significant increase from the organic-only high-teens midterm adjusted EBITDA growth that we discussed at Investor Day, demonstrating our increasing confidence in our ability to deploy capital. To support this M&A platform, in February, we announced closing of a $30 million asset-based credit facility with J.P. Morgan, with the ability to upsize to $50 million. Importantly, our aircraft remain unencumbered, creating additional future financing opportunities as needed. This facility remains undrawn but provides important flexibility for future acquisitions. We also expect to support the acquisition strategy with Joby earn-out payments of up to $45 million related to the sale of Blade, our former passenger business. Up to a $17.5 million portion of the earn-out will become due in August, which is based on Blade's financial performance post-close, and we are encouraged by the results Joby has released to date. The balance, which will become due in March 2027, is based on the retention of former Blade employees who transferred to Joby and is largely hedged by our ability to recover stock from those employees if they do not fulfill their obligations. Finally, as a reminder, if Joby elects to pay in Joby stock, the number of shares will be determined at the time the earn-out is earned, not based on a historical Joby stock price. On the strategic partnership front, our device-agnostic strategy is working, and it is resonating with both current and prospective customers. Our willingness and ability to always support our customers' clinical decisions regarding device usage as well as our capability to fly these devices when possible has helped to attract new customers to the Strata Critical Medical, Inc. platform, and we are encouraged by the recent approval of yet another new machine perfusion device and the long pipeline of devices that are currently in clinical trials. As we like to say around here, we still believe that the customer is always right. We also continue to explore opportunities to leverage our existing assets and infrastructure to expand into adjacent offerings. While not material to the overall business at this point, we are now flying radiopharmaceuticals nearly every week as part of a pilot program. We have utilized existing personnel and resources for this program to date and will continue to monitor progress to determine if it makes sense to invest further, but we are encouraged at the positive reaction we have received in the market to date. We will turn to the financial results now. But before we dive in, let us review a few reporting changes we have introduced this quarter. Starting at the top of the income statement, we will now disaggregate revenue across three business lines. Logistics revenue is comparable to the medical revenue we disclosed before the Keystone acquisition and represents Strata Critical Medical, Inc.'s organic growth. Note that logistics revenue includes air and ground logistics along with our organ placement business, which we market as TOPS. Transplant clinical revenue includes clinical revenue generated from transplant customers, including NRP, surgical organ recovery, product sales, and other related services. Other clinical revenue includes clinical revenue generated from cardiac surgery departments within hospitals, including perfusion services, autotransfusion, ECMO, product sales, and other related services. Moving down the income statement, we will now report two segments: Logistics and Clinical, which represents the sum of transplant clinical and other clinical, all businesses that we acquired with Keystone. We have shifted away from the non-GAAP flight profit metric utilized by our divested passenger business and have migrated to the more traditional measure of GAAP gross profit as our segment profitability metric. As a result of this change, we shifted some costs from SG&A to cost of sales in our logistics business, which has no impact on adjusted EBITDA but results in logistics gross margins that are approximately 200–250 basis points below the previously reported medical flight margin metric. We will now report both logistics and clinical gross profit to provide insight into fundamental trends of the business. As we previously discussed, given our now consolidated corporate structure focused entirely on medical, we will no longer report SG&A by segment or unallocated corporate expenses. Instead, we will break out our SG&A into seven categories available in the MD&A, which we expect will be more helpful in understanding the cost drivers of the business. Finally, as a reminder, our P&L reflects continuing operations only, as the results of the passenger business that we divested in August 2025 have been reclassified as discontinued operations for all periods. The cash flow statement and balance sheet, however, continue to include discontinued operations in historical periods, the impact of which is highlighted. Moving now to the financial highlights from the quarter. Full-year 2025 revenue and adjusted EBITDA of $197.1 million and $14.1 million, respectively, both beat the high end of our guidance range, driven by a strong Q4 that was ahead of expectations. Q4 2025 revenue of $66.8 million was driven by logistics growth, which is organic, of 35.3% to $49.2 million in the quarter versus $36.4 million in the prior year. Air logistics strength was supported by new customers, existing customers, and a higher logistics attachment rate for our transplant clinical customers. Clinical revenue was $17.6 million in the current quarter versus $2.8 million in Q3 2025, which reflects the mid-September 2025 close of the Keystone acquisition. Compared to historical unaudited financial results in prior periods before the Keystone acquisition closed, clinical revenue grew strongly in the mid-double digits year over year, and mid-single digits quarter over quarter. Within clinical, transplant clinical revenue was $7.8 million in Q4 2025, and other clinical revenue was $9.8 million in Q4 2025. Compared to historical unaudited financial results in the prior year, before the Keystone acquisition closed, we saw significantly faster growth in the transplant clinical business line. This strong clinical growth continued despite industry regulatory and media scrutiny in 2025, which resulted in a flattening of U.S. organ donors and NRP donors. As Melissa mentioned earlier, we are encouraged by recent regulatory updates. While we have not yet seen a pickup in industry data for overall donors, we have seen a recovery in NRP donors in recent months. New customer acquisitions continue to drive growth in other clinical revenue, and there is a significant opportunity to continue to acquire new cardiac perfusion customers given our strong value proposition and relatively low market share. Gross profit increased 90% to $14.4 million in the quarter, versus $7.6 million in the prior-year period, driven by organic growth and the Keystone acquisition. Gross margin increased approximately 80 basis points year over year to 21.6% versus 20.8% in the prior-year period, driven by higher logistics gross margins and the positive mix impact from the Keystone acquisition. Logistics gross profit, which represents Strata Critical Medical, Inc.'s organic growth, increased 39.5% to $10.6 million in Q4 2025 versus $7.6 million in the prior-year period, driven by strong revenue growth and an approximate 70-basis-point increase in gross margin to 21.5% versus 20.8% in the year-ago period. Clinical gross profit was $3.8 million in Q4 2025. Adjusted SG&A rose to $8.9 million in the quarter, versus $7.5 million in Q3 2025, which largely reflects a full quarter of Keystone SG&A. Adjusted EBITDA rose to $7.0 million in Q4 2025, up from $1.1 million in the year-ago period and $4.2 million last quarter. Adjusted EBITDA margin rose to 10.4% in Q4 2025. Note that the year-over-year adjusted EBITDA comparison will not be particularly meaningful until we lap the passenger divestiture in Q3 of this year, given significant cost savings realized during the sale that are not reflected in the prior-year results. Operating cash flow was negative $8.3 million in Q4 2025. The $15.3 million difference between adjusted EBITDA and operating cash flow was driven by $9.6 million of nonrecurring items, including a legacy legal settlement which we disclosed last quarter, residual transaction costs, and other nonrecurring items, along with approximately $5.7 million in working capital, which was driven in part by delays in collections during our back-office integration, which we expect to normalize in the coming quarters. Additionally, the logistics business saw significant growth into year-end, contributing to the working capital build. Capital expenditures, inclusive of capitalized software development costs, were $2.0 million in the quarter, driven primarily by capitalized aircraft maintenance and ground vehicle purchases. We ended the quarter with no debt and approximately $61.0 million of cash and short-term investments. Moving to the outlook. Given the stronger-than-expected volume growth in Q4 that has persisted into 2026, along with the expected onboarding of new customer wins in the second half of the year, we are raising our 2026 revenue guidance range to $260–$275 million from $255–$270 million previously. We are also raising our adjusted EBITDA guidance range to $29–$33 million versus $28–$32 million previously. We are reiterating our free cash flow before aircraft and engine purchases guidance of $15–$22 million. For comparison purposes, assuming we closed the Keystone acquisition at the 2025, the company would have generated revenue of $243 million, while we estimate our adjusted EBITDA was consistent with the pro forma range we provided at the time of the acquisition. In the first quarter to date, we have seen continued strength in daily logistics trips as well as clinical cases despite a soft January for the industry. However, we have seen a slight mix shift to shorter air trips so far this quarter, and separately, we did have several days where our Northeast fleet was grounded due to winter storms. We put this in the category of normal ebbs and flows of both the industry as well as our specific subset of customers. As such, we expect a modest sequential revenue decline in Q1 2026 versus Q4 2025. On the profitability front, we expect adjusted EBITDA margins to decline approximately 100 basis points sequentially in the first quarter driven by this lower revenue. We do expect to see a sequential improvement in revenue and margin in the second quarter as well as in the back half of the year, boosted in part by expected new customer additions. In summary, we are thrilled with our progress after our first full quarter operating the now fully integrated organ transplant platform. We are getting great feedback from customers. Our financial results are exceeding expectations. We are even seeing smaller competitors proactively reaching out, hoping to join forces and thus enhancing our already strong acquisition pipeline. The best is yet to come, and we look forward to continuing to achieve and exceed our goals in the months and years ahead. With that, I will turn it back to the operator for Q&A. Operator: Thank you. Star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Our first question comes from the line of Yuan Ju with B. Riley. Your line is now open. Yuan Ju: Good morning. Congratulations on a strong quarter. My first question is around regulatory policy. Can you please remind us or give us an update on the continuous distribution policy? Who are the stakeholders opposing this continuous distribution policy and why? And then why lungs are approved earlier than other organs? Melissa M. Tomkiel: Thanks for being on the call, and I appreciate the question. So continuous distribution is still the goal for all organs. As you pointed out, lungs have already transferred over to that, and we are seeing a lot of positive results, both for the number of organs that can successfully match to the people who need them the most and also, as it relates to our business, we are uniquely able to handle those longer trips for our customers. As it relates to the transition for hearts and livers, we did see at the beginning of this year a deprioritization of that process as regulatory agencies focus on some of the more pressing issues that were raised by the media over the last six to twelve months. We have seen a lot of progress on those fronts with new proposed rules coming out of CMS and coming out of OPTN. But we do not have a certain timeline as to when they will move that continuous distribution transfer back to the front burner again. We do know that that is the end goal. And once things get started, we would expect to see at least a six-month comment period, and OPTN has been very clear that they would like to gradually transition from the current acuity circles model to continuous distribution over a period of about a year once that rule is set up. In terms of stakeholders that are opposed to it, I do not know if I would characterize it as opposition, but there are certainly folks that want to make sure everybody is ready for what will be a more logistically challenging process when you move to a true national organ allocation program. We are very well positioned to help the entire industry support what is a more efficient way to get organs to the people that need them. Of course, we want to proceed carefully because some transplant centers and OPOs might not have the right partners like Strata Critical Medical, Inc. to enable them to hit the ground running with a new policy like this. Yuan Ju: Got it. Thanks for the helpful color. If we break down this transplant value chain which part of the service has the highest value and margin and what is the percentage of your customers using your full-service portfolio? Matthew Schneider: You know, we gave gross profit by segment, both logistics and clinical, this quarter, and you will see that on a blended basis, the profit margins are very similar. You do tend to see in the transplant clinical business slightly higher profit margins than the non-transplant clinical business. We are already seeing a lot more of those legacy Keystone customers, our clinical customers today, see the value in an integrated offering and start to use logistics. We talked about how about 40% of our sequential growth in logistics this quarter was driven by more business from those clinical customers. And oftentimes, it is not just a convenience decision for the customer. We are able to harmonize the departure location where our aircraft assets are located and where the clinicians and equipment are located that are performing that clinical procedure. It will save the customer money to use those integrated solutions together. So the next phase for us is to try to convert more of those clinical customers to contracted logistical customers and vice versa. We have already added a lot of our logistics customers onto rate cards that enable them to use our clinical services. But as we have talked about a lot, clinical services when purchased by transplant centers tend to be a little more ad hoc. So we are going to give it a few quarters to see what the uptick is, but we are really happy that many of our customers have reached out to get the contracts in place to be able to use both sets of services. Yuan Ju: Got it. Thanks for taking our questions. I will jump back to the queue. Operator: Thank you. Our next question comes from the line of Benjamin Haynor with Lake Street Capital Markets. Your line is now open. Benjamin Haynor: Good morning, folks. Thanks for taking the questions. First off for me, just on the acquisition pipeline, as these opportunities become available, do you expect to be announcing them as they occur? And then as it applies to kind of the adjacent offerings, I would imagine there are also some acquisition candidates that you would have there. Or is that more something that you would think about doing de novo, like with the radiopharmaceuticals? Melissa M. Tomkiel: Well, our first and foremost focus as far as our acquisition pipeline is on the product service that we currently offer. And we are doing that because we want to increase our scale and national footprint because that provides a more cost-efficient and time-efficient solution for our customers. So we do plan on announcing as we close on acquisitions. Hopefully, there is some news in the coming months. As we have mentioned, we do have a robust pipeline that we are working through. And we are very excited about all the opportunities that are out there that we are seeking through partners, like with Keystone in the past and Trinity before them, who are trusted and have credibility and enhance our service offering. As well as, you know, Will mentioned earlier, we are being approached by a lot of small competitors. It is still pretty fragmented. And a lot of smaller players realize that this cannot be done the right way without scale. So they want to join forces with us and share the same strategic vision. William A. Heyburn: And, Ben, to your question on the radiopharma side, we know we can do this. We know we can do it well. The question is whether relative to the other opportunities we have in front of us, which we are really very excited about, is that where we want to be investing time and resources? And so what we like to do is we like to first get some experience actually performing a service, which we are doing almost every week. But we are not at a place right now where you would see us make an acquisition in that space in the near term. As Melissa said, we are focused on our core business lines right now. We are going to keep learning on the radiopharma side. Benjamin Haynor: Okay. Got it. That is helpful. And on the folks that are approaching you, is part of the reason why, beyond just the scale, some of the regulatory scrutiny and such that the industry is seeing as well? Or is that too much of a stretch? Melissa M. Tomkiel: No. It is not a stretch at all. I mean, we like what we are seeing on the regulatory front because it is raising the standard across the industry, but it is bringing the standard to the level that we have. And we have the technology, and we have protocols and processes already in place to be able to provide the services in a way that the regulators want to see. So, yes, for sure there are smaller competitors out there that do not have those and do not have the infrastructure or the high-caliber team that we have that want to join up with us. Benjamin Haynor: Makes sense. And then just on the shorter trips that you have seen so far early this year, it sounds like that is more luck of the draw than anything. There is nothing to read into that? William A. Heyburn: I would not read into it. No. You know, it is a combination of mix shift to there are some customers that just generally have better luck matching closer, or there are OPOs that are flying shorter distances consistently. So we see the mix shift around from a customer basis quarter to quarter. And we also see trip lengths change. So this is the normal ebb and flow. And we are very encouraged to see those trip volumes both on the logistics and the clinical side staying very strong all the way into 2026 to date. Benjamin Haynor: Okay. Got it. And then lastly, on the new customer wins, anything you can share on the profiles of those customers and how much a factor those wins were in bumping up the revenue guide? William A. Heyburn: Too soon to give specific guidance on the new customers. But what I would say is that it is really encouraging to see that this integrated model is resonating with folks. We are getting a lot of new leads from the combined customer base of the much larger organization that we have today. And also, the aircraft strategy, as Melissa talked about, is really resonating with people. We think we struck the perfect balance there. You know, as we talked about, we will invest in one or two new aircraft to support some brand-new geographies that we will be serving much more consistently. But this all adds to the power of the platform and allows us to serve not just those customers, but other customers as well. So as we get closer to the launch date, we will provide a little more detail around those new customers. Benjamin Haynor: Got it. That is all I have. Thank you so much, and congrats on the progress and the outlook. William A. Heyburn: Thanks for the great questions, Ben. Operator: Thank you. Our next question comes from the line of Jon Hickman with Ladenburg Thalmann. Your line is now open. Jon Hickman: Hey, good quarter, Will. Could you just kind of reiterate, how many hubs are you operating out of in the United States now? Matthew Schneider: Hey, Jon. This is Matt. Are you referring to the air bases? Jon Hickman: Yes. Matthew Schneider: Yeah. Our air bases are probably overall in the teens. We, you know, as Will just said, when we add new customers or we have density in a certain region, we consider adding a new base. Based on new customer wins this year, we are likely to add at least one or two new bases. That is our plan for the year. William A. Heyburn: But remember, we have the capability to fly from anywhere through the asset-light network. So when we talk about a base, that just means that we have either an owned or contracted aircraft that we are certain is going to be available to us in that location versus aircraft that we have safety-vetted and can use but may not be held back for our use. And then on top of that, we do have some dedicated aircraft to us that can float and move their locations around the country as needed, which gives us even more flexibility. Jon Hickman: And then could you, maybe I missed this, but on the logistics side, I know it has been a goal kind of to increase the ground services. Were you able to do that this quarter? Kind of as a percentage of revenues? Matthew Schneider: Yes. I mean, our air business was very strong in the quarter, really in the back half of the year. So we continue to grow and scale our ground business, adding new hubs. But as a percentage of revenue, I believe it is about the same as it was in the prior-year period. And that just reflects, as I said, the strong growth in air and other revenue, including our organ placement business. Jon Hickman: Okay. Thank you. I appreciate it. Operator: Thank you. Our next question is from Yuan Ju with B. Riley. Your line is now open. Yuan Ju: Yeah. Maybe a quick follow-up on radiopharmaceuticals. Are you mainly handling the radiotherapeutics or radio imaging agent? And then are you mainly supporting the commercial product versus the clinical trials? William A. Heyburn: We think we can do all of these things really well. You know, we are probably best situated with our existing fleet on the clinical trial side of things because most of the aircraft we have access to are not cargo-configured. So a smaller load is going to be easier for us to leverage the existing fleet. If this was something that we wanted to invest more resources in, we could support full loads on cargo aircraft as well. But that is not in the existing fleet today. Yuan Ju: Got it. Thank you. Operator: I would now like to hand the call back over to Matthew Schneider. Matthew Schneider: Great. Thank you. So we received a few investor questions that we will now take on the call. The first one is on AI. And the question is, how will AI impact the transplant market over time and our business in particular? Will, why do you not take that one? William A. Heyburn: Sure. Great question. And I think this is a great business to remain extremely durable and actually benefit from AI rather than have any risk. If you think about what we do, we are operating in the physical world, scrubbing into operating rooms, flying airplanes every day. These things cannot be accomplished without access to these specialized aviation assets and credentialed medical professionals. We are driving with lights and sirens on the ground. And so, as such, we really see the artificial intelligence opportunity to make this business more efficient. We are already starting to employ it for real-time error checking as we are coordinating communications amongst multiple different stakeholders in an organ transplant mission. And we think over time, it could have the potential to make our cost structure more efficient, allowing us to invest in those differentiated people and assets that make our business great and really defensible. The next question we received is on some of the dynamics that we talked about in the first quarter, in terms of the weather impact that we alluded to. Melissa, can you just talk about the impact of weather that we are seeing in the first quarter? Melissa M. Tomkiel: Sure. Normally, weather really does not have an impact on our operations, and that is because our flights get priority over other flights at airports. So if a cell comes in, it might cause a disruption or slowdown or air traffic delays at an airport for an hour or two. It is not going to have any significant impact. We called it out for the first quarter because it was pretty unusual circumstances as far as the severe weather in the North, which is a very important region for us. We base several aircraft in the Northeast, and we have a high customer concentration there as well. And what we saw in the first quarter was so unusual with airports actually being closed for a number of days. So that will have an impact on the number of flights. Now we do see case volumes surging on days after or following an airport closure or something like that. So that will offset or mitigate that impact. And, you know, of course, it does not affect our confidence for the year, as you can see with the guidance. Matthew Schneider: And then we received a question recently just on some of the macro events and the impact of higher oil prices on our business. Melissa, can you just take that one? Melissa M. Tomkiel: Sure. Well, a raise in fuel price is going to result in higher costs for our customers, and that is not something we ever like to see. It will not impact our cost structure. When we contract with our customers, we negotiate fuel surcharge thresholds at a certain number, and anything above that gets passed through. So if we see a surge in pricing, that is going to be passed through to the customer, and it will not turn things upside down for us. William A. Heyburn: And we are above those thresholds already today. So any increase from fuel prices today would just get passed through. Matthew Schneider: That concludes the retail investor Q&A portion of the call. I just want to point out that we are planning on participating in the Sidoti and Needham investor conferences over the next few weeks, and we are looking forward to reporting our first quarter 2026 results in early May. Thanks to everyone for joining the call today and for your continued interest and support. Operator: This concludes today's conference. Thank you for your participation. You may now disconnect.
Operator: Greetings, and welcome to the Surgery Partners, Inc. Q4 and full year 2025 earnings call. At this time, participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to your host, David T. Doherty, Chief Financial Officer. Please go ahead. David T. Doherty: Good morning, and welcome to the Surgery Partners, Inc. Q4 and full year 2025 earnings call. I am joined today by J. Eric Evans, our Chief Executive Officer. During this call, we will make forward-looking statements. There are risk factors that could cause future results to be materially different from these statements, as described in yesterday’s press release and the reports we file with the SEC, each of which are available on our corporate website. The company does not undertake any duty to update these forward-looking statements. In addition, we reference certain financial measures that are non-GAAP, which we believe can be useful in evaluating our performance. These measures are reconciled to the most applicable GAAP measure in yesterday’s press release. I will now turn the call over to J. Eric Evans. J. Eric Evans: Thank you, David. Good morning, and thank you all for joining us today. My initial comments will briefly highlight our consolidated fourth quarter and full year 2025 results. I will then provide additional color on the drivers of performance this quarter and on our initial outlook for 2026. First, let me provide highlights from our fourth quarter and full year results. We reported full year net revenue at the low end of expectations at $3.3 billion, up 6.2% year over year, with same-facility revenue growth of 4.9%. Full year adjusted EBITDA was $526 million, up 3.5% year over year but significantly below our expectations. Our adjusted EBITDA margin was 15.9%, reflecting 40 basis points of margin compression. These results tell a tale of two halves where momentum in the first half of the year gave way to significant headwinds in the second half, culminating in fourth quarter performance that fell short of our revised expectations. Before getting into the details, I want to level-set the scope of the challenges we experienced in the second half of the year. In our Q3 call, we lowered our guidance based on delayed net capital deployment as well as slower case growth and payer mix trends we experienced in Q3 and early Q4. While those trends continued in Q4, the impacts were isolated to our surgical hospitals and our earnings shortfall was concentrated in just three surgical hospital markets. These markets had a combination of softer-than-expected case growth, payer mix shifts, and anesthesia dynamics that created outsized pressure. The balance of our portfolio performed in line with expectations, and these issues were not systemic across the enterprise. I will address these headwinds in more detail shortly. However, I first want to emphasize that we are confident that our long-term structural growth remains intact, driven by a combination of organic, de novo, and acquired growth. We remain committed to our growth algorithm and are focused on improving free cash flow, reducing leverage, and creating long-term shareholder value through our portfolio optimization strategy. I will now turn to the drivers of Q4 performance in more detail. Starting with organic growth, in the facilities we consolidate, we performed nearly 670,000 surgical cases in 2025, compared to 656,000 cases in 2024. We ended the quarter with 1.3% same-facility case growth, reflecting marginally softer-than-expected volume growth. Despite the short-term weakness, we remain committed to our organic growth strategy, centered on expanding surgical case volumes while strategically shifting towards higher-acuity procedures, including orthopedic specialties and total joint replacements. We performed over 42,000 orthopedic cases in the fourth quarter, supported by strong growth in total joints, with these cases growing 15% in the fourth quarter and 19% on a year-to-date basis compared to the same periods last year. We are reaffirming and continuing to execute on expanding our facilities’ capabilities to deliver high-acuity procedures. Our investments in robotics and physician recruitment remain core to our strategy of capturing greater high-acuity demand. Within our portfolio, we have 74 surgical robots in service, including the addition of six in 2025, that enable our physician partners to safely perform increasingly complex procedures. Physician recruitment, a critical component of our organic growth initiatives, remains on track with almost 700 physicians recruited in 2025. That said, a portion of our payer mix pressure in 2025 was attributable to physician transitions. Several experienced physicians who historically contributed to higher commercial payer mix and volumes retired or departed during the period. At the same time, many of our newly recruited physicians served a higher proportion of Medicare patients than previous cohorts and did not ramp as quickly as anticipated. This physician transition dynamic contributed to our payer mix pressure, as commercial payers represented a declining percentage of total revenue year over year. Notably, this phenomenon was not seen across the full enterprise. It was largely seen in our surgical hospital markets and was more concentrated in a handful of our larger facilities. We anticipate improvement in both volume and payer mix as these newer physicians mature within our platform, but we will need to lower operating expenses in the short term to protect margin. As I mentioned earlier, fourth quarter margins saw compression year over year and came in below our revised outlook from the third quarter. At a high level, the margin pressure we experienced in the fourth quarter was driven by two primary factors concentrated in three surgical hospital markets. First, we saw slower-than-expected case growth and a sharper-than-expected shift in payer mix in those facilities, driven by both physician transitions as well as near-term addressable market-specific dynamics. Second, in those same markets, our cost structure, including labor expenses as well as the cost of anesthesia coverage, did not adjust quickly enough to that changing payer mix, creating incremental near-term margin pressure. While we have been managing anesthesia dynamics across our ASC portfolio for several years, the incremental pressure we saw in 2025 was largely in our surgical hospitals, with a higher Medicare mix, rather than broad-based across our ambulatory footprint. Given these impacts, we acknowledge that our performance does not reflect the potential of our business or the strength of our model, and we recognize that there is work to be done in terms of execution. Importantly, the dynamics we experienced in the second half are identifiable, measurable, and addressable. We now have clear visibility into the drivers of our recent performance, and those learnings are embedded in our 2026 planning assumptions. Reflecting on performance and the need for improvement, we have also invested in new leadership at those facilities, and our recently named Chief Operating Officer, Justin Oppenheimer, is dedicating substantial time to support their success. I will speak about the 2026 outlook shortly and our plan to move forward, but first, let me finish my review of the quarter with a brief discussion on capital deployment. In 2025, we deployed $182 million of capital toward acquisitions, modestly below our annual target of $200 million plus proceeds from divestitures and admittedly back-end weighted. We continue to believe this is the right annual deployment level given how fragmented our industry remains and the breadth of opportunities available to us. Importantly, acquisitions we completed during the year were made at attractive value and represent meaningful additions to our portfolio that we expect will support future growth. The pace of deployment reflected our disciplined approach to capital allocation, and we remain encouraged by the strength of our near- and mid-term pipeline. M&A remains a critical component of our growth strategy, and we remain focused on executing transactions that align with our strategic objectives and generate long-term value at favorable multiples. Investing in the development of de novo facilities represents a relatively new and expanding component of our long-term growth, enabling us to establish ASCs in strategically selected high-growth markets where they focus on higher-acuity specialties. In the fourth quarter, we opened four de novos, which makes the total eight openings throughout 2025. As a reminder, the typical development timeline for de novo facilities entails 12 to 18 months to build, with an additional year required to reach breakeven performance. Now I would like to take a moment to share a progress update on our portfolio optimization process. As a reminder, we are executing a comprehensive portfolio optimization strategy designed to accelerate balance sheet improvement without sacrificing growth. The portfolio optimization process reflects a proactive long-term approach to unlock value and drive sustained success, rather than a reactive response to near-term market pressures. Our focus remains on selectively partnering or divesting facilities that will help us best meet the goals of our strategy. We continue to advance our portfolio optimization efforts and are focused on a small number of our larger surgical hospitals that fall outside of our core short-stay surgical strategy. These efforts, some of which are in active negotiations, are intended to be incremental and disciplined, and any actions we ultimately take will be guided by value creation rather than timing. We believe these actions will be accretive to shareholder value and demonstrate financial benefit to the company through reduced leverage and increased cash conversion as a percentage of adjusted EBITDA. We are encouraged by the steady advancement of our portfolio optimization efforts, and our team is confident we will reach a resolution on a key part of this effort within the first half of the year. The recent Baylor Scott & White joint venture involving our surgical hospital in Bryan, Texas is a good example of the strategic alignment we are seeking through our portfolio optimization efforts. This transaction allows us to partner with a leading health system that is well-positioned to support long-term growth and physician alignment in the market. As a result of the transaction, we will no longer consolidate the facility, which will reduce reported revenue. However, on a run-rate basis, we expect the earnings contribution to improve despite our lower ownership, reflecting a more efficient capital structure and improved alignment with our strategic objectives. Importantly, this transaction was driven by long-term value creation rather than near-term financial impact, and it reinforces our focus on simplifying the portfolio and concentrating on assets that best fit our short-stay surgical strategy. We look forward to sharing any further material updates from the ongoing portfolio review process when appropriate. We also plan to provide a comprehensive update on our longer-term portfolio composition at the upcoming Investor Day, the timing of which will be aligned with a validating milestone in our portfolio optimization process. As we assess our operating landscape and plan for the year ahead, we are taking a measured and conservative approach to the 2026 preliminary guidance resets for parts of the business. Our initial guidance for net revenue is $3.3 billion to $3.45 billion, representing single-digit year-over-year growth and underscoring our continued conviction in the company’s organic growth opportunities. We are providing initial guidance of at least $530 million of adjusted EBITDA, contributing to growth of at least 0.7%, which incorporates the anticipated near-term impact from many of the key headwinds we have discussed this morning. We have quantified the impact of anticipated headwinds and the core organic growth underlying our initial guidance in the supplemental slide that we provided with our earnings materials. Let me now take you through…
Operator: Good morning, everyone. My name is Jim and I will be your conference operator today. At this time, I would like to welcome everyone to the Amylyx Pharmaceuticals, Inc. Fourth Quarter and Full Year 2025 Earnings Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be the opportunity to ask questions. To place yourself into the queue, please press star then one. To withdraw your question, you can repeat the steps of star then one. Please limit yourself to one question with one follow-up today, and if you have additional questions, you are invited to rejoin the queue. Please be advised that this call is being recorded at the company's request. It is now my pleasure to turn the floor over to Lindsey Allen, Vice President, Investor Relations and Communications. Welcome, Lindsey. Lindsey Allen: Good morning, and thank you all for joining us today to discuss our fourth quarter and full year 2025 financial results and business update. With me on the call today are Joshua B. Cohen and Justin B. Klee, our Co-CEOs; Dr. Camille L. Bedrosian, our Chief Medical Officer; and James M. Frates, our Chief Financial Officer. Before we begin, I would like to remind everyone any statements we make or information presented on this call that are not historical facts are forward-looking statements that are based on our current beliefs, plans, and expectations and are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, our expectations with respect to Avexatide, AMX035, AMX114, and AMX318; statements regarding regulatory and clinical developments, the impact thereof, and the expected timing thereof; and statements regarding our cash runway. Actual events and results could differ materially from those expressed or implied by any forward-looking statements. You are cautioned not to place any undue reliance on these forward-looking statements, and Amylyx Pharmaceuticals, Inc. disclaims any obligation to update such statements unless required by law. I will now turn the call over to Justin. Justin B. Klee: Good morning, everyone, and thank you for joining us. In 2025, we meaningfully advanced our pipeline, made important progress on our regulatory and commercial preparations for Avexatide, strengthened our financial position, which extended our cash runway into 2028, and positioned the company for what will be a transformative year in 2026. Importantly, in 2025, we initiated the pivotal Phase III LUCIDITY trial of our lead program Avexatide, a GLP-1 receptor antagonist in post-bariatric hypoglycemia, or PBH. In addition, our collaboration with Gubra progressed significantly, and in January, we announced the nomination of AMX318, a novel long-acting GLP-1 receptor antagonist, as a development candidate for PBH and other rare diseases. We also made strides in ALS; AMX114 received Fast Track designation and demonstrated a favorable safety and tolerability profile in cohort one of the Phase 1 LUMINA trial in people with ALS, allowing us to advance into the next cohort. As we look ahead, our top priority is our work toward potentially delivering the first approved therapy for PBH. We are focused on three objectives for Avexatide in 2026. One, deliver top-line data from the pivotal Phase III LUCIDITY trial, expected in Q3 2026. We are excited to share that the recruitment phase of LUCIDITY is complete, and we are on track to fully complete enrollment this quarter. With the final potential patients currently in screening, we continue to expect to randomize and dose the last eligible participants this month. Two, advance NDA readiness and regulatory preparations so we can move rapidly following top-line data. We are already hard at work drafting NDA sections to support a potential submission. And three, strengthen launch readiness to support a potential 2027 commercialization of Avexatide if approved. We are actively building our commercial infrastructure and fine-tuning our launch strategies, drawing on our experience of successfully establishing a commercial organization in the past. As we prepare the organization and continue to understand the market, we are making key hires, conducting market research, including gathering insight from clinicians and people living with PBH, and building our disease education initiatives and market access strategies. We are acting with urgency, driven by the significant unmet need in PBH and our conviction in the opportunity we believe is ahead of us. When we assess the epidemiology of PBH, we benefit from a growing body of prospective and retrospective published literature, including large, long-term cohort studies evaluating hypoglycemia in people who have undergone bariatric surgery. From these studies, we estimate that there are approximately 160,000 people living with PBH in the U.S., out of the more than 2 million people over the last decade who have undergone the two most common types of surgery, sleeve gastrectomy and Roux-en-Y gastric bypass. Our independent claims analysis across multiple databases continues to help validate our view of the market opportunity and further our understanding of where people with PBH are being cared for. Additionally, we continue to hear from clinics and families about the difficulty in managing PBH and how the lives of patients are upended by this condition. With that, I would now like to turn the call over to Camille to further discuss the unmet need in PBH, the LUCIDITY trial, and some of the launch preparation underway in her organization. Camille L. Bedrosian: Thank you, Justin. PBH is a chronic metabolic condition driven by an exaggerated GLP-1 response, primarily after food intake, resulting in recurrent and often debilitating hypoglycemia. These events cause an inadequate supply of glucose to the brain, known as neuroglycopenia, with potential clinical consequences such as cognitive dysfunction, seizures, and loss of consciousness. For people living with PBH, this creates a life of perpetual vigilance, where a meal with friends or a drive to work carries the risk of debilitating hypoglycemia and its consequences. This fear disrupts independence and compromises safety, nutrition, and overall quality of life. Currently, there are no approved therapies by the FDA. Our pivotal Phase III LUCIDITY trial is evaluating Avexatide 90 mg once daily in individuals with PBH following Roux-en-Y gastric bypass surgery, using the FDA-agreed-upon primary outcome of reduction in the composite of level 2 and level 3 hypoglycemic events through Week 16. The LUCIDITY trial is anchored in the robust data generated to date from five prior Avexatide clinical trials in PBH that demonstrated statistically significant reductions in hypoglycemic events. Most notably, Avexatide 90 mg once daily led to a 64% least squares mean reduction versus baseline in the composite rate of level 2 and level 3 hypoglycemic events, with a p-value of 0.0031. Also of note, the Phase 2 trial showed no placebo response. However, to be conservative, we modeled up to a 50% placebo effect and a 35% effect size relative to placebo for LUCIDITY, and under these assumptions, to detect clinically meaningful benefit, we believe LUCIDITY remains well powered. LUCIDITY was designed with the goal of replication. The five prior Avexatide clinical trials in PBH directly informed the dose, the primary endpoint, inclusion criteria, and surgical subtype. We focused on enrolling a similar patient population, collecting the data in a similar manner, and executing LUCIDITY with high quality. As Justin shared, the recruitment phase of LUCIDITY is complete, and we continue to expect to randomize and dose the last eligible participants this month. We are pleased by the ongoing high participant interest and broad engagement we have seen across all clinical trial sites. The open-label extension, or OLE, portion of the trial is also already underway. Participants become eligible to enter the OLE immediately upon completion of the double-blind phase. In addition to NDA preparation activities ahead of the potential approval of Avexatide, we are actively ramping up our medical insights capabilities, disease education activities, KOL and community engagement, and evidence generation. These efforts will facilitate understanding of the Avexatide data, PBH burden, and the potential value of a new treatment for PBH by key stakeholders, including the broader medical community, payers, and people living with PBH. We established core medical leadership functions and have already hired leaders for our medical field force, health economics, outcomes, and real-world evidence research, and patient and professional advocacy. 2026 is a busy and exciting year for our medical team as we prepare to potentially deliver the first treatment for people living with PBH. I will now turn the call over to Jim to review our financials. Jim? James M. Frates: Thanks, Camille. We entered this pivotal year in a strong financial position. We ended the fourth quarter with $317 million in cash and marketable securities compared to $344 million at the end of the third quarter. This capital provides us with an anticipated cash runway into 2028 to fund our operations through our expected milestones, including our key focus, the LUCIDITY top-line readout, expected in Q3 2026, potential FDA approval, and the potential commercial launch of Avexatide in 2027. Turning now to our results for the quarter, total operating expenses for the quarter were $36.6 million, down 8% from the same period in 2024. Research and development expenses were $21.2 million compared to $22.9 million in Q4 2024. This decrease was primarily due to decreases in spending on AMX035 for the treatment of ALS and PSP. The decrease was offset by increased spending related to the clinical development of Avexatide in PBH. Selling, general, and administrative expenses were $15.4 million compared to $17.1 million in Q4 2024. This decrease was primarily due to a decrease in consulting and professional services. We recognized $6.4 million of non-cash stock-based compensation expense for the quarter, compared to $6.8 million of non-cash stock-based compensation expense in Q4 2024. Of note to be aware of for our Q1 2026 results, as Justin stated earlier, in January, we announced the nomination of AMX318 as a development candidate for PBH and other rare diseases. The selection and handover of the development candidate resulted in a milestone payment of $4 million to Gubra, which we will reflect within research and development expense in our Q1 2026 income statement. Before I turn the call over to Josh, I would like to just take a step back from the financials for a moment. The more we learn about the PBH landscape and speak with those living with or treating the condition, the more we recognize the importance of our work given the magnitude of this unmet medical need. We believe Avexatide is a breakthrough treatment for PBH and are working hard to prepare to launch the treatment, if approved, for people living with this difficult condition. With that, I will now turn the call over to Josh. Joshua B. Cohen: Thanks, Jim. While our immediate focus is on Avexatide, our broader pipeline strategy is designed to leverage expertise in endocrine conditions and neurodegenerative diseases to build a diverse portfolio of potential medicines. This strategy is exemplified by AMX318, which, as Justin mentioned, is our investigational long-acting GLP-1 receptor antagonist. We selected AMX318 following a rigorous evaluation of a large number of peptides against key criteria. AMX318 demonstrated a robust chemical stability profile, strong in vitro potency, evidence of in vivo activity and tolerability, high solubility, and a favorable pharmacokinetic profile consistent with a long-acting peptide. IND-enabling studies for AMX318 are underway, with an IND filing targeted for 2027. For AMX114, we plan to present biomarker data from cohort one of our Phase 1 LUMINA trial in ALS in the first half of this year. LUMINA is a randomized, double-blind, placebo-controlled, multiple-ascending-dose clinical trial in people living with ALS, with cohort one investigating the first and lowest of four doses being evaluated. We presented initial safety and tolerability data from cohort one at the International Symposium on ALS/MND last December. We are pleased to observe that AMX114 was generally well tolerated, with no treatment-related serious adverse events. Based on these data, we proceeded with the next cohort of participants, and we expect to complete enrollment of cohort two of the LUMINA trial this month. We look forward to sharing our progress in this dose-escalation study. For AMX035, we continue to work with the FDA on a Phase 3 trial in Wolfram syndrome following the long-term data from the Phase 2 HELIOS trial that were presented last year. To close, Amylyx Pharmaceuticals, Inc. has an exciting path ahead. First and foremost, we are focused on LUCIDITY. In parallel, we are working on the NDA to be prepared for a strong submission following top-line results. Additionally, we are expanding our commercial and medical team's efforts as they work towards a potential launch in 2027. We will now open for questions. Operator: And to our audience joining today over the phones, we will now begin the Q&A session. To ask a question, simply press star then one on your telephone keypad. To withdraw your question, repeat the steps; star then one will also remove you from our queue. We ask that you please limit yourself to one question with one follow-up today, and if you have additional questions, of course, you are invited to re-signal and join the queue once again. Our first question today will come from the line of Seamus Christopher Fernandez at Guggenheim. Seamus Christopher Fernandez: Great. Thanks so much for the question. So, I wanted to just ask the learnings that you have gained from the execution of the clinical trial so far, specifically the recruitment is now complete. We are going to see a lot going forward, but in terms of the run-in, was hoping you might be able to give us a little bit of color in terms of the quality of the events that are occurring during the run-in, the severity. I know there were very specific requirements around that, but in terms of the powering dynamics, I will have a follow-up question in that regard. What have you learned during the run-in period about these patients and the patient population along the way that can basically maybe give us a little bit more color and, you know, certainly enthusiasm to match what we have heard from thought leaders in the space? Justin B. Klee: Yeah, thank you very much for the question. I will start with the inclusion criteria. The whole design of the study was really informed by the prior trials, particularly the prior Phase 2 trials. Those were very successful and showed very statistically significant, clinically meaningful reductions in hypoglycemic events, and so we carried all of that forward into the Phase 3. We do believe that we are recruiting the right participants. We believe that we are conducting the right study. What I can say, probably more anecdotally from the sites, is what has really come through is the unmet need here. Each one of these hypoglycemic events is a medical emergency. If you look at the materials from the American Diabetes Association, for example, very clearly on their website they say severe hypoglycemia, which means level 2, level 3 events, is a medical emergency. You really hear that from the sites, that these are really challenging events. That is what makes PBH so challenging as a disease. We have also been very encouraged by the broad participation across the sites, and I think, again, it just underscores all of our market research as well, which is that this is a substantial unmet medical need. It is a large orphan condition. There are many people who are struggling with PBH, and there are no treatments approved for PBH right now. Really, the mainstay is just the medical nutrition therapy, and that is really just to try to control excursions as best as possible, but people continue to have these events regardless. So really, our conduct of the study has underscored the opportunity we have ahead of us. Seamus Christopher Fernandez: Great. Maybe just as a quick follow-up. The powering of the study and the sort of statistical design; you have got 16 weeks of treatment versus a much shorter treatment period from the Phase 2. Also, an unusually low placebo rate, but obviously the powering assumptions that were discussed, as much as a 50% placebo rate. Just trying to get a better understanding of why that level of placebo would be even possible in this case when we go from zero in the Phase 2? Just trying to get a better understanding of some of those characteristics, what could actually impact the placebo response relative to what we have seen in the Phase 2. Thanks so much. Joshua B. Cohen: Yeah, great question. Maybe I will start by saying scientifically and based on prior data, we really do not expect much of a placebo response. When you look at the past Phase 2 trials, there really was not much of a placebo response at all. Actually, prior work from Zealand Pharma with dasiglucagon also did not see much of a placebo response in PBH. So we really do not expect one. But what I would say is we do believe that Avexatide is an active drug. Going through the five prior trials, we see consistent effect. So I think strategically, as we were designing the Phase 3, we wanted to make sure we were very well powered. I would say not just on placebo effect, but across all the assumptions that went into our powering analysis, we tried to be conservative to make sure that we would have more than adequate power in this study. Operator: Great. Thank you. Next question will come from Corinne Johnson at Goldman Sachs. Kevin Strang: Good morning. This is Kevin on for Corinne. Just a follow-up basically on the commercial prep that you all are doing, including market research. Could you just put the learnings so far from LUCIDITY into the context of the commercial prep you are doing now, how that has helped you, and where you are in terms of commercial prep? Then just a quick follow-up on the OLE. Can you give us some color on how many patients are currently having been enrolled into the OLE? Thank you. Justin B. Klee: Thank you. I would differentiate two things. Priority one is our execution of the LUCIDITY trial. I do think, again, it underscores the unmet need and opportunity here. In addition to that, we are also doing substantial commercial preparations, particularly across our medical affairs and commercial organization. I can share what has really come through there. In 2025, we tried to get a real handle on the market. We spent a lot of time first in the literature assessments, talking with key opinion leaders, going to conferences. After that, we spent a lot of time with various claims databases and other medical information systems so that we got a real sense of how many people with PBH there are, where they are being treated, what is the patient journey, those sorts of elements. I will say that first, all of our research really triangulated to this about 160,000 prevalence number, and that is today. We expect that the population will only continue to grow from there, given that this is a rare occurrence that happens to some people in the years following bariatric surgery. But once PBH occurs, it seems that it does not go away. We work with people who have had PBH for 15 or 20 years. What we have done subsequently then is to reach out to many of those centers from the claims work and try to corroborate our numbers. For example, we see you have 100–120 patients under your care. Is that right? Who are the primary health care professionals who care for them? What is the frequency of visits? Those sorts of things. Everything has come back really corroborating our claims work. Again, it just underscores that this is a large orphan condition. This is a substantial unmet need. We hear that again and again from all of our market research. There are really no treatments available for people with PBH today. There is a growing awareness of PBH as well. PBH is now on endocrinology board exams. We expect to hear on a potential ICD-10 code this year as well. So I think everything is pointing towards that this is a large unmet need. It is a growing unmet need and underscores the importance of a potential treatment in the future. For your question on the OLE, I will pass to my colleague, Camille. Camille L. Bedrosian: Sure. Thank you. We really do not report on details of an ongoing study. Having said that, we are pleased with the participation in the LUCIDITY study, having now completed recruitment, and participants are rolling over into the OLE. We are very much looking forward to top-line data in Q3 of this year. Thank you. Operator: Our next question will come from Marc Harold Goodman at Leerink Partners. Marc Harold Goodman: Yeah. Can we go back to this checking out the claims database data and figuring out whether these sites actually have the patients and whether they match up? Can you just elaborate a little bit more on how many of these sites have you actually checked out? Are you checking out large ones, medium size, small ones? Just give us a sense of what it looks like out there as far as numbers of patients in these sites, like how many have over 100, how many are in the 50 to 100, just so we understand the concentration. Joshua B. Cohen: Yeah. Good question, Marc. We will probably get more into that as we get closer to our hopeful commercial launch in 2027. What I would say is we did try to pressure test our claims data pretty well, looking at a variety of different natures of center, as you suggest, trying to make sure that what our claims are identifying are real, that there is not some issue in how the claims data is finding patients. One thing that is helpful for us too is not just in validating the epidemiology, working to continue corroborating the 160,000 number, but also in determining where these patients are seen, which helps us as we start thinking forward into deployment and into the best way to reach these centers. I will say that our data continues to suggest that this is organized like you might expect for an orphan disease. There certainly are a number of centers that see quite a concentrated pool of patients, and then there are some centers that see less as well. But I think that all lends itself well to some of the orphan disease strategies that you might typically see in a commercial launch. Justin B. Klee: I will just add as well, I really want to underscore the unmet need that we hear. We have talked to a substantial number of clinics now, and the story is the same again and again, which is that PBH is a really difficult condition for patients. It is a really difficult condition to manage as a physician because people are hyper-reactive. They sometimes have triggered events, but sometimes for no seeming trigger at all. As a physician, I think they feel a little helpless because they really do not have tools to either prevent or really treat these hypoglycemic events. Going back, each one of these events is a medical emergency. Think from the physician's point of view, you have a patient who is very frequently having medical emergencies and there are very limited tools in your toolkit to help manage that. Across the many clinics that we have spoken with, that story is the same. I think it just underscores the opportunity we have. Operator: Our next question this morning will come from Michael Gennaro DiFiore at Evercore ISI. Michael Gennaro DiFiore: Hi, guys. Thanks so much for taking my question. Just want to examine the Avexatide Phase 2b trial for a bit. I noticed that in Phase 2b, the standard deviations for hypoglycemia were very large, especially in the 90 mg arm, which would suggest that there could have been non-responders or at least some sub-responders to therapy. So were there non-responders or suboptimal responders? If so, to what extent might they have played a role in driving the hypoglycemic event rates? Thank you. Joshua B. Cohen: Yeah, good question. Going to the Phase 2b and the 90 mg arm, maybe just to start with, we saw a very strong effect there, roughly a 66% effect with a very strong p-value, less than 0.001 as well. The median effect—the median patient—actually had their event rate go to zero, which gives you a sense of just how strong the results we saw were. Yes, there is some variability. Some people have more events, some people have fewer events, which I think does account for that standard deviation. But, by and large, we were seeing the response across the cohort that was studied. I think that shows up also in the p-value, which is showing that the effect is much larger than the noise that was observed in that trial. Justin B. Klee: I would add, that is one of five trials that showed the same thing. Avexatide in all five trials showed substantial reductions in hypoglycemic events, and that is what ultimately supported FDA Breakthrough Therapy designation as well. Michael Gennaro DiFiore: Very helpful. Thank you. Operator: We will hear next from James Condolas at Stifel. James Condolas: Hey, thanks for taking my question, and congrats on the progress. I wanted to ask another commercial one. One of the more interesting data points that we have seen coming out of some of the work that Stanford did in terms of this market is that there are 30,000 critical PBH patients. As you continue to do work on this market and look at things like claims, do you think there are really this many very, very severe PBH patients that are going to the ER, being admitted to the hospital, etc.? As you think about it, are those patients kind of fair to think about as maybe lower hanging fruit relative to the rest of the patient population? Thanks so much. Justin B. Klee: Yeah. Thank you, James. It is an important question. This is something we started to look into in our market research and our interactions with clinics. What has really come through is I think generally physicians have said, yes, certainly people who are in and out of the ER are high on our list of people we really want to help. But there has not been that much differentiation between someone who is very frequently in and out of the ER and somebody who maybe is having hypoglycemic events on a less frequent basis. I think the reason is that physicians believe that any one of these events could land somebody in the ER. Each one of these events as a medical emergency has the potential to be a catastrophe. While yes, they are certainly particularly interested in helping the people who are really critically impaired, they really believe that PBH by itself is a very dangerous condition. Again, that is why I keep underscoring the unmet need here. That has just come through again and again and again. I think all of this is informing our go-to-market strategies and the type of commercial opportunity we have ahead of us. Joshua B. Cohen: I might just add too, anecdotally, as we have talked to sites—and I think this bears out in the claims-based work that we have been doing too—pretty much every clinician we speak to will share stories about motor vehicle accidents, severe falls that result in people having fractures, cases where people have maybe had seizures or hypoglycemic coma. I would add that it is not just the direct consequences of hypoglycemia—the failures of the brain to function due to low glucose—it is also all the indirect effects: falls, accidents, things like that as well. Pretty much every clinician we have spoken to has their stories about seeing those really severe outcomes come to manifest. Camille L. Bedrosian: I will also add here, for individuals, not every individual may go to the ER or be hospitalized because their lives have changed completely. Their lives are very constrained and narrow—staying in the home. People with PBH learn to understand what they can and cannot do, and try and avoid the accidents or the profound hypoglycemia that leads to unconsciousness or seizures. Even though someone does not go to the ER, it does not mean they are not severely, severely constrained, living at home, needing a companion, etc. James Condolas: Makes sense. Thanks for the color. Operator: Our next question today will move forward to the line of Rami Katkhuda at LifeSci Capital. Rami Katkhuda: Hi, team. Thanks for taking my questions as well. I guess based on your conversations with physicians and payers, is there a magnitude of reduction in these hypoglycemic episodes that is considered meaningful? Or is statistical significance in LUCIDITY enough to see broad uptake? Camille L. Bedrosian: Right, so what we have heard from physicians certainly is ultimately what they would like to see is an approved drug for people living with PBH. Leading up to that, as we have been articulating today and as the American Diabetes Association clearly states on their website, hypoglycemia of the level—level 2, level 3—each one is a medical emergency. Physicians also say, and the patients too, that they would like a reduction, and just one event will be absolutely meaningful. Having said that, of course, we are conducting LUCIDITY, and we would say that a statistically significant reduction will be very important and take us to our next steps with Avexatide. Rami Katkhuda: Got it. And I guess, do you plan to share baseline characteristics from LUCIDITY before the Q3 readout? Joshua B. Cohen: We are still considering, but I think as we look at this study, it is a pretty quick turnaround, given that it is only a 16-week study. We will continue considering that, but I think mostly we are excited about data coming out in Q3. Rami Katkhuda: Thank you very much. Operator: We will hear next from Jeff Meacham at Citibank. Please go ahead. Jeff Meacham: Hey, guys. Morning, and thanks for the question. I know you guys call out AMX318. I know you are thinking life cycle management in PBH, but maybe help us with the timing. Is there a fast path to a pivotal once you finish the initial Phase 1, and with LUCIDITY experience in hand? Related to AMX318, are there other endocrine indications, rare or otherwise, that at this point look interesting to you or still too early to tell? Thank you. Joshua B. Cohen: Maybe starting with AMX318, I will reiterate we are very excited about the compound, especially given the work that we did with Gubra, where we screened a very large number of peptides and really tried to find the best possible GLP-1 antagonist that we could, trying to optimize across many parameters including the PK profile, as well as the potency, in vivo activity, manufacturability, things like that as well. Certainly, we are moving that compound ahead as quickly as we can. Going to your other point, we really do see this as part of our broader excitement about GLP-1 antagonism. We have heard from clinics and we have seen the literature as well that it is not just bariatric surgery that can result in these dangerous hypoglycemic events. People get these events after surgery for gastric cancer—gastrectomies—esophageal cancer—esophagectomies. People may have surgeries for peptic ulcer disease, gastroesophageal reflux disorder, etc., all of which can lead to these recurrent hypoglycemic events. I would also add that it is not just in the U.S. People are having these, including due to the high rates of gastric cancer in Asian countries. Certainly, there are both bariatric surgeries and cancer-related surgeries in Europe as well. We look at efforts to make a long-acting agent in that context; we think that this is a really exciting approach—GLP-1 antagonism. We want to keep investing in it and moving the science forward. Operator: Our next question this morning will come from Graig Suvannavejh at Mizuho. Graig Suvannavejh: Hey. Good morning. Thanks for the progress, and thanks for taking my question. Could you go to the market opportunity for Avexatide in PBH? Can you just remind us of the current patient and physician experience with acarbose? On the assumption that Avexatide gets to the market, whether existing use of acarbose by PBH treaters might represent, in any way, a potential hurdle to uptake of Avexatide? Thanks. Justin B. Klee: Thanks, Graig. Very important. I would start with, acarbose is not FDA-approved for the treatment of PBH, and right now, I think PBH is probably pretty typical of a rare disease with no available treatments. What I mean by that is that physicians are willing to try whatever they can to help their patients. Acarbose helps with potentially one small aspect of what causes the hypoglycemia, which is the general digestion of carbs. However, one, that is only a limited part of what can trigger these hypoglycemic events. Two, acarbose is really not well tolerated. As we look through, for example, the prior trials and experience of people on acarbose, it was not uncommon for people to come off acarbose in a matter of weeks because it is just really not well tolerated—very significant GI discomfort and symptoms. Probably the most important thing I would say is that we really do not think it is targeting the root cause of PBH. What characterizes PBH is this very hyper-reactive state, and people are hyper-reactive because the body has substantially increased its GLP-1 response. The GLP-1 response is often up to 10 times normal, and with the up to 10 times normal response, that is what causes the insulin spike and therefore the hypoglycemic events. If you are not targeting the root cause of what is causing this hyperactivity, then people are going to continue to have events. Again, this is what we have heard again and again from physicians. So probably the short answer to your question is no, we do not believe that acarbose in any way is solving the challenges of PBH, nor do we think that will impact the uptake of Avexatide. Operator: Our next question today will come from Christopher W. Chen at Baird. Good morning. Thanks for taking my question and congrats on the progress. Christopher W. Chen: Just regarding potentially getting an ICD-10 code for PBH this year, you mentioned, Justin. Can you talk a bit more about, for those unfamiliar, what an ICD-10 code specifically is and what would securing one for PBH mean for Avexatide in your view? Then, can you just put a finer point on the nature of those discussions currently? Are you able to actively engage in those discussions? Thank you. Justin B. Klee: Yeah, thank you very much. An ICD-10 code is a medical code that designates particular conditions, and there is a government process to determine whether ICD-10 codes are necessary. Generally, it is that there is a particular medical condition and it is of substantial enough importance—and at times population as well—that there should be a new code introduced. The fact that they are considering an ICD-10 code for PBH just speaks to the growing awareness of this condition, of its importance, and of the substantial population. I will say that these efforts have been really led by the medical community. As I also mentioned, PBH is now on the endocrinology board exam. I think really the awareness of PBH as an unmet medical need and as a very difficult condition with a growing prevalence has become front and center. We will hear more in April. I think it is important to mention as well we do not need an ICD-10 code for future reimbursement if the product is approved, because this would be through pharmacy benefit—it is a take-home product. But an ICD-10 code certainly helps with, for example, as we are looking in claims databases, as big health systems are looking for people with PBH, making sure they are cared for appropriately. That is where this designation really helps. Again, we just think it speaks to the overall growing awareness of this condition. Operator: Thank you. Our next question will come from Jason Gerberry at Bank of America. Please go ahead. Dina (for Jason Gerberry): Good morning. This is Dina on for Jason. Thank you so much. We just had a quick follow-up to a prior discussion point on the events in the LUCIDITY trial. Curious if in your market research, you similarly hear that clinicians are more focused on a reduction in level 3 hypoglycemic events as opposed to the regulatory composite endpoint? Can you just remind us what is your expectation for how events should skew at baseline between percentage level 2 versus level 3? Thank you. Joshua B. Cohen: Yeah, great question. Maybe just to give context to why the different levels were selected. Level 2 was really defined by a number of research studies in the diabetes space as well, where they looked at what level of blood sugar do you start to have severe symptoms. They found that that level was often when you get below 54 mg/dL. That is why level 2 is defined; it is the level where symptoms frequently start to get severe for individuals. Level 3 is when the symptoms have become so severe that you are incapacitated and rescue becomes warranted—people who dip deep into hypoglycemia. As we speak to clinicians, I do not think they view a level 2 as asymptomatic and not risky; it is a very risky event. People who are having a level 2 may be right around the corner from having a level 3. I think that is also why there is the value in the composite endpoint as well, because these events often travel together. Often level 2 is turning into a level 3 fairly quickly. In previous studies, there was maybe slightly more level 2 than level 3, but generally, the events were occurring with similar frequency. I would add too, it was not uncommon in previous studies that they occurred together and that you would quickly have a patient going from level 2 to level 3, or logging the blood sugar below 54 at the time where they become incapacitated. Thank you. Operator: Moving forward, Ananda Kumar Ghosh at H.C. Wainwright. Your line is open. Please go ahead. Ananda Kumar Ghosh: Hey, hi. Thanks, guys. One of the common questions we have been getting is the assumption of extended LUCIDITY trial compared to prior trial and the impact on the diet evaluation. I was wondering how, during the design of Phase 3, these factors were incorporated. Camille L. Bedrosian: With regard to diet, we provide diligent training to sites, and detailed information to the participants that focuses on maintaining consistency in diet—the medical nutrition therapy—throughout the study, each phase of the study. This point is reinforced at various points throughout the study, and participants actually are asked to reaffirm that they are adhering to the dietary guidelines that we have set out for LUCIDITY. Important to note also, and reiterate, that we are conducting LUCIDITY while replicating many of the features of the prior successful Phase 2 studies, and dietary consistency is one of them. I will also point out that the participants are very highly motivated in the study to follow all aspects of it because they are eager, as well as their investigators, to have a treatment for PBH. We are really pleased with how LUCIDITY is being executed. Thank you for the question. Justin B. Klee: I will just add as well, from a drug perspective, we have no reason to believe that there should be any sort of waning effect or tachyphylaxis or anything of that nature. The safety profile of Avexatide, both from the nonclinical and clinical studies, has been very good. As we look forward to the results in the third quarter, as Camille said, we designed the study and are conducting the study, obviously to support regulatory approval, but really with the Phase 2 elements in mind. Ananda Kumar Ghosh: Okay. Great. Maybe I have a quick follow-up question. Is there any mechanistic or rationale which shows whether GLP-1 receptor blockade remains effective even if patients increase their carbohydrate intake? Joshua B. Cohen: Great question. We do believe that the effect of Avexatide is quite strong. Maybe as one example of that, in the Phase 1 studies, the paradigm of those studies was that they gave people with PBH a large bolus of glucose either with or without Avexatide. What they saw in people who were receiving placebo was, after the large bolus of glucose, the people with PBH’s blood sugar would go up and then it would drop precipitously into the hypoglycemic range, and patients would need to be rescued. For people who were on Avexatide, particularly in the first Phase 1 but also in the other Phase 1s that were conducted, nearly all participants did not go into that hypoglycemic range. Those studies evaluated levels of glucose such as a 75-gram bolus of glucose. We do believe that the effects of Avexatide are robust to a pretty significant carbohydrate load. Of course, though, in PBH, the recommendation—and really what patients have been doing for years to avoid these really traumatic events—is to avoid any foods that can cause that type of glucose excursion. People with PBH are usually very well trained, and we continue training them over the study as well to avoid meals that will result in big glucose excursions. Ananda Kumar Ghosh: Got it. Thanks very much. Operator: Ladies and gentlemen, we would like to thank everyone that did signal for a question today. At this time, we will take a follow-up from Seamus Christopher Fernandez at Guggenheim. Seamus Christopher Fernandez: Oh, great. Thanks for the question here. Just wanted to ask about the tolerability profile of Avexatide in particular, and then what you would hope to learn in the early phases of the Gubra asset development, particularly as it relates to things like anti-drug antibodies, injection site reactions, the factors that you think are most important to advancing the Gubra asset and ensuring that it provides a profile consistent with the market expansion opportunities beyond Avexatide. Thanks so much. Joshua B. Cohen: Yeah, great question. Maybe starting with the tolerability of Avexatide, it has been quite excellent through our studies to date. When you look at the five prior trials, there really were not dropouts. People were able to stay on the drug quite successfully. To your question on ISRs, those were generally mild when they occurred and generally at a pretty similar rate to placebo, so really not all that much seen there. Also, ADAs were very, very rare and not really associated with much when they occurred. As it relates to the Gubra molecule, one of the things we did look for was immunogenicity in the animals that we studied. We tried to make sure we selected a molecule that was not immunogenic, at least in animals. Of course, as we translate to humans, it will be something we continue to evaluate. Our goal is definitely to select a molecule that does not have significant ADAs or ISRs. It also comes down to leaning a little bit on Gubra’s experience as well, as we try to select peptides that avoid those types of liabilities. Operator: To our phone audience joining today, this does conclude the Amylyx Pharmaceuticals, Inc. Fourth Quarter and Full Year 2025 Earnings Conference Call. Have a great day. We thank you all for your participation. You may now disconnect your lines.
Operator: Thank you for standing by. My name is Jill, and I will be your conference operator today. At this time, I would like to welcome everyone to the EVgo, Inc. Fourth Quarter and Full Year 2025 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. If you would like to withdraw your questions, simply press 1 again. I would now like to turn the conference over to Heather Davis, Vice President of Investor Relations. You may begin. Heather Davis: Good morning, and welcome to EVgo, Inc.'s Fourth Quarter and Full Year 2025 Earnings Call. My name is Heather Davis, and I am the Vice President of Investor Relations at EVgo, Inc. Joining me on today's call are Badar Khan, EVgo, Inc.'s Chief Executive Officer, and Keefer Lehner, EVgo, Inc.'s Chief Financial Officer. Today, we will be discussing EVgo, Inc.'s fourth quarter and full year 2025 financial results, followed by a Q&A session. Today's call is being webcast and can be accessed on the Investors section of our website at investors.evgo.com. The call will be archived and available there along with the company's earnings release and investor presentation after the conclusion of this call. During the call, management will be making forward-looking statements that are subject to risks and uncertainties, including expectations about future performance. Factors that could cause actual results to differ materially from our expectations are detailed in our SEC filings, including in the Risk Factors section of our most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. The company's SEC filings are available on the Investors section of our website. These forward-looking statements apply as of today, and we undertake no obligation to update these statements after the call. Also, please note that we will be referring to certain non-GAAP financial measures on this call. Information about these non-GAAP measures, including a reconciliation to the corresponding GAAP measures, can be found in the earnings materials available on the Investors section of our website. With that, I will now turn the call over to Badar Khan, EVgo, Inc.'s CEO. Badar Khan: Thank you, Heather. When I first joined EVgo, Inc. as CEO at the 2023, we set a goal to be adjusted EBITDA breakeven in 2025. And I am pleased to say we achieved that goal in the fourth quarter. This significant milestone demonstrates the growth, scale, operating leverage, and durability of the EVgo, Inc. business and the dedication and hard work of our team. As I will touch on later, we are now focused on our next milestone of achieving the real operating leverage inflection point, which will allow us to further accelerate adjusted EBITDA growth and margin expansion. EVgo, Inc. delivered another excellent year of results with total revenue of $384,000,000, a 50% increase over last year, and record charging network revenues. We ended 2025 with 5,100 stores in operation, following a very large store deployment of 500 new stores in the fourth quarter. Total energy dispensed in our public network increased over 30%, which is more than our store growth. Our pilot, approximately 100 J 3,400 connectors, also known as MACs, during 2025 was successful, and we will be rolling out over 400 more Max connectors in 2026, both at new sites and retrofits at existing sites, with the goal of effectively doubling our addressable market over time. Given the returns we expect to generate from these stores, we plan to increase our public stores deployed by over 50%. This increased pace for deployment significantly increased the number of NATS connectors, and our next generation charging architecture represents real investment in 2026 to drive longer-term value creation. EVgo, Inc. continues to offer drivers more choices on where to charge their EVs as our owned public network and extended network expands across the U.S. Today, drivers can find over 1,200 EVgo, Inc. stations across 47 states. EVgo, Inc. is the third largest and second fastest-growing network in the U.S., serving all EV models with key OEM, rideshare, and site host partnerships, and I look forward to expanding our network even further in 2026. Our network stands at over 5,100 stalls and is one of the most highly used EV charging networks in the United States. While we know charging station deployments have grown significantly the last several years, the reality is that the usage of America's EV network is disproportionately concentrated amongst three largest charge point operators, or CPOs: EVgo, Inc., Tesla, and Electrify America. This is according to an independent third party. The concentration of consumer demand among these top three operators demonstrates the importance of network effect, an already established customer base, which in our case encompasses 1,600,000 customers, and scale as a driving force behind this unmatched network utilization. EVgo, Inc.'s fourth quarter utilization was 24%, which is higher than the average of the top three and nearly fivefold higher than the large group of subscale CPOs, most of whom see usage in the single digits. Per store demand growth for EVgo, Inc.'s charging network continues to outpace the industry. Since Q1 2024, EVgo, Inc.'s utilization has grown four percentage points, while the rest of the industry excluding the top three has actually declined by two percentage points. In other words, according to this third-party data, EVgo, Inc. has emerged as a clear leader the EV charging space in the United States, representing outsized consumer demand for our network as compared to the competition. It is clear to me that EVgo, Inc. has a strong competitive moat that is enduring and continues to strengthen over time. We have developed superior AI-driven and scalable site selection algorithms, and host partnerships allow us to build charging stations where drivers want to be, conveniently near where people shop, eat, and run their daily errands. We are continuing to scale with strong grocery and retail partnerships, including an expanded partnership with Kroger, which we announced earlier this year. EVgo, Inc. now has almost 14 times CPOs. the average number of stalls of the rest of the industry outside the top three. We have partnerships with rideshare companies such as Uber and Lyft, who we believe partner with EVgo, Inc. in part because of our enormous scale advantage versus the dozens of smaller operators, and the value drivers get with discounted rates on the EVgo, Inc. network. As you may have seen recently in the news, EVgo, Inc. and Uber are in discussions to expand our partnership to meet rising demand for our services from rideshare drivers. We have developed and are continuing to deploy leading customer engagement tools and capabilities to enhance our customer experience. The investments we are able to make in our EVgo, Inc. app and other technologies are only possible given we have the scale, network effect, talent, and capital to build the tech stack. Of note is AutoChargePlus, where eligible drivers enroll their vehicle and payment method; when they pull up to a charger, they simply plug in and charge. It is a seamless customer experience, and 30% of our sessions are now initiated with AutoChargePlus. EVgo, Inc. continues deploying more 350-kilowatt or faster chargers that now make up the majority of our network, offering a full charge in under 15 minutes, compared to just 19% for the rest of the industry, excluding the top three. Our products and hardware teams worked tirelessly to improve the charging experience, including ongoing maintenance campaigns targeted at improving reliability on our existing chargers and through our next generation charging architecture. Finally, unlike many in the industry, we have the non-dilutive financing in place to build at scale. This competitive advantage is not solely driven by EVgo, Inc.'s superior site selection but rather the combination of all the factors I have described, built over 15 years of doing what we do. In the 2026, expect to reach a critical milestone in the evolution of the business, achieving a key operating leverage inflection with gross profit from our charging operations without any contribution from our non-charging business covering adjusted G&A. At the same time, we are intentionally investing in three key areas that we believe will strengthen the long-term competitiveness, resilience, and value of the EVgo, Inc. platform. We will build our already significant skill advantage by ramping up our deployment teams to meet market demand. Further separate ourselves from dozens of smaller operators, significantly increase the number of new owned stores we bring online in 2026 with even higher growth planned in 2027. We will roll out more next connectors this year, doubling our addressable market in the long term. This represents an investment in 2026 as we are trading highly productive CCS tolls with max tolls where performance is lower than CCS initially, but growing over time as NAX drivers discover these tolls through our customer marketing campaign. And our investment in next generation charging our improves the fundamentals of the business as we scale. It simplifies the hardware, reduces failure points, improves reliability, and lowers operating costs over time, while also giving us the flexibility to support higher power vehicles and standards like MAX, and ultimately delivering a better customer experience. That combination is critical to sustaining high utilization and expanding margins as the EVgo, Inc. network grows. Over the last two years, we have deployed over 1,200 stalls on our network each year, including our extend network. In 2026, we expect this will increase to 1,400 to 1,650. And importantly, we plan to increase the number of new owned and operated stores deployed by over 50%. Approximately two thirds of these stalls will be deployed in the 2026. We are targeting cash-on-cash paybacks of three to five years, with our highest-performing top 15% of stores achieving paybacks in as little as one to two years. These strong returns support our ability to continue accelerating store deployment, enabled by the non-dilutive financing we have in place that positions us to further scale our build-out in 2027 and beyond. Our autonomous vehicle partnerships remain an important source for further growth and potential upside to these forecasts. And as discussed before, new stores, more existing, extend partnerships are expected to wind down during 2027, allowing us to transfer build capacity to our owned and operated business. The industry transition to NAX is an exciting opportunity for EVgo, Inc. Over half the EVs on the roads today have MAX inlets, mainly Teslas today, but new models from other OEMs are being launched with native Max. We expect to add over 400 MACs connectors into your network by the 2026, allowing drivers charge at our stalls without an adapter and effectively more than doubling our addressable market. In 2025, we deployed about 100 connectors in our existing sites on a pilot basis with the goals of validating the technology and determining how to grow NAAC's throughput as quickly as possible. I am pleased with how the NAX connectors are performing from a technology perspective. I do want to thank our hardware team who worked tirelessly to make these liquid-cooled cables happen for our fast chargers. EV drivers can find our NAX locations with EVgo, Inc. mobile app, or from the distinctive yellow signage at these sites. Throughput for next tolls is currently lower than our CCS tolls at the same site, but we are clearly seeing it grow, driven by increasing numbers of tested drivers charging at these tolls. Over the course of this year, we expect to grow max per toll usage through our customer communications efforts, driving awareness. This is an important medium- to long-term goal as native MAX vehicles share overall VIO grows. I have highlighted a number of company-specific sources of competitive advantage, and now I want to turn to some of the industry-wide tailwinds we continue to see driving the share of public fast charging that EVgo, Inc. also benefits from. Today, we are beyond the early adopter phase of EV, with almost 6,000,000 EVs on the road. American drivers are choosing to go electric, and EV prices continue to fall relative to ICE vehicles, making EVs more affordable, which in turn makes EV ownership more accessible to more Americans, including to those that live in multifamily housing. These drivers often do not have access to a garage or private driveway, and therefore are more reliant on public fast charging. In fact, they charge approximately one and a half times more on the EVgo, Inc. network than those drivers that live in single-family homes. The electrification of rideshare is another key tailwind that has been and is continuing to drive the share of public fast charging. Rideshare drivers are adopting EVs five times faster than regular motor races and are more likely to live in multifamily housing or otherwise not have access to home charging, and charge significantly more on the EVgo, Inc. network than the average retail customer. Companies like Uber and Lyft have their own targets and incentive programs to help rideshare drivers make the switch, and on the policy side, New York City and California both have policies in place to encourage increased rideshare electrification each year through 2030, which other states like Massachusetts are also considering. Over the last three years, commercial rideshare throughput as a percentage of total throughput on EVgo, Inc.'s network has almost doubled and is roughly a quarter of EVgo, Inc.'s public network throughput today. We are pleased to have reached an initial agreement with Uber. They will guarantee a minimum level of utilization and incentivizes EVgo, Inc. to build a number of new larger charging stations in key urban locations in San Francisco, Los Angeles, Boston, and the New York metro areas. This expanded partnership with Uber is designed to address a key concern amongst electric rideshare drivers, which in turn we expect will continue to accelerate electrification of rideshare. I am excited to share more details of this expanded partnership once it is finalized. More affordable vehicles, increasing number of drivers living in multifamily housing, accelerating rideshare electrification together with faster vehicle charge rates are all driving the growth of public fast charge, and we remain very focused on capitalizing on these exciting tailwinds to fuel EVgo, Inc.'s continued growth. Finally, EVgo, Inc. is well positioned to benefit from the growth in autonomous rideshare. Autonomous vehicles are electric, and just like human-operated rideshare, vehicle downtime when an EV is charging is lost. Ready. So fast charging is key to maximizing their utilization and revenue. Given the amount of technology in these vehicles, they can consume more kilowatt-hours per mile driven, and as a result, are even more reliant on fast charging. AV market poised for tremendous growth over the next five years, with a 20-fold increase in robotaxis expected by 2030. EVgo, Inc. has been operating dedicated charging stations for autonomous rideshare fleet since 2020. Today, we have 140 dedicated charging stalls for autonomous vehicle companies. We are proud to be Waymo's charging partner in San Francisco and Los Angeles, and we operate charging sites for another AV company as well. While this is a small part of the EVgo, Inc. business today, our track record, partnerships, competitive strengths, position us well to support the rapid expansion of the AV market, which should, in turn, provide meaningful upside to our business plans over the medium and long term. Before Keefer shares more detail on our fourth quarter and full year results, I want to take a moment to introduce him to our investors and analysts. We are thrilled with the nearly two decades of operational and financial expertise Keefer brings to the public health and CFO, former investment banker, and private equity investor. He is a great addition to the Madison team, and I look forward to partnering with him to try and share further value. Now I will turn it over to Keefer. Keefer Lehner: Before I begin, I want to share how thrilled I am to be at EVgo, Inc. We build the infrastructure this country needs. Since joining in mid-January, I have been working closely with that RN team to transition into the role. I am excited about the substantial organic growth runway in front of us. My focus is clear. Building on the strength of our balance sheet to accelerate profitability as we continue to scale the business for accelerated long-term growth and value creation. With that, let us jump into our fourth quarter and full year results. Operational stall growth, one of the key components of growing EVgo, Inc.'s revenue. We ended Q4 with 5,100 stalls in operation, a three times increase compared to 2021. We added over 1,200 new stalls to the network in 2025, including 500 in just the fourth quarter, representing our largest stall deployment in a quarter ever. Our customer base has grown almost fivefold over that same period, which contributes to the network effect, driving increased brand loyalty and usage across our ever-expanding network. We have grown the total energy dispensed on EVgo, Inc.'s network in 2025 to 366 gigawatt-hours, a 14-fold increase over that same period since 2021. 2025 revenues of $384,000,000 have increased over 17 times from 2021 levels. Charti network gross profit margin expanded over 2,500 basis points from the mid-teens to the upper thirties, reflecting the meaningful operating leverage of fixed cost of sales on a per stall basis as throughput and revenue per stall continue to rise. Importantly, we again delivered improving profitability with adjusted EBITDA growing at a meaningfully faster rate than revenue, and we achieved a positive adjusted EBITDA margin in 2025 for the first time in company history. Total throughput on the public network during the fourth quarter was 99 gigawatt-hours, an 18% increase compared to last year. Revenue for Q4 was $118,000,000, which represents a 75% year-over-year increase with growth in all three revenue categories. Total charging network revenue was $64,000,000, a 37% increase versus the prior year. Extend revenue was $24,000,000, delivering growth of 33% over the same period. And ancillary revenue of roughly $31,000,000 was up about 9x. Q4 ancillary revenue benefited from a $26,000,000 contract buyout from a former AV partner that exited the space. Charging network gross profit and margin in the fourth quarter were $29,000,000 and 46%, respectively, up 56% and 560 basis points, respectively. This is slightly higher than our run rate, given the higher than usual network OEM revenues resulting primarily from branding revenue associated with our GM contract and higher charging credit breakage. Since 2021, charging network gross profits have grown over 32 times. Fourth quarter adjusted gross profit of $60,000,000 was up over 2x versus the prior year. Adjusted gross margin was 51% in Q4, an increase of over 1,700 basis points over the same period. Adjusted G&A for the quarter was $35,000,000, an increase of 14% compared to the prior year, as a percentage of revenue improved from 46% in 2024 to 30% in Q4 of this year. Adjusted EBITDA was $25,000,000 in 2025, a $33,000,000 improvement versus 2024. Importantly, if you exclude the impact of the $24,000,000 ancillary contract buyout, we were still positive adjusted EBITDA for the fourth quarter. Moving to key highlights for full year 2025, total throughput on the public network in 2025 was 366 gigawatt-hours, a 32% increase compared to last year. Revenue for 2025 was $384,000,000, which represents a 50% year-over-year increase with growth across all three revenue categories. Total charging network revenue was $218,000,000, a 40% increase compared to 2024. Xtend revenue was $116,000,000, delivering growth of 34% compared to the prior year. And ancillary revenues of $49,000,000 were up 239% year over year, again benefiting from a $26,000,000 contract buyout from a former AV partner that exited the space. Charging network gross profit and margin in 2025 were $86,000,000 and 39%, respectively, up 46% and 170 basis points, respectively, versus the prior year. 2025 adjusted gross profit of $141,000,000 was up 86% versus the prior year. Adjusted gross profit margin was 37% in 2025, an increase of over 700 basis points. Adjusted G&A as a percentage of revenue also improved from 42% in 2024 to 34% this year, further demonstrating the scalability and operating leverage intrinsic to our model. Adjusted EBITDA was $12,000,000 in 2025, a $44,000,000 improvement versus the prior year. Full year net capital spending for 2025 was $76,000,000, a 64% increase versus the prior year. 61% of 2025 CapEx, net of capital offsets, was spent in Q4 as we deployed over 500 SALs in the quarter and began laying the groundwork for accelerated growth in 2026. For a 2025 vintage, net CapEx per stall was approximately $70,000, a slight increase from 2024 vintage, which had an elevated amount of capital offsets. On the financing side, we also borrowed an additional $6,000,000 under our commercial bank facility in December 2025. As mentioned in last quarter's call, we received the latest DOE loan funding of $41,000,000 in October 2025. In total, that brings our commercial bank and DOE loan balances as of 12/31/2025 to $66,000,000 and $141,000,000, respectively. Turning to our outlook and guidance for 2026, as we have outlined earlier, we see an opportunity to build a top-tier charging network in the United States. While EV sales in 2026 are expected to be flattish to slightly up from 2025, that still means at least 1,200,000 new EVs will be on the road, and VIO is expected to expand 20%+ year over year, with new EV sales expected to account for less than 10% of our total 2026 revenue. We are investing in scale, density, and deepening our network advantage while focused on capturing strong returns on capital deployment. We expect to accelerate our deployment of EVgo, Inc. public and dedicated stalls this year with 1,050–1,250 new stalls being added in 2026, with the majority of these additions coming in the 2026. In order to facilitate our accelerated future growth, we are making investments in G&A to support this growth engine. Our expectation of a number of extend stalls operationalized this year is 350 to 400 stalls, which will get us through approximately 70% of the contract with the pilot company. We anticipate building the remaining Insta installs under this contract in 2027. of pilots network. At which point the contract will primarily be tied to operations and maintenance. Overall, we plan to deploy 1,400 to 1,650 total stalls in 2026, a significant step up from 2025, and we expect the rate of deployment to continue to increase as the company grows in 2027 and beyond. For the full year 2026, we expect total revenues of $410,000,000 to $470,000,000 with adjusted EBITDA in the range of negative $20,000,000 to positive $20,000,000. We also expect significant shape in second-half weighting to the year, as approximately two thirds of the 2026 stall deployments will go live in the second half of 2026. The adjusted EBITDA range is informed by variability of expected throughput on our network. The incremental benefit of each kilowatt-hour sold has a big bottom-line impact. Roughly 2.5 gigawatt-hours of retail throughput equates to approximately $1,000,000 of adjusted EBITDA impact. We expect second-half 2026 run rate to be well above full-year guidance, given the significant shape to the year. We expect second-half annualized adjusted EBITDA to be up to $40,000,000. We do anticipate Q1 and Q2 adjusted EBITDA will be negative, given the growth investments we are making and the second-half weighting of our new stall additions in 2026. Charging network revenue should be around 70% of 2026 total revenue. Charging revenue is expected to increase each quarter on a year-over-year basis. In the first quarter, growth is expected to be softer, as our new stalls added in Q4 are still ramping up, and we had significant weather impacts from winter storms. Extend revenues for 2026 are expected to be down on a year-over-year basis as we are constructing fewer stalls under the program this year as we get closer to completing the contract of pilot. Beginning in 2028, this will drive lower revenue solely tied to O&M activity, which frees up our team to focus on further accelerating the expansion of owned and operated network. Given our strong unit economics and paybacks, we are investing in G&A in 2026 for accelerated future stall deployment and improving the customer experience. These near-term investments are expected to position EVgo, Inc. to accelerate revenue and profit growth into the future. Adjusted G&A for 2026 is expected to be $150,000,000 to $155,000,000 for the full year, which is approximately 35% of 2026 revenue guidance. This is largely in line with 2025 SG&A expense as a percentage of revenue but on a full-year basis is burdened by the back-end growth of the 2026 plan. 2026 will be an exciting year of transition for EVgo, Inc., as we augment our foundation to support sustained profitability and set the table for an accelerated go-forward growth trajectory, which should drive improved incremental margins, sustainable profitability on a go-forward basis. With that, I will hand it back over to Badar to dive deeper into EVgo, Inc.'s differentiated value proposition our shareholders. Badar Khan: Thank you, Differ. Our unit economics we have shown over the last two years and the details for Q4 are in the appendix for our investor deck, highlighting the growth we are driving in cash flow per store. Throughput per store growth results from EVgo, Inc.'s competitive moat and rising EV VIO. We believe our superior site selection, top-tier partnerships with OEMs, site hosts, rideshare, navy companies, our leading customer engagement and customer offerings, including faster chargers, and our growing customer base that is now 1,600,000 customers all combined to create a moat around EVgo, Inc.'s business that is hard to replicate, one we spent 15 years building. This is what drives our recurring and effort-expanding cash flow per store. Daily throughput per stall, whether for the average of the network or the top 15% of stalls, continues to rise. Our 350-kilowatt stores currently comprise over 60% of our network and will comprise around 90% of the network within a few years, are now generating almost 350 kilowatt-hours per stool per day. Annualized cash flow per store for our entire network in Q4 was $21,000. If you look at our sweet 50-kilowatt chargers, that is $28,000, proof that our network will scale to our longer-term target. The top 15% of our network was over $65,000, which represents a payback period of just over one year for new stalls performing at these levels. Top 15% of stalls clearly shows the operating leverage within charging gross profit, where these tolls generated 54% charge in gross margin, a full eight percentage points higher than the average of the network due to the higher throughput per store. EVgo, Inc. reached the critical milestone this quarter, delivering positive adjusted EBITDA for the quarter and for the full year. This achievement rely in part on our non-charging lines of business, Send and ancillary. Because of the growing number of owned and operated stalls and the growth in store profitability due to rising throughput per store, the real growth in the company comes from our charging business. Revenue growth since our IPO is over 70, and we have moved from an adjusted EBITDA loss to a profit. As we have said before, nearly two-thirds of our total G&A is largely fixed, growing much slower than the growth in the charging business. Therefore, the real operating leverage inflection, with the gross profit from our charging business alone without any contribution from the noncharging businesses, covers our G&A, occurs in late 2026. From that point, expect a significant increase in our already strong incremental margins, with a significant portion of our charging gross profit falling straight to the bottom line, further accelerating the growth in adjusted EBITDA and driving significant adjusted EBITDA margin expansion. This is on top of the operating leverage that exists within charging gross profit that I just discussed earlier. Over the next four years, we are targeting charging network profits to grow at a CAGR of 50% to 60%, with adjusted G&A growing at a CAGR of approximately 15%. This operating leverage results 105% to 130% CAGR in adjusted EBITDA. We are confident that over the course of the next few years, have a business that goes from breakeven to triple-digit millions in adjusted EBITDA. EVgo, Inc. spent the past 15 years building a business model and a competitive moat that is hard to replicate and benefits from a number of growing megatrends and tailwinds that have already translated into strong financial results and will deliver even stronger results over the coming years. EVgo, Inc. operates a highly differentiated, industry-leading charging platform that has meaningfully higher utilization than almost every one of our peers. This is not only driven by proprietary site selection capabilities but also best-in-class customer experience and customer engagement to a large and growing customer base, combined with leading partnerships across the broader industry. Our ability to attract non-dilutive financing to accelerate our growth further separates us from our peers. Our focus on owning and operating our network, especially in the high-density urban centers where drivers need fast charging the most, results in a business model with strong and growing unit economics with equally compelling operating leverage, and all of this benefits from a compelling macro backdrop that will propel the business for many years to come. Vehicles in operation are expected to more than double by 2029. The share of public fast charging continues to rise due to the electrification of rideshare, more affordable vehicles, faster charge rates. Standardized cables will double EVgo, Inc.'s addressable market over time, and, of course, the rise fully electric, autonomous vehicles that will need to charge at fast charging locations will just add to the growth we expect to see in our network. By the time we end 2029, we are targeting to have an enduring infrastructure business with over 12,500 public owned stores, charging network revenues model to grow at 40% to 50%, and adjusted EBITDA margins in the 25% to 30%. This is a capital-efficient accretive growth model that positions EVgo, Inc. to compound intrinsic value as we continue to scale our network. Taken together, our differentiated approach, accelerated demand environment, and the strong returns on new investments gives us deep confidence in the long-term value creation opportunity ahead. Operator, can now open the call for Q&A. Operator: Thank you. The floor is now open for questions. If you have dialed in and would like to ask a question, please press 1 on your telephone keypad. If you are called upon to ask a question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. We do request for today's session that you please limit yourself to one question and one follow-up, and you may requeue for any further follow-up questions. Your first question comes from the line of Stephen Gengaro of Stifel. Your line is open. Stephen Gengaro: Thank you. Good morning, everybody. Congrats on the progress. This might be an odd question, but when you look at the customers, I forget the number you mentioned, but 1.3 or 1,500,000 customers. Can you tell us, or do you have a sense for the percentage of usage that a certain piece of the customer base has? Like, if you have 1,600,000, I think was the number you gave, like, are the repeat users driving like, a 25% driving 75% of the business? Like, how do those numbers look? Badar Khan: Yeah. Stephen, we, you know, we I have been saying on a pretty much regular basis over the last several quarters that around half of our usage comes from rideshare customers or from customers on accounts. So these are the customers that are, you know, using our network most frequently. I think we have said rideshare is roughly a quarter. Rideshare alone is roughly a quarter of the business. We have got the subscription accounts, and, of course, customers on the OEM charging programs, so that is roughly what it is. I think rideshare in particular, as we said over many quarters now, it has gone from, you know, roughly 10% four years ago to about a quarter, so it is a really exciting, you know, part of the demand of the network. Rideshare is electrifying; it is going to continue to electrify. Companies like Uber and Lyft, cities like New York City, states like California, you know, are all focused on encouraging electrification of rideshare, so that is really a big component there. Stephen Gengaro: Okay. Great. Thank you. And the other one was, how do you participate, and I know you mentioned this on the autonomy side. Like, are there incremental, are there folks at the EVgo, Inc. charging? So how does that ultimately work, in your mind? Badar Khan: Yeah. Well, I mean, I think that as we said on the call, I think the autonomous vehicle space is, I think, a very significant source of potential upside for the business. We have got about 140 operational stalls that are dedicated to autonomous vehicle partners. We have been actually, we have had operating stalls for AV partners for years, actually five years now or more. Since 2020. I am sorry. So, you know, we have been doing it for quite a while. We are adding, maybe doubling the number of stalls this year in 2026, so it is still pretty small. But I do think that just like in human rideshare, EVgo, Inc., you know, will become the partner of choice for autonomous vehicle companies, just given our scale, our balance sheet, the emphasis on reliability, our, you know, significantly superior customer demand that we shared from the third-party industry data. And, you know, these sites do have, you know, human operators who are plugging the cables in. They are cleaning the vehicles. If that was your question. Stephen Gengaro: Great. No. That is helpful. Okay. Thanks. I will get back in line. Thank you. Operator: Your next question comes from the line of Laura Deng of RBC Capital Markets. Your line is open. Laura Deng: Hi. Good morning. Thanks for taking my question. I think last quarter, you all mentioned those charger tech enhancements. Just wanted to know if there is an update with that and when you expect to have that second enhancement completed, and then I have a— Badar Khan: Yeah. We are thrilled, very pleased with the work that is going on, actually, with our supply chain partners, that is Cigna and Delta. You know, we have been systematically, you know, requalifying, reinstalling the tech on each of sets of equipment, and progress is going great. We completed that program with Cygnet, I want to say, over a year ago now, and the effort that we have with Delta continues through the course of this year. I expect that we will be well past the majority of that program by the middle of the year. So going really well. Laura Deng: Got it. Got it. Thanks. And then on next, what have you all seen with the initial performance on the connectors installed so far? And then what gives confidence to accelerate that deployment this year? Badar Khan: Yeah. So the throughput per stall on our max stools has nearly doubled since the fall, and that is really giving us the confidence to accelerate the rollout this year. The throughput here on these max cables, max tools, are actually still well below CCS stalls, and that is because it just takes a little longer for Tesla drivers to kind of get used to charging at places other than Tesla Superchargers. But, you know, we do expect that over time through our engagement efforts, our customer communications, and really also because our stores are, our charging stalls are, faster—that there is 350-kilowatt versus the Supercharger network of 250. They are closer to where drivers are, where they run errands, they live, they work. We would expect to see that rise. And that is really why we are really quite excited by this next deployment. It effectively doubles our addressable market. There are many more NAX vehicles; there are CCS over time, you know, charging our network without an adapter. It is an investment in 2026 that I expect will be, will pay off quite materially in the future. So that is why we are talking about rolling out over 400 more next stalls over the course of this year. Laura Deng: Great. Thank you. Operator: And, again, if you have a question, it is star 1 on your telephone keypad. Next question comes from the line of William Peterson of JPMorgan. Your line is open. William Peterson: First, it looks like you lowered your build schedule targets now through 2029. Trying to get a better understanding of what is driving the revision. Is it higher CapEx per stall? I mean, less demand? I presume it might be less demand, but, you know, can you define, like, what your expectations are? I think you were talking about industry expectations of VIO doubling by 2029. But, I mean, what if growth remains flat or even declines, implying lower VIO? Would you subsequently lower your deployments? Or do you feel confident in the revised guidance? I understand the value proposition of EVs, but the near-term growth projections are certainly far from rosy. Badar Khan: Yeah, William. I mean, I think that as I look at our build plans for our owned stalls, which is really what we are focusing on here, that start with 2026, we are, you know, really stepping up the deployment of new stores in 2026. We have been growing new stores, owned stores, roughly kind of 700 to 800 a year for about, what, four years now? And what you can see for 2026 is it is up to about 80 for 5% higher. 50-some to 85% higher. So that is a very significant step up. We will incur those expenses this year in terms of deploying more stores. 2027 is about two and a half to threefold versus 2025 levels, so it is another big step up. We will start incurring growth expenses for the 2027 deployments towards the end of this year. And I think when I look at this deployment schedule, it is really, we are just being very disciplined around how we deploy capital. That is what guides our decision-making. We are generating payback that is as fast as one to two years at the top end of our network, the top 15% of stores. We are targeting three- to five-year paybacks. We are getting something at the faster end of that range. And so as long as the, you know, returns that we are generating in this capital is at those levels, and then frankly, that does not even need to be at those levels, we think it makes a ton of sense to deploy capital. You know, we balance a bunch of things from, you know, in the past, it has been the balance sheet. The balance, of course, is at the strongest place it has been in pretty many years now. We do think about in-year earnings. We do think about the sequence of deploying our operational capacity. I think the pilot contract deployments reaching an end 2027 does allow us to transfer some of that operational build capacity over to the owned operation, owned fleet, without causing too much disruption. So that is how we think about it. In terms of the underlying VIO, I mean, look. We have seen these forecasts. You and I, we have seen these forecasts. It has been slashed in the last couple of years. And, you know, and yet, you know, we say it is a muted environment demand environment, and yet it is still two or three times where we are today in 2030. And so I do not know about these forecasts. I sometimes feel like they swing like a pendulum going back and forth. We are going to be focused on deploying capital in a way that makes sense for our shareholders. And the good news is we can deploy faster or slower based on the returns that we are seeing. William Peterson: Yeah. Thanks for that color. I would like to maybe double click and unpack on the why, kind of relatively wide EBITDA guidance range. Maybe understand better what drives it closer to the lower end of the range versus positive. You talked about pretty significant ramp in the second half. Is there anything else that we should be thinking about? For example, how much does removal of the 30 DE EV tax credit have an impact? Maybe, you know, the extend much shows up in 2026 versus 2027? Just anything you can do to help us better understand the guidance range. Keefer Lehner: Good morning, William. This is Keefer. I will jump in on this one. To your point, we guided to an adjusted EBITDA range, and at the midpoint is breakeven. But we did also, to your point, share color on both the shape of 2026 as well as the exit rate represented by a second-half annualized number, which is clearly well above the full-year guidance range. The shape for the year is really driven by the deployment cadence of our 2026 capital spending, plus some near-term investments at the front end of the year from a G&A perspective as we work to ensure we have the foundation in place to support the more rapid build-out of our owned and operated network. So those are really the key drivers there. I think, you know, the operating leverage around the charging business and our charging margin is really what drives that. As operating leverage increases through stall-dependent and group-dependent cost, that illustrates that operating leverage on a go-forward basis. So charging network gross profit accounts for roughly two thirds of the range within the $110,000,000 to $140,000,000 forecast that we showed in the slides. William Peterson: Thanks, Keefer. Operator: Your next question comes from the line of Craig Irwin of Roth Capital. Your line is open. Craig Irwin: Good morning, and thanks for taking my questions. Actually, question is very much on the same line of what the last person just asked. So I was hoping you could get a little bit more granular about incrementally how much G&A dollars you are investing in 2026 versus 2025? And if you could maybe give us color on you know, where you are spending these dollars. You know? Is this you know, primarily in rideshare support and multifamily? Or is this in, you know, education and other things with, you know, used car, used DV buyers? I mean, there are many different ways you could approach organic growth on the network. If you could maybe just share with us a little bit about, you know, where you are spending the money. Keefer Lehner: Yeah. Craig, great question, and thank you. As you think about 2026, just total adjusted G&A, we are guiding to a range of $150,000,000 to $155,000,000. At the midpoint there, that is up about 19% compared to full year 2025 and up about 8% from where we exited 2025 on a Q4 annualized basis. So G&A spending will be up year over year, albeit at a much more muted level than what we are expecting from a top-line and margin expect standpoint. Our G&A remains kind of two thirds fixed as you think about the fixed and variable split. And where we are really making investments in 2026 is around internal resources as well as additional R&D support and resources as we work to build out and roll out latest-generation hardware, software, and firmware over the course of 2026. Badar Khan: Yeah. Craig, maybe if I just jump in here a little bit, just to add a little more to that. And if you just take a step back, we are generating paybacks as fast one or two years. We have got a network that is now nearly 15 times larger on average than, you know, almost everybody else in the space. The demand on our network on a personal basis is five times higher. So many of our top shareholders are actually keen for us to leverage this strength by growing faster. So where Keefer was talking about increased resources, it is really to grow faster. Grow faster, solidify that competitive advantage, really separate ourselves from the rest, which gets us to that triple-digit millions in adjusted EBITDA, really, in less time it took us to get from negative 80 to breakeven. We could choose to not go that fast, and we might be $20,000,000, maybe $25,000,000 better off in 2026 on adjusted EBITDA. But I think that honestly seems to be a little shortsighted. It wastes the moat that we have built, and not to mention it lowers, it results in a slower adjusted EBITDA ramp than if we go faster. So we are actually really excited about this year. I think it is a year of pretty ramping up, which will pay off handsomely. We expect to pay off handsomely, going forward. Craig Irwin: Understood. That makes complete sense. So my next question is about the network gross margins. Right? So I definitely appreciate the detail that you have been sharing with us over the last several quarters. 600 basis point improvement year over year, that is fantastic. There is quite a lot of volatility out there around electricity prices, and, you know, several investors have been asking about your ability to pass through some of the short-term volatility that shows up in the market. You know, many other large buyers of electricity actually this last quarter had contracting margins, and you have had expanding margins. Can you maybe just discuss how you purchase and make your commitments for electricity? And, you know, your visibility on expanding these margins like you share for your top 15% of the network. Badar Khan: Sure. I mean, look, margins will expand just because of the operating lever. Within charging gross profit where, you know, roughly 30% of our costs are on a fixed and a personal basis. And I think as you just mentioned, you see that when you look at the difference between the top percent of our network and the average of our network, every quarter when we report, every other quarter, we put our unit economics. You can see our charging gross margin is quite a bit higher. It was eight percentage points higher for higher-use stalls. So there is this embedded operating leverage as usage per store rises. But, Craig, we know we have got real scale. Relative to everybody else in this industry, almost everybody else, we have got real scale. We are able to engage in active energy cost management in certain derivative markets. As you know, my background comes from that space. You know, we have got very sophistic or more sophisticated dynamic pricing algorithms deployed across the network. We deployed them in through 2024 and 2025. We have got that next round of— Operator: Pardon the interruption. We seem to be experiencing technical difficulties. I will place you back on music hold until we get this resolved. Thank you. Badar Khan: Kitty Harris? Hello? Operator: We have the speakers back. Please go ahead. Badar Khan: Okay. Can you guys—I will assume that you can hear us. So, look. Craig, just to summarize, we feel pretty good, pretty excited about our pricing sophistication. I will say that we are in the foothills of a multi-decade journey, and so, you know, our long-term unit economic gross margins are really not different from where we are today. So I think that might seem to be a conservative assumption. Craig Irwin: Great. Well, congratulations on the healthy quarter there. Badar Khan: Thanks, Frank. Operator: Your next question comes from the line of Christopher Pierce of Needham. Your line is open. Christopher Pierce: Hi, Chris. Morning. First question, I guess, is can you hear me after that? Badar Khan: Are we live? We can hear you. We can hear you. Yeah. Christopher Pierce: Okay. Perfect. I, you know, you have talked about moving faster. You talked about the network effects and network advantages. I guess if we think about you know, this long tail of substandard operators, is there a chance for M&A to maybe some areas where it is a desirable geographic location, and you have got a competitor there that is a maybe a only competitor, and that would sort of grow the install base even faster? Or is that not quite something that is possible, given the DOE or how you guys think about installing and needing electricity for 350, etcetera? Badar Khan: At the highest level, Christopher, we want to ensure that we are deploying capital that is generating the best returns. Deploying capital organically, as we can all clearly see, is generating very strong returns. If we are able to deploy capital inorganic, that could compete with that, then, of course, we will take a look at it. You know, it is our view that, you know, our, you know, our, you know, really quite material difference, superior performance on demand in terms of usage per store is due to the site location, but also all the other things you were just alluding to: our network effect, you know, our investments in customer experience, customer engagement, the reliability, the charger speed. And so, you know, if there may be a scenario where, you know, our sort of know-how on top of somebody else's assets, as long as they are in good locations, could generate much more attractive returns. But, you know, these are all hypothetical at this point. We are just very focused on deploying capital organically. Christopher Pierce: Okay. You, good luck. Operator: Operator, are there other—Yes. Your next question comes from the line of Andrew Shepherd of Cantor Fitzgerald. Your line is open. Andrew Shepherd: Hey, everyone. Good morning. Again, thanks for taking our questions and congrats on the quarter. Think a lot of our key questions have been asked. I wanted to maybe touch on autonomy and autonomous vehicles since that is a big, you know, area of emphasis going forward. Just curious, like, how should we think about KPIs in that industry, and what would you recommend we look for in terms of seeing progress there? Should we expect, you know, a major increase in utilization rate? Is it just an increase to the salt pounds, network throughput? Like, you know, what will be the key lever to focus there for autonomous vehicles? Thank you. Badar Khan: Yeah. And, I mean, I think as I said before, I think this is a space that is really very exciting and is a potentially very significant source of upside in the medium to longer term. We do have 140 of the 5,100 stores that are operational, 140 today that are dedicated to autonomous vehicle partners. We separated them out in our disclosure at the 2025. We added 30 to that count last year. This year, it will be maybe a bit double, maybe kind of 50 to 75 stores. So maybe that is a metric to look at. I will say it is pretty early in the game in terms of the autonomous vehicle space. Our contract structures are ones where we—current contract structures are ones where we do not have any utilization exposure. In other words, we are just getting a fixed monthly fee for these stores. So these are kind of like contracted cash flows over a long period, you know, long term. We are still working out between our partners and ourselves what are the best contract structures that make sense for everyone in the long term. But, you know, just like human rideshare, as I said, I expect that EVgo, Inc. will become the partner of choice for these companies, just given the scale, the balance sheet, you know, and the track record that we have built here over the last many years. And we have been on the AV space—we have been serving AV partners for five years now. Andrew Shepherd: Got it. That is super helpful. Appreciate all that color. Maybe just as a last and quick follow-up. Can you maybe just remind us a capital need going forward with roughly $211,000,000 in liquidity. You also have the DOE loan. You know, how are you thinking about capital needs? And particularly if you are planning on being active in the M&A market? Thank you. Badar Khan: Well, just to be clear, we are very focused on growing the company organically. And so, there are opportunities to deploy capital that compete with that, we will look at it. But today, we are very focused on growing organically. You know, I will say—I will ask Keefer just to comment on the capital needs, but, you know, we have got one of the—at this point, I think the strongest balance sheet we have had in my time, certainly, as CEO and prior to that. So, and we have got this, I consider, kind of superior and lower-cost access to non-dilutive financing through the DOE and the commercial bank facility, and so we feel very good about those facilities. But I will ask maybe, Keefer, just to comment on how you think about the capital needs this year. Keefer Lehner: Sure. Good question. So to jump in on 2026, capital spending, right now we are estimating a range in kind of the high $100,000,000 up to approaching $200,000,000 of spend for 2026. Approximately two thirds of that would be earmarked for 2026 deployments. So the wiggle room there is just related to future capital spending that hits from a timing perspective. On a net basis—that was a gross number I just gave you—on a net basis, we are expecting offsets this year to be approximately 17%. So on a per-stall basis, we do believe we will be able to drive down gross capital spending per stall somewhere in the low single digits on a year-over-year basis as we look from 2025 to 2026. Andrew Shepherd: Wonderful. Super helpful as always. Thanks so much, and congrats again on the quarter. Badar Khan: Thanks, Andre. Thank you. Operator: And your last question is a follow-up from the line of Stephen Gengaro of Stifel. Your line is open. Stephen Gengaro: Thanks. Thanks for taking the follow-up. This was in reference to the margins and the pricing side. This came up a little bit on an earlier question, but have you implemented, or how do you handle sort of the dynamic pricing model? Like, how aware is the system of alternatives, and how do you sort of adapt to changing environments with pricing? Is that real time? Is it just—could you give me an update on how you handle that? Badar Khan: Yeah. Stephen, so we rolled out our set of dynamic pricing algorithms back in 2020, late 2024. So they have been running now for about, you know, 12 to 18 months. And these are, it is, these are really algorithms that are, you know, optimizing pricing for us to generate, you know, absolute, you know, sort of maximize absolute gross margin. And so, you know, these algorithms are resulting in different prices certainly throughout the day over a 24-hour period and across different locations where prices might be going up or down. We expect to roll out a new level of algorithms this spring. We were hoping to do that at the end of last year, but we had the record deployment of new stalls—it was the largest deployment of new stalls in the company's history ever in Q4. We wanted to just sort of manage the operational bandwidth here. And those new algorithms just take us to a lover, another level of sophistication in terms of frequency of change and disaggregation in terms of pricing combinations across our entire network. Stephen Gengaro: Great. Have a—appreciate all the details again. Operator: Absolutely. With no further questions, that concludes our Q&A session. I will now turn the conference back over to Badar Khan for closing remarks. Badar Khan: Great. Well, thank you, everyone. EVgo, Inc., as you can see, reached a critical milestone of adjusted EBITDA breakeven, and we had just a fantastic fourth quarter in terms of new stores deployed. We can see from this third-party industry data that EVgo, Inc.'s competitive moat that we spent 15 years building is really paying off, with far superior customer demand versus almost everybody else on the network. 2026, we are choosing to leverage this position of strength and make investments that both secures this competitive advantage and results in adjusted EBITDA reaching or in the triple-digit millions within reach. I look forward to sharing that progress with you over the course of this coming year. Thanks all. Operator: This concludes today's conference call. You may now disconnect.
Operator: Hello, everyone. Aline Anliker: A warm welcome to BW LPG Limited's Q4 2025 earnings presentation. My name is Aline Anliker, and I am the Head of Corporate Communications at BW LPG Limited. Today's presentation will be given by our CEO, Kristian Sorensen, and our CFO, Samantha Xu. After the presentation, we will have a Q&A session. The questions can be put into the Q&A chat during the presentation already, or you can raise your hand and ask your question directly once we move to the Q&A part. Before we begin, displayed on the current slide, I would like to highlight the legal disclaimers. Please also note that today's call is being recorded. Without further ado, I would now like to hand over to our CEO, Kristian. Kristian Sorensen: Thank you, Aline, and hi, everyone. Thanks for calling in as we review our fourth quarter financial results and the recent developments, including the Middle East situation, which dramatically escalated last weekend. Let us turn to slide four, please. So, highlights. The beginning of Q4 was marked by lower in the US–China relationship as the reciprocal port tariffs were lifted and postponed until November. In addition, there was a significant build in US propane inventories well above trend levels, driven by strong US production. Over the winter, there were no major disruptions from the usual cold season weather, supporting a wide arbitrage throughout the fourth quarter and into 2026. Moving on to the Q4 results. We reported a TCE income of $50,300 per available day and $48,100 per calendar day, above our guidance of $47,000 per day for the quarter. The Q4 profit after minority interest was $104 million, equivalent to an EPS of $0.69. Our trading branch, BW Product Services, reported a gross profit of $27 million and a profit after tax of $23 million for the quarter, and we are pleased to report a strong realization of $12 million from our trading activities in Q4, bringing the full-year 2025 realized trading results to $66 million. For Q1 2026, we are guiding on about $54,000 per day fixed for 94% of our available days. These are solid levels above our all-in cash breakeven of $23,400 per day, but it is reflecting the time charter coverage in the first quarter of 42% of our available days at $44,200 per day. Please see the appendix in this presentation for the full breakdown of the time charter days and levels. The Board of Directors has declared a dividend of $0.57 per share, representing 100% of our shipping NPAT, exceeding the guidance set by the dividend policy. Looking further on our shipping activities, we are continuing our active drydocking program in 2026, with 13 vessels scheduled for drydocking. The majority of these are planned during Q1, with a total of 193 off-hire days expected during the first quarter due to drydocking. Given the dramatic escalation in the Middle East over the last couple of days, our first priority is to ensure the safety of our colleagues and crew in the region at the same time as we protect and optimize the overall interests of the company. We have three ships from our Indian-flag fleet in the Arabian Gulf, two on time charter to Indian charterers, and one vessel in dry dock. So far, there have been minimal negative financial impacts, only pertaining to the vessel in dry dock where the nighttime work is suspended. The two vessels on time charter are on hire in accordance with the respective time charter parties. In addition, we have all the vessels on time charter idling outside the Arabian Gulf, assessing the evolving safety and security situation in the Strait of Hormuz. Our next open spot vessel for AG loading could be available the last decade of March, unless we decide to ballast them to the US Gulf, depending on how the security situation and market develop. Like we have experienced in previous rounds of increased tension in the Middle East, the market response is to secure cargoes and ships from alternative loading regions, mainly from the US Gulf. We fixed one vessel yesterday at around $80,000 per day for mid-March loading, while other fixtures in the market are reported around the same level for first-half April loading in Houston. Further, in other subsequent events from the quarter, we recently announced that in January, we secured three-year time charter-out contracts for two VLGCs, the BW Tucano and the BW UG, increasing our full-year 2026 fixed-rate time charter-out coverage to 36% at an average of $43,700 per day. Let us move to the next slide, please. So although the main attention right now is on the impact from the Middle East war, we believe it is worthwhile to remind ourselves of the market fundamentals, as 2025 and the start of 2026 positively surprised the VLGC markets. By the end of 2025, US propane inventories were well above the trend level, at 100 million barrels, compared to 85 million barrels at the end of 2024. This was driven by strong production levels and supported the US export volumes, while domestic consumption remained steady at around 50 million tons per year. As we enter the inventory draw season, US propane inventories declined somewhat but remained well above the levels typically expected at this time of the year. The high inventory levels have contributed to continued downward pressure on US LPG prices and have, together with healthy demand in the Far East, supported a wide arbitrage as reflected in the US–Far East price differential. If you look at the graph on the right-hand side, we can see the relationship between the arbitrage and the VLGC spot rates. A wide arbitrage usually allows for higher willingness to pay for shipping, something that has been the case in recent months. In addition to commercial drivers, such as the US–Far East arbitrage, other geopolitical events and infrastructure expansions have also contributed to a strong market in recent months. Late October, for instance, the US and China agreed to a trade truce, paving the way for a revived US–China LPG trade. And further into January, we have also seen the Nederland terminal in the US Gulf increasing its number of VLGC loadings after commissioning the terminal expansion in 2025. And lastly, before the armed conflict commenced on Saturday in the Middle East, the increased tension in the region led to market participants fixing vessels further out in time than what they normally would have, creating a shortage of available vessels, ultimately pushing up spot rates. In addition to the factors we discussed on this page pertaining to the exports of LPG, it is also important to look at how the developments in the Asian import markets are shaping the LPG trade dynamics under the normal market circumstances. Next slide, please. On this slide, we can see how trade flows responded to several major disruptions during 2025, with trade tensions between the US and China being among the most significant during the year. Chinese imports on VLGCs from North America and the Middle East fell by 3% in 2025 compared to the year before. This number is, however, heavily impacted by a few months during 2025 where the trade tensions were at their highest and imports from the US were much lower than normal. Towards the end of last year, China also had lower imports than usual. This, however, coincided with Chinese LPG inventories declining. For the beginning of 2026, Chinese LPG imports are again on the rise, and the ongoing Middle East conflict is likely to support more cargoes from the US ending up in China as the Middle East supply is disrupted. As we have highlighted before, incremental LPG production is priced to clear in the international markets, and with the US–China trade war as a backdrop, this produced some interesting trade flows in 2025. For instance, LPG volumes into the Far East declined 2% year over year, while India saw its imports growing by 10% during the same period, driven by higher cargo flows from the US, increasing the ton-mile compared to the traditional sourcing of LPG from the Middle East. India is a market of growing importance for LPG, with about 10%, equaling 2 million tons, of Indian LPG imports contracted from the US for 2026. We also see Indian government subsidies continue supporting retail demand, and new pipeline infrastructure is expected to further improve inland distribution. Another region that saw an increase in import volumes from North America in 2025 was Southeast Asia. This region has historically imported most of its LPG from the Middle East; however, the trade war shifting more of the Middle East volumes to the Far East increased volumes from North America found their way to Southeast Asia last year. As long as the Middle East tension is halting LPG exports from the region, we anticipate more US volumes flowing to the markets east of Suez, which is supportive for freight in the short term. Over the longer term, however, vessels that have traditionally loaded in the Middle East are likely to see cargoes from the US, which could place downward pressure on the rate structure for US-loading VLGCs. Next slide, please. Looking at the two main regions for LPG exports, North America and the Middle East, we will continue seeing export growth in the years ahead, assuming the Middle East situation returns to normal. In the Middle East, the exports from Saudi Arabia and Qatar are disrupted, with duration of these disruptions remaining uncertain at this point in time. Secondly, the raging Middle East war has halted all ships passing in and out of the Arabian Gulf, which would have a dramatic impact on Middle East exports short term. It remains to be seen how long the large energy markets in Asia can accept their supply of hydrocarbons being choked. The US exporters probably have some slack and room for optimization as we move into April, but we have limited visibility at the moment. Anyhow, it is obviously not enough to replace the shortfall of volumes from the Middle East in the medium term. If we look through the current fluid and dramatic situation, Saudi Aramco has now started oil production from the Jafura field, with gas output expected towards the end of this year. Furthermore, the first phase of Qatar's North Field expansions is expected to come online in Q4. In the US, the Permian crude oil production continues to yield more NGLs per barrel of oil produced. In addition to this, more LPG export infrastructure is coming online, enabling continued growth in exports. In sum, we expect the larger North American region to grow its exports in the mid-single digits over the coming years, while Middle East LPG exports are expected to grow in the high single digits. Next slide, please. And let us take a look at the Panama Canal, which continues to play an important role for the VLGC markets. Throughout 2025, the Canal's Neo-Panamax locks frequently saw utilization close to its max capacity, often driven by increased transits from container vessels. This fueled volatility in transit fees and waiting time, which in turn continues to divert VLGCs around South Africa in order to timely reach their destinations. The Middle East situation may increase the traffic in the Panama Canal in the short term as market participants rush to secure cargo and shipping capacity from the US. While in the coming years, we expect usage of the Panama Canal to remain high. An important driver for this is growth in several shipping segments that, to a large extent, are being built for increased exports out of the US. This includes VLGCs, of course, but also very large ethane carriers and LNG vessels. Now, it is important to highlight that not all VLGCs and LNG carriers will service the US exports exclusively. They will also be shipping volumes out of the Middle East and other places, and some volumes out of the US will not be sailing through Panama. But regardless, considering the limited capacity of the canal to handle additional transits, we will likely continue to see VLGCs sailing around South Africa in the foreseeable future. Let us take a look at the current fleet and the orderbook. We can see that the fleet has grown in the last three months and now stands at 421 VLGCs on the water. The orderbook is currently at 105 VLGCs under construction, with delivery stretching all the way to 2028. We have seen some new orders for newbuildings this year; the contracting remains modest compared to the levels seen in recent years. While we expect more newbuildings to be delivered going forward, it is also worthwhile to keep in mind that 10% of the fleet is older than 25 years of age. So to sum up, the underlying fundamentals of the VLGC market are robust in the medium term, but the serious situation in the Middle East is increasing the volatility and uncertainty. The US Gulf spot rates are so far benefiting from increased demand for cargoes and ships, while the long-term conflict will probably increase the number of VLGCs seeking employment in the US Gulf and putting pressure on the rate sentiments. The US does not have enough production and export capacity to meet the shortfall of the Middle Eastern exports, and we will probably see a rather serious situation unfolding in the consuming markets in Asia unless the exports of hydrocarbons from the Middle East resume rather soon. Assuming the Middle East situation normalizes, the medium-term outlook is underpinned by expanding export infrastructure in the US and increasingly higher NGL content in the Permian oil production. At the same time, new gas projects are expected to support LPG exports out of the Middle East in the coming years. As mentioned, the VLGC fleet is now at 421 ships. The orderbook is relatively large, and the inefficiencies in the VLGC market will define how the orderbook will be absorbed. Firstly, the Neo-Panamax locks in the Panama Canal are operated at or near full capacity, and growth in several shipping segments linked to increased US exports likely continues to divert VLGCs around South Africa. Secondly, the trade pattern will play a vital role in how much shipping capacity is needed, and we have seen new long-haul cargo flows from the US into markets east of Suez. And thirdly, if you envisage a normalization in the Middle East involving 11 million tons of Iranian LPG exports being shipped on compliant vessels rather than the shadow fleet, which currently counts about 50 VLGCs, you will have a rather bullish outlook, pretty similar to how it would play out in the VLCC tankers market. Finally, looking at the paper market at the moment, it is pricing itself around $85,000 per day for the rest of the Ras Tanura–Chiba benchmark leg, although the liquidity remains limited. That concludes our market segments. To you, Samantha. Samantha Xu: Thank you, Kristian, and hello, everyone. Thank you for being here with us today. I will start with our shipping performance. 2025 has been a quarter that we deliver above the guidance, with a TCE of $48,100 per calendar day, or $50,300 per available day. The fleet utilization was at 94% after deducting technical off-hire and waiting time. Delivering this healthy result in a market full of uncertainties is a strong testament to our commercial strategy, which builds on healthy time charters and FFAs concluded during active and strong markets. Such protection provides stability and support when spot markets come under pressure, as we have witnessed in this quarter. In Q4, the time charter portfolio was 44%, out of which 33% was fixed-rate time charters. Looking ahead for Q1 2026, we have fixed 94% of the available fleet days at an average rate of about $54,000 per day. This also includes index-linked time charter contracts, which could share some spot market upside when the market becomes stronger. For full-year 2026, we have secured 40% of our portfolio with fixed-rate time charters and FFA hedges, at $43,747.90 per day. Altogether, our time charter-out portfolio is expected to generate around million. Although the level of rates appears to be slightly lower than 2025, it continues to represent a very healthy level of earnings against an all-in cash breakeven of low $20,000. Next slide, please. In Q4, Product Services posted a realized gain of $12 million, reflecting effective risk management in the turbulent market conditions that we experienced. At the quarter end, we reported a $33 million increase in mark-to-market on our cargo position, offset by an $18 million decrease in paper positions. After accounting for G&A costs and other expenses, Product Services reported a net profit after tax of $23 million for the quarter, with net asset value at $53 million at December, creating good dividend capacity. As we highlighted in previous quarters, these mark-to-market movements, which regularly give volatility to P&L, are largely driven by the gradual phasing-in of our multi-year term contracts, as reflected in a volatile market. While the periodic value adjustments are significant, they reflect the delta between the balance sheet dates and will see fluctuations before the positions are realized. We will continue to report our future trading performance, including mark-to-market, via our quarter-end trading result updates. We are pleased to see that the analyst consensus have, in general, included our trading performance. It is also important to note that trading gains and losses are realized across different financial periods; they cannot be extrapolated from past performance, as unrealized positions will vary depending on year-end valuations. The realized trading profit, though, will add to the company's dividend potential and be considered for dividend distribution post year end, along with other factors such as net profit after tax, cash flow, and other commercial considerations. Our trading model is designed to create value by combining cargo, paper, and shipping positions. With that in mind, we would like to remind you that reported net asset value does not include unrealized physical shipping positions of $26 million, based on our internal valuation. In Q4, our average VaR, value at risk, was $3 million, reflecting a well-balanced trading book, including cargo, shipping, and derivatives, even after accounting for the increased term contract volume that is scheduled to start from the end of 2026. Going on to our financial highlights. We reported a net profit after tax of $123 million, including a profit of $31 million from BW LPG India and a $23 million profit from Product Services. Profit attributable to equity holders of the company was $104 million for the quarter, which translates to earnings per share of $0.69 and an annualized earning yield of 21% when compared against our share price at the end of December. We reported a net leverage ratio of 28.4% in Q4, down from 32.7% at the end of 2024. The reduction was mainly due to lower lease liabilities, following the exercise of a purchase option of BW Kizuku and BW Yushi, and principal repayment made during full-year 2025. For Q4, the Board declared a dividend of $0.57 per share, representing a 100% payout of our shipping profit for the quarter, beyond the 75% payout ratio of our shipping profit guided by our dividend policy. The healthy liquidity and positive outlook of the market supported our wish to pay back to our shareholders. For the period end, our balance sheet reported shareholders' equity of $1.9 billion. The annualized return on equity and return on capital employed for Q4 were 26% and 19%, respectively. Our 2025 OpEx concluded at $8,800 per day, a marginal reduction from last year. For 2026, we expect our owned fleet's operating cash breakeven to be about $18,500 and $20,200 for the whole fleet, including time charter vessels. The all-in cash breakeven is estimated to be $23,400, driven primarily by lower lease repayments and a decrease in financing cost. Next slide, please. Finally, let us look at our financing structure and repayment profile. As of end Q4, we maintained a healthy liquidity position of $613 million, consisting of $226 million in cash and $387 million of undrawn credit facilities. This is after voluntary cancellation of a two-ship financing facility, including $36 million repayment and $260 million undrawn revolving facilities. This cancellation reduced our funding cost and level of cash breakeven, further strengthening our financing discipline. Looking ahead, liquidity stays strong, repayment profile remains sustainable, with major repayments starting from 2030. On Product Services, trade finance utilization stood at $182 million, or 23% of available credit line, leaving ample headroom for future trading needs. With that, I would like to conclude my updates. Thank you for listening, and I give it back to you, Aline. Aline Anliker: Thank you, Samantha. Thank you, Kristian. We would now like to open the call for your questions. Please, you can type your questions into the Q&A channel, or you can also click the raise hand button to ask your question verbally. Please note that you have been muted automatically when joining the call; please press unmute before speaking. I would like to start with the verbal questions first before then moving on to the chat. I can see already that Petter has raised his hand. So please proceed, Petter. Petter Haugen: Good afternoon. Thank you. A quick, very difficult question first then. About the Middle East unrest. In terms of the current Iranian volumes, is there any indication that Iran is still exporting LPG, or has that now come to a complete halt? And secondly, are there any convoys now planned for other exporters within the Arabian Gulf? And if so, what is the war-risk premium paid these days? Kristian Sorensen: Thanks, Petter. We do not have the full overview of the exports from Iran under the current circumstances, but there are, let us say, unconfirmed reports that ships are still planned for exporting LPG and being through convoys, basically sailing to China. But we do not know if this is just market rumor or if it is actually a real effect. So, and your second question, Petter, what was that again? Petter Haugen: No, well, the first one was more about the Iranian-specific questions, and the second one was about the convoys, I suppose, then for other sort of legitimate exporters. Kristian Sorensen: Yes. So we do not have any concrete news about convoys being established at the moment. This is something we have seen if you look historically back to when the pirate attacks were peaking and also previous wars in the Middle East. There have been convoys with naval escort vessels established, but that is something we have no firm news about at the moment. Petter Haugen: Understood. And if you were to do the transit here now, is there insurance, or is it possible to get insurance? And what is the war-risk premium paid these days? Kristian Sorensen: As far as we have been informed, you will not get ships insured if you pass into the Arabian Gulf through the Strait of Hormuz at the moment. But this is changing from day to day, Petter, so it is hard to give an exact answer to what would be the case tomorrow. But for the time being, that is something which is difficult to assess. Yes. Petter Haugen: No. So effectively now, the Hormuz is actually closed, for LPG vessels at least. More or less. Kristian Sorensen: As far as we can see, there are no ships on the conventional fleet shuttling in and out of the Arabian Gulf. But again, what is actually happening with the shadow fleet, which is about 50 old ships shuttling between Iran and mainly China, that is unclear. Petter Haugen: Understood. Understood. A quick follow-up on the FFA rates, and to what extent would you think that those rates now quoted, we see that it is pretty similar in terms of day rates out of the US and out of the Middle East. But in the VLCC market, we have seen some numbers which are, well, from what we hear, not particularly relevant, being very high. So now the FFA market is pricing in some $80,000 plus. Is that also a level at which you can fix ships in the TC market these days? Kristian Sorensen: Before the weekend, there were reports about a one-year time charter done in the mid-$50,000s per day. So far this week, with the current situation, we have not heard any discussions about any discussions, and I think the situation is so fluid at the moment, so it is hard to give an assessment on that. But the last one in the market is reportedly in the mid-fifties per day for 12 months. Petter Haugen: Okay. That is helpful, Kristian. I will turn it over. Thank you for taking my questions. Aline Anliker: Thank you, Petter. I have Climent up next. Please, if you unmute yourself. Climent Molins: Hi. Good afternoon, and thank you for taking my questions. Several US LPG projects have come online. You commented on this briefly, but at what utilization was overall US LPG export infra running prior to the war? So, in other words, to what extent is there, let us say, spare capacity to increase volumes out of the US in the short term? Kristian Sorensen: This is a very good question, and we discussed this yesterday at the desk, actually. We believe the US terminals have some slack capacity to export more volumes if they optimize the berthing, which you have seen them do before, for instance by loading VLGCs instead of midsized vessels, so you basically have a more optimal usage of the jetties and the berths. We do not know exactly whether all the midsized vessels can be replaced by VLGCs—most likely not—but probably the US has some slack in their export volumes. It is difficult for us to assess exactly because we do not have enough visibility on the April loadings at the moment, so it is hard for us to say, but we anticipate some slack to be made available for VLGCs. Climent Molins: Makes sense. That is still very helpful. I will turn it over. Thank you. Aline Anliker: Thank you. Next up would be Joy Wu. Joy Wu: Hi. Yes. Thanks. I have two questions. So first thing is I would like to understand on the overall fleet, from what we have known until now, is there any vessel getting because of the Iran situation escalation over the weekend? And also looking forward, let us say two weeks, is there any vessel that is unable to detour to avoid the high-risk waters as far as you are aware, or is there any so-called crisis management that has been put in place for all the fleet nearby the risky waters? Yes. This is my first question. Kristian Sorensen: If I understand you, you are asking if ships can be diverted from loading in the Middle East. Is that your question? Joy Wu: Yes. Kristian Sorensen: Of course, the ships which have not yet entered the Arabian Gulf and are outside in the Indian Ocean, for instance, they can always start ballasting towards the US Gulf or other loading areas to seek employment. This is basically down to the decision made for every single vessel in the region which is not inside the Arabian Gulf. It depends: if the ships are on time charter, it is up to the charterers to decide where they want to employ the ships. If it is part of the spot fleet, the one I mentioned, our first ship which could be available for a spot cargo out of the Middle East is towards March. But, of course, if the situation is as serious as it is now, we will rather ballast the ship to the US Gulf to employ the ship, if that makes sense. Joy Wu: Yes. Thanks. And sorry to, on top of that, can I just confirm there is no vessel currently sort of stuck in that risky region near Iran? Kristian Sorensen: Are you thinking of our fleet or the VLGC fleet in general? Joy Wu: Your fleet, including all the so-called managed fleet, per se. Kristian Sorensen: As mentioned in our highlights, we have two ships from our Indian-flag fleet on time charter to Indian charterers, which are in the Arabian Gulf, still on time charter, and we have one vessel in dry dock in the region, also Indian-flagged. You will see that also being mentioned in the highlights page, slide four. Joy Wu: Okay. Got it. But do we see any serious coming up concerning these three—that two actually, one in dry dock, one is in the risky zone, sort of? Do we foresee any financial impact or any drastic negative developments to these three vessels? Kristian Sorensen: So far, there is minimal negative financial impacts only due to a slight delay in the drydocking of the ship in dry dock, and we do not have any threats to our ships or crew at the moment. So there are no direct threats, but it is an overall view on the market and the situation that is making us avoid the transits through the Strait of Hormuz. Joy Wu: Okay. Thanks. Aline Anliker: Thank you, Joy. Let us move on to John Dixon first before we then have Abhishek. Please, John, go ahead and unmute yourself. John Dixon: Hello, Kristian. Samantha. How are you doing this morning? Kristian Sorensen: Well, I guess I am here. How are you? John Dixon: Kristian, I do have a question. So I have listened to Samantha for a little while, a couple quarters, and relating to the trading profit that would be eligible for dividend distribution. Is that included in your current dividends, or are you planning on having your Board review that later in the year for dividend distribution? I am just curious to see if I can learn a little bit more how that is considered and when you are likely to have that be a part of your dividend distribution. Samantha Xu: Thanks for the question, John. That is a very good one, and also for following up our previous quarter earnings as well. Indeed, as we mentioned, Product Services—basically their realized trading result—will build on our dividend capacity, and then we would like to look at it to declare once a year post year end. So specifically for Q4 2025, the $0.57 per share dividend declared by the Board is only 100% shipping NPAT; it does not include any contributions from Product Services. However, the Product Services Board has already reviewed the proposal and also approved the dividend proposal for Product Services for 2025, and the approved dividend will subsequently be considered in the future quarters within 2026 and distributed to the shareholders accordingly. John Dixon: Okay. So that basically would be distributed on a quarterly basis throughout the remainder of the year. Is that what I am understanding? Samantha Xu: No. It would be forming the overall company dividend capacity. You can imagine that we will have a bigger base for considering the dividend distribution for the upcoming quarters. John Dixon: Okay. Alright. I understand that now. Thank you, Samantha. I appreciate the explanation. Samantha Xu: Thanks, John. Aline Anliker: Thanks, John. Next up, we have Abhishek. Please. Abhishek: Hi. Good evening. I have two questions. One, you mentioned that there are three ships which are stuck in the conflict zone. May I know the name of these three ships? And second, last year you raised borrowing for acquisition of new ships, basically new vessels in India. So, I mean, as per presentation also, we can see that India is a high-growth market for you. So do you plan any further new acquisition of fleet in India this year? Kristian Sorensen: Thank you for the questions. The ships are BW Element, BW Elventier, and BW Loyalty from the Indian-flag fleets. When it comes to further expansion of the Indian-flag fleet, that is something we are considering. It depends also on the employment that we see and where we can employ our ships most efficiently to ensure solid and robust shareholder value creation. So it is definitely something we are considering, but it remains to be seen if we decide to do so. Abhishek: Okay. Thanks. Yes. Aline Anliker: Thank you. Let us move on to some questions from the chat. We have a question posed by Kevin: Is there an option to delay drydocking to take advantage of current high charter rates? Kristian Sorensen: This is something we are always considering. It should be said that these immediate spikes that we experience now, for instance, are difficult to plan for, and these drydockings have to take place within a certain time. We try to optimize depending on the market view and so on, but it also needs to fit into the commercial program, and of course we also need to have available space at the docking yards. So the question is: yes, we try to plan around this. Usually, the first quarter is the weakest quarter of the year. If you look back in time, there have been several years where the rates are softening considerably in January, February. This was not the case this time. But of course we plan around optimizing the fleet positioning so that we can hopefully have all the vessels in position at the best point in time of the cycle in the market. Aline Anliker: Thanks, Kristian. Another question from the chat: Has the current war disruption led to higher long-term charter rates? Kristian Sorensen: So far, we have not seen that, and again, these are very recent developments, so there have not been any serious talks about time charters so far. Aline Anliker: Then another one from Kevin: Have scrapings increased recently, and will that continue or be delayed in 2026 due to the elevated spot rates? Kristian Sorensen: Scrappings, as you allude to, very much depend on the underlying freight. As long as we see the freight market operating at the current levels, we do not really see much scrapping activity, if anything at all. These ships can technically trade for many more years after they turn even 30 years of age. So, technically, if they are well maintained, they can still sail across the seven seas. Aline Anliker: The last one from Kevin: Will the three ships in the Gulf region of conflict be at risk for lower revenue than currently expected? Kristian Sorensen: For the time being, that is not the case. Two of the ships are, like mentioned, on time charter in accordance with their time charter parties, and for the ship in dry dock, we will see when she gets out of the dry dock. We see there are certain needs in the region to employ ships as well. We will see what happens, because the spot market and the freight market is evolving day by day here. But so far, no impact as far as we can see. Aline Anliker: Thank you, Kristian. If you either want to type into the chat or raise your hand, there is still some time for more questions. I see one hand up. Carl, if you would like to unmute yourself. Carl Heine, can you hear us? Carl Heine: Yes. Yes. Can you hear me? Aline Anliker: Yes, we can. Carl Heine: Could you comment a little bit about the capacity expansion in the US—Energy Transfer, Enterprise Product Partners? How I read that it is about 250,000 and 300,000 barrels a day in new export capacity. Probably not all of it will go on VLGC, or we cannot really— Kristian Sorensen: We cannot really hear you that well, to be honest. Carl Heine: You cannot hear me? Hello? Explore Africa with fear. Aline Anliker: If you just speak up a bit louder, if that is possible. Carl Heine: Yes. I wanted you to comment on the capacity expansion in the US—the exports—and how many ships you think that will, or how many ships you will need to cover that expansion? Kristian Sorensen: This depends on the trade pattern, like I also mentioned in the presentation, and also how the Panama Canal is congested or not congested in the time ahead. It is a very big difference if the ships are sailing through the Panama Canal to Northeast Asia, or, like we have seen recently, more and more ships sailing around South Africa into India and Asia, which is absorbing more shipping capacity actually than if you sail the milk routes from the US through Panama to Northeast Asia, quick turnaround and back again. I think it is hard on the spot to simulate that exactly, but we can— Carl Heine: A high–low number? Kristian Sorensen: Sorry. How many ships? Carl Heine: No, I said you can just provide a high and a low. Kristian Sorensen: Sorry. A high number of ships needed for the exports. Is that what you are asking for? Carl Heine: Yes. You can just give us—are you low or high? Kristian Sorensen: Are you talking up until 2028, or is it within this year? Carl Heine: I was thinking first and foremost this year, but I could get both answers, please. Kristian Sorensen: I need to get back to you on that exactly, to be honest, because I do not have that number in front of me. I will get back to you on that when I have looked at the numbers. Carl Heine: But these two projects, when do you think they will come online in '26? Kristian Sorensen: You mean Enterprise—the two Enterprise expansions, right? Carl Heine: Yes, and Energy Transfer. Kristian Sorensen: Energy Transfer is already ramping up as of the beginning of this year—end of last year, beginning of this year. Enterprise is expanding their flex capacity first, and then secondly the LPG-specific capacity, which is later this year. You will see in our previous investor presentation, we have it stacked up on slide number six, is it not? Yes. Aline Anliker: Alright. Thank you. Any more questions before we round up? Aline Anliker: If not, thank you, Kristian. Thank you, Samantha. Hold on. I just see another hand. Okay. Well, okay. We have—let me check. Okay. We have a couple of minutes. So, Choi, if you would like to unmute yourself, please. Joy Wu: Yes. Thanks very much. I will make this quick. So going back to the three vessels, Indian flag, in the risky zone, I could not get the names. I think I heard two names. One is Element, one is Loyalty, and one is the drydocking vessel's name? Kristian Sorensen: Yes. Elventier and Loyalty are the ships' names. Sorry. Element, Elventier, Loyalty—that is the three vessel names. Joy Wu: Okay. Okay. Thanks. Kristian Sorensen: Okay. Thank you. Aline Anliker: Well, thanks a lot to all our key stakeholders for joining us for today's call. Thank you, Kristian. Thank you, Samantha. This will conclude BW LPG Limited's Q4 2025 earnings presentation. The call transcript and the recording will be available on our website shortly, and again, thanks for dialing in. We wish you a good rest of your day and look forward to seeing you again next quarter. Thank you.
Operator: Good afternoon, everyone, and welcome to Grupo Bimbo's Fourth Quarter and Full Year 2025 Results Conference Call. If you need a copy of the press release issued earlier today, it is available on the company's website at grupobimbo.com. Before we begin, I would like to remind you that this call is being recorded and that the information discussed today may include forward-looking statements regarding the company's financial and operating performance. All projections are subject to risks and uncertainties, and actual results may differ materially. Please refer to the detailed note in the company's press release regarding forward-looking statements. I will now turn the call over to Mr. Alejandro Rodriguez, Chief Executive Officer of Grupo Bimbo. Please go ahead, sir. Alejandro Rodríguez Bas: Good afternoon, everyone, and thank you for joining us today. Connected on the line today are CFO, Diego Gaxiola; BBU President, Greg Koehrsen, along with several members of our finance team. I'm very excited and deeply honored by the opportunity and the trust placed to lead this extraordinary company as CEO. I would like to extend my sincere gratitude to Rafael Pamias for his leadership and dedication to Grupo Bimbo. Under his guidance, the company strengthened its strategic positioning and operational discipline, always driven by a long-term vision. My commitment is to build on this trajectory and continue positioning Grupo Bimbo as a beloved company in households around the world by driving growth through our powerful brands and expanding our global presence. Together with the leadership team, we will maintain a constant focus on our associates, customers and consumers while preserving and strengthening our culture and philosophy of building a sustainable, highly productive and deeply humane company. Before we move forward, I would like to recognize the recent retirement of Tony Gavin and Mark Bendix in the near future. Tony served as President of Bimbo Bakeries U.S.A, completing an extraordinary 42-year career with the group. And Mark will be concluding more than 12 years in the company, serving most recently as Executive Vice President of Grupo Bimbo. We're deeply grateful for their leadership, commitment and lasting contributions to Grupo Bimbo. As part of a planned leadership transition, Greg Koehrsen was appointed President of Bimbo Bakeries U.S.A and joined our Steering Committee in January 2026. Greg brings more than a decade of leadership experience with Grupo Bimbo. He has held several senior positions across the organization, most recently leading BBU's transformation journey. We're pleased to have Greg leading the continued evolution of BBU. He will join us on all future conference calls and will be available to address questions regarding the North America business. Now turning into the year in 2025. We proudly celebrate our 8th year anniversary. Over these 8 decades, we have grown from a small bakery in Mexico into the world's largest baking company and a relevant player in snacks with a global footprint and deeply humane culture that continues to define who we are. As part of this milestone, we inaugurated MiBIMBO in Mexico City, an interactive museum that honors our journey and brings our story closer to the community. We warmly invite everyone to visit. Celebrating our history also reinforces our commitment to innovation, long-term value creation and to nourishing a better world over the next 80 years. In 2025, we advanced these commitments through discipline and execution and deliberate actions. Despite the complex global environment marked by macroeconomic volatility, inflationary pressures and shifting consumer behaviors, our performance demonstrated underlying strength and resilience of our business model. We delivered record financial results and market share gains across multiple categories, supported by continued investment in our brands, expanded distribution and a robust innovation pipeline. We also achieved solid profitability gains driven by disciplined operational performance across regions, further supported by productivity gains in North America, where we're capturing the early benefits of the transformation initiatives launched in 2024 with notable efficiencies across manufacturing, administrative and logistics operations. As a result, we achieved margin expansion for the full year, all while continuing to execute with discipline [indiscernible] strategic bolt-on acquisitions in attractive high-growth markets, including Eastern Europe. These actions strengthened our global footprint, expanding our presence to 93 countries, enhanced our capabilities and improved our ability to serve evolving consumer needs. Building on this foundation, as consumption habits and occasions continue to diversify, innovation remains key to our strategy. Our innovation rate now exceeds 12%, reflecting our ability to translate consumer insights into differentiated offerings. By leveraging the strength of our trusted brands, together with the prior CapEx investments, operational excellence initiatives and recent acquisitions, we have reinforced our competitive position to further strengthen our market leadership. This integrated approach provides a strong platform for the long term, sustainable growth, supporting incremental volume gains, enhancing profitability and creating enduring value across our markets. On our ESG journey, 2025 marked a milestone year in advancing our commitments, aligned with our purpose of nourishing a better world through our Baked For You initiatives, 98% of our bread, buns and breakfast portfolio deliver positive nutrition. We remain on track to eliminate all artificial colors by 2026 and continue to strengthen our core portfolio with around 48% of sales meeting or exceeding the 3.5 star benchmark under The Health Star Rating System, demonstrating optimal nutritional quality in every bite. Our environmental agenda through our Bake for Nature initiatives have achieved 100% reuse of treated water versus our 2020 baseline, while exceeding our generic agriculture target with more than 500,000 hectares cultivated under these practices. We also reached 99% recyclable packaging. We continue to progress in renewable energy and fleet electrification with more than 40,000 electric vehicles. Looking ahead, we remain fully focused on advancing our medium- and long-term ESG ambitions. While challenges remain, celebrating Grupo Bimbo's 80th anniversary with record results and the ongoing commitment of our people highlights the strength of our operational model and culture with disciplined execution at the core of all our efforts. We are well positioned to continue delivering consistent performance, driving profitable growth, enhancing returns and creating sustainable value in 2026 and beyond. Now taking a look at the regional results of the fourth quarter. In Mexico, we delivered 4.8% sales growth, reaching an all-time high for a fourth quarter. This solid performance reflects our ability to grow despite a softer consumer environment, delivering positive results across all categories with particularly strong performance in sweet baked goods, cakes and buns and rolls. Results were also driven by favorable product mix and positive execution across all channels with convenience standing out positioning double-digit growth. This positive momentum accelerated towards the end of the quarter, including a record sales week in December, marking the strongest weekly performance in the region's history. This robust top line growth, combined with the distribution efficiencies, productivity gains and disciplined cost control resulted in an adjusted EBITDA margin expansion of 40 basis points to robust 22%, reflecting the strength and flexibility of our operational model. Looking ahead, we remain encouraged by the resilience of our portfolio and the strength of our commercial execution. Through initiatives focused on prioritizing volume performance and delivering an attractive value proposition across both price and product mix, supported by innovation, we expect to maintain positive momentum. In North America, excluding FX, fourth quarter sales declined by 3%, reflecting a still soft consumption environment. That said, our top line trends continue sequentially, supported by the actions taken throughout the year to strengthen revenue growth management, a more refined price pack architecture and bring differentiated innovation to market, all to enhance our value proposition to consumers. We are particularly encouraged by recent innovation launches that address evolving consumer needs, including Sara Lee half loafs designed to serve smaller households and more accessible price points and Thomas Protein bagels, which resonate with health-conscious consumers. Our actions in 2025 are reinforcing our confidence that we have and continue to improve a portfolio of attractive consumer-centric products that positions us well to drive sustainable growth. Our efforts have resulted in market share performance improvements across all branded categories with positive gains in buns and rolls, mainstream bread and salty snacks. On profitability, thanks to the record productivity benefits captured throughout our transformation initiatives, we delivered a strong 330 basis points EBITDA margin expansion to 9.2%. This performance demonstrates how our team's discipline and focus are translating into structural improvements, strengthening efficiency and competitiveness across the operation. Looking ahead, while external headwinds remain, the improving momentum across key categories, coupled with the operational strength built throughout the transformation initiatives position us well to continue progressing and to support a more balanced path toward growth and profitability over time. Moving on to Latin America. Excluding FX effect, net sales grew 15.4% to a record fourth quarter level, driven by positive momentum across every organization as a reflection of a strong focus on execution and effective price/mix strategy. Sales results also benefited from the acquisition of Wickbold completed in October 2025. Wickbold is a leading bakery player in Brazil that complements our brand portfolio and expands our presence in key categories, further strengthening our leadership position in the market. This acquisition offers meaningful synergy potential, including commercial opportunities and scale efficiencies that will enhance profitability over time. During the quarter, integration-related expenses led to a contraction of 420 basis points on the EBITDA margin. These investments are focused on capturing future synergies and strengthening the long-term value of the business, while additional integration costs are expected in the coming quarters. They are strategic in nature and aimed at unlocking efficiencies and commercial opportunities. As integration advances, we expect margins to progressively improve. Excluding integration expenses, adjusted EBITDA margin for Latin America contracted 180 basis points due to higher raw material costs in Brazil attributable to the FX impact as well as increased general expenses from strategic investments for future growth, mostly related to improvements in Chile's commercial operating model across the supply chain, including benefits from the transformation project in North America and past accretive acquisitions. In Europe, Asia and Africa, excluding FX effect, sales increased 17.8%, reaching an all-time high. This performance was primarily driven by the consistent strength of Bimbo QSR Romania, U.K. and India, which posted double-digit growth rates, coupled with the contribution from the acquisition completing during the year, including Karamolegos in Romania and London in the Balkans. The remarkable adjusted EBITDA margin expansion of 420 basis points resulted from the solid sales performance, productivity initiatives, lower administrative and restructuring expenses related to last year's bakery closure in Spain and the accretive contribution from the past acquisitions. This performance led to a record double-digit margin of 13.8%. With this, I would like now to turn over the call to Diego, who will walk you through our financials. Please, Diego, go ahead. Diego Cuevas: Thank you, Alejandro. Good afternoon, everyone, and thank you for joining us today. 2025 demonstrated the value of our diversification, disciplined execution and long-term view. Despite the challenging operating environment, we not only met our guidance, achieving record levels of sales and adjusted EBITDA, but exceeded our profitability outlook, driven by a better-than-expected fourth quarter performance. As a result, adjusted EBITDA margin expanded by 30 basis points to 13.9%, the second highest annual margin in our history. Across our operations, performance was underpinned by notable strengths. Our EAA region substantially increased profitability, reaching a record double-digit margin. Significant contribution came from our operations in Mexico, posting sustained growth and an all-time high adjusted EBITDA margin of 20.4%. These achievements helped offset the softer consumption environment in North America and short-term headwinds that we face in LatAm. Furthermore, we continue to capture record productivity benefits from the transformation project in North America, driving a margin expansion of 60 basis points to 9% for the year, reinforcing our confidence in the path we have set. Alongside these efforts, enhanced revenue growth management capabilities, lower raw material costs and disciplined strategic investments also helped us surpass our original profitability outlook despite continued volatility in the global operating environment. From a capital allocation perspective, the $1.2 billion in CapEx that Alejandro mentioned for 2025 came below both prior year levels and our initial guidance of $1.3 billion to $1.4 billion. Although investments were lower than expected, our capital allocation priorities remain unchanged, centered on productivity, growth initiatives and long-term value creation. This same approach guided the acquisitions completed during the year, strengthening our platform in attractive markets and supporting long-term returns. In addition, we also distributed MXN 5.6 billion through dividends and share buybacks. Moving on to the balance sheet. Our total debt closed at MXN 154 billion. The increase compared to 2024 reflects the financing for CapEx and strategic investments, partially offset by the 11% appreciation of the Mexican Pesos. While we had originally anticipated a gradual deleveraging phase to start in 2026, our strong operating results, our focus on cash flow discipline allow us to start the beginning of this deleverage process in 2025 with our net debt to adjusted EBITDA ratio declining 0.2x as compared to 2024, closing at 2.7x. Also 3 weeks ago, we issued MXN 12 billion in Mexican bonds in 2 tranches, 4 and 9 years. It was a success. It attracted a remarkable demand of MXN 19 billion, which underscores the confidence investors have in our strategy, financial profile and long-term objectives. Now, I would like to provide some visibility of what we are expecting for 2026. First, regarding top line, excluding the effect of the appreciation of the Mexican peso, we anticipate sales to increase in the low to mid-single-digit range, driven by growth across all regions in local currency, supported by continued investments behind our brands, value-accretive innovation for consumers and a strong frontline execution. We also foresee a gradual improvement in the consumer environment, particularly in North America. Now incorporating our exchange rate assumption, where we are estimating an appreciation of the Mexican peso in 2026 as compared to 2025 of MXN 1.50. And given that approximately 2/3 of our sales are generated outside of Mexico, this appreciation represents an impact of more than 500 basis points on our expected top line growth. As a result, we expect net sales in peso terms to be flattish. Regarding our adjusted EBITDA margin, we expect a slight margin expansion, driven primarily by operational leverage and efficiencies across the supply chain, including benefits from the transformation project in North America and past accretive acquisitions. As for our raw material costs, we expect stability to a slight tailwinds throughout the year as some commodities have experienced decreases. Finally, we expect CapEx investments to range between $1.2 billion to $1.4 billion, reflecting the carryover from 2025 as we close below the plan. This is just a timing effect as we continue to follow a focused and prudent investment approach centered on returns, efficiency and strategic growth. As we look to 2026, we do so with confidence, supported by exceptional teams, a resilient business model and a globally diversified platform that continues to deliver solid results. The progress achieved in 2025 has strengthened this foundation, positioning us to continue advancing on our long-term value creation path. Thank you all for your time. We can now proceed with the Q&A session. So please go ahead. Operator: [Operator Instructions] The first question will come from Ricardo Alves with Morgan Stanley. Ricardo Alves: Impressive performance in Mexico, particularly on the profitability. Congrats on that. Now, it beat at least our numbers, mainly on SG&A. We noticed in the release and I quote efficiencies in distribution productivity across the value chain and lower admin expenses. Can you expand here? What's striking to us is that you'd find ways to cut costs in such a high-performing division already. So I think it's worth exploring what were those low-hanging fruits, those initiatives that you still found perhaps in Mexico, how sustainable that could be? And I think that, that would help us model the division a little bit better. So just more thoughts on the Mexico profitability. My second question is quicker. I think that this one is probably to Diego on financial expenses. Financial expenses were higher than what we expected a bit. I think that in the release, you're making reference to energy hedges and higher leverage in rates. So just wanted to hear a little bit more details as it pertains to the magnitude of each effect. It's not 100% clear to us what would be cash in nature, for instance. We did notice that there is an FX component, an FX loss component, but it's too small to explain. So if you could elaborate a little bit more on those other issues, Diego, that would be super helpful. Alejandro Rodríguez Bas: Thank you very much for your question. So we drove EBITDA margin expansion through solid top line growth. But as you asked, we also worked in 3 fronts. So the first one was distribution efficiency. So despite that we seem to be mature, we have worked with our commercial execution and route-to-market model that expanded customer reach and improved selling efficiency. So like you said, it's a mature model, but we will continue to work on it. Productivity gains, we're working on food waste reduction as we have had. We're just doubling down on it and improved finished goods control. And finally, a disciplined cost control, enabling savings across administrative and operational expenses. For instance, we're using AI in administrative tasks to look further for optimization. Diego Cuevas: Ricardo, thank you for joining the call. Well, let me explain a little bit more details on the financing cost for the full year, if I got your question correctly, right, not just for the quarter. Ricardo Alves: The question was a little bit more on the quarter, but that's totally fine also. Diego Cuevas: No problem at all. I can jump to the quarter. No problem, no issue. So basically, yes, as you mentioned, we have an important increase of a little more than 20% for the fourth quarter, which is mainly driven by the impact of energy cost hedges, which I will probably get into a little bit more details to provide the right visibility and understanding of this movement. We also have higher interest expenses from an increased debt position. And finally, and less material, a higher foreign exchange loss. Now what happened also it's a comparable basis. What we have related to the VPPA, a Virtual Purchasing Power Agreement, which, as you know, is a financial contract with a renewable energy developer that allows to support the renewable energy generation without physically receiving the power has some fluctuations on the P&L depending on the price as compared to what we have in the agreement. So what happened last year is that we had a movement on the cost of energy where the fixed price was lower than the projected energy prices, which made us to recognize a benefit in the income statement. And of course, conversely, if the fixed price is higher than the projected prices, then we will have an impact in our results. So maybe this quarter wasn't a big movement. What happened is that in the comparable quarter 2024, we did have a positive impact. So that is basically the VPPA. And then the other, as I mentioned, I think it's very clear, we have a higher leverage in absolute terms, although we were able to deleverage the company before our expectation. Remember that we had for the full year a guidance of a slight improvement to a flat leverage ratio. So seeing today, the leverage of the company at 2.7x as compared to 2.9x, it's a very good news. We were able to anticipate the deleverage, as I mentioned, by being very careful on the CapEx. We ended below the expectation, but also a better operating performance, as you noted, basically across all different segments. Operator: The next question will come from Ben Theurer with Barclays. Unknown Analyst: This is Reeve filling for Ben. Sort of 2 here. Firstly, as there's been more discussion around GLP-1 adoption and potential implications for food consumption. Have you seen any measurable impacts over 2025 in volume or mix, particularly in North America and more developed markets such as Europe? And how do you materially view this as a factor today versus something that's still more of a longer-term consideration? And secondly, EAA saw a meaningful step-up in profitability this quarter. Can you break down the key drivers of the margin expansion and discuss how much of this is sustainable versus one-off? Sort of how should we think about the margin progression in EAA over the next few quarters? Alejandro Rodríguez Bas: Thank you, Ben. I will take the first one. So the impact from Ozempic GLP-1, we have a greater understanding of the phenomenon now and its consequences, and we have detected some changes in consumer behavior among users. We're actively working on enhancing our portfolio, and let me share with you 4 initiatives. One example, we're making products with a higher fiber and protein content. We believe this trend is here to stay, and we will continue to ride on it as protein bagels or within the Thomas brand, and we're also around the world developing products in our big breakfast category. So we expect to see more innovations like these ones. The second one is we're also offering smaller portions in snacks with a minimum nutrition density. And by bringing smaller portions, we accompany this kind of adopting consumers. The third one is we have been developing sugar-free recipes and increased innovation in premium products. The premium products that will overall maximize the experience of this seeking a reward, but at the same time with a lower or non-sugar content. And finally, we will continue to transition into simpler and more natural recipes. By this, we will provide options for these emerging consumers. So as I said, more grains, higher fiber, more protein-based solutions and continue to innovate in that space. Diego Cuevas: Yes. So now for the question regarding the improvement in the margin. I mean 2025 was a record year for EAA. It's a reflection of an exceptional performance driven by both, one, solid organic growth, but also the contribution from accretive acquisitions, particularly the last one that we did in the Balkan that as we mentioned when we concluded this acquisition, it is accretive in all points of view to the profitability of the company. We feel confident that this margin is not only sustainable, but that we can continue to improve it in the future. Specifically, EAA has been a region that has outperformed. In 2025, we achieved a 12%, 5-year compounded annual growth rate in sales, and reached the record annual margin of 10.8% with more than a 300 basis expansion for the year. So we're very happy with the performance, but also we're very confident for a positive future for this region. Operator: The next question will come from Alvaro Garcia with BTG. Alvaro Garcia: My question is on North America. You mentioned you foresee a gradual improvement in the consumer environment there. You also made some comments on sort of where the transformation project is in the context of your margin guidance. So yes, any color on sort of the factors driving that potential gradual improvement? And any commentary on margins, specifically for North America in '26 would be very helpful. Alejandro Rodríguez Bas: Thanks for the question. I'll talk a few points on trends, and then you also asked about our transformational efforts. So as it relates to trends, you saw in our prepared comments and it's pretty clear and syndicated data that the total category continues to be somewhat pressured we are seeing sequential improvement in the category quarter-over-quarter in 2025. And beyond that, we've seen improvement quarter-over-quarter in our share performance over that period of time. We're particularly excited about our performance in mainstream bread, in buns and rolls and in salty snacks, where we've seen positive share gains in the fourth quarter, and those have candidly continued on even at the beginning of this year. So the thing I would leave you with is that the consumer continues to be bifurcated across the market, value mainstream and premium and our response is to make sure that we are innovating into those spaces appropriately to move where our consumers are going for each of the cohorts. So that's how I might think about the trends. In terms of our transformation journey, I would say we've made significant progress in 2025. As you could imagine, we looked at every area of our business from a cost perspective, manufacturing, logistics, procurement and our G&A spend. And I just want to thank the team for the progress that they've made together over the course of time. I would expect us to continue to be very inspecting all areas of our cost base. We will continue to do that. The other area that I think is important is that our price and promotion. We looked at our pricing and promotion very carefully over the last couple of quarters. We're going to continue to look at our pricing and promotion activities very carefully to make sure that we're doing so in a way that is beneficial to our customers. And we will continue to have rational and disciplined pricing and promotion activities as we go forward as well. So I think that's important to understand as we think about our transformation journey. Operator: The next question will come from Antonio Hernandez with Actinver. Antonio Hernandez: Just a quick one regarding Latin America. What are your expectations there, especially in Brazil? I mean you have now this new acquisition and an interesting year because of elections. So the overall outlook in the region and more specifically in Brazil. Diego Cuevas: Antonio, we weren't able to hear the last part of your question. So do you mind repeating, please? Antonio Hernandez: Sure. My question is regarding your outlook in Latin America and more specifically in Brazil, given the recent acquisition, an interesting year there in Brazil because of elections as well. So overall outlook in the region. Diego Cuevas: Yes. I mean, we feel confident for the region also that we will start to see positive trends as we believe the fundamentals for sustained growth are in place. Now I want to be very specific that in the fourth quarter and in the coming quarters, we will still have some extraordinary expenses for the integration of the Wickbold acquisition. That, of course, I mean, it was a project that took a lot of time to be approved. And it's a project that has the potential to create synergies, but we need to invest a lot and many of these investments are going to be reflected through the P&L. So that can put some pressure in the short term. But again, now with a more long-term view, I think that the region will start to go back to previous margins. And now with the acquisition and once we end the integration, we feel confident we're going to be able to surpass even the level of margins that we had in the past. Operator: The next question will come from Froylan Mendez with JPMorgan. Fernando Froylan Mendez Solther: Can you hear me well? Can you hear me, sorry? Diego Cuevas: Yes. Yes. We can hear you. Fernando Froylan Mendez Solther: Perfect. Excellent. Regarding the evolution of the project in the U.S., how far are we from stabilized margins? How far can they go? And could you share a little bit more color on the outlook on a per region basis, both top line and margins, if possible? Alejandro Rodríguez Bas: Yes. Thanks for the question. I would say in terms of where we are in the transformation journey, we've made significant progress, as you can see in the results in 2025. To reiterate, we will continue to look at every area of the business. We expect that our -- the gains that we made in this past year, we feel good about how they will carry on into the future. And short of giving specific guidance, I would say that we will continue to look at every area of the business as we have done and will continue to do. Diego Cuevas: Yes. And regarding the guidance or the outlook for the different regions, we do not provide that specific guidance. What I can tell you without being specific is that, of course, we feel confident that it's going to be a positive year in local currencies. So organically, we're going to be able to see some growth. And also, as I mentioned, for Grupo Bimbo, we expect a slight margin increase, which is, of course, the consequence of improvements in the different regions. Fernando Froylan Mendez Solther: Well, maybe if I can then add a little bit on the U.S., in the U.S., where do you base your, let's say, view that there should be an improvement? Is this more on your side, regaining share? Or is it more of a consumer recovery that you're seeing or expecting? Alejandro Rodríguez Bas: Yes. Maybe a couple of things. Again, I think we see moderate improvement in the category, but it's a category that continues to be pressured. There are certainly pockets of growth. And for us, it's really about making sure that we are being disciplined about innovating in the right spaces for our consumers. I would say, too, as we continue to be rational and disciplined as it relates to pricing and promotion, I do think that, that will continue to be positive for the entire category in 2026. Operator: The next question will come from Matteo Bessada with TRG. Mateo Besada: Congrats on the results. I don't know if you already touched on this, sorry if you did. But I wanted to know if you could provide a little bit more color on what drove the margin improvements in Peru, see if there were any unusual tailwinds or if it's fair to expect this type of structurally higher margins from now on like consistently on the double digits. Diego Cuevas: We had a strong operating performance in many markets. You know the LatAm region is the composition of several countries. Peru, Ecuador, Chile, there are many markets that had a very good performance. And again, that, we still believe that we can continue to have an improvement in the margins. Of course, we do not disclose not only the guidance, but the specific margins by country. Now the -- for the quarter, the region had what we mentioned, the impact, particularly from the operations of Brazil because of 2 things. One, the pressure that we had from the cost of sales due to the hedges that we had for the FX and also the onetime expenses related to the integration of Wickbold part of the [indiscernible] Brazil business. Mateo Besada: Sorry, guys, I don't know if I said LatAm. I wanted to hear about Europe margins. Diego Cuevas: Europe? Sorry. I thought you were asking about Peru. So I probably made -- it wasn't very clear. So for Europe, I think that this was also previously asked. In Europe, we had a record year. We had an organic growth, but also the positive contribution of the acquisitions that we did enter into new -- 4 new markets through the acquisition of Don Don in the Balkans. This has helped also the margins of the regions. It was a very accretive acquisition. We believe that this margin is not only sustainable, but we have room to see a continuous improvement. Operator: The next question will come from Renata Cabral with Citigroup. Renata Fonseca Cabral Sturani: I have 2, actually are follow-ups. One is related to the transformational project in the U.S. I wonder if you could share some color of the advancement in terms of operation that you achieved so far? And for 2026, what should be the top priority within the products, for instance, the distribution of the salt or the sweet snacks, you see more opportunity in one or in the other or both if the -- all the logistics capabilities are already in place. If not, where do you see some opportunities to tackle in 2026 would be really helpful. And another one is a follow-up on margins in the U.S. because we are seeing some transformation in the markets that the company operates. From one side, we have the increase in the portfolio of the private label. On the other hand, we have the new transformational projects. So both interacting will end up maybe in 3 to 5 years in a different margin for the company. So not asking for guidance here, but more direction in terms of what do you think the margin from U.S. will go towards the next couple of years? Unknown Executive: Thank you for the question. I'll start, and then I'll turn it over to Diego for the second part of the question. As it relates to the transformation journey, I would think about 2026 as sort of deepening our efforts on almost every area that we've already talked about. So logistics, manufacturing, our pricing and promotion disciplines, all of those we're going to continue to work along. If there's one thing I would maybe add to the discussion, and Alejandro already mentioned this in his prepared comments, is using AI as an enabler across all of those different areas. So demand forecasting, network optimization, et cetera, those are areas that we believe that AI can be utilized within our organization in order to make it even better in the future. So that might be one area of color that would be additive to the conversation. For the rest of it, I'll turn it to Diego. Diego Cuevas: Thank you, Greg. Well, let me give you a little bit of color. I'm going to go back a few years. We used to operate in North America, and this, of course, is past history in the low double digits. So 2022 was 11%. Then in 2023, we had a 50 basis point contraction. And then as everybody knows, we had a very complicated second half in 2024, and we ended the year in 8.4%, 8.5%. Now what we're seeing in 2025, I think it's outstanding, more considering that we still haven't seen a recovery in the consumption environment as we already talked about. Unfortunately, we're still seeing a decline on volumes. But even though we're facing that complicated consumer environment in the U.S., we were able to deliver, I would say, an impressive and above our expectation margin expansion, not only in the fourth quarter, but for the full second year. I perfectly remember when we provided the guidance last year that we were very specific that still for the first half of 2025, we were expecting a margin contraction, and that exactly happened. Now what we feel very happy about is to see how sequentially the margin contraction in North America started in the first quarter with 130 basis, then negative 70 basis. Then we were able to achieve 90 basis points expansion and of course, this quarter, 330 basis. So we were able to end the year with a positive margin expansion in North America, 60 basis. Now consider that first, volumes were not necessarily on an optimistic environment. And second, that we have a lot of onetime expenses in the year. A lot of expenses that have to do with the transformation that we have talked a lot about and that Greg explained, and that is putting some pressure to the results. So now are we going to continue to have expenses, definitely, because we haven't ended this transformation. Is this going to create some pressure? Yes, not necessarily more than the one that we already have in 2025. That on the side of the expenses. What is, I would say, encouraging is to think that we will start to see and capitalize on these past investments. So I think that more than a specific comment on the guidance for 2026 or 2027, I will definitely say that we're on the right path to go back not only to the margins that we had in the past, but even to end having a company with a higher profitability than the one that we had some years ago. Operator: The next question will come from Felipe Ucros with Scotia Bank. Felipe Ucros Nunez: Alejandro, I think you just took one from me on where long-term margins could go in the U.S. and whether you would get back to levels. I had a second one, which had to do with the market share gains. You discussed this quite a bit in your remarks and also in the release. I know there's been a little bit of innovation, but I imagine those categories are still small. Wondering what you think was the main driver in getting those shares back up? Any color you can give us on those would be great. Unknown Executive: Yes. Thanks for the question. And I'm assuming that the market share gains that you're talking about were -- I'll at least speak to North America. And if there's a question beyond that, I'll let Alejandro take it. As it relates to North America, I would say a couple of things. First, the innovation is -- has been successful. So -- and Alejandro talked about both of the ones that I'd like to highlight. Small loafs, which really go to shrinking overall households in terms of number of people and then our protein efforts, Thomas' Bagels being one example of that, where we are reaching to not only new consumer cohorts, but also existing consumer cohorts that are changing their purchasing behaviors and their consumption behavior. So you can expect us to continue to innovate along those lines because those have both been successful, and we expect to do more innovation like that in the future. I would also add that part of our transformation efforts has been around sales execution. And with that, that's around all of our DSD disciplines. And we've seen improvement in our DSD disciplines, thanks to the fine efforts of our frontline associates that are in the field every single day. And that goes to our ordering patterns. It goes to executing at a high level on our innovation when we do launch it and then also executing at a high-level, our promotional activities when we partner with customers in order to do something exciting within the consumption environment. So I would say execution has been part of our improvement as it relates to our share gains. So innovation and execution would be where I would underline. Felipe Ucros Nunez: And the question was mostly for the U.S. So that covers it. Operator: The next question is a follow-up from Ricardo Alves with Morgan Stanley. Ricardo Alves: It's on snacks. We noticed 2 divergent sales trends more recently. In sweet snacks, Entenmann seems to be losing a little bit of share on the margin. So I just wonder if there is any update on the competitive environment in the U.S., specifically around Entenmann and your main competitors? Any pricing or discount that we should be aware or I don't know, maybe packaging or channel issues. On the flip side, as I said, diverging trends. Salty snacks, super strong. So I wonder what's up with Takis. What is the latest double-digit growth in the fourth quarter? So just wanted to see the industry is still kind of flattish. So anything that you could do. If you could zoom a little bit further into those 2 subcategories, that would be helpful to understand what's going on. Unknown Executive: Yes. Great. Thanks for the question. Appreciate it. I'll answer the question as it relates to sweet snacking, and then I'll turn it over to Alejandro, who can probably talk more broadly about salty snacking. Yes, as it relates to sweet snacking, I would say it's always -- it always has been and continues to be a very competitive environment. It is a subcategory that has been under probably a little bit more consumer pressure than most subcategories. So there's certainly that component of it. I would say as it relates to the competitive environment, we're continuing to take a hard look at the intimates business specifically and our Sweet Baked Goods portfolio in general. We believe that there are innovation that we can bring to the -- to those brands and to the category that we think will be helpful to the consumer who is still very interested in those offerings. So there's some work to do, I would say, on Sweet Baked Goods, but we're actively working on that as we go forward. Alejandro Rodríguez Bas: Thank you, Ricardo. And as you know, I used to be the leading person of the salty snacks globally. So I think our success in the U.S. in this fourth quarter has been the result of what Greg was talking. It's all about execution. It's focusing in what we know what to do, and we're just doing it better. Our product is awaited. It's awaited everywhere, and we're just being able to drive through more product and the response of consumers has been very good, as you have seen.
Vincent Warnery: Good morning, everyone, and thank you for joining us for our full year 2025 results conference. I'm pleased to present an overview of our performance, together with Astrid, who will later provide a detailed financial review. But before we begin, I want to touch on the situation in the Middle East. In situations like this, the safety of our employees and their families is our highest priority. Teams are in place in the regions to offer assistance and support on the ground, and we are in close communication with them. Given the volatility of the situation, it is too early to assess any potential impact on our business. We hope for a peaceful solution soon. Let me now turn to our full year 2025 results. 2025 was a year that demanded a lot from us. Economic and geopolitical uncertainties, shifting consumer behavior and continued trade disruptions negatively affected market dynamics. Skin care market growth slowed to levels not seen in recent history, with particularly strong effects in the emerging markets region. These conditions shaped and challenge our performance more than anticipated at the start of the year. Even so, we continue to make progress in several important areas and where we fell short, we took immediate action. At the same time, 2025 showed that the core elements of our strategy remain effective. Our focus on science-based innovation, our global footprint and expansion into new markets, our culture of care and responsibility. This provided important stability throughout the year. In a challenging market environment, we were able to maintain our position as the best-performing skin care company globally for the third year in a row. Once again, our Derma business was an undisputed success, driven by innovation, white space expansion and strong scientific credibility. La Prairie showed initial signs of improvement towards the end of the year, but the recovery remains fragile in a volatile luxury market and disruptions in the retail landscape negatively impact Q1 2026. And while our skin care focus strategy has delivered on many fronts, the most recent performance of NIVEA requires a strategic rebalancing. We have taken decisive actions, laying the foundation for restoring momentum and returning our business to a more attractive and profitable growth trajectory. In 2025, the global skin care market slowed significantly, decelerating from mid-single-digit growth in 2024 to around 1.5% to 2%. This slowdown intensified as the year progressed and was particularly visible in regions that have driven strong growth in previous years, including Eastern Europe and emerging markets. Pricing normalized after inflation-driven increases, geopolitical tensions influenced consumer sentiment and consumers became more cautious and increasingly selective in their routines. While Beiersdorf was affected by this market slowdown in 2025 and continues to feel its impact in 2026, we were still able to deliver solid growth in a significantly more challenging environment. NIVEA ended the year with an organic sales growth of 0.9%, reflecting the impact of weaker market dynamics, a repositioning of our business in China as well as a back-end loaded innovation pipeline. Our Derma business delivered double-digit growth for the fifth year in a row, supported by breakthrough innovations and successful expansion into white spaces. Our Health Care business continued to perform strongly, with close to double-digit growth, providing further evidence for our innovation-driven strategy. At La Prairie, organic sales declined by 4.5% in 2025. The performance improved quarter after quarter, but market conditions remain volatile. Tesa delivered moderate growth of almost 2%, driven by a strong performance in the electronics business. Altogether, our skin care business grew by 3.7%, clearly ahead of the market. Once again, we outperformed our key competitors in this segment and remained the best-performing skin care company globally. This performance underscores the strength of our skin care expertise and its ability to deliver sustained outperformance. Let's dive a little deeper into our Derma business. The undisputable success story of our Derma brands Eucerin and Aquaphor continued in 2025. Net sales reached a record EUR 1.5 billion, approaching close to 20% of consumer net sales, supported by continuous market share gains in a market growing only at low single-digit rates. In Q4, facing a tough comparison with the Epicelline launch in the prior year, Derma still grew by nearly 10%. Derma growth in 2025 was broad-based across all regions. In Europe, our home market, Derma delivered an impressive 8.3% organic sales growth as Epicelline continued to drive the performance. In North America, our largest Derma market, we grew by nearly 9%, an outstanding results driven by Face Care and Radiant Tone, our Thiamidol product in the U.S. In emerging markets, at 16.3% organic sales growth, Thailand, Mexico and Brazil were the key performance drivers. In addition, India, domestic China and Japan were important white spaces that we expanded into. We also continue to outperform competition. This is a testament to the success of our science-based growth strategy of launching breakthrough innovations and successfully expanding into white space opportunities. Our innovation, our hero ingredients, Thiamidol and Epicelline are continuing their success stories. Thiamidol, in its eighth year, continued to grow at double-digit rates. In early 2025, we launched it in the U.S. and later in the year, we brought this innovation to the domestic Chinese market. Epicelline, our anti-aging breakthrough ingredient continued its successful rollout across Europe and in emerging markets. Our Derma innovation pipeline remains strong and sets industry standards. The entry into white spaces has unlocked new growth opportunities for industry. Let me share a few examples. In India, Eucerin's launch generated strong momentum. It was one of the first global dermocosmetics brands to enter the market and quickly became a top dermatologist recommendation. In China, following regulatory approval, Eucerin's Thiamidol serum was launched on the domestic market and has become the #1 derma anti-pigment serum. And in Japan, we introduced Eucerin, marking another important milestone. As the world's third largest cosmetics market, expectations for quality and innovation are extremely high. For this debut, we developed a premium anti-aging line, tailored to local consumer needs. Our Health Care brands, Hansaplast and Elastoplast delivered one of the strongest years in history with organic sales growth of more than 9%. The launch of our Second Skin Plus Protection plaster illustrates how we continue to drive innovation even in mature categories. This advanced technology offers superior healing and protection. It is setting a new benchmark in wound care and resonates strongly with consumers. We continue to invest in research and development to reinforce our leadership in this segment with new innovations coming soon. NIVEA faced a particularly challenging year, navigating difficult market conditions and delivering growth below our initial expectations. There were 3 key factors behind this development. First, the market slowdown was more severe than we expected. Second, we completed a comprehensive repositioning of our business in China, which temporarily affected our performance negatively. And third, most of our major innovations were scheduled for the second half of the year, which limited momentum early on. In 2025, the mass market for skin and personal care products slowed significantly. The decline was most notable in emerging markets, where value growth rates more than half versus 2024 and further deteriorated throughout the year with volume growth turning negative in Q4. Skin and personal care were most effective than other beauty categories. This had a direct impact on NIVEA's performance over the year. The speed and scale of the market downturn exceeded our initial assumptions, requiring adjustment to our guidance during the year. In China, we successfully completed a fundamental repositioning of NIVEA to prepare the brand for long-term success in this key market. Our strategy in China is clear. We aim to win through innovation in skin care. Therefore, we shift our focus away from price-sensitive personal care categories and partners, prioritizing premium skin care and accelerating growth through digital-first channels. This involved streamlining our portfolio, optimizing distribution and tailoring innovation to local consumer needs. These measures were completed by the end of third quarter and NIVEA is now better positioned to compete in China's dynamic market and capture future opportunities. Subsequently, we launched Thiamidol under NIVEA in the domestic Chinese market, leading to impressive double-digit growth rates of NIVEA in the fourth quarter. Our innovation pipeline in 2025 was strong but the major launches were concentrated late in the year. As a result, the contribution for innovation to our full year performance was limited, particularly in the first half. The rollout of breakthrough innovations such as Epicelline began to contribute in the latter part of the year, especially in Q4. In 2025, we launched Epicelline on the mass market. Our NIVEA Cellular epigenetic serum represented the strongest NIVEA face care rollout in our history. The selling performance has been strong and in line with our expectations, reflecting robust retailer demand and effective distribution. We also saw very good sellout momentum. The product quickly reached #1 positions at leading retailers and continues to be the #1 serum across Europe. Reliable data and consumer repurchase rate is not yet available, given the recent launch. This will be a key metric to monitor in the coming months to assess long-term consumer loyalty and the sustained performance of Epicelline in the mass market. Our Luxury brand, La Prairie represents a smaller share of our business, but it remains a strategically important part of our portfolio. The full year remained below 2024 levels. But as we had expected, the business showed a sequential improvement quarter-over-quarter, growing plus 3.8% in Q4. This was mainly driven by more favorable deployments in China, particularly in e-commerce. At the same time, the luxury market remains highly volatile with persistent weakness in the U.S. and in travel retail markets. Ongoing disruptions in the U.S. department store landscape as well as travel retail in China are expected to negatively impact our performance in the first year of 2026. With that, let me hand over to Astrid to walk you through tesa and our financials. Astrid Hermann: Thank you, Vincent, and good morning from my side as well. Let me start with the performance of our tesa business. In 2025, tesa delivered organic sales growth of 1.8% in a challenging global economic environment, characterized by tariff disruptions and ongoing challenges in the automotive industry. Within our industry segment, electronics was again the main growth driver, with particularly strong results in Greater China and Asia Pacific. The product ranges from mounting front and back modules, solutions for battery bonding and conductive tapes were further developed and converted into customer-specific solutions. The automotive business closed the year broadly in line with the prior year. Ongoing volatility in Europe and North America continued to weigh on the performance, while China and Latin America delivered growth supported by successful customer projects. Printing and Packaging Solutions also recorded year-on-year growth. The performance was driven by expanded activities in splicing tapes and flexographic printing, with notable contributions from North and Latin America and continued positive development in China. Finally, the Consumer segment delivered growth despite a challenging market environment, especially in Europe. E-commerce showed strong year-on-year development and made a meaningful contribution to the overall result. Let me now walk you through our 2025 financial performance. Overall, we delivered a stable performance in a challenging market environment with organic sales growth of 2.4%. We also made further progress on our profitability. Our EBIT margin increased to 14.0%, up 10 basis points versus last year, reflecting continued cost discipline and ongoing operational improvements. Earnings per share increased to EUR 4.25, up 4.9% compared to 2024, driven by improvements in our profitability and our tax rate. This outcome underlines the financial stability of our business in a year marked by significant external pressures. These results provide a strong foundation as we recalibrate our NIVEA strategy, continue to innovate and drive sustainable long-term growth. Let's now turn to the segment level performance. In 2025, Beiersdorf Consumer business net sales grew to EUR 8.176 billion at an organic growth rate of 2.5%. Adverse foreign exchange effects, including a softer U.S. dollar resulted in a lower nominal growth of 0.02%. Profitability improved with EBIT, excluding special factors, growing to EUR 1.108 billion, a 20 basis points margin increase driven by disciplined cost management despite cost pressures on our gross margin. Our tesa business recorded organic growth of 1.8% during the same period, closing the year with net sales of EUR 1.676 billion. Due to unfavorable foreign exchange effects, nominal sales slightly declined by negative 0.7%. The EBIT margin, excluding special factors, was 16.1%, in line with our guidance. Now let's take a closer look at our performance across the different regions. In Western Europe, we achieved robust organic sales growth of 1.8%, particularly in key markets like the U.K., Italy and Spain. As always, it is important to highlight that our luxury travel business is also included in this region and had a negative impact of nearly 100 basis points. Our business in Eastern Europe declined by 2.3%, driven by softer markets and overexposure to personal care, retailer disruptions as well as intensified competition with local brands, particularly in our key market, Poland. The Americas regions closed the year with sales growth of 3.1%. This good performance was largely attributable to the outstanding results of our Derma brands in the United States and in Canada at high single-digit growth rates as well as the continued strong growth of NIVEA in Canada. At the same time, Latin America experienced a notable slowdown, particularly in the Personal Care segment. As a result, our softer NIVEA sales in key markets such as Brazil and Argentina, weighed on our overall regional performance, while Derma sales grew at double-digit rates. The Africa, Asia, Australia region recorded 4.5% organic sales growth. India was the most important positive contributor to this growth next to Japan. Our NIVEA repositioning activities in China negatively impacted this region in the first 9 months of 2025. Following the successful completion of our repositioning activities, China contributed significantly to increasing the region's organic sales growth to 9.3% in the fourth quarter. Now let's take a look at the development of our consumer gross margin. Our Consumer gross margin decreased by 70 basis points year-on-year from 61.0% in 2024 to 60.3% in 2025. Pricing contributed positively, adding 30 basis points, underscoring the continued strength of our brands and our ability to partly offset cost inflation despite a more moderate pricing environment. Increased costs driven by higher raw material prices and limited volume growth weighed on our gross margin. Mix effects positively contributed 40 basis points, primarily driven by the continued outperformance of our Derma business. Lastly, unfavorable foreign exchange effects contributed minus 50 basis points. Let me conclude our financial overview by highlighting the key elements of our group income statement for the year. Our group's net sales grew slightly to EUR 9.852 billion in 2025. Our group gross margin declined to 57.7% with tesa experiencing similar cost and foreign exchange pressures as our consumer business. Our marketing and selling expenses remained roughly at the previous year's level, reflecting a slight increase in the Consumer and a slight decrease in the tesa business. We continue to drive strong support for our brands with consumer-facing activities, which we were able to increase in 2025, while also driving effectiveness and efficiency of our marketing expense. As in previous years, we have taken the decision to continue to increase our R&D spending, reflecting a strong commitment to fostering breakthrough innovations that will shape our future. At the same time, we maintained a disciplined approach to our general and administrative costs, leading to a reduction of these expenses in 2025. Our EBIT, excluding special factors, grew to EUR 1.378 billion, a 10 basis points EBIT margin increase in line with our guidance. Lower special factors as well as an improved effective tax rate were additional drivers to increase our profit after tax to EUR 955 million or EUR 4.25 per share, a EUR 0.20 increase compared to 2024. Back to you, Vincent. Vincent Warnery: Thank you, Astrid. After 5 years in our roles, this is the right moment to take a closer look at what has driven our performance and how effective our strategy has been. Over the past 5 years, we increased net sales by almost 30%, reaching a level of EUR 9.9 billion in 2025. Despite the slowdown in 2025, we continue to be the best-performing skin care company, outgrowing our key competitors in this important category. EBIT, excluding special factors, also improved significantly by almost 40%, a clear proof of our commitment to profitable growth. Our top line outperformance was fueled by 3 key pillars: First, breakthrough innovations. Science-based research and development are at the heart of what we do. Second, successful expansion into white spaces, both in terms of categories and markets. And third, a strong and growing e-commerce business. We have been growing double digit in e-commerce for more than 5 years in a row and gaining market share. In 2025, we generated 17% of our net sales online. Let's start with innovation. One of the clearest examples is Thiamidol. This highly effective ingredient has been cascaded across our brands and markets, the latest additions being Chantecaille as well as the U.S. and China. Since I started at Beiersdorf, we have turned the Thiamidol franchise into a EUR 500 million business. We are continuing to grow double digit and are gaining market share again, supported by high recognition of the ingredient in the scientific community. Thiamidol was validated by a scientific consensus of 10 world-leading dermatologists as the only dermocosmetics solution for the management of hyperpigmentation. Another breakthrough innovation is Epicelline, a game changer in anti-age, and while everybody speaks about longevity, our epigenetics technology already provides a solution. After its success in the Derma segment, we launched Epicelline to the mass market through NIVEA. This reflects the same principle as Thiamidol, developing highly effective ingredients based on strong science and systematically making them accessible across brands and markets. Microbiome research at S-Biomedic is the next frontier of our innovation pipeline. What started as a venture capital investment and R&D partnership several years ago has turned into the development of a breakthrough microbiome innovation for acne-prone skin. We developed PROBIOM8 to correct blemishes from acne-prone skin using the first-ever skin-native probiotics. With significant results proven in clinical studies, it is planned to be launched under Eucerin DERMOPURE CLINICAL in the second half of this year. Evaluated by hundreds of dermatologists and tested on thousands of consumers, PROBIOM8 significantly improves acne-prone skin with no side effects. More to come later this year, stay tuned. Turning to the second pillar of our strategy, expansion into white spaces. We have focused on the defined set of key markets and made strong progress in the U.S., Brazil, India, China and Japan. Let me briefly zoom in on the U.S., Brazil and India. In all 3 markets, our white space strategy has translated into measurable progress. In the U.S., we launched Eucerin Sun followed by Eucerin Face and introduced Thiamidol in 2025. This strengthened our foothold in one of the world's most competitive dermatological skin care markets. Our Consumer business in North America has reached EUR 1 billion. In Brazil, Eucerin advanced from a niche positioning to one of the leading players in the market. Within just 5 years, we managed to move from #15 in the market to a #4 position. And India remains a clear success story for us. While we been present in India with NIVEA and our Health Care business for a long time, we managed to more than double our business within the last 5 years. This was driven by outstanding performance of NIVEA as well as the launch of our full skin care portfolio, including Eucerin, La Prairie and Chantecaille. Our Derma business has fully delivered on our strategy. Since 2021, we almost doubled our business, reaching sales of EUR 1.5 billion in 2025. Even in the slowing Derma market last year, our Eucerin and Aquaphor brands demonstrated double-digit growth. Also, NIVEA, the largest skin care brand in the world grew by an impressive 34% over the last 5 years. We succeeded in regaining credibility in face care through Thiamidol and Epicelline. However, the required investment has not allowed us to maintain the right advertising focus on other categories. And through our exclusive global innovation program, we lost some momentum on core local ranges in some key countries. As a result, we were not able to outperform the market to the same extent as in prior years, and NIVEA's growth slowed significantly in 2025. We have, therefore, taken decisive action to recalibrate our strategy for NIVEA to restore the brand's growth trajectory, which is a key priority for '26 and 2027. What exactly does this recalibration mean? We are rebalancing our NIVEA strategy along 3 pillars. First, we are broadening our focus by strengthening categories next to face care, such as deodorants and body care. So going next to major global franchises, we'll support important local product lines by giving key markets such as China, the U.S., India, Japan and Brazil, greater flexibility in local execution. And third, we are putting more effort behind accessible face care products. Let me dive a little deeper into each of the pillars. NIVEA already has a strong foundation in categories such as deodorant and body care. Building on this base, we are shifting parts of our investment in R&D, marketing and new launches in these categories. By broadening our range, we are strengthening NIVEA's position across a wider set of segments and creating additional growth opportunities. In recent years, NIVEA focused strongly on global launches and centralized campaigns. Going forward, we'll continue to rely on growth innovation platforms and hero ingredients as a foundation, but give local teams greater freedom to tailor launches, products and marketing to local needs and push key local franchises. One example is LUMINOUS Glow, a successful innovation for Emerging Markets. Another one is NIVEA Facial, a key face care line in Brazil that we launched in other markets as well. Lastly, we rebalance the focus also to popular face care products at a more accessible price range next to the premium face care lines like LUMINOUS and Epicelline. NIVEA remains an iconic yet accessible brand. Our portfolio deliberately spans from everyday essentials to premium innovations. And as you know, the vast majority of our portfolio is priced at very accessible levels. The rebalancing of the NIVEA is underway. In the fourth quarter of 2025, we initiated a shift in our advertising and promotional spending, reallocating resources to support a broader range of categories and local initiatives. This marked the first step in the rebalancing process. In 2026 and beyond, we are implementing a set of pipeline measures to strengthen our innovation road map. This includes breakthrough ingredient line extension on the one hand, and broader launches across categories on the other. We are fostering fast-track execution of innovation to meet current trends, and allowing for certain regional innovation tailored to local consumer needs. These measures will take some time to show their full impact. We are confident in our ability to return NIVEA to sustain growth, and will report on our progress in each of the coming quarters. So let me turn to the outlook for our business. We own and manage some of the most iconic skin care brands in the world and operate in the highly attractive skin care market, the largest category in the beauty space. Over decades, this market has demonstrated strong resilience and a consistent ability to recover within 1 or 2 years after periods of slowdown or decline. Our well-established and trusted brands together with our Win With Care strategy, provide a strong foundation to navigate the current market environment and to deliver sustained long-term growth. Let us now look at our midterm guidance. In an evolving market environment, our focus remains firmly on outperforming the market. We'll do so by continuing to expand into white spaces, launching breakthrough innovations and responding dynamically to changing market conditions. A key priority will be to return NIVEA to an elevated growth trajectory through a clear action plan and targeted measures as part of our strategic rebalancing. On top of that, the use of our cash position to pursue inorganic growth opportunities remains an important element of our strategy and should provide additional upside. We also remain committed to profitable growth in the midterm, which translates into growing EBIT at least as fast as net sales. We are convinced of the continued EBIT margin expansion potential for our business. In light of the global market dynamics, we will not quote a specific number. We'll have to be flexible to respond to market conditions and will not sacrifice long-term value creation opportunities for short-term margin gains. While the use of cash for inorganic growth remains a core element of our capital allocation strategy, we have also strengthened our commitment to returning cash to shareholders. This is reflected in enhanced cash distribution through share buybacks and dividends. As a next step within this framework, we are continuing to strengthen shareholder returns. The Executive and Supervisory Boards of Beiersdorf propose that the dividend for the 2025 financial year is confirmed at EUR 1 per share. The proposal will be submitted to the Annual General Meeting on April 23. Following the successful share buyback programs in 2024 and 2025, Beiersdorf will initiate a further share buyback program valued at up to EUR 750 million over a period of 2 years. While we remain very confident in our profitable growth prospects over the mid and long term, it is important to acknowledge that market dynamics has not improved at the start of this year. We saw a clear slowdown over the course of last year, and the softer environment has continued into early 2026 without clear signs of a near-term recovery. And while we have initiated our NIVEA rebalancing strategy, the measures will take some time to become fully visible. In parallel, the luxury skin care market remains volatile. And while improvements were visible in China in 2025, severe disruptions in the U.S. department store landscape and travel retail in China negatively impact the current performance. We view these disruptions, especially in China, travel retail, as temporarily and not a full reflection of the underlying consumer demand. Nevertheless, they will have a noticeable negative effect on our Q1 luxury performance. Let us turn to our guidance for 2026. Against a continued challenging and volatile market environment, we expect sales to be flat to slightly growing organically across our business segments. This applies to both the Consumer and tesa segments as well as at group level. We still expect to be able to outperform the market as demonstrated in previous years. The first quarter of 2026 is expected to land below this range at a low single-digit negative organic growth rate. While Derma is expecting to deliver another strong quarter, NIVEA's innovation momentum that positively affected Q4 2025 is less impactful this quarter. In addition, the disruptions in U.S. retail and China travel retail landscape we put significant pressure on the luxury brands in Q1. On profitability, we expect the EBIT margin, excluding special factors in Consumer, tesa and for the group to be coming slightly below the 2025 level. This is driven by raw material cost increases, unfavorable FX and only limited fixed cost leverage on gross margin. At the same time, we'll not decrease our marketing spend proportionally as we want to ensure sufficient investment behind our brands. This concludes our full presentation, and we are looking forward to your questions. Over to you, Christopher, for the Q&A. Christopher Sheldon: [Operator Instructions] And we will start with Callum Elliott of Bernstein. Callum Elliott: Hopefully, you can hear me. So my first question is on the strategic rebalance, specifically, the increased support and spending that you were talking about behind deodorants, body care, local product lines. Is that incrementing -- incremental spending vessel or just a reallocation of resources away from face care? And can you talk a bit more about when you expect to see the benefits of some of that rebalance? And then my second question, please, is on cash conversion. You guys have the weakest cash conversion of all large cap global consumer staples companies. and it gets worse this year in 2025. I understand that there's part of this driven by strategic decisions around CapEx, et cetera, but on more executional pieces like working capital, again, we see you getting worse this year, working capital now over 10% of sales. So my question probably more for Astrid, is this cash conversion a strategic focus for you at all? And if yes, when should we expect to see improvement? And if no, why not? Vincent Warnery: Thank you, Callum. So I will take the first question. Obviously, the focus that we had on premium face care was very expensive in media. This is by far the most expensive skin care category. So what we are doing is simply to reallocate part of the spendings from premium face care into body and deo and affordable skin care. The good news is that on those categories, they are much less media intensive. So we can really develop strongly those businesses with an amount of working media and amount of promotion, which is much below what we are currently spending on the NIVEA premium face care. Second question? Astrid Hermann: Yes. So Callum, to your question related to cash conversion, yes, it was not where we were hoping it to be this last year. There were some impacts that were related to some aging tax payment that we've made to stop the clock there, but are absolutely looking to recover. We also had, obviously, given the very backloaded Q4, some impact, obviously, on working capital. We also had some higher inventory than we would have liked to, but we are looking to improve that. And I can promise you that it is a focus for us as a company, and we're looking to make progress in 2026. Christopher Sheldon: And then the next one on the line is Celine Pannuti of JPMorgan. Celine Pannuti: So I wanted to first come back on the guidance for the year. Low single-digit negative, you said for Q1. So you mentioned the impact from the department store and travel retail. Is it possible to give us a bit of an idea of how much double-digit down will La Prairie be in Q1? And likewise, NIVEA, I would expect still it to be as well negative. Would that be the case in Q1? And does it mean that the rest of the year, you expect it to be up low single digits or thereabout? And how do we think about this when you have a tough comp in the second half? My second question is on NIVEA, because Vincent, you are recalibrating the strategy. I was nevertheless surprised that we don't get more innovation benefit. You said that the innovation benefit in '25 was really hitting at Q4. And why don't we get that innovation benefit in H1? I appreciate you don't have the data from the repurchase rate, but like it feels like the innovation doesn't have a lasting impact. So what visibility do you have on this? And if you could also explain the -- you give more freedom to local markets to adapt. I understood when you came 4, 5 years ago that probably there was too much freedom. So can you come back and explain what's different when -- in the recalibration you're making? Sorry for long questions. Vincent Warnery: Thank you, Celine. On your first question on the Q1 2026, I think we are -- obviously, we are very optimistic regarding Derma, and this is clearly the driving force of Beiersdorf. It has been, it will be. On NIVEA and La Prairie, we have 2 different phenomena. On NIVEA first, Q4 was clearly a quarter of selling because we have tesa, as you remember. From September, this is where we had most of the innovation. So we have done a good quarter with NIVEA, but now we have to sell out the innovation. We don't have new selling innovation coming in Q1, it's more Q2. So it's about absorbing the volumes, being sure that we drive the sellout. The good news that the first market share is positive. That's encouraging, but this is what will happen in the Q1. On La Prairie, it's a bit specific. We are clearly seeing over the year a progress. The retail sales, the sellout is improving. We are even growing double digit in China. We are improving our figures in the U.S., growing high single digits in Europe, but we are hit by 2 phenomenas, which are not hitting only La Prairie, and you've seen that in the course of our competitors. On the one hand, the U.S. department store environment is difficult with one key retailer being on Chapter 11. And in China, there was a change of travel retail operators of the 2 airports of Beijing and Shanghai Sunrise, which obviously has an impact on the volumes because they are -- they didn't buy in December and the new trade -- travel retail operators will buy more at the end of the quarter, beginning of Q2. So that has an impact on the selling figures of the Q1. And to give you -- to quantify that, it will be a double-digit loss, but hopefully, after looking at the good health of the sellout, we'll do a better job. On your question on NIVEA, the recalibration in fact, is clearly taking place in September. It started by the launch of the Derma Control deodorants together with Epicelline. And then it's coming with new launches, new initiatives, which will hit the shelves starting in Q2, but more surely in H2. When you look at the launches we did in the last quarter, we are very happy with Epicelline. Epicelline is -- we said that already, but it's by far the best ever launch of NIVEA in face care. We went immediately to a position of being the #1 serum in Europe, very, very important launch for us. We have seen the sell-in. We have seen the sellout. We are just waiting for repurchase rate. But as you know, we know pretty well the formula, because it's very close to what we launched in -- on Eucerin. Derma Control is starting well, it's a good figures in Europe. We are gaining market share in deodorants, which is something we didn't have since a long time. So we hope to see those 2 launches developing well in Q1 and Q2. And we have also a lot of other opportunities, other launches, other activities coming in the second quarter. So yes, we'll see clearly the digestion of the selling of Q4 into Q1 and this development of the sellout. And then we should enter into a more positive dynamics, having still in mind, and this is also one of the main reason of the guidance that we are working on the skin care market, which is at 1% growth. So that's also the big change versus what we had in the past years. We are clearly in a slowing market, and this is impacting, obviously, a brand like NIVEA, which is very large, which is in multiple categories. On your last question, Freedom, in a frame, this is the way we call it. You're absolutely right. In fact, when I took over as a CEO, I saw a NIVEA landscape, which was purely local. And it's not that it was working because we had a lot of small things in the countries, but none of them being really impactful. So I move it to a direction, which was a bit extreme, which was to globalize NIVEA. So it was successful, as I said, on franchises like LUMINOUS, Thiamidol and Epicelline, but it also was made at the expense of some strong local franchises. We mentioned Facial in Brazil, which used to be, in fact, the basis of NIVEA skin care in some key countries. So we are not only reassessing those local franchisees as key priorities and coming with new launches. But also, we are ensuring that the countries can play with them. It's about influencers, for example, it's about specific in-store activities. It's about also advertising campaigns. We'll have some global campaigns, but we'll have also some local campaigns in China, in Japan, in India, in Brazil, in the U.S. that we believe will be better at recruiting new consumers. So that's this rebalancing. We are not back to the history, but we are just rebalancing versus the globalization that took place since 2021. Christopher Sheldon: The next one is Warren Ackerman of Barclays. Warren Ackerman: It's Warren Ackerman here at Barclays. So one operational question and one strategic. The operational one is really -- can you maybe dive into Eastern Europe? I know it's been weak all year, but it really lurched down in Q4. I think it was down like 7% organically, well below consensus. So -- and I know you've talked about Poland and other places. But can you maybe kind of slightly deeper dive into what actually is going on in Eastern Europe? And is that one of the key reasons why the guide is so low for 2026? What is your expectation for Eastern Europe for this year? Are you seeing kind of delisting? Is it just big share losses? What's happening in Eastern Europe? And then the second one is strategic. I think on the wires, Vincent, you say that M&A is a top priority. I think the quote is we're looking at every skin care opportunity that comes to market. Just a bit surprised on that comment, given you're in the middle of a big repositioning of NIVEA, you've got soft skin care market to deal with. Is this the right time to be looking at deals, where you've got so much going on, on the base business and also when perhaps some of the results from Coppertone and Chantecaille haven't been the best. Just interested in the timing of that comment and what's behind it? Vincent Warnery: Thank you so much. On your first question, yes, we had a difficult year in the Eastern Europe, and it used to be a growth driver for the Consumer division. First, the big thing is that the market went down from something that used to be 15% growth to flat 2%, 3%, which was, in fact, the results also of some consumer -- lack of consumer confidence. And the fact also that over the years, we all have now to increase prices due to increase of cost of goods. So there was clearly an issue of consumer confidence. We had also a specific issue in the fact that we're over-indexed in personal care in these markets. We are pretty small in skin care. We are more in personal care. And in deodorants, we were hit by a lack of new products, but also a lack of investment. And there is also a dynamic which is very interesting. There is a strong development of local brands. Korean brands, for example, which is obviously a challenge for us. So we have to come back with new products, new initiatives. We had also some difficult discussion with some retailers indeed. The good news is that we are back to very good discussions with retailers, and we have some good plans in place. We have also a lot of new launches, and I mentioned this affordable face care. This is one of the regions where we'll be clearly investing in affordable face care. And last but not least, we believe also that some of the activities we are putting in place, for example, influencers, will help us also regaining market share again, Korean brands. So it's not yet the light at the end of the tunnel, but we feel more positive about Eastern Europe than we were in 2025. On your second question, yes, we are looking at every acquisition. We are obviously looking at businesses that we could improve. This is why we will clearly not buy companies in places where we have no muscles, no know-how. We have to look at that. We have, as you know, a pretty small portfolio. We have also learned. We -- I think the M&A muscle has developed over time. We did a much better job with that Chantecaille than we did with Coppertone. Chantecaille is one of the big hopes of 2026. We fixed the basics. We have also a new team in place. So I believe we have a kind of knowledge or learning curve that is making us more able to integrate and to make good businesses. So when they will come, we look at them, we might make an offer. We might not make an offer because every time we look at really at the price, but we need to be clearly looking at opportunities because today, we have a portfolio which is much too small. Christopher Sheldon: And the next question is from Joffrey Bellicha Meller of Bank of America. Joffrey Meller: The first question is on the Chinese growth component in the fourth quarter. I was just wondering if you could explain a little bit more of the contribution from Thiamidol in the country and whether you had seen any cannibalization effects from your cross-border e-commerce sales previously. More importantly, I guess on China, thinking about 2026, you obviously have an easy base or an easy comp due to the rebalancing act you've performed last year. But I really wanted to understand whether you saw any legs to the growth that you saw in 4Q? And maybe I'll leave it at that on the Chinese piece. The second element that I wanted to ask, maybe this is more for Astrid, but with this affordable face care line that you want to launch, what will be the impact on mix for the gross margin in 2026? And also in the press release, in that regard, you mentioned that the NIVEA rebalancing was going to last into 2027 as well. So is there any way of guiding us or helping us understand where we could land in terms of margins on EBIT for 2027? Vincent Warnery: Thank you, Joffrey. On China, I must say that we feel pretty positive. If you look at the different brands of the portfolio. I will start with La Prairie. La Prairie, we grew double digits, not only on e-commerce, but also on brick-and-mortar. We are gaining market share. So we are pretty positive about the development of China. And I think some of the new products we are launching in the coming months will make our business on La Prairie business even better. We have also the launch of Chantecaille, which started at the end of the year, which is pretty promising. It's more e-commerce than brick-and-mortar, but this is clearly an opportunity for us. And then there is a Thiamidol effect that we took us 12 years to get the registration of Thiamidol. We started to launch Thiamidol and Eucerin, and we are extremely, extremely happy with the results. Immediately, the serum, the anti-pigment serum became the #1 anti-pigment serum online in the market. And we are even the #2 anti-pigment brand online. So clearly, outstanding results on Eucerin. We are coming also with new products, the beauty of the Thiamidol story is that it comes with a lot of new SKUs. So I clearly believe that on Eucerin, we have found our way and China will become one of the top countries in the next future. On NIVEA, we started late. We started only at the end of the year in November, December. The figures are good. But I want to be not overpromising. We have still some work to do. As you remember, we are transforming a cheap offline personal care brand into premium online face care brand. It has obviously -- it is a stretch. We have some good launches. We have some good activities. But overall, I think we'll have a good quarter 1, and we'll have a good year on all the brands of Beiersdorf in China. Astrid Hermann: And then your question on the affordable face care and the impact on mix as well as your question on EBIT. So look, the affordable face care line still tends to be accretive to our overall margin, especially also because the A&P spend behind it is not quite as strong as in our premium range, so it's still accretive. Additionally, we continue to believe that we will grow our Derma business quite strongly, which will have a positive impact on our margin and our mix. Of course, there is then the investment behind other lines such deo and body, which will partly offset that. We're looking to still have a slightly positive or a balanced impact on margin and on the mix. So let's see. In terms of 2027 EBIT, what we are saying for the midterm is that we look to continue to drive profitable growth. We are not at this time committing to a specific EBIT increase. Christopher Sheldon: The next question is from Jeremy Fialko of HSBC. Jeremy Fialko: Look, when we take the '26 guidance in aggregate, it obviously implies a worse performance for Consumer relative to 2026. So perhaps you could kind of give us a little bit more color from a sort of a brand standpoint, what you're expecting over the year? For example, do you think that NIVEA can grow in the year? Or is the repositioning and the work you need to do going to mean that it will be negative? And then I guess maybe the second question is if we can just go a little bit deeper down into some of the drivers of the growth that you'd expect to see from NIVEA? And what I'd be interested to hear your comments on the things such as the drag you're likely to see on Personal Care, and whether there's going to be any sort of negative pricing effect on NIVEA, if there are certain things that you need to reposition or whether you think that the brand volumes actually can be positive? So those are my 2 questions. Vincent Warnery: Thank you so much, Jerry. On the guidance, we clearly have built the guidance on what we know and not what we hope. So when I look at what we know, we know that the skin care market has slowed down, used to be 7% last year. It's today more into the 1%, even negative in emerging market in volume. So that's something we have to take into account, which is particularly important when you deal with NIVEA. It is also confirmed by the performance of some competitors. You saw the #1 skin care company delivering close to 0% growth. So we know it's a difficult moment for skin care. That we know. The second thing we know, which is obvious, we know that Derma will continue to overperform. We are extremely optimistic with Derma. We have some big launches, and we mentioned and we'll talk about that later at the launch of Activia. We have also some big things coming at the end of the year. So more to come, but Derma is more than ever the growth engine that we know. We know also that I mentioned that, the effect of Sunrise and also the U.S. retail department store environment is causing us a big decrease in Q1. So obviously, we'll have to make it up in the next 9 months, which means that the performance of La Prairie won't be in line with the good performance we see in the sellout. And last but not least, something we don't know yet. We don't know yet when the recalibration of NIVEA will show its effect. We are happy to see that the January market share is positive. That's something we didn't experience since a long time. So that's a first very, very good sign. We know also that the new products are coming in the second semester that we are also having this activation of local franchises in the second quarter. So we will -- clearly, we are aiming at having a positive NIVEA in 2026. But clearly, the market dynamics will pay a role. The appeal of our new products and new advertising campaign will have a role, and this is something we'll monitor. And of course, we'll update you every quarter. On the second element, NIVEA Personal Care, it's a complicated environment because we have clearly a good proposal in Europe, and this is why we were happy to see some market share gain in Europe with the launch of Derma Control. So we are even in a pretty good position and #1 in many countries. It's a bit more difficult in emerging markets. We have clearly some markets which are collapsing, was the case of Brazil. We know also that we have to improve the value of our deliveries in the sense that we cannot increase prices, but we have to increase profitability in order to invest. So there is some value management to engage in. So we are working on that. We have not yet -- we have not yet found the perfect recipe for emerging markets, but this is clearly a priority. And also here, what is interesting, we have big, big local franchises in Latin America, in Thailand. So we will also leverage those franchises, which have a pretty strong appeal locally, and that will complement the global launches like Derma Control and the relaunch of Black & White. So we don't need to decrease prices. You have to remember that NIVEA is cheap. It's between EUR 2 and EUR 10. Only 2 products are more expensive. This is LUMINOUS serum and this is Epicelline. So we have a good price, but clearly, we have to find the good activities in the country to regain momentum. Christopher Sheldon: So the next one is David Hayes of Jefferies. David Hayes: So a couple for me. Just following up on the sort of volume mix pricing dynamics. Can you give us a sense of what the contributions will be across those 3 elements in that sort of flattish guide for 2026 in Consumer? And I may have missed it, but can you give us that for retrospectively 2025? And then secondly, on the margin reconciliation. Is there kind of an accelerated cost save intention program within the margin guidance? I'm just trying to reconcile the moving parts again, given marketing spend seems to be at least equal, you've got this FX headwind dynamic. I'm just trying to understand what the offsets are to that, that the margin would still be relatively flat. And maybe on the FX, 50 basis point headwind last year. Is it possible given where we are today on rates, et cetera, to give a sense of the quantum of the FX headwind in 2026 as it stands? Vincent Warnery: I think Astrid will take both questions. Astrid Hermann: In terms of this year's growth, 2026, we do see primarily volume growth from what we are expecting at the moment, much, much less pricing growth, as we've already seen. Again, from a mix perspective, we do see a balance where we continue to drive certain parts of our business, particularly Derma, but also face care and so on, that should be accretive to our margins. And then we will see, obviously, and hopefully acceleration of our deo business, which will be partly offsetting, but hopefully really contributing to that volume growth. In terms of, I'll call it, cost discipline, I think we have worked the last years and plan to continue to do that, to really ensure that in the end, when we're thinking about our overheads, we invest in the strategic areas of our business, but then look to continue to keep all other costs really under control and even reduce. You would have seen that we've made some progress there. And yes, FX headwinds has obviously been quite significant in the last year. We have had some help, obviously, from what we've hedged into the new year. That's a bit less, unfortunately, of an impact. We do see that negative on our results. Let's see where it ends up being. It's really very uncertain right now to really give you a precise number. We will monitor that and make sure that obviously, we find ways to offset the impact there. Christopher Sheldon: The next one is Guillaume Delmas of UBS. Guillaume Gerard Delmas: Two questions for me, please. One on NIVEA and one on La Prairie. On NIVEA first and the innovation program for 2026. I think at the same time last year, you were showing us that 47% of the brand would be launched or relaunched in 2025. So wondering how does 2026 compare to that 47% level of 2025? Should we expect a similar magnitude or even a further step up? And still on the innovation topics for NIVEA, I mean you announced this morning, you're launching -- you will be launching accessible face care propositions. At the same time, you've also introduced very premium products such as Epicelline. So how do you ensure that you do not overstretch too much the NIVEA brand? And then my second question on La Prairie. I mean, brand had an encouraging end to '25. But yet, if I look at the annual turnover of La Prairie, it's now nearly 30% smaller than what it was in 2022. So you indicated the Q1 softness, but where does the brand go from here? I mean do you think it needs some adjustments to its strategy? Or you're confident that it will be back to positive growth territory in 2026? And that you can go back to the 2022 sales level in not-too-distant future? Vincent Warnery: Thank you, Guillaume, for your question. On your first question, you're right, we had planned to do, 40% of our portfolio is supposed to be relaunched, was relaunched in 2025. It is true also that most of the relaunches were based on some sustainability changes. So it was not really visible in some cases by consumers. So we will -- and we have also made some changes that was what required a lot of investment and did not really deliver additional sellout. So 2026 will be a bit wiser in terms of relaunches. We have some launches and they will be hitting the shelf in Q2 and Q3 mostly. And in terms of relaunches, will come really when we come with a true added value. For example, we are relaunching Black & White deo with a bit formula. We're also launching our sun care line. So clearly, choosing the areas where R&D can provide a visible benefit to consumers, and we'll do that in the, as I said, mostly from April. On the -- your question on accessible face care and premium face care is absolutely right. But I would say there are 3 cases. And there are the cases where we can do both. I think Europe is obvious. We have a brand, which is so large and so wide that it is not a problem, and you just have to visit a store to have LUMINOUS and Epicelline around EUR 20 and have an accessible Q10 at EUR 10 and Essential at EUR 2. So we have to find a way to support both. Most of them -- some of them are media-driven, other are more promotional-driven, some of them are influencer-driven. So we'll be able to do that. In emerging markets, it's a bit different. There are countries, for example, I was mentioning Brazil, where we are not launching Epicelline because we believe that the consumer price of Epicelline is too high, then here in Brazil, the focus will be clearly facial will come with new innovation in the second semester and also a big launch in 2027. So facial will be the absolute priority for the skin care business, the face care business of Brazil. And other emerging market where we will privilege on the contrary, the premium face care offer, but using some specific elements. For example, you might have seen the pictures. We are launching LUMINOUS in Thailand, in a sachet. So we have the most premium of NIVEA, this is Thiamidol, but we use also the right way to each consumer and to be sure that consumers are purchasing the LUMINOUS in their stores. On your question about La Prairie, you're absolutely right in your statement. I think the new strategy that we are putting in place is starting to pay off. And again, if I eliminate this one-off effect of our Q1, it's about coming with a more affordable proposal. And when I talk affordable, this is obviously something which is more around EUR 300. We tried that already with some smaller sizes of existing franchises and Skin Caviar, for example. We are coming soon with a new franchise, which will be priced between EUR 150 and EUR 300, which will allow us to convince to recruit younger consumers, which obviously could be a bit reluctant, putting EUR 1,000 in a cream of La Prairie. The second element where we are clearly accelerating e-commerce. We are already pretty good in China. I was mentioning the successive double-digit growth that we have since 5 years in e-commerce, Tmall, JD, and TikTok, but we are also becoming much more ambitious in the rest of the world. We are launching next month, for example, La Prairie on Amazon in the U.S. That's something which is a premier, and we are working with Amazon to be sure that the equity of the brand will be respected. We have other plans also like that, which we lose to be more accessible, especially in the world where you see clearly that department stores are losing ground and the e-commerce is taking over. So the strategy is starting to work. Again, China is a good example. Much more to do. So hopefully, again, after this hiccup of the Q1, we should see some good things happening on La Prairie. Christopher Sheldon: The next one is Olivier Nicolai of Goldman Sachs. Jean-Olivier Nicolai: First question is on Germany specifically. One of your competitors launched a Mixa brand. Do you see any impact for core NIVEA there? And how you're planning to protect your market share? Vincent Warnery: Yes, Mixa is a brand which has been launched in Europe and starting in Germany. So obviously, aiming at taking over market share from NIVEA. This is a partly strong in body and not present in other categories. I mean, they are part of the competition, the way CeraVe was a competitor also in the past. We have a good formula. We have also good activities. If you were in Germany, Olivier, you will see today this week, a big campaign on the NIVEA cream Vegan. We're adding a new SKU to NIVEA cream, the historical iconic NIVEA cream also to gain some shelf and to gain also new users, and it's working very well. So we'll treat Mixa as a normal competitors and forcing us to be even better on body and on NIVEA cream, but so far, so good. We are growing on body. Christopher Sheldon: And the next one is Karel Zoete of Kepler Cheuvreux. Karel Zoete: Question with regards to the margin. You look back to the last 5 years, and we see good progress from both top line and bottom line. But if we go back to 10 years, you had a business with a 15% operating margin in Consumer. Today, you're almost 50% larger on the top line. So I was just wondering why is there not more operational leverage in your business given the scale you've added during that period of time? And good gross margins. So that's the first question. And the second question is really quite straightforward, given where FX sits today, your expectations on EBIT, would you expect EPS growth in 2026? Vincent Warnery: Astrid? Astrid Hermann: Yes. So look, in terms of our progress, we have showed even some in our presentation this time around. We have made really nice progress in the last few years. In terms of your answer where we are versus the time when it was similar or even higher. During the time, the margin was primarily achieved through really cutting advertising spending to drive profitability, while a lot of investments in the business, e-commerce, digital and so on were not made. We have since, as you know, back at a few years back, really kind of done a margin reset to really invest in those businesses. But then with the investments in those businesses drive the right kind of growth that will allow us to hopefully scale much, much faster in the future. And we've made that progress. As you see, we have really caught up on e-commerce. We're doing very well there. We're really digital in terms of our advertising. We're trying to be where the market is and really compete there. We've significantly invested in our innovation in our white spaces. So we're really putting the money to good use to then drive longer-term growth. Yes, this last year has been a bit of a hiccup, also driven by the markets, but we do think for the future, we have that opportunity with these investments to continue to drive profitable growth. And then in terms of your question, look, we are at this moment, given also the uncertainty giving this guidance of slightly below prior year in terms of EBIT. We will stay with that right now to allow us that flexibility but hope throughout the year, we can provide more color on that figure. Christopher Sheldon: And then the next one is Fon Udomsilpa from RBC. Wassachon Fon Udomsilpa: Two from me, please, on market share and pricing. So first one, you already provide a lot of color around market share performance by region, but could you also comment on the performance for the whole Consumer business through 2025 following the launches in Q4, how has that trend compared to the beginning of the year? Any number you could give would be helpful. And another one on NIVEA pricing, sorry. So in preparation for the strategy to broaden price range for the portfolio, could you help us think where do you see the current price positioning of NIVEA? Any part of the portfolio you think maybe the brand is not as price competitive yet or any part of the portfolio that you see higher competition? Vincent Warnery: On the market share, overall, we gained market share in a very strong way in Derma. In Derma, we are overperforming the market by a factor of 3. So gaining market share in absolutely every country, on absolutely every category. It's not only the case of anti-pigment. It's also the case of anti-age. We became, for example, #1 anti-age brand emerging market, and we were already #1 in anti-pigment. So clearly, sun care gaining market share every year in every country. So clearly, Derma, we are really in this dynamic since 5 years, and we believe that it will continue. On NIVEA, we are not gaining market share, and this is why I was happy to mention that January '26 is positive after a number of months without positive gain. We're not really losing market share against the big guys. We are losing market share against local brands and indie brands, so which is forcing us to react, hence, the localization in some real, hence the use of influencers. But overall, this is one of the priority. I clearly would like NIVEA to regain market share and to be back into this positive dynamics. On La Prairie, different profiles. Overall, we are gaining slightly market share. But clearly, where we overperform in China. China, we are gaining packet share in brick-and-mortar and e-commerce. In the U.S., we are getting better and better quarter after quarter. So in the last quarter, we were at parity with the market, knowing that the U.S. is a bit specific. We are only sold in the department store, and we are also a bit victims of the disaffection of department stores. So overall, okay, and some good also news in some European countries. And last but not least, Health Care, we are gaining market share every year since 9 years, overperforming the market. This is an extremely strong brand, also very profitable. So very happy to see that. So in total, as I said, we are a business -- skin care business, which grew 3.7%. The skin care market grew 1.5%, 2%. So we gained market share in 2025 as a company in skin care. On your second question, I think, as I mentioned, the price positioning of NIVEA, we are an 85% of the range is between EUR 2 and EUR 10. So we don't have an issue of price. We did have some issue of pricing with our LUMINOUS range in emerging markets. This is why we decided to change the packaging of LUMINOUS in order to be able to price down LUMINOUS but still being profitable. That's the change we have done. So we don't have the same packaging LUMINOUS versus Europe versus emerging market. We have also reworked to know the formula to be sure we would be affordable in India. If you remember, I presented the case, and we moved from dispenser to a tube in order to have the same gross margin, but to have a product which is acceptable. And we just did the same with the sachet in Thailand, also to have the right offer while not deteriorating the gross margin. So we are no -- we don't want to decrease prices. We are coming with a moderate price increase and even no price increase in some cases. But clearly, we believe today that we have the right setup for our brands, and this is how we believe we're going to be able to regain momentum. Christopher Sheldon: So we'll have 2 more. We'll start with Bernadette Hogg of Reuters, and we'll have Mikheil afterwards. So Bernadette, please go ahead. Bernadette Hogg: So my first question was, are you thinking of joining some of your peers and asking for paid U.S. tariffs back now that the Supreme Court has judged them to be illegal. And at the 9 months results, you mentioned the skinimalism trend. Is that something you see continuing through 2026? And how do you think about positioning yourselves within trends like that? Vincent Warnery: We didn't get the second question. Astrid Hermann: What sort of trends are you speaking about? Bernadette Hogg: Skinimalism. You talked about that 9 month... Vincent Warnery: Absolutely. Skinimalism. On the first question, no, we are not planning to be part of the company suing the U.S. government simply because we are not really hit by the tariffs. As you might remember, we have -- 90% of our products are either products produced in Mexico where we have the U.S. MCA agreement. So we are not -- there's no additional tax and the rest is produced in the U.S. So the part which is produced in Europe is a very small part of the Eucerin range. So we are not planning to be part of this movement. On the second element, yes, absolutely. The skinimalism is something which is very important. We see that in all categories. We see that in derma, we see that in luxury, we see that in the -- on mass market. It's about having the right ingredients, it's having the right offer. So we are -- one of the things also we are recalibrating, We used to be very obsessed by our own ingredients and Thiamidol, Epicelline. We are coming also with other ingredients, which are well-known, could be vitamin C, could be niacinamide in order to be sure that we are able to offer in one product, an even better, an even stronger performance by mixing ingredients. We are also working on some specific products, which are combining the skin effect of, for example, moisturizer and a cream. So all of that is underway. And we believe also that our brands are pretty well positioned. If you look at Eucerin, this is a problem solution brand. So exactly spot on with the trend. And if you look at NIVEA, we are used also to convince women which are using a small routine, for example, Germany, but also a very large routine, like in China, Korea or Japan. So we are equipped for that, and we leverage this trend. Christopher Sheldon: Next one is Mikheil Omanadze of BNP Paribas. Mikheil Omanadze: I have one, please. Based on what you hear in the market, what actions are your major competitors taking to remedy this skin and personal care slowdown? And are any of your large retailer partners pushing for price reductions, which may suggest maybe more material pricing pressure in mass skin and personal care that is factored into your full year guidance? Vincent Warnery: Great question. The slowdown we -- it happened already. I was looking at the history, in 2013, skin care market minus 2%, 14% plus 2%, 15% plus 14%. If you look again 2018, plus 3% the year after, plus 9%. So it's something it's cycle. At the end of the day, the skin care market remains the most strategic market. The way our traditional competitors are acting is coming with new innovations. We were lucky to be really the one bringing all the top innovation in skin care. As I said in my introduction, a lot of people are talking longevity. We have launched Epicelline already 1 year ago. So this is the way you drive market up. We are in a business, which is offer driven, and which is not really demand-driven. So if we come with a nice proposal, if we come with a new formula, this is a way we attract new consumers. We convince them to buy our products. Are other players doing another game? Yes, of course, if you look at the local brands, if you look at the indie brands, it's about cheaper prices. It's about very well-known ingredients. It's about influencers only. And the good news in a way that it goes up and down. And at the end, the big brands are back, and this is where the consumers come back when they want to have a safe formula when they want to have a safe ingredients. And this is also why we feel that the market dynamics will come back. I mean one good example I could mention, if you look at Derma, we are delivering a double-digit growth every year since 5 years, despite the fact that the market went down to low single-digit growth in 2025. The market is what you bring to the market, and we are pretty well equipped in skin care with the Beiersdorf R&D muscle. Mikheil Omanadze: Sorry, on pricing potential? Vincent Warnery: No. Pricing honestly, when you look at competition, we don't see any actions, which I think will damage the market. We are doing promotion in mass market. That's true for everybody. No big issue on this front. Christopher Sheldon: Thank you. That was our last question. This concludes our full year results conference. Beiersdorf's next Investor release event will be the release of our first quarter results on April 21, 2026. We appreciate your interest in Beiersdorf and look forward to seeing you here again in April. Thank you very much.
Operator: Hello, everyone, and thank you for joining the Morgan Advanced Materials Full Year Results 2025 Call. My name is Lucy, and I'll be coordinating your call today. [Operator Instructions] It is now my pleasure to hand over to Damien Caby, Chief Executive Officer, to begin. Please go ahead. Damien Caby: Thank you, Lucy. Good morning, everyone. I'm Damien Caby, the Chief Executive of Morgan Advanced Materials, and today with me is Richard Armitage, our CFO. I'll kick off today with a summary of our full year results at group level. Richard will then take you through the financial positions and the technical guidance. And I will come back to share progress against the strategy that we unveiled in December last year and our outlook for 2026 before I'll be moving on to Q&A. So in 2025, we delivered a resilient performance in the backdrop of challenging market conditions. We're executing our strategy, making headway in [ our levers ], and we're well on track to deliver early wins in 2026. We're focused on maximizing our portfolio value with the sale of MMS and the initiation of a strategic review of our Thermal Products division. Our outlook for 2026 is in line with current market expectations. We're expecting organic constant currency revenue growth of 1% to 2% in end markets, which have broadly stabilized. The 3.3% OCC decline of our revenue last year was driven by the well-publicized downturn of the semiconductor market. In 2025, revenues in this market remained stable at low level. In the other segments, changes in our sales offset each other. We continue to deliver strong growth in Aerospace and Defense, driven by new engine and MRO orders. Healthcare revenue declined year-on-year due to tariff-related inventory adjustments and lower volumes in some of our customers' mature product lines. In the process and metal industries, we saw mid-single-digit declines in Europe and in Asia. Petrochemicals and Chemicals held their ground with growth in North America, offsetting declines in Europe. As you can see on the chart to the right, through the past 18 months, group OCC revenue has been stable. Despite the end market environment, we delivered a resilient headline margin at 9.6%, in line with expectations. The continued positive contributions of pricing and efficiency improvements, the benefits of our simplification program and cost control offset the majority of the impact of volume and mix. Our results announcement released earlier today provides our views on the outlook for 2026. I will come back to that at the end of the presentation. I'll now hand over to Richard. Richard Armitage: Thank you, Damien, and good morning, everyone. I would like to start with an overview of the financial results for the year to the 31st of December 2025. As expected, headline revenue was GBP 1,030 million, reflecting a 3.3% drop on an organic constant currency basis. Following a decline of GBP 5.3% in the first half, revenue in the second half was broadly flat year-on-year, which points to a degree of stabilization in a number of our end markets, allowing for pricing of around 3.5% for the year, the volume decline in the year was around 6.7%. It is worth noting also that the 3.3% revenue decline equates to the decline in semiconductor revenue of around GBP 33 million, demonstrating the resilience and stability of the rest of the business. Group headline adjusted operating profit, which includes GBP 5.3 million of MMS operating profit predisposal, was GBP 99.1 million, a reduction of GBP 29.3 million, giving an adjusted operating margin of 9.6%. Return on invested capital was 14.1% slightly below our through-cycle range but still delivering an attractive return. Headline free cash flow was an inflow of GBP 45.4 million, which shows an improvement over last year as we continue to improve our working capital. Adjusted EPS was 15.9p per share, and we have held the total dividend for the year flat at 12.2p. Specific adjusting items amounted to GBP 47.6 million for the year on a continuing basis. Turning to look at the reporting segments in more detail. We can see that the principal driver of performance carbon revenue was the year-on-year decline in semiconductor, albeit that semiconductor revenue stabilized during the year with the second half broadly flat half-on-half. Aside from semiconductors, the business has shown good stability through the downturn. Aerospace and Defense was slightly down year-on-year due to the timing of some large defense orders, whilst our rail and energy businesses continue to perform well. On a sequential basis, the decline through to the first half of 2025 and subsequent stabilization is also visible. The impact on operating margin of low volume and a weaker mix was partially mitigated by substantial efficiency and simplification benefits, which limited the margin decline to around 2.6%. Technical Ceramics has shown very good resilience over the last 2 years and was able to achieve revenue growth during 2025. The main driver has been aerospace and defense with growth of 22% in that sector, driven by the demand for new aircraft, along with robust maintenance revenue, driven by increased fleet utilization. Technical Ceramics Industrial business also showed low single-digit growth despite the industrial downturn, helped by its focus on a differentiated product range and customer service. Partly offsetting this were health care, which was affected by lower volumes for some mature product lines and semiconductor, which followed the market downturn. Operating margin also remained stable at 11.5%, with a slightly weaker mix being offset by efficiency improvements. Thermal Products performance was influenced by regional economic dynamics, as you can see here. Europe showed the most marked decline due to lower investments in process industries, whilst weak demand in metals and automotive impacted the business globally. However, we can see from the sequential graph that most of this decline was between the first and second halves of 2024 with revenue having been broadly stable since then. In the strategic growth area of fire protection, double-digit growth was achieved with strong demand from the Middle East. The principal driver of the 3.3 percentage point decline in margin was volume, given that Thermal Products is a high fixed cost business with a roughly 40% drop-through on revenue movements. We also experienced operational issues in our U.S. business, which negatively impacted margin by 1 percentage point, then FX and hyperinflation accounting in Argentina causing a further 1 percentage point decline. We would note that we would expect a strong drop-through in thermal reversing this volume effect as markets recover. We're also pressing ahead with a substantial site improvement plan that will benefit the U.S. business. Turning now to the profit bridge. We can firstly see a negative FX impacts arising from the progressive weakening of the U.S. dollar versus sterling, with total FX reducing margin by 40 basis points. The average U.S. dollar rate was $1.32 in 2025 compared with $1.28 in the prior year. The principal impact on margin, though, was volume and mix, which led to a 4.4 percentage point reduction. This was caused by the volume decline and associated overhead under recovery combined with the mix effect of semiconductor sales being weaker than expected. We were able partly to offset this with 1.7 percentage points of margin derived from another year of consistent delivery from our simplification and continuous improvement programs. We expect this performance to continue in 2026 and also to benefit from our transform activities with net benefits of circa GBP 11 million expected this year. Pricing of around 3.5% served to offset inflation of around 5% on cost of goods sold. Our simplification program is nearing completion, GBP 16 million of in-year benefits delivered in 2025 as planned. And it is worth remembering that the work we have done to reduce our manufacturing cost base over the last 3 years, coupled with our planned optimization opportunities, has given us the opportunity to accelerate margin improvement via a healthy drop-through as end markets recover. We incurred significant specific adjusting items at GBP 47.6 million. The largest item was a noncash impairment of GBP 15.6 million in relation to our semiconductor assets in the U.K. This is part of the previously announced GBP 60 million capacity investment and represents equipment that is devoted to specific product raise for which demand is currently uncertain. Costs associated with our business simplification program amounted to GBP 13.4 million. Implementation costs to date amount to GBP 35 million, for which we have delivered benefits of GBP 24 million. Once complete, we expect total cumulative savings of GBP 27 million for implementation costs of GBP 40 million, which is in line with our original projection when the program started in 2023. Absent any material adverse developments in our external environment or portfolio changes, this will conclude our restructuring activities for the time being. Expenditure on our ERP rollout plan has progressed as planned with GBP 13.3 million incurred on design and configuration in the period. We expect to incur around GBP 20 million in 2026 before the program starts to wind down during 2027. We have also recorded a movement in the fair value of our shares in Foseco India Ltd as at the 31st of December of GBP 7.2 million, which values our holding at GBP 47 million. However, the business has recently released a strong set of results for 2025. And if our holding were valued today, it would be approximately GBP 54 million. Moving on to cash flow. I would firstly note our working capital, which showed a much improved performance over prior year with an inflow of GBP 50.4 million. This comprised an underlying improvement of circa GBP 13 million, resulting from a strong focus on inventory and receivables management, supported by a further GBP 38 million of nonrecourse working capital arrangements. Net capital expenditure amounted to GBP 65.9 million, lower than the prior year as our investment in semiconductor capacity came to an end. Cash flows relating to exceptional items totaled GBP 22.8 million, comprising simplification costs of GBP 10 million and investments in our ERP rollout of GBP 13 million. Free cash flow was therefore an inflow of GBP 45 million. We did receive a net GBP 10 million after tax and fees from our sale of MMS with the balance of consideration due to be received later in 2026. We completed the second tranche of our share buyback and as previously announced, paused the program in early January. Net debt finished at GBP 232 million, excluding lease liabilities, in line with our expectations and representing 1.8x EBITDA. As a reminder of our capital allocation policy, we are fully aware that the decline in our EBITDA has resulted in our leverage moving above our target range of 1 to 1.5x. We're focused on correcting that, and we'll bring leverage to around 1.5x over the next 2 years. Our target leverage, therefore, remains in the 1 to 1.5x range in relation to ongoing operations. And as before, we would consider increasing this in due course into the 1.5x to 2x range in the event of a compelling acquisition. Whilst capital investment remains a priority to support organic growth opportunities, we foresee limited needs for capacity investment and expect to be able to maintain overall CapEx at around GBP 50 million or 1.2x depreciation for the next 3 years. We will maintain a dividend for now, then grow it in line with adjusted earnings once cover returns to around 2.5x. Once stabilized, we will consider the need to fund inorganic investment alongside additional returns to shareholders. The Board will review the situation regularly, recognizing the opportunity that additional returns present to return cash to shareholders and enhance earnings. Finally, I will move on to technical guidance. As noted, we expect capital expenditure of around GBP 50 million. Our net finance charge will be around GBP 24 million, increasing in part due to the expiry of GBP 94 million of fixed debt during the year on which we have been paying an average interest rate of 3%. Our effective tax rate will increase slightly into the 27% to 29% range due to our mix of profitability shifting slightly towards higher taxation regimes. I would also note that so far, the direct impact of tariffs has been immaterial, although we continue to note the potential for an indirect impact on end market demand. We would expect year-end leverage to be around 1.7x. Thank you. And I would now like to hand back to Damien. Damien Caby: Thanks, Richard. I'd like now to shift the focus towards the future. I'll start by reminding you of our path forward as a group. We have a clear strategy to unlock our potential. It is founded on 3 levers: transforming operational effectiveness, driving stronger growth and maximizing portfolio value. In transforming operational effectiveness, we moved beyond continuous improvements by addressing underperforming large sites to reduce cost and enable growth, by leveraging the group's scale for back-office efficiency, and by enhancing business analytics for faster, better informed decision. To drive stronger growth, we pursue more proactive programmatic customer collaborations and expansions in selected markets, focusing where we have the strongest right to win and continually improving it. To maximize our portfolio value, we are shaping our portfolio to focus on the markets and on the applications where we have or established advantaged and integrated positions. Our goal is to ensure that our resources are focused where we can create the greatest study. One avenue to achieve this is to set up partnerships along attractive value chains where we want to increase our competitive strength. Another avenue which we're pursuing is to actively manage our portfolio of businesses with bolt-on, M&A and divestments where we're not the best owner. In the near term, our road map will achieve 12% EBITDA margin by 2028. This will be largely driven by the first 2 pillars of the strategy, transforming operational effectiveness and driving stronger growth. We have also initiated the actions which will bring margins further up in the medium term, reinforcing collaborations with key customers, building up and progressing our pipeline of organic and inorganic adjacencies. Our teams are focused on executing our road map and moving at pace. This chart summarizes the key progress milestones of the past 3 months and some of the next steps. Starting with Transform. In procurement, Michael has to join us on February 1, reporting to me. He brings a strong experience of setting up and leading procurement organizations in specialty industrial companies. He will establish group-led procurement at Morgan, deliver early wins in selected categories during the second half of this year. Turning our large underperforming sites. In the second part of 2025, we consolidated ceramic fiber manufacturing in the U.S. into one site. Rationalization of our make-to-stock product portfolio is 70% complete. The commercial cross-qualification of our manufacturing lines has started with the objective to further optimize asset utilization in the course of next year and to achieve productivity improvements. The planning for the other large sites is progressing well, and the implementation will start in Q2 at the second site. We are confident that the procurement and site turnaround initiatives will deliver at least GBP 20 million of margin improvements by 2028. In back office, since December, we've expanded the scope of our European shared service center to include finance back office activity for our U.K. sites. And in digitalization, our new enterprise-wide ERP was implemented at a pilot site last year, and we are ready to start full deployment this spring in successive waves across our businesses. This will be carried out in a sequence designed to quickly improve costs and margin management and to optimize product flows and working capital across our network. Turning to driving growth. Dedicated teams have been set to drive stronger growth in selected markets and are acting at pace. I will report on their progress in future earnings calls. I am pleased to see early benefits from initiatives launched in 2025 with projects in low-carbon steel making and improvements in on-time delivery at sites manufacturing replacement parts. We have decided to deploy capital in selected high-growth areas. These are bite-size customer-backed capacity increases. We're expanding our armor capacity to scale up our supply backed by government contracts. We're increasing capacity for parts used in iron implantation in semiconductor fabrication to support the increasing demand and localization strategy of existing customers. To maximize our portfolio value, we're pursuing partnerships along our strategic value chains. An early achievement is in fire protection in the Middle East, where we've been teaming up with local duct manufacturers. We have worked with a number of them to design, qualify and certify their fireproof smoked extraction ducts with our fire wrap system to meet more stringent fire ratings, and our revenue has increased by 60% in 2025. Last but not least, we're announcing today that we have commenced a strategic review of our Thermal Products division. At our Capital Markets event in December, I laid out our clear path for this division to deliver GDP growth and sustain 8% to 10% margins. It consists of the optimization of asset utilization, the turnaround of the performance of the largest side, growth in high-value segments. The execution of this plan is progressing at pace. A review we're announcing today will assess a full range of options, including a potential disposal to maximize the group's margin and growth profile, and to ensure that our resources are deployed where they can deliver the strongest long-term returns. Further updates will be provided in due course. Looking forward, our outlook for 2026 is unchanged. With stabilizing end markets, we expected organic constant currency revenue to grow at 1% to 2%. We're seeing continued growth in aviation and defense and positive trends in power and rail. We're seeing slightly improving project activity in petrochemicals and in the processing industries, but continued weakness in Europe, in health care, and in semiconductor sales, where we are benefiting from the rebound in silicon, which starts to offset continuing inventory adjustments in silicon carbide. Supported by our established track record of efficiency improvements, which contributed 1.7 points in 2025 and the first results of our operational transformation initiatives, adjusted operating profit margin will return to around 10%. Leverage will start to return to our target range. As you can see, we're moving at pace on all our strategic levers, and we remain confident in our financial framework. Thank you. That ends our formal presentation, and we will now take questions. I will hand back to the operator to coordinate that. Operator: [Operator Instructions] The first question today is from Scott Cagehin of Investec. Scott Cagehin: Just a few questions for me. First one being, Richard, on working capital, how do you see that playing out through '26 based on your revenue guidance? The second question is about thermal products, sort of why announce now, given the strategy update was in December. It was sort of obvious that it's lower growth, lower margins, but has that been a catalyst for you to announce that now? Or is it just a case of freeing you up to do something with it? And then the last question is regarding the Foseco stake that you have. I think I remember you tied up to the end of the half year, and I assume you plan to dispose of that holding. Is that the case? Richard Armitage: Scott, firstly, on working capital assume flat year-on-year for this year, I think. Secondly on Foseco, we have a lockout period until towards the end of June. We do then intend to sell down our holding over a period of time. That will depend on market conditions, and we are preparing actively a plan to help us do that. I'll ask Damien to comment on the thermal question. Damien Caby: Yes. Thanks, Scott. So as far as the timing of this announcement. So if you remember, in December, we announced that we were going to take a proactive approach to our portfolio, and we laid out a clear plan for thermal. Thermal is delivering on this plan at pace. We've been, in the meantime, very proactive and very -- and moving at pace on making the first steps of assessment of this strategic review. And we've reached the point now given the complexity of this business that it is time to move forward to the next phase. So it's really the result of us following up on our commitment in December and moving at pace. Richard? Scott Cagehin: Just a quick follow-on. Is that business disposable though? Like is it -- have you separated it clearly? Can you dispose of it? Or is there some work to do there? Richard Armitage: Thanks, Scott. We've done some preliminary assessment. We believe if the decision were made to dispose of the business that it is relatively separable, but there is still a considerable amount of investigation to do. Operator: The next question comes from Jonathan Hurn of Barclays. Jonathan Hurn: Just a couple of questions from me, please. Firstly was just on the semiconductor market. I wonder if you could talk a little bit more about that and obviously, the 2 sides of that business. Just maybe firstly just on the silicon side, what kind of sort of rates of growth are you seeing in that business? And what's the opportunity to get further penetration of customers there? And on the silicon carbide, is it still your view that, that market starts to pick up in 2027? That was the first one. The second one was just sort of following on Scott, in terms of thermal products, like you say, you've done work on it. But can you give us any color on what you think the potential tax leakage of any sale could be? And also, if you do sell it, is there any sort of impact on the wider pension? Damien Caby: Thanks, Jonathan. So I'll start with the semi-silicon over Semicon question and Richard could pick up the second question. So we're definitely seeing a strong rebound in silicon semiconductor, which by now represents approximately, I mean, more than half of our semiconductor business. I mean, the industry is reporting 20% growth rate. The growth rate that we are seeing with our products is lower than this because part of the growth in the market is tied to a mix improvement in the quality of the wafers. And for us, it doesn't make a big difference. So we're seeing this. We are well placed with customers who are used to buy our products along the manufacturing chain of this. And depending on their inventory positions and their own demand, we're seeing the rebound in this part of the market. As far as silicon carbide is concerned in 2027. I'd say that this is still a very dynamic market in -- especially in the main regions where we're supplying, which are Europe and the United States. So -- we have -- as Richard mentioned, we've seen some stabilization last year. We're managing this and staying attuned to the market. And as I said as well in the capital market event, looking for ways to expand our position via partnerships in China where this market is really moving big time, at least the early part of the value chain. Richard Armitage: Jonathan, regarding potential tax leakage, we have made an estimate, albeit we would like to do more work on it. It points to a number that's fairly middle of the range in the scheme of these things. It is not a number that we think would prevent the sale, if it were to progress being value accretive. Impact on pension, there is a limited connection between the business and the U.K. pension fund, so not a particularly high exposure. We are going through a process of consultation with the relevant pension funds and other stakeholders as we're required to do. Operator: The next question comes from Harry Philips of Peel Hunt. Harry Philips: Several questions, please. Just trying to get some thoughts around the broader semicon sort of profile in terms of where this year profitability might go in terms of you've written down, obviously, part of the asset. I was just wondering when you -- when you consider this GBP 7 million sort of headwind that you potentially had, how that might reduce on the write-down? And obviously, if you don't commission everything fully, then clearly, just wondering how that sort of profile plays out in '26 and '27? Similarly, just in terms of the sort of time line, if you like, for the transform process and the timing of those cost savings? And then maybe accompanying that along with the ERP, the sort of restructuring cash you might incur this year? And then very finally, just noticed in the working capital comment, the use of sort of factoring and what have you. Just wondering thoughts behind that? And when you talk about working capital being neutral in the current year, does that assume sort of the factoring is a sort of one-off move in the year just gone? Or is that sort of more actively being pursued, please? Richard Armitage: Harry, 4 questions in 1 there. Very good. Thank you. So Semicon, I understand the question. So as Damien has alluded to, the supply chain into what you might call the traditional Semicon market primarily for silicon chips has picked up a little. We are expecting a little bit of an uptick of that during the year. And right now, we would anticipate probably commissioning the remaining assets in our program towards or around the end of the year. So I'm not going to be specific around what that commissioning costs will be, but it's not GBP 7 million is probably the order of GBP 1 million or GBP 2 million, something like that towards the end of the year. You mentioned ERP and restructuring. So ERP of around GBP 20 million, restructuring a little bit based dependent on timing, but sort of GBP 2 million to GBP 4 million, something like that. So in that range of GBP 22 million to GBP 24 million for the year, I think. Working capital. So underlying, we would expect to be roughly flat across the year and the factoring balance also to be relatively stable. Now each of those could move by a few million pounds, but broadly neutral. The thinking behind the factoring was that we set out some time ago to establish a number of flexible financing facilities. So as you know, we have some fixed debt maturing this year. Interest rates are still relatively high. So we wanted flexibility in our financing, and actually, this working capital financing is attractive in terms of pricing. So typically, at a sort of all-in interest rate of 4.5% to 5%, whereas to replace fixed debt at the moment, it could well be above 5.5%. So that was the thinking behind that. Harry Philips: Fantastic. And then just to sort of transform potential benefits to get to that GBP 20 million by '28? Damien Caby: Yes, we're moving at space on this, Harry. So we're going to start to see some benefits in the second half related to procurement and the ramp-up will continue through 2027. We're very confident that we will get to the GBP 20 million by 2028. Operator: [Operator Instructions] The next question comes from Andrew Douglas of Jefferies. Andrew Douglas: Just a quick one for me following on from Harry's questions. Can you just talk to me about ERP costs post '26, you say that there's a ramp down in '27. Can you just give us a rough indication of what '27 does? And is it fair to assume that there's nothing in '28? Or is it a slow steady measured decline? Richard Armitage: The answer for 2027 depends a little bit on the speed of our rollout. So I might write this minute expect GBP 20-ish million to be coming down to maybe GBP 15 million or something like that, but we'll have to come back in due course. 2028 would, if anything, be a tail end few million pounds, I suspect. Operator: The next question comes from Mark Fielding of RBC. Mark Fielding: Just a couple of follow-ups to the earlier comments. In terms of the thermal products review. Just can you give us a bit more thoughts around the time line for the next update and what we would be expecting of that? It feels like you've obviously thought about disposal option, but it's relatively early in that planning process. So is it --- is the next update more going to be a fix like this is what we think we're probably going to do? Or could we be further advanced at that point? And then secondly, in terms of the wider portfolio, obviously, this is a big chunk of the portfolio following out from the Molten Metal Systems. Is that the end of the portfolio streamlining? Or is there more that you are thinking about and reviewing in the business? Damien Caby: Okay. Mark, thank you. Regarding the time line, so as you've noticed, there's been a real concrete rigorous work done before we made this announcement. The thermal business is a complex business. There is 30 subsidiaries. There is a number of JVs. This is the step that we are moving into now is a complex and an important step. As you've seen, we're really moving at pace. On the other hand, we have to remain rigorous and focused. So we'll provide an update in due time. As far as the wider portfolio is concerned, we will continue to review how to maximize our portfolio value moving forward. As you can imagine, this strategic review is going to be an important effort for us to carry out in the short term. Operator: The next question is from Harry Philips of Peel Hunt. Harry Philips: Sorry to come back again. But just sort of tidying up on various bits and pieces and sort of slightly in keeping with Mark was just saying about possible disposal. But obviously, the central cost line has gone up to GBP 10 million. Is that a sensible number? Is that a sort of annualized number we should run with going forward? And then clearly, that's quite a step-up from where it was pre the exit of MMS. I'm just thinking about if thermal goes, is that sort of a point in time when -- if it goes rather, there's a sort of material change to that central cost line? Richard Armitage: Thanks, Harry. Yes, it's a good question. The increase is driven by IT. And I suppose you could describe it that we're going through a hunt in which the underlying running costs of our new ERP system and other things that we're investing in, bearing in mind that the transform program that we defined in December includes trying to make rapid progress in making use of digital tools, creates a sort of hump in expenditure for a couple of years. There comes a point where we can then start to remove some of the legacy costs of IT in the business and perhaps that comes down. So I think that's the best way to do it. I'm not going to say what it's going to come down to, but we're going through that period of one, replacing the IP, but also investing heavily in digital tools to help us transform the business. As to what happens should the disposal of thermal go ahead, that's part of what we will investigate in the next phase of work. Harry Philips: Okay. And then just to be -- so for sort of modeling purposes, just running a 10, 11, is that just a sensible assumption or just might it -- given the level of activity you've highlighted through the presentation, might it spike up a fraction this year? I suppose what I'm trying to get at it is the guidance is, as you've laid out, what's sort of central cost line assumption within that? Richard Armitage: We wouldn't expect a further increase. Operator: [Operator Instructions] We have no further questions at this time. So I'd like to hand back to Damien for closing remarks. Damien Caby: Thank you. So key messages for today, resilient performance in the backdrop of challenging market conditions, outlook for a revenue growth of 1% and 2% in end markets, which have stabilized. And we're executing our strategy at pace. We're making headway in all the levers and focusing on maximizing our portfolio value with the sale of MMS and the initiation of a strategic review for Thermal Products division. Thank you very much for attending this call, and good rest of your day. Operator: This concludes today's call. Thank you all for joining. You may now disconnect your lines.
Operator: Ladies and gentlemen, welcome to the SIG Full Year 2025 Results Conference Call and Live Webcast. I'm Vickie, the Chorus Call operator. [Operator Instructions] And the conference is being recorded. [Operator Instructions] At this time, it's my pleasure to hand over to Ann Erkens, CFO. Please go ahead. Ann-Kristin Erkens: Good morning, ladies and gentlemen, and thank you for joining us for this full year 2025 earnings release of SIG Group. My name is Ann Erkens, CFO of the company, and until 2 days ago, also Interim CEO. I will discuss the results with you today, and it is a big pleasure to have our new CEO, Mikko Keto, with me on the call today, who joined the company on March 1. As always, the slides for this call are available for download on our investor website. This presentation may contain forward-looking statements involving risks and uncertainties that may cause results to differ materially from those statements. A full cautionary statement and disclaimer can be found on Slide 2 of the presentation, which participants are encouraged to read carefully. And with that, Mikko, welcome on board officially. Do you want to say a couple of words as a first introduction? Mikko Keto: Thank you, Ann. And I would like to congratulate you and the SIG team for the strong fourth quarter. And that fourth quarter gives a solid foundation to start the work for 2026. And I began my onboarding a while ago, firstly, looking at outside in, the company and the performance, and now, I have pleasure to do onboarding in the company looking at inside out. And there are some really strong points in the company when I look at it, for example, solid foundation through innovation, customer partnerships and delivering value, both to our customers and shareholders. One key aspect of the business also is customer retention. I can see that the customer retention is high. We have long-term relationships with most of our customers. It means that the lifetime value of the customer is high. I will continue my journey in the beginning to understand the business in more detail, now being inside the company. And I'm looking forward working with you all in the coming months and years to deliver value to shareholders and the SIG organization as a whole. And thank you for your trust and support and looking forward to working with you all. Ann, back to you. Ann-Kristin Erkens: Thank you, Mikko. Let's start with the key messages for the fourth quarter. In line with our announcement on September 18, our revenue growth has reflected the subdued consumer environment throughout the year. However, we were pleased to see that we saw a sequential improvement in the fourth quarter, resulting in a positive 0.5% growth for Q4. This brought full-year revenue growth to plus 0.1% at constant currency and constant resin, so to the upper end of our expectations, communicated in September. On a substrate level, aseptic carton grew by 1.2%. It was especially strong in the Americas, which is one of the reasons why we expand the capacity of our production plant in Mexico. The chilled carton business declined by 5.3%, impacted by the competitive environment, especially in China. It is noteworthy though that the situation was improving in the fourth quarter. The bag-in-box and spouted pouch business was negative 3.4%, reflecting the higher comps in the second half of the year. As announced in September, following a strategic review of the group by the Board of Directors, and in light of the prevailing soft market conditions, we have recognized nonrecurring charges of EUR 351 million pretax in 2025. All charges relating to this review have been booked now. In the fourth quarter, these amounted to EUR 31 million with the largest item being restructuring charges relating to the elimination of positions as discussed at the investor update. All conversations with the affected employees have been completed in 2025 and the corresponding savings are ramping up throughout the first half of 2026. Also, during the fourth quarter, we could complete 2 asset disposals with land sales in China, the retired chilled carton plant in Shanghai and in Germany. These 2 divestments contributed approximately EUR 17 million as a positive onetime impact to the 2025 free cash flow. Now, moving to filler placements. We placed 68 new fillers in the year 2025 across all geographies and well within our aspired range of 60 to 80 placements in a year. The incremental growth of fillers in field was 14 as 54 fillers were returned or scrapped at customer sites. The average age of these old fillers was more than 15 years. Total book value was around EUR 1 million. This was normal course of business and has been reflected in the financials as such. As discussed in the Q3 call, as part of the strategic review, we have also assessed the utilization and corresponding cash generation of fillers in field. This led to EUR 21 million of filler impairments within the nonrecurring items for underutilized fillers at customer sites, respectively, for fillers on stock. Please note, this does not mean that there was a reduction of available capacity in the field. For 2026, we have an attractive pipeline and expect to place a similar number as in 2025. On the innovation side, the second machine of our new Neo line has been placed in Saudi Arabia. Next to higher speed and output, this machine is also characterized by a very low waste rate of below 0.5%. The Neo line is, of course, also capable of processing the new Alu-free full barrier sleeves, where our rollout continues in Europe and also in Southeast Asia. Terra Alu-free full barrier from SIG is the first aseptic carton that is recognized as recyclable under Korean regulations. In the other direction, from East to West, we see the expansion of the DomeMini format, which was first introduced in Asia and is now coming to Europe. It is expected on shelves in Europe in the first half of 2026. And finally, we were very proud that we received for the seventh time the EcoVadis platinum status with a record score of 99 out of 100. Now, let's take a look at how our business has evolved on the revenue side. We closed the year 2025 with a revenue of EUR 3.25 billion. In reported terms, this is 2.4% below the prior year due to the stronger euro. At constant currency, revenue growth was 0.4% and at constant currency and constant resin prices, it was up by 0.1%. The revenue share by segment, which is the region, is almost unchanged versus the prior year. Europe with a 32% share remains the largest region. Asia Pacific and the Americas each have 27% share, and IMEA is 14%. For SIG, the largest countries in the IMEA region are Saudi Arabia, Egypt, North Africa and India. By business line, aseptic carton is 79% of our sales, chilled carton is 4% and the bag-in-box/spouted pouch business is 17% of our revenue, unchanged to the previous year. By product, 87% of our revenue is packaging material, and service contributes 7%, was last year 6%; and equipment 6%, was last year 7%. Moving to the results of 2025 on profit, cash flow and returns. Adjusted EBITDA amounted to EUR 718 million with a margin of 22.1%. Excluding the nonrecurring charges related to the strategic review, adjusted EBITDA was EUR 788 million with a margin of 24.2%. This compares to 24.6% in the prior year. The adjusted EBIT was EUR 442 million with a margin of 13.6%. If we exclude the nonrecurring charges, adjusted EBIT was EUR 500 million at a margin of 15.7%. On adjusted net income level, we recorded EUR 231 million or EUR 285 million without the nonrecurring charges. EPS declined from EUR 0.81 to EUR 0.75. Free cash flow landed at 101 -- sorry, EUR 191 million for the year 2025 after EUR 290 million in 2024. As the nonrecurring charges in '25 were almost exclusively noncash, there is no need to discuss the number without nonrecurring items here. Lastly, return on capital employed, ROCE, calculated at a 30% tax rate was 25% and 29%, excluding the impact of the nonrecurring charges. Capital employed is here defined as PP&E, right-of-use assets, capitalized development and IT costs, net working capital and the noncurrent deferred revenue. Looking at the Q4 figures. Revenue at constant currency slightly grew by 0.6% and by 0.5% at constant currency and resin. Adjusted EBITDA was EUR 223 million, translating into a margin of 24.7%. This includes EUR 8.4 million of nonrecurring charges. Without these charges, adjusted EBITDA was EUR 231 million in the fourth quarter with a margin of 25.7%. Adjusted EBIT was EUR 156 million, translating into a margin of 17.4% and also including EUR 8.4 million of nonrecurring charges. Without these, adjusted EBIT was EUR 165 million in the fourth quarter with a margin of 18.3%. Adjusted net income was EUR 78 million. Excluding the nonrecurring charges, it was EUR 88 million. Free cash flow in the fourth quarter was EUR 275 million, close to previous year's levels. Turning now to the performance by region. In Europe, full-year revenue has declined by 0.8% at constant currency compared to strong prior year growth of above 6%. We were delighted to see the region showing a growth of 4% in the final quarter of the year. This performance reflects several factors, including lower availability of raw milk for aseptic processing compared to the strong supply conditions in 2024, especially in the second and the third quarter of the year. In the fourth quarter, the industry observed lower raw milk prices and correspondingly more milk going into aseptic carton. Also, the region benefited in 2024 from the ramp-up of filler placements following wins related to EU regulations on tethered caps in prior years. Throughout the year, export volumes of UHT milk has been lower, and the juice category in the region has also declined, impacted by a weak summer season. Excluding nonrecurring charges, both adjusted absolute EBITDA and EBIT increased in Europe. Also, margins expanded by more than 200 basis points. The margin was positively impacted by price and by a favorable customer mix due to the lower export volumes. In India, the Middle East and Africa, overall revenue development for 2025 was impacted by a strong prior year comparison of 13% growth, leading to a slight growth of 0.4% for 2025. In the last quarter of '25, revenue growth has been slightly positive, too. Carton volumes have been impacted by lower consumer demand across the region as well as by higher competition and the monsoon season in India. Bag-in-box and spouted pouch revenue growth has been strong in the region, including in India. The EBITDA margin without nonrecurring charges came in at 26.8%, slightly ahead of the previous year. FX headwinds in the region were more than offset by pricing. The EBIT margin was slightly below the prior year, as it was impacted by additional depreciation of the India plant following its start-up. For the financial year 2025, revenue for Asia Pacific declined by 1.7%, both on a constant currency basis and on a constant currency and constant resin basis. Continued market softness in the region and the competitive environment in chilled carton impacted our revenue performance last year. Also, the later occurrence of the Chinese New Year in 2026 had an impact on volumes in China, particularly during the fourth quarter, making Asia the only region that did not record a positive volume growth in Q4. Still, we were able to continue to outperform the market in China with product innovation and flexibility. Southeast Asia, Japan and Korea continued the growth momentum despite the market downturn. We recorded strong filler sales and also have a good pipeline for 2026. The adjusted EBITDA margin without nonrecurring charges was negatively impacted by product mix and SG&A costs. The adjusted EBIT margin was additionally impacted by the annualization of the depreciation of the new chill plant in China. The Americas were the region that recorded the highest growth in 2025 with 4.4% at constant currency and 3% at constant currency and constant resin. Aseptic carton growth was especially impacted positively by liquid dairy in Mexico. Also, we saw price increases in Brazil and a higher service revenue. In the bag-in-box business, share gains achieved in the U.S. in dairy and in syrup could mostly offset declines in wine, the retail business and non-systems businesses. In this segment, the margin both on an adjusted EBITDA or EBIT level was impacted by unfavorable foreign currency movements, investments necessary to enhance capabilities and wage inflation. On this slide, we have summarized the breakdown of the full EUR 351 million nonrecurring charges that were recorded in 2025 in connection with the strategic review and the market softness. After the EUR 320 million recorded by the end of the third quarter, the fourth quarter saw an additional EUR 31 million. The total of EUR 351 million is well within the guidance range of pretax EUR 310 million to EUR 360 million, which we provided in September. We also indicated that around 90% of this amount will be noncash with the cash outflow mostly occurring during 2026. We expect the '26 cash impact to be approximately EUR 25 million. The split by bucket of the nonrecurring charges is as follows: EUR 107 million is an impairment to the value of the bag-in-box and spouted pouch businesses, reflecting weak consumer sentiment and business performance. This has affected the recoverability of acquisition-related assets. EUR 86 million of impairment concerned the value of the chilled carton business. This principally reflects the weak market conditions in China, which has impacted the recoverability of the assets. EUR 82 million relate to the reassessment of the required operating capacities in aseptic carton within the context of the current weaker market environment. This includes production capacities in India, selected equipment in China and some filling lines across locations, where, as discussed on the first slide, impairments related to low capacity utilization. Under the headline innovation, around EUR 62 million is associated with the reassessment of the group's innovation portfolio, including the impairment of equipment that is no longer required and the impairment of capitalized development costs relating to projects that have been stopped following the strategy review. Finally, a charge of EUR 14 million mostly covers the restructuring costs related to the elimination of a low 3-digit number of positions in SG&A and R&D. Our annual report summarizes all relevant information in Note 4 of the financial review, and additional details are presented in the Notes 7, 9 and 12 to 14. Let me now remind you about what we discussed in Q3 on the presentation of the nonrecurring adjustments. In line with our standard definitions, charges included as part of adjusted EBITDA are those where regional management is held accountable for the delivery of returns on customer projects, such as filling line investments or product launches. As you can see from the graph on the right, this portion amounted to EUR 69 million. Charges excluded from adjusted EBITDA include noncash, unrealized derivative positions and noncash impairments of intangible assets. In addition, we also take charges below the line that relate to footprint or capacity rationalization as well as rightsizing of the organization. Any such booking below the line needs group approval and rigorously follows our standard definitions. Charges excluded from adjusted EBITDA amounted to approximately EUR 281 million for the period, taking the total nonrecurring charge recognized in 2025 to EUR 351 million. Next, let's take a look at the EBITDA bridge for 2025. EBITDA was affected by a negative EUR 44 million relating to the currency impact, which reduced the EBITDA margin by 60 basis points. Excluding FX, the adjusted EBITDA without the nonrecurring charges increased by EUR 12 million. This improvement of EUR 12 million was mostly supported by EUR 42 million contributions from top line, which reflects price increases and favorable mix impacts. In addition, raw material costs were overall lower by EUR 9 million in '25 compared to the prior year. This was mostly due to the polymer category. On the other hand, production was negative EUR 10 million as the lower volumes in the second half led to unabsorbed fixed costs and lower efficiency. In addition, SG&A was up EUR 17 million in '25. This included wage inflation and growth investments in the first half of the year, which we have reduced in the second half due to the softening of the market. Turning now to adjusted EBIT. As of 2026, we will report our business performance on an EBIT level as introduced during the investor update in October. We believe this enhances transparency and relevance, and at the same time, will support our management teams around the world to take better capital allocation decisions. In the backup of the presentation for this earnings call, you can find a summary of 2024 and '25 EBITDA, adjusted depreciation and amortization and resulting EBIT by region. The adjusted EBIT margin '25 without nonrecurring charges amounted to 15.7%, below the prior year number of 16.5%. Naturally, also here, there was a negative impact of FX on the margin, 70 basis points. In absolute terms, adjusted EBIT without nonrecurring charges was EUR 511 million with the improvements in EBITDA, discussed before, being offset by additional depreciation of EUR 12 million, driven by the PP&E CapEx in India and China as well as by the filler placements. In this slide, we show our usual reconciliation between reported EBITDA and adjusted EBITDA. For '25, you can see the impact of the nonrecurring charges on the relevant line items with the right-hand side aligning to our definitions as discussed on Slide 13. Same as in Q3, other includes costs for the renewal of the group's IT systems and consulting charges for the strategic review. Under the column for nonrecurring charges, other reflects penalties related to the delay in the further expansion of the group's production facilities in India and the charge for the CEO separation. The gain on sale of PP&E and other assets of EUR 5 million primarily relates to the asset sales in China and Germany. Following the methodology presented on the previous slide, here we show the impact of the nonrecurring items on net income and adjusted net income. Profit for the period without nonrecurring charges was EUR 208 million in 2025, including all nonrecurring charges, the group recorded a loss of EUR 87 million for the year. On adjusted net income, as stated in the last quarter, the Onex PPA amortization, which arose from the acquisition accounting when the group was acquired by Onex in 2015, was fully amortized as of the end of Q1 2025. As such, this line will be 0 going forward. We have added for your reference, a slide to the backup of this presentation that summarizes the amount of the Onex PPA and all other PPA by year and also shows the impact on gross margin, SG&A and EBIT. Please note that also all other PPA is expected to be lower in '26 following the impairments in '25. As a disclaimer, the '26 estimate is, of course, subject to FX fluctuations throughout the year. In summary, the delta between the reported and adjusted KPIs will be smaller going forward. Net CapEx, includes -- including lease payments in 2025, amounted to EUR 200 million or 6.1% of revenue. While CapEx for the plant in India following the completion of the first phase was lower, we continued to invest into the expansion of our Mexican aseptic carton factory given the strong growth that we have seen in the region, America North. Please also note that the cash inflow from the sale of land and buildings in China and Germany of EUR 16.9 million for the group's definition is included in net CapEx. For the 68 filler placements, EUR 173 million CapEx was spent. The upfront cash ratio has been slightly lower at 71% in '25, but still at a good level. Net filler CapEx as a percentage of revenue was 1.5% after 1.1% in the previous year. Free cash flow amounted to EUR 191 million in 2025 after EUR 290 million in the year before. This was driven by the lower adjusted EBITDA versus prior year, which included a significant FX headwind of EUR 44 million, as discussed before. The other significant negative impact laid in the higher payments for customer volume incentives in 2025, which were a result of the very strong volume growth of 6% in 2024. As an approximation in the balance sheet, the provision for customer volume incentives decreased by EUR 39 million in 2025. On the positive side, tax payments were lower by EUR 11 million in the period. Additionally, 2 favorable impacts that were of a one-off nature supported the cash flow: one, the already discussed EUR 17 million for the asset disposals in China and Germany; and two, lower interest payments as for the new bond of 2025, interest payments only occur once per year. Overall, interest payments were lower by EUR 27 million. Net working capital as a percentage of revenue improved by 100 basis points as accounts receivable were lower. This was offset in the operating working capital by the lower liability for various customer incentive programs. Turning to debt and leverage. Net debt at the end of 2025 was EUR 2.144 billion. The stronger euro helped to reduce the reported net debt by EUR 43 million. However, the free cash flow earned in '25 was lower than the dividends paid in '25. Our interest expense was lower by EUR 15 million versus previous year. This was driven by more favorable underlying market rates, and on average, lower utilization of the revolver, partially offset by the higher coupon of the new bond. The net leverage ratio at year-end stood at 3x after 2.6x in the prior year. The net leverage ratio was influenced by the lower adjusted EBITDA and also by the nonrecurring charges. As per the determination rules of our net -- of our debt agreements, which, for example, exclude the impact of impairments, the net leverage ratio stood at 2.8x. In line with the initial guidance that we had provided at the investor update in October, we expect a similar market environment as in 2025, resulting in an outlook for revenue growth on a constant currency and constant resin basis of flat to 2% for the year 2026. We feel encouraged by the sequential improvement and return to growth in the fourth quarter. We said in October that we would see the '26 EBIT margin improve versus the '25 margin, excluding nonrecurring charges, and we expect to land in a range of 15.7% and 16.2% this year. In line with our usual seasonality, adjusted EBIT margins and free cash flow will be higher in the second half of the year. As always, our guidance is subject to input cost changes and foreign currency volatility. The guidance for the adjusted effective tax rate is 26% to 28%, and net CapEx, including lease payments, is projected in the corridor of 6% to 8% of revenue. On the dividend, as highlighted in our communication of September, the Board will propose to the AGM to support the payout in '26 for the year '25. Our midterm financial guidance is laid out as follows: Revenue guidance for constant currency, constant resin growth is in the 3% to 5% range, reflecting a normalization of market dynamics in the midterm. The EBIT margin will reach a level of above 16.5%. Guidance for net CapEx, including lease payments, remains at 6% to 8% of revenue, and there's no change to tax expectations. We will focus on cash flow generation and deleveraging to improve our balance sheet. In the midterm, the group targets a net leverage ratio of around 2x, and we have set ourselves an important milestone of achieving 2.5x by the end of 2027. The company remains committed to returning cash to shareholders and expect to reinstate dividend payments in a corridor of 30% to 50% of adjusted net income in the coming year. In summary, SIG has a clear path forward for value creation. With our strong business model and innovation capabilities, we can build on multiple growth drivers. We have executed the cost adjustment program that we described in October, and there are plans in place to further improve our best-in-class margins. Rigorous capital allocation discipline will improve our balance sheet and return profile and foster a robust cash generation. This concludes the presentation. 2025 has been a challenging year for SIG, but a year that ended on a more positive note. We would like to thank our customers for their trust in our systems and solutions and our shareholders for their continued support for the company. And finally, a heartfelt thank you to the SIG teams around the world for their hard work, dedication and commitment. And we are now happy to take your questions. Operator: [Operator Instructions] The first question is from Ioannis Masvoulas, Morgan Stanley. Ioannis Masvoulas: Mikko, congratulations on the new role. And I'd like to address the first question to you, if I may. SIG has already done a lot to reposition the business and cut costs over the past several months. Where do you see the biggest opportunities to go even faster and deeper on the self-help journey? And what could this entail for additional cost cutting or potential changes to the business mix? And I'll stop here for the first one. Mikko Keto: So, of course, I started on Monday, and I've been looking at, as I said in the beginning, firstly, outside in. I've been looking at the benchmarks, the KPIs from outside. And I think we can still improve our competitiveness. And I'm trying to look at the value creation short term and longer term. And of course, the idea is that the long term, we build a stronger foundation for the kind of -- for the coming years. And of course, the areas what I'm looking at is still organizational efficiency. I'm looking at the performance cuts. I'm looking at the purchasing program and also opportunities to simplify the business and how business is done. And when looking at the benchmarks, how we comp against other companies and peer group and typically targeting best-in-class, but I'm just in the process of doing that. And I think I will be working with the SIC team to look at all these areas. But basically, target is to be extremely competitive in terms of efficiency, performance culture, purchasing and looking at ways to simplify the business. Ioannis Masvoulas: No, that is helpful. And good luck with the new role. Then the second question is just on the guidance. When I look at the EBIT margin that you managed to achieve for 2025 at 15.7%, excluding the one-offs. And then, looking at 2026 guidance, where the low end is pretty much at the same level. But then, you are indicating top line growth of between 0% to 2%. So worst case the top line is not going to be worse. And then, you have taken some costs out in '25 that should really fit through in '26. So what would get you to the bottom end of that range, assuming you're still able to maintain the revenue at, at least stable over the next 12 months? Ann-Kristin Erkens: Yes, Ioannis, thank you for the question. And I understand your view on this guidance, and I think it makes perfect sense. I would also call it cautious guidance. But we also have seen, especially in the last couple of days that the world remains very volatile and -- let's first start the year, and then we see how this develops. Operator: The next question from Jorn Iffert, UBS. Joern Iffert: My questions would be 2 to 3, please. The first one also for Mikko, if I may. You were saying you want to focus on to improve competitiveness. What do you mean with this exactly? And what are the action points to do so? Because we thought that SIG is gaining market shares over the last couple of years. So what exactly you think needs to improve here? This would be the first question. Second question, if I may, on the competitiveness, you said in the 2025 release that you are facing more competition in some regions. Can you say from where is this coming from? Is this coming from your key competitors? Is it coming from non-system suppliers? And the third question, just a technical one, please. Can you help us what do you expect on average selling prices for 2026 and on the raw material price situation? And what you're budgeting? Mikko Keto: Maybe I will start and then hand over to Ann. And when I talk about competitiveness, our track record is good. If you look at the customer retention, we don't really lose customers, and the lifetime value of the customer, if you think that we place a filler, the lifetime value of then the packaging material and then services is really high. So in that sense, we are competitive. And of course, the foundation is a piece of equipment or technology, which is absolutely unique, and there's nothing matching that one. So the kind of starting point is good. But, of course, we are facing all the time competition, so we cannot -- it's part of the performance culture that you always need to look ahead. You can't be complacent at any given time despite our position is good. And when I talk about competitiveness, I would look at still the organizational efficiency, are we at a good level in all the KPIs? And I'm just started, so I will be diving into details in the coming weeks and months. Are we efficient organization how we run the business? And then, of course, looking at competitiveness in products, looking at competitiveness in packaging material, looking at competitiveness in service. And all those 3 areas, they have a slightly different kind of how you measure competitiveness. One is the technology, one is the product cost, and therefore, also the purchasing program is a very important factor to us. And then, of course, as a part of the overall competitiveness has to do with organizational efficiency, is there ways to simplify how we run the business? Because typically, simple is more effective and efficient. But I will dive into all KPIs. And I think it's more, as I said, creating that we are competitive also long term because, as Ann may explain in more detail, we are facing, of course, competition from non-system suppliers for the packaging material. We've been defending that well because we are not losing any customers. But of course, long term, it's a race that we need to be competitive with the piece of equipment. We need to be competitive in packaging material. We need to have a value-add services so that customers see the value of our technical support and spare parts. So it's going all across. Ann-Kristin Erkens: And maybe if I can add on increased competition, I have mentioned that on the slide for Asia, specifically on the chilled carton business, where we said additional capacities have been placed in that market in the last 2 years, and that's also why we think it's not the perfect place for us to be active in the future assuming that probably a follow-up question will then be where we stand on finding a strategic partner. Let me also comment here. The process is well underway, and we would update as soon as we have something to say. And Jorn, you have also asked on sales price development and raw material cost development. So on the price side, as always, we will have regions that will see price increases, driven by inflation, especially, and we will see others where it's probably more stable. And on average, for the group, I would not believe this plays a major role in 2026. Following now really 4 years of increasing prices, I think that has also demonstrated the value that we capture with our customers. And why is that at this moment considered also to be absolutely the right thing because the raw material situation for us this year is not so much a discussion topic. But of course, we also monitor that situation carefully now with the situation evolving in the Middle East. I would also like to remind you that we have fixed long-term contracts on the paper side. So we know what the price outcomes will be on that front. And we apply hedging for the aluminum and polymers. But of course, there's always an unhedged portion, which then fluctuates with the market. But at this moment, you don't see us overly excited on that front. Joern Iffert: And one clarification question, please. You mentioned one-off restructuring cash cost in '26 of around EUR 25 million, right? Ann-Kristin Erkens: Yes. Overall, cash impact of the nonrecurring charge is EUR 25 million for '26. Operator: And the next question from Alessandro Foletti, Octavian. Alessandro Foletti: Yes. Mr. Keto, I also have a couple, one by one. Maybe on the market in the Americas, or maybe more specifically the U.S., you mentioned that you saw certain categories up more related to dairy in bag-in-box and spouted pouch with others down. Can you give an indication of what's the size of these 2 categories? So we can sort of understand, I imagine one is growing faster than the other one or old categories going down, new categories coming up. So we can have a view on when this whole business can become positive. And the same question on the system, non-system split of sales. Ann-Kristin Erkens: Yes. Thanks a lot, Alessandro. On the Americas bag-in-box, spouted pouch, indeed, as we said. So -- and also, as we have described in the investor update, there is different product lines below. So going into food service, going into retail and also more industrial applications. And although the market overall for food service is not yet super exciting and picking up, we believe that we have held up very well and also improved our -- we had share gains in the foodservice segments, especially in dairy, but also in syrup. But then, the retail business, which is largely the wine business, has been soft. Wine as a category is a little alcohol in general, is a little under pressure, and also non-system applications that we still had in the U.S. have not been very much growing in 2025. But overall, on a net basis, I think this came out slightly positively for the Americas, and that's why we are okay with the development in this year in the given market. And overall, for the U.S., I think also the growth of aseptic carton, again, coming back to why we are expanding the factory in Mexico has been very satisfactory. Alessandro Foletti: Okay. But is it fair to assume that sort of the old declining category still represents 80% of your business, and the other one, the new and growing as more 20%? Or am I far away from this? Ann-Kristin Erkens: No. So I would say, overall, the Foodservice business is clearly more than half of the bag-in-box, spouted pouch business, absolutely. Yes. Alessandro Foletti: Okay. Right. And then, I have a question on your dealers. You mentioned you will install around about the same number as this year. Now you have made some impairments last year. Can you use some of those fillers that you have impaired now for the growth that comes this year? And does it have an effect on your CapEx then? Ann-Kristin Erkens: Yes, of course, I mean, we will not scrap anything that can still be used, not as is normal practice also. We have always done it that way, and we will continue to do that, absolutely. So, yes, and if that reverses, we will, of course, also call that out specifically. Alessandro Foletti: Okay. Okay, good. Maybe one final one. On the free cash flow, in the bridge, you mentioned already a couple of parts, but maybe can you give an indication of what can be expected from the working capital in 2026? Ann-Kristin Erkens: Yes. So if I should build a bridge for the EBITDA of 2026, I would assume that the EBITDA, in line with the earnings guidance, should be broadly the same, considering that we will have 1 quarter of FX overhang because the depreciation of the euro only started basically in April last year. I would believe that working capital definitely will not see negative contributions again in 2026. And then, on the other hand, you also need to consider that the land and asset sales, of course, won't repeat and that we will have the one-off of the restructuring or reorganization that we have called out with EUR 25 million. And I think all of this should make you land slightly above EUR 400 million probably. Alessandro Foletti: Right. That's very helpful. Maybe one very final addition. When you speak about the working capital, not seeing another contribution, you speak about the net working capital or the all-included operating net working capital? Ann-Kristin Erkens: Sorry, all included operating working capital -- yes. Operator: The next question is from Benjamin Thielmann, Berenberg. Benjamin Thielmann: Welcome aboard, Mikko. Two questions from my side, if I may. We can take them one by one. First one is on the filler placement. You mentioned, Ann, that in '26, we can expect a similar number of fillers being placed, and in '25, 68 new fillers in '25, 54 were replacement and scrapping. I was just wondering, can we assume a similar mix in 2026 as well in terms of how many new fillers are coming on top and how many are being replaced on the customers? That's the first one. Ann-Kristin Erkens: Yes. No, Ben, thanks for the question. So first, I would say when we talk about filler placements, really the number of new placements is always the more important one because that is placement for customers that have a clear plan to sell something. Otherwise, they wouldn't put out the money for this filler. So -- and capacity of newly installed fillers, of course, is always higher than capacity of old fillers that we take out of the market. So on a net-net, it's an estimation that net increase of fillers, but the capacity added is always more. So what do we expect as replacement or retirement for '26? It's always difficult to quantify in the beginning of the year. But I would not expect that it's going to be a 0 or a very low number. So it's normal course of business. You always have some coming back. And the longer the company is successful in the business, of course, also the more likely it is that some of our fillers placed in the market are aging and are being replaced by new fillers of our group. Benjamin Thielmann: Okay. And then maybe a follow-up on the filler placement, we got -- we have seen a very strong run rate in the last couple of years. If I look back to 2018, the filler placements in '25 and '26 are below the average run rate in the last couple of years. And there was an impairment, partly because of underutilized fillers on the customer side. Is that something that worries you as of today, the customers maybe have invested a little bit or overinvested in particularly the years around COVID and shortly after, and we should get used to a lower run rate? Or do you think this is a temporary lower run rate? Ann-Kristin Erkens: Ben, I think we always say 60 to 80 new placements in a year is the corridor that helps us to continue our market share's gain trajectory. And yes, the number has been elevated a couple of years ago, but that also was on the back of the introduction of new EU regulation, where our customers, especially in Europe, had to revisit their fleet and then made more often a choice for SIG than normal. And also, considering the fact that we have a USP with the flexibility on sizes that we produce on a given filler, that also attracted significant attention of customers, of course, and continues to do so during the time of inflation. So I would rather explain it with positive one-off that we have seen in the last couple of years than with -- we now see a negative environment. It's within 60 to 80, everything is good enough to sustain our pace. Benjamin Thielmann: Okay. Perfect. And then maybe a last one, if I may, would be on competition. It seems that pricing is not a big issue for you guys in 2026, which is clearly good. I was just wondering, has anything changed in the competitive landscape recently? We have seen that, for example, Lamipak has launched a gable top carton. Is there anything that you would flag? It seems like you continue to gain market share if I look at the numbers of your peers. Any pressure on pricing from any new competitors? It doesn't seem like it, but I'm a little bit surprised. Any color on how you view the competitive landscape as of today compared to maybe last year? Ann-Kristin Erkens: Yes. I think the competitive landscape overall hasn't changed. The non-system suppliers have been around for many years. They basically provide roll-fed systems, not sleeve-fed systems. So -- but that said, we always need to, of course, be vigilant, make sure that we remain competitive and that we drive innovation in the market so that customers want to choose SIG also for the future. And that is exactly what we do. So we're never going to become complacent or stop innovating and driving our system forward. But at this moment, I wouldn't see any reason to be looking at the world differently than before. Operator: The next question from Pallav Mittal, Barclays. Pallav Mittal: I'll take it one by one. So firstly, you highlighted Americas was strong and one reason was the growth in Mexico. Given the environment in Mexico at the moment, we have seen some staples companies highlighted as a tough environment. So how should we think about that for SIG in 2026? Are you seeing any impact on your operations so far? Ann-Kristin Erkens: Pallav, no, our operation in Mexico is running stable. And, of course, we monitor also this one very carefully because the safety of our teams is the most important thing for us, but we don't have any disruption there or any problems to report at this moment. Pallav Mittal: Sure. And then secondly, sir, I mean, at the top end of your margin guidance, EBIT margin for this year, 15.7% to 16.2%, you will be quite close to the 16.5% guidance that you have for your midterm. And given that you're not expecting any significant market improvement this year, is it fair to think that the margins could be much higher than that 16.5% that you've indicated in the outer years? Ann-Kristin Erkens: Yes. As we have discussed in the investor update in October, we see this midterm guidance really as a midterm guidance and not as a long-term guidance. And, of course, as Mikko has indicated, the company aspires to get better every year. And, of course, we also would target a higher number. But we will update once we get there. I think until then, the 16.5% is a nice yardstick to use for the time being as a midterm guidance. Mikko Keto: And I think, of course, there's still a cost inflation in the cost base every year. There's 4 -- depending on the market, 4% plus inflation on the SG&A, which is kind of coming to all the companies. So it's putting pressure. But, of course, we are looking at competitiveness long term. And I think we will detail that, then maybe later in the year, what is our long-term plans. But I think it's good to understand that there's also cost inflation, of course, in the cost base of the company, which is putting some pressure. Pallav Mittal: Sure. Mikko, congratulations. And lastly, if I can just squeeze one in, is there any update on the litigation? Any updates on the core? How should we think about that? Ann-Kristin Erkens: No. There is no update on the litigation process that is running as per the timeline. And we also have not come to a different assessment of the case, and it's still considered to be a contingent liability, and you find it disclosed in Note 33 of the annual report. Operator: The next question from Manuel Lang, Vontobel. Manuel Lang: I have a question regarding the midterm outlook as well, more on the growth side. There you see some growth returned in the last quarter to positive territory, but you still expect muted growth this year. So what's the current indication or, let's say, run rate, if you will, that you see on the end markets in the different substrates and regions? And then maybe a second question, more specifically on India, you mentioned the region was impacted by weather effects last year, but what's your view on the utilization of the plant in India currently, and also, let's say, midterm? Ann-Kristin Erkens: Manuel, so on the midterm -- sorry, on the guidance that we see right now, 0% to 2%, indeed, I said that we saw a strong sequential improvement in the fourth quarter, gives us confidence to be in this guidance range in 2026. And if we should discuss this by region, I think we should expect that Europe continues to be on this normal level that you should expect from a mature market. Americas, ahead of this, of course. Asia, I think we have reached something like a bottom level. So let's see how that continues in China. And then, India, Middle East, Africa, I would have said up until Friday, of course, they will return to growth and will be our strongest growth region. And the team in the region is very familiar with disruption and lumpy development. So we're very confident that they will handle the situation also under these circumstances in a decent way. So -- and then -- yes, I think that's the outlook on the growth side. And on India, indeed, last year, we have discussed, like many companies, quite a lot, the longer monsoon season, which impacted revenue growth. I mean, I can't give you now the weather forecast for in 2 months or so. But at this moment, we see a slightly more positive development from India, but definitely behind the expectations that we have had a couple of years ago, but it will be definitely a positive contributor to growth. Manuel Lang: Okay. Very clear. I have maybe one follow-up on the fourth quarter growth. How much do you think, if you can share that, was driven by the volume incentives for clients? And what's really, let's say, the underlying improvements in volume growth? Ann-Kristin Erkens: I would say that wasn't really driven by any incentives. And that also you see, I think if you look at the development by region. So really the strong 4%, that we had in Europe, was driven by lower raw milk prices and really more milk being packed in aseptic carton. And also, in Asia, the negative number. I mean, that is a function of the occurrence of Chinese New Year. So I think the rebates really didn't play a role too much. That said, of course, the fourth quarter remains our largest quarter, and probably also, will continue to remain our largest quarter in the future. Operator: We have a follow-up question from Ioannis Masvoulas, Morgan Stanley. Ioannis Masvoulas: Just looking at Slide 4, where you show the growth -- revenue growth in bag-in-box and spouted pouch at negative 3.4%. Could you give us an idea what the underlying revenue growth would be if we were to exclude the noncore parts of bag-in-box, especially wine, just to get a sense on the earnings power of what you consider or revenue growth power of what you consider as core? Ann-Kristin Erkens: Yes. Ioannis, I don't want to now kill you with all the details, but it's very clear that the core segments within that portfolio, of course, have performed much better than the minus 3.4% that you see for the overall. Still, we need to consider the market environment in food service, especially in the U.S., which has not yet been growing significantly again. But I think you see the clear spread in the growth rates between the 2 boxes, if you want. So the core business was slightly positive. Ingrid McMahon: We have some online questions, so if I could address those, please. Your guidance, does it include the guidance for revenue 2026? Does it include any perimeter changes you anticipate as you look to exit noncore operations from Charlie at BNP Paribas? Ann-Kristin Erkens: Yes. So our guidance for '26 on the growth side is an organic growth guidance. Should we achieve any divestment in the year, of course, we will exclude that from the perimeter. Ingrid McMahon: And an additional one for Charlie, what depreciation and amortization charge do you expect in 2026, including or excluding amortization of acquired intangibles? Ann-Kristin Erkens: Charlie, I would point you to the backup slide that we have provided. I hope that, that would be helpful for you also. Ingrid McMahon: Then, Christian Arnold from ODDO. Could you quantify the negative effect of the later timing of Chinese New Year compared to the previous year? And does it mean that you will have a positive impact on Q1 2026 in the same magnitude? Ann-Kristin Erkens: Christian, thank you very much. So it's, of course, impossible to perfectly quantify it. But indeed, as we saw a weaker Q4 in Asia Pacific, we should expect a slightly better Q1 that basically builds on the positive seasonality here. Overall, let me again come back to how do we say -- how do we expect the growth for '26 to play out between the different quarters, please take -- continue to bear in mind that we had a bit of a special seasonality in '25 with a much stronger first quarter and also stronger second quarter. So I would expect that the comps also play a role in the seasonality of '25, but there is this positive one probably from Chinese New Year running against it. Ingrid McMahon: And also from Christian, could you tell us to what extent you are changing -- increasing your prices in 2026? Ann-Kristin Erkens: Yes. I said, we believe that price increases doesn't play a big role also on the back of not too much inflation on the raw material cost side for '26. Ingrid McMahon: And then from Ashish, Citi, how do you think about restructuring charges in 2026? Ann-Kristin Erkens: Yes. So all the restructuring charges relating to the measures that we have announced at the investor update in October has been recognized in 2025, and we will just see the cash outflow relating to this still in the first half of the year, probably. That's all. Very good. Okay. Operator, do we have any more questions on the line? Operator: At the moment, there are no more questions. Ann-Kristin Erkens: Wonderful. Then, thank you very much for your questions, everybody, and for your time this morning. So I hope you take away, SIG has a clear path forward for value creation underpinned by a resilient business model and strong customer relationships. We remain firmly focused on disciplined and consistent execution, and we appreciate your continued interest in the company and look forward to updating you on our progress over the coming months and quarters. Have a wonderful rest of the day. 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 your lines. Goodbye.
Operator: Good day and thank you for standing by. Welcome to Agora, Inc. Fourth Quarter and Fiscal Year 2025 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. The company's earnings results press release, earnings presentation, SEC filings and a replay of today's call can be found on its IR website at investor.agora.io. Joining me today are Tony Zhao, Founder, Chairman and CEO; Jingbo Wang, the company's CFO. During this call, the company will make forward-looking statements about its future financial performance and other future events and trends. These statements are only predictions that are based on what the company believes today and actual results may differ materially. These forward-looking statements are subject to risks, uncertainties, assumptions and other factors that could affect the company's financial results and the performance of its business and of which company discussed in detail in its filings with the SEC, including today's earnings press release and the risk factors and other information contained in the final prospectus relating to its initial public offering. Agora, Inc. remains no obligation to update any forward-looking statements the company may take on today's call. With that, let me turn the call over to Tony. Please go ahead. Bin Zhao: Thanks, operator, and welcome, everyone, to our earnings call. I'll begin by reviewing our operational performance for the past quarter. We are pleased to report our fifth consecutive quarter of GAAP profitability in Q4, marking our first full year of GAAP profitability since 2018, driven by sustained double-digit revenue growth, improved operating leverage and disciplined cost management. Total revenue for the fourth quarter were $38.2 million, representing 10.7% year-over-year growth. Our GAAP net profit for the quarter was $4.9 million with a GAAP net margin of 12.9%. Next, I would like to share with you our recent business update, which highlights both the strength of our core real-time engagement business and the accelerating momentum of our conversational AI initiatives. Our platform's scalability and reliability were recently validated during a high-profile live streaming event over the Super Bowl weekend. MrBeast, the world's most followed content creator, hosted a broadcast session on Whatnot, the leading video-based shopping platform and a long-standing customer of Agora. We delivered high-quality full HD video to nearly 600,000 peak concurrent viewers worldwide while enabling their interactions at sub-second latency. To quote our customers' own words from their technical blog, "On event day, Agora's real-time media pipeline performed reliably at peak. Time to first frame stayed under 1 second, latency remained consistently low, and video quality held stable throughout the stream, even as we pushed systems to their limits at extreme load." We believe this is the largest live video shopping event in U.S. history. Events of this magnitude are the ultimate stress test for real-time infrastructure. Our ability to deliver stable, high-quality video with ultra-low latency at a global scale demonstrates our leadership in network resilience, distributed architecture and real-time routing. This event was powered exclusively by our platform, as no competitor can match our performance and scale. This is why industry leaders in e-commerce, social, entertainment and education continue to trust our infrastructure for their most critical moments. At the same time, we are witnessing rapid adoption of our conversational AI engine product. Since its launch in March 2025, usage has more than doubled each quarter. We are also encouraged to see early experimentation among our customers quickly evolve into real-world deployment across multiple verticals, including customer services, smart devices, education and AI-powered consumer applications. Companionship toys powered by our solution, such as Fuzozo, are driving accelerated shipments with high user stickiness. Validating this momentum, a leading consumer hardware giant recently launched a companionship toy built on our technology. Furthermore, our conversational AI kit, integrating a voice module and an emotion-display screen, has set an industry trend and is now widely adopted by manufacturers. We started the year with a strong reception of our conversational AI solutions for Physical AI at CES 2026 in January. At the event, we introduced the latest upgrade of our conversational AI device kit, featuring enhanced multimodal capabilities, including vision understanding and motion control. These new capabilities enable the development of embodied AI hardware and robotics across multiple use cases. For example, our customer Luwu Dynamics is developing a desktop embodied AI robot powered by this solution. Many of our customers also showcased products at CES that leveraged our solutions, ranging from AI companion devices and robotics to next-generation Physical AI products. The strong market interest and media coverage coming out of CES further validates the growing demand for real-time, human-like interaction embedded directly into smart devices. Beyond one-on-one interaction between humans and AI agents, we are also expanding into multi-agent collaboration scenarios. During the quarter, we supported Agnes AI in launching its next-generation AI group chat and multi-agent collaboration platform. By leveraging our real-time engagement infrastructure and conversational AI capabilities, Agnes AI enables multiple AI agents and human participants to interact seamlessly. We believe multi-agent orchestration represents the next frontier of AI-driven productivity while agents can coordinate tasks, share information and collaborate with humans in real time. Across these developments, a clear theme is emerging. As AI becomes more interactive and multimodal, the technical complexity behind delivering a seamless interaction experience between a human and an AI agent increases significantly. Real-time conversational AI requires not only powerful foundation models, but also advanced audio processing, ultra-low latency networking, global scalability, interruption handling, turn-taking management and device-level optimization. These are areas where we have made substantial investments and have built a strong competitive edge. Our deep expertise in real-time infrastructure uniquely positions us to bridge the gap between AI model capability and production-grade user experiences. Looking ahead, we remain focused on driving revenue growth and advancing conversational AI innovation throughout 2026. We enter the new year with strong momentum, supported by an expanding customer pipeline, growing production deployments and increasing ecosystem partnerships. We believe we are well positioned to capture this transformation and create long-term value for our shareholders. Before I conclude, I would like to thank our customers, developers, partners and shareholders for their continued trust and support and our global teams for their dedication and innovation. With that, let me turn things over to Jingbo, who will review our financial results. Jingbo Wang: Thank you, Tony. Hello everyone. Let me start by first reviewing financial results for the fourth quarter of 2025 and then I will discuss outlook for the first quarter of 2026. Total revenues for the fourth quarter reached $38.2 million, representing a 10.7% year-over-year increase and exceeding the high end of our guidance. This marks our fourth consecutive quarter of double-digit organic growth. If we look at the 2 business divisions, Agora revenues reached $19.9 million in Q4, representing 14.4% year-over-year growth and 9.3% quarter-over-quarter growth. The strong growth reflects our successful market penetration and growing adoption in verticals such as live shopping. Shengwang revenues reached RMB 129.2 million in Q4, up 5.7% year-over-year and 5.6% sequentially, driven by continued business expansion and adoption in key verticals such as social and entertainment and IoT. Dollar-Based Net Retention Rate is 109% for Agora and 89% for Shengwang. Gross margin for the quarter was 65.1%, down 1.5 percentage points year-over-year and 0.9 percentage points sequentially. The slight decline was primarily driven by the lower margin profile of our conversational AI-related products, as usage is still ramping and remains at a subscale level. Turning to expenses. R&D expenses were $13.6 million in Q4, down 7.7% year-over-year, reflecting our continued cost discipline. R&D expenses accounted for 35.8% of total revenues compared to 42.9% in the same period last year. Sales and marketing expenses were $7.1 million in Q4, down 2.1% year-over-year. Sales and marketing expenses represented 18.7% of total revenues in the quarter compared to 21.1% in Q4 last year. G&A expenses were $5.4 million in Q4, a decrease of 16.5% year over-year, primarily due to lower provisions for credit losses following improved customer collections. G&A expenses represented 14.1% of total revenues compared to 18.7% in Q4 last year. Moving on to the bottom line. We delivered net income of $4.9 million in Q4, representing a 12.9% net income margin. As Tony just mentioned, this marks our fifth consecutive quarter of GAAP profitability and first full year of GAAP profitability since 2018. Based on our current business momentum and visibility into 2026, we expect net income to grow compared to 2025. Now turning to cash flow. Operating cash flow was $9.3 million in Q4 compared to $4.5 million in Q4 last year. Moving onto balance sheet. We ended Q4 with $374.9 million in cash, cash equivalents, bank deposits and financial products issued by banks. Net cash outflow in the quarter was mainly due to share repurchase of $10.9 million. In the fourth quarter, we repurchased 12 million ordinary shares, or 3 million ADSs, representing 3.3% of our outstanding shares at the beginning of the quarter. Since our Board approved the share repurchase program in February 2022, we have repurchased $143.1 million worth of shares through December 31, 2025, which represented 71.6% of our $200 million share repurchase program. We are pleased to announce that our Board has authorized a 12 month extension of our share repurchase program through February 28, 2027, with all other terms unchanged. This reflects the Board's confidence in our long-term growth prospects and our continued commitment to delivering shareholder value. Now turning to guidance. For the first quarter of 2026, we currently expect total revenues to be between $36 million and $37 million, compared to $33.3 million in the first quarter of 2025, representing year-over year growth rate of 8.1% to 11.1%. This outlook reflects our current and preliminary views on the market and operational conditions, which are subject to change. In closing, I want to extend my sincere gratitude to our exceptional teams in Agora and Shengwang. Our sustained double-digit revenue growth and double-digit net income margin are a direct result of your dedication and execution. Let's remain focused on driving revenue growth and advancing conversational AI innovation throughout 2026. To our shareholders, thank you for your continued trust and partnership. Thank you all for joining today's call. Let's open it up for questions. Operator: [Operator Instructions] First question comes from Daley Li from Bank of America Securities. Huiqun Li: Firstly, congrats on the strong Q4 results. And I have two questions here. Firstly, could you update us the overall RTE demand trend in China and overseas? And what industries are the key demand drivers? Secondly, you have released the ConvoAI Device Kit. And could you please share more color on the conversational AI applications and what industries and applications are the key drivers? And besides I'm not sure, could you share some color about your targeted revenue for the conversational AI this year? Bin Zhao: Okay. For the real-time engagement market trend, in China, demand from social entertainment and education customers continue to grow at a modest rate while we remain optimistic on the vast growth potential of IoT and digital transformation customers to drive our China revenue. In recent months, competitive pressure further abate, and we believe the industry will continue to consolidate. In U.S. and international markets, as I mentioned earlier, our success in one of the massive single-channel live streaming event solidifies our position and brand awareness among live shopping customers, which will bring more business opportunities for us. We are confident that we will gain more market share in this vertical. And for ConvoAI Device Kit, so we do expect our conversational AI revenue to continue to grow. The use cases, not just companionship toys, as I mentioned, also physical AI equipment are all happening. For the... Jingbo Wang: For the revenue, so as you know, we released our conversational AI engine in March last year. And since its release, as Tony just talked about, its usage has more than doubled every single quarter. Its revenue contribution is still relatively low at the moment because a lot of customers are in POC stage. So the revenue growth lagged behind usage growth. But we do see a healthy pipeline of customers. So based on that, we expect to see revenue contribution from conversational AI to ramp up throughout this year. And our goal is for conversational AI to approach 5% of ARR contribution towards the end of this year. Tony, do you want to talk more about the use cases? Bin Zhao: Sure. We've been talking about the conversational AI use cases before. It's still focused on customer service, companionship devices, education and interactive. We're now also focusing closely with global customers from U.S., Europe, South America, Asia Pacific region and inside China to implement our solution in a couple of customer service scenarios such as outbound marketing, marketing, cooling market cooling, appointment scheduling, order confirmation and so on. For companionship devices, a number of device shipments and activations are promising. And more importantly, our solution is becoming the de facto industry standard or best practice, we expect to see more customers launch their products throughout the year, including some based on well-known IP with the potential to become a global hit. Operator: Next, we have [ Ri Han ] from CICC. Unknown Analyst: This is [ Ri Han ] from CICC. Can you hear me? Bin Zhao: Yes. Unknown Analyst: Congrats on another solid quarter, especially with revenue coming above the high end of guidance. My first question is on gross margin. We noticed that gross margin declined slightly year-over-year to 65%, just as Jingbo said. Can you walk us through the key factors behind that decline? Should we view this as mix driven and temporary or more structural given AI ramp-up costs? How should we think about margin trend into 2026? My second question is on profitability for 2026. After achieving full year GAAP profitability in 2025, how do you think about operating income and operating margin next year? What are the main drivers that could support further margin expansion? Yes, that's it. Jingbo Wang: Sure. So I will talk about gross margin first. As I said, the slight decrease in gross margin was mainly due to the impact of conversational AI-related products because some of the customers are still in early pilot stage, and we don't charge customers for pilot POC experimentations. So revenue ramp-up lags behind usage growth. And also the, ConvoAI infrastructure is currently running at a very small scale, subscale levels. So that's why the -- if we only look at the margin of that particular product, it's very, very low at the moment, and that drags down the overall margin slightly. We do expect this to improve as usage and revenue ramp up, but it might take a couple of quarters to fully recover. So when we kind of do our internal forecast and give guidance on 2026 profitability, we are essentially forecasting flat gross margins compared to Q4 2025. So in terms of operating income -- so we expect operating income to improve significantly -- further improve significantly compared to 2025. It's driven by revenue growth, improved operating leverage. And our goal is to achieve GAAP operating profit in Q4 2026. Please note, this is after taking into consideration about $6 million of share-based compensation in 2026 and also nearly $4 million of amortization related to the headquarters project. So after these 2 items, we expect to significantly improve the operating income. Operator: Next question comes from Zongxuan Yang from CITIC Securities. Zongxuan Yang: Also congrats on the last quarter's performance. So I just have one question follow the first question from Bank of America regarding to AI. So we can see that the stock price for -- especially for those U.S. software companies have fluctuated recently. So like the market has a lot of concern about AI software. So I just want to know that how do you think of the -- maybe like the infrastructure and the cybersecurity company position on this AI era? And also maybe like other company's leader on this issue and the other company's position in the AI. Bin Zhao: Yes. So SaaS service strengthened because of the drastic cost reduction in building UI/UX and application layer logic of software by web coding or AI coding. However, the system level or infrastructure level core services, including the PaaS and API services we provided are actually facing increasing demand from web coding. And the need for an even higher quality and scalable API services are actually much needed than before. And it's hard to imagine those hardcore low-level or system-level infrastructure technology would be easily disrupted by web coding or just AI coding. So as the demand for real-time multimodal interactions with AI engine growth, especially in this sector, we will largely benefit from the global trend of AI development. Plus who is not an AI company these days? If you're not, you're outdated. We, as a company, is the first one to introduce AI technology into RTE sector even before the generative AI era. And we are the first one to launch AIGC RTE SDK, first one to demo full duplex conversational AI. We provide the best AI turnkey and AI models in the world, and we are one of the few to launch the real-time API with OpenAI. So we are heavily invested in the AI development and AI infra front. We have also positioned the company as a leading innovator in generative AI era, and we are committed to be one in the coming decades. Jingbo Wang: Yes. Actually, I want to add like layman's perspective from a non-technical person. So now if you ask a coding agent, a cloud code or open cloud to write an app with real-time engagement features like write a meeting app for your own company or your team, it's most likely actually if you try, you'll see that the agent will call API to build this instead of trying to rebuild the entire real-time communication infra and the fundamental code again. So actually, will be used by the coding agents rather than be replaced by coding agents. Operator: Our last question comes from Xu Yue from China Securities Co. Yue Xu: Congrats on the solid results. So I have two questions. The first question is regarding the gross profit margin. We see that this quarter, the gross profit margin is kind of dragged down by AI investment. So how do we forecast for future AI product margin trend? And the second question is, how do you view the growth trajectory for the coming quarters for AI toys and customer service? And have we seen the inflection point of adoption in these verticals? Jingbo Wang: Sure. So again, in terms of gross margin, we actually think the conversational AI product has great margin potential based on our own internal estimate. If we operate at normal levels at a good utilization rate and a decent scale, the gross margin of the AI product should be at least similar, if not higher, than the current core RTE products. So the current relatively low margin is really due to the suboptimal scale and also a lot of POC ongoing. So we don't have like a fundamental concern on the margin. It will just take some time to ramp up to the target levels. So that's on gross margin. In terms of the AI product adoption, as Tony talked about, right, we do expect the adoption to grow throughout this year. And you talked about the performance and cost, right? I think it's not just us in terms of performance, but for all the players globally in conversational AI, there are a lot of new start-ups focused on this area. And I think we face the problem, same problem. The technology itself is fundamentally ready. But from an engineering perspective, there remains a lot of corner cases and use case adoption to be done. This will take time. But it's really just a question of time, not a question of whether it will work or not. So we think we made a lot of progress already in 2025. That's why in several use cases like companion card, like outbound calling. In several use cases, it's already working, and we'll solve more problems this year. And we do think it's not like one single turning point, but we will solve use case by use case and gradually penetrate into more verticals. And on the cost side, as we all know, cost is coming down steadily on all the models, so we do not think the cost will be a blocking factor. Operator: Thank you. There are no further questions. That concludes today's Q&A session. Thank you, everybody, for attending the company's call today. As a reminder, the recording in the earnings release will be available on the company's website at investor.agora.io. And if there's any other questions, please feel free to e-mail the company. Thank you. Jingbo Wang: Thank you. Bye-bye.
Operator: Ladies and gentlemen, thank you for joining us, and welcome to the Belite Bio Fourth Quarter and Fiscal Year-End 2025 Earnings Call. [Operator Instructions] I will now hand the conference over to Sophie Hunt. Please go ahead. Unknown Executive: Good afternoon, everyone. Thank you for joining us. On the call today are Dr. Tom Lin, Chairman and CEO of Belite Bio; Dr. Hendrik Scholl, Chief Medical Officer; Dr. Nathan Mata, Chief Scientific Officer; and Hao-Yuan Chuang, Belite Bio's Chief Financial Officer. Before we begin, let me point out that we will 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 issued earlier today. And now I'll turn the call over to Hao. Hao? Hao-Yuan Chuang: Thank you for joining today's call to discuss our fourth quarter and full year 2025 financial results. 2025 was a year of significant progress for us as we achieved several key milestones. We look forward to a truly transformative year in 2026 as we position Tinlarebant to potentially become the first ever approved therapy for people living with Stargardt disease, the devastating eye disease that usually begins in childhood or young adulthood and leads to progressive vision loss and then legal blindness in almost all cases. Today, I'll provide a recap of our 2025 achievement, key milestone for 2026 and financial results. Starting with 2025 achievement, of course, the most significant achievement was the announcement of our top line results for the Phase III pivotal DRAGON trial in December. We're very excited to share that the trial met its primary efficacy endpoint, demonstrating statistically significance and clinically meaningful 36% reduction in the growth rate of upper lesion, measured by definitely decreased autofluorescence by fundus autofluorescence imaging compared with placebo. These results position us well for engagement with the regulatory authorities as we see a path to commercialization in Stargardt disease. In the DRAGON II study, we reached the target number of 60 subjects in January. As of February 27, we had enrolled 72 subjects as subjects who had passed the screening before, the registration closed, can still be admitted to the trial. We expect the final number of subjects enrolled to be between 72 and 75. We also completed enrollment in the Phase III PHOENIX trial in GA with 530 subjects. Finally, we completed a $402 million public offering with over allotment fully exercised by the underwriter in Q4. Importantly, the net proceeds went from this along with other raises comparing the year, restricting us extremely well to support commercialization preparation for Stargardt disease, development and expansion of pipelines and general corporate purposes. Now moving to 2026. As I said, this will be a transformative year for Belite. The top priority in our planned NDA submission to the FDA in the second quarter of 2026. And with our NDA submission planned, we have also kicked off our commercialization preparation work for Stargardt disease. I'm pleased to share that we have hired all of the key leadership positions and are now in the process of building our organization in sales, market access, medical affairs, marketing, regulatory and operations, et cetera. It's a busy but exciting time for us, and we look forward to sharing more as we progress with our launch preparation works. Last but not least, I'll now close with the financial recap. For the fourth quarter, R&D expenses were $14.6 million compared to $7.3 million in Q4 2024. The increase was primarily due to the first expenses related to the DRAGON II trial. Second, we received a lower Australian R&D tax incentive in Q4, 2025 as such incentive was received in Q3 2025 versus last year it was received in Q4 2024. And third, API manufacturing expenses. On a non-GAAP basis, which excludes share-based compensation expenses, R&D expenses for the fourth quarter was $12.2 million compared to $5.7 million for the same period in 2024. We believe this non-GAAP basis provides a better picture of our operating expenses since our share-based compensation expenses is heavily driven by achieving the volume milestone and the volatility of our own stock price and a comparable company stock price using the valuation. SG&A expenses were $13.5 million compared to $4.2 million in Q4 2024. The increase was primarily due to increase in share-based compensation expenses and professional service fees. As we achieved development milestones and started to prepare for filing and commercialization. On a non-GAAP basis, SG&A expenses for the fourth quarter was $4.2 million compared to $1.5 million in Q4 2024. Overall, the fourth quarter, we reported a net loss of $25.3 million compared to $10.1 million in Q4 2024. On a non-GAAP basis, we reported a net loss of $13.6 million for the fourth quarter compared to $5.9 million for Q4 2024. For the full year, R&D expenses were $45.4 million compared to $29.9 million for the full year 2024. The full year increase was primarily due to; first, expenses related to PHOENIX trial; second, share-based compensation expenses; and third, API manufacturing expenses, partially offset by the royalty payment recognized in 2024. On a non-GAAP basis, excluding share-based compensation expenses, the R&D expenses were -- for the full year was $36.2 million compared to $26.2 million for the same period in 2024. SG&A expenses were $38.9 million compared to $10.1 million in 2024. The increase was primarily due to increase in share-based compensation expenses and professional service fee. As we achieved development milestone and started to prepare for filing and commercialization. On a non-GAAP basis, SG&A expenses were -- for the full year were $9.1 million compared to $4.8 million in 2024. For the full year, we reported a net loss of $77.6 million compared to a net loss of $36.1 million in 2024. On a non-GAAP basis, net loss was $38.7 million compared to a non-GAAP net loss of $27.2 million in 2024. Moving to the balance sheet. As I said, we had a successful year of fundraising through underwritten public offering to registered direct offering and a significant pipe. We're very grateful to our shareholders for their strong support. As a result, we closed the year with $772.6 million in cash, cash equivalent, U.S. treasury bills and notes as compared with $145.2 million at the end of 2024. Our balance sheet remains strong, and we are well positioned to deliver our near and long-term objectives, including the commercial launch for Stargardt disease. With that, I'll turn the call back to the operator for Q&A. Operator: [Operator Instructions] Your first question comes from the line of Judah Frommer with Morgan Stanley. Judah Frommer: Just a couple of questions for us. I guess on the NDA submission, are you still thinking about that being a rolling submission? And what role would DRAGON II play within that submission process, I would -- maybe in the U.S. and other geographies as well. And then I guess just given the cash balance that you've amassed here, can you help us with the uses of cash between getting through the remaining Stargardt trials, getting through GA and commercialization and anything else we should be thinking about? Yu-Hsin Lin: Okay. I'll answer the first question regarding the NDA. So it will be a rolling submission. We are on track for the NDA submission in Q2. We're expecting the CSR to finalize this month. And once that's finalized, we are ready to submit pretty soon. What's the next? DRAGON II. Yes, so the DRAGON II will be for Japan only because the Japanese authorities would like to see the data of Japanese patients, so that's strictly for the Japan. And the commercialization and the budget, I think it was the other question, I'll refer that to Hao. Hao? Hao-Yuan Chuang: Yes, so for the next three years, we expect existing pipeline, including the NDA submission, all of those, what we call that like R&D kind of related activity will cost us about $150 million. And for the commercialization itself for the next 3 years is probably somewhere between $200 million to $250 million. Operator: Your next question comes from the line of Tazeen Ahmad with Bank of America. Tazeen Ahmad: Can you just give us a little bit of guidance on how we should be thinking about pricing given the profile of the drug and given the undermet need, we'd be curious to maybe get a sense of a range of what would be appropriate to be considering here? And then can you just remind us what are the key gating items left before you submit the NDA in the second quarter? Yu-Hsin Lin: Hao, do you want to take this one as well? Hao-Yuan Chuang: Sure. Well, for the pricing, apparently, it's still early for us to set a price. But I think we have been seeing that the average rare disease drug price in the U.S. being somewhere about $350,000. And we do think it's fair to say that we expect ourselves can be doing better than that, but still early to really set a price. Tazeen Ahmad: Okay. And then on... Yu-Hsin Lin: Yes, what was the other question? Tazeen Ahmad: Yes, what are the gating factors left before you submit for approval in 2Q? Yu-Hsin Lin: I guess we have everything ready. So we're just waiting for the clinical study report. So as we speak, we are on track. Operator: Your next question comes from the line of Marc Goodman with Leerink. Your next question comes from the line of [ Timur Ivannikov ] with Cantor. Unknown Analyst: This is [ Timur Ivannikov ] for Steve Seedhouse. So our question is about the timing of your potential launch. So assuming you have an NDA filing in the second quarter, do you have initial expectations on the launch timing? And then I think you were talking about maybe 25 field reps. But how quickly after the approval do you think you can launch? And how do you assess the difficulty of this launch maybe to other rare diseases or other retinal disease? Yu-Hsin Lin: Hao, do you want to take this one as well? Hao-Yuan Chuang: Sure, sure. Well, so we expect we probably will launch by Q1 2027. The sales team, as you said, we expect that we have probably a team more focused on genetic testing, which will be one of the key factors to get the patient confirmed. The second team will be more about the drug -- about the brand. So total somewhere like 25 to 30, we think is a fair assumption at launch. Potentially, after 2 years of launch, you may expand that team further as you want to get to every corner in the U.S. Yes. So I think being able to launch by Q1 2027 is our goal. And to your question about the challenges, we think compared to other disease, given there's no treatment for Stargardt disease, this should be a fairly straightforward drug. The difficulty will really be getting patients, getting the physicians to be aware this treatment is available and then shorten the time it takes for people to get the genetic testing done and get their insurance coverage. I think that -- these will be the few execution kind of test that we will be focused on. But I wouldn't see those are like challenges for us. Yu-Hsin Lin: Hao, maybe we could get Hendrik to also add more color to this question, given that he is prescribing himself. He looks after these Stargardt patients, and he knows the whole clinical landscape very well. So Hendrik, do you want to add anything? Any details? Hendrik Scholl: Yes. Thank you, Tom, but I would like to confirm what Hao-Yuan just said and pointed out, it's a fact that many patients are lined up in large databases. Many of Stargardt patients because it includes genetic testing to make the diagnosis are being seen in large centers, including large academic centers and such centers typically have database of patients where they also include the genotype of these patients. So these patients, therefore, are immediately available because they are known to the centers and patients can be contacted by treating physicians if the patient him or herself would not seek clinical care immediately. So I believe because this is a monogenic disease, there's an extra opportunity to get to patients very quickly. Operator: Your next question comes from the line of Marc Goodman with Leerink. Marc Goodman: Yes. Sorry about the confusion. Can you talk about your filing plans OUS? And then secondly, what are your latest thoughts on the timing of an interim look for the GA work you're doing? Yu-Hsin Lin: Thanks, Marc. So you're saying that the timing of ex-U.S. NDA submissions or the U.S.? Marc Goodman: Yes, yes, OUS. Exactly, ex-U.S. Yu-Hsin Lin: Okay. So the -- we want to set the priority of the FDA on U.S. We want to put all resources to make sure that we are successful with the NDA in the U.S. So everything outside of the U.S. will build on to that. And this requires discussions with the regulatory authorities in different regions to see what type of timing that we're expecting, or they're expecting. So this will be an update which regions they will prioritize after the U.S. So we are in constant communications with the EMA, the PMDA and other authorities as well. So we want to keep the U.S. -- keep all the bandwidth on the U.S. FDA given that we expect there's going to be a lot of questions. So we don't want to dilute our resources at this point by spreading it to -- spread out and then submission -- submitting it on too many regions. Does that answers your question? Marc Goodman: Correct. Yu-Hsin Lin: What was the other one? Marc Goodman: The interim look for the geographic atrophy. Just curious what your latest thoughts are? Yu-Hsin Lin: Yes. So right now, we are probably expecting that would be somewhere second half of the year. We haven't actually looked at it yet because we are prioritizing everything on launching Tinlarebant for Stargardt. So we will have a further update for that, probably in the next quarter. Operator: Your next question comes from the line of Yi Chen with H.C. Wainwright. Unknown Analyst: This is [ Eduardo ] on for Yi. Just following up on the geographic atrophy trial. Do you have any idea of what level of lesion growth inhibition you're targeting to consider that trial as success in that broad population. And then also if you had any comments on capital allocation for the LBS-009, and how you prioritize that, and when you expect to maybe move into a Phase I study and if you have any details on the specific liver indication as a primary lead. Yu-Hsin Lin: So I'll get Hendrik to answer on the GA one. I'll start with the 009. Right now, there's no plans for 009 yet. So again, we're prioritizing everything on Tinlarebant and be a successful launch in the U.S. first. All the others will fall and will prioritize after that. Hendrik? Hendrik Scholl: And I'm happy. Thank you, Tom. I'm very happy to take the question on what's the threshold that would make treatment of GA success with our oral compound. When you think about OAKS, DERBY and GALE, [ the 2 ] injectables Syfovre and Izervay they found efficacy signals of 13%, 21% and 14% in their registration trials. Given that these are injectables that need to be injected essentially monthly for the rest of the life of patients affected by GA. We feel that if we reach that threshold, then it is already a success. Having said that, I mean, we are more ambitious given what we found in Stargardt disease, 36%, we feel that reaching 13%, 21%, 14% so roughly about -- something between 15% and 20% could absolutely be possible, and we would like to go beyond that. But again, since our compound is an oral compound, if we reach the same threshold, we will be the standard of care because it will be a very hard sell for patients to tell them to come in for injections every month if there is an oral treatment available. Operator: Your next question comes from the line of Boris Peaker with Titan. Boris Peaker: Congrats on the progress. Just maybe we'll start with Stargardt. Do you anticipate the label to become a broad Stargardt label for all patients? Or would it -- you think potentially be restricted to patients ages maybe 12 to 20, similar to the pivotal study. Yu-Hsin Lin: I'll refer this to Nathan and of course, Hendrik to add more details as well. Nathan? Nathan L. Mata: Nathan, here, the CSO. So we've had that discussion with FDA, and we've made the argument that basically it's the same disease, whether it's affecting children or adults, and they concurred. There's no evidence to suggest that these patient populations would be any different. Of course, Hendrik knows from the ProgStar data that the lesion growth profiles are not dramatically different between children and adults. So yes, we'll be pressing for the full label from -- for subjects 12 and older because, again, it's the same disease, same genetic sort of dysfunction that leads to the dysfunction of the same protein. So again, spectrum of the same disease across different populations. Boris Peaker: Got it. And other just to follow up on -- go ahead. Sorry. Hendrik Scholl: No, I just wanted to add that it's all about the generalizability of the data, right? And there has really been such an easy case to convince the regulator, this is the same disease. And we included adult subjects 18 to 20 years, but we also included adolescents, as you know, right? But if there is a patient affected at aged 22, 28, 32 with biallelic mutations in ABCA4, why would that be considered a different disease? Why would somebody believe there would be no efficacy if you treat later because, and Nathan pointed it out, the ProgStar study has shown that progression rates amongst different age groups, 12 to 18, 18 to 50 and beyond 50 were essentially similar. Boris Peaker: Got it. And just another follow-up on Stargardt. I understand your initial emphasis is obviously going to be on the U.S. market. But I'm just curious for the ex U.S. opportunity, how important is visual acuity, I guess, for approval and potentially for just reimbursement and justifying pricing? Yu-Hsin Lin: Hendrik, do you want to take this as well? Hendrik Scholl: Certainly. I mean, to be clear, visual acuity is important for every regulator, right? It's just how realistic is it that any given trial in Stargardt disease would find a visual acuity efficacy signal, right? When you look at the ProgStar data and an average visual acuity loss of 0.55 letters per year, but life expectancy of 60 to 80 years after the first diagnosis. That means that it's simply impossible even if you have a treatment that arrests the progression to find an efficacy signal then visual acuity is the primary outcome measure. If you arrest progression and the progression is 1.1 letters in 2 years, that would be the difference that you would target, but everybody knows that there's a 15 letter threshold set by the FDA to be clinically meaningful. And the intersession variability of visual acuity measurements in a population of macular degeneration patients such as Stargardt is 8 letters. So meaning that visual acuity as an outcome measure is an unrealistic target. But DDAF, which is our primary endpoint has been shown in cross-sectional correlations in the ProgStar study to be highly significantly correlated with visual acuity loss. It just means that you have to treat for a while until eventually you will see a visual acuity benefit. Operator: [Operator Instructions] Your next question comes from the line of Bruce Jackson with Benchmark. Bruce Jackson: So in terms of the commercialization strategy in the United States, you've chosen to go direct, have you given any thought to what your international commercialization strategy might look like? Yu-Hsin Lin: Yes, of course. So right now, we are open. We're very flexible on that. We do have multinational pharmaceutical companies wanting to partner or license. Right now, that's still open. We believe right now, we -- at least our regulatory submission pathway is pretty straightforward for all regulatory authorities. So we believe we can add more value, at least starting from the FDA, once we get the approval, we'll see how it goes in other regions. But we believe that we have a very straightforward approval path for all other regions as well. So it depends on what kind of reasonable deals or deals that we think was a good partnership after the FDA -- after we get FDA approval. Bruce Jackson: Okay. Great. And then if I could just get a follow-up on the ex-U.S. regulatory strategy. You've got quite a bit going on this year. Do you intend to seek further approvals in Europe? And when might those get submitted? And that's... Yu-Hsin Lin: So the FDA being on top of our priority. And then second, I would say the EMA and probably next to it will be Japan as well. And then followed by China and all other regions. Operator: Your final question will be from the line of Michael Okunewitch with Maxim. Michael Okunewitch: Congrats on all the great progress. I guess, I'd like to see if you could help me understand just how well understood the true prevalence of Stargardt diseases given there have been no approved therapies. Do you expect that having something available could help build awareness and uncover additional undiagnosed patients? Yu-Hsin Lin: Hendrik, can we throw this question to you? Hendrik Scholl: I'm happy to answer the question. So the answer is absolutely, absolutely. If there is a treatment, and we have seen that about a decade ago for patients affected by biallelic mutations in RPE65 to be treated with Luxturna, the first gene therapy for that condition, absolutely led to a whole wave of patients that have been undiagnosed before to be diagnosed. And that includes a proper diagnosis clinically and genetic testing. In Stargardt disease, the symptoms are more straightforward than in RPE65. It's a much more diffuse disease affecting night vision in the periphery. In Stargardt disease, central vision is affected. Patients seek clinical care, but we will need a genetic diagnosis in order to treat patients. What is the true prevalence of Stargardt disease? In the past, for rare diseases, it was very difficult to find out what the actual prevalence is. It's only known in the Beaver Dam eye study, Blue Mountain eye study, Rotterdam eye study, what the prevalent eye diseases are. But there's new opportunity since about a decade or so to study genetic databases, knowing about the mutations in the target gene and the penetration rate. And this allows us to estimate and taking into account the race mix in the United States that we need to consider about 53,000 patients being affected by ABCA4-mutated retinal disease, including Stargardt disease. So I think that it's a realistic number now, which is firmly based on genetic databases that are available for populations of European descent, East Asian descent and African descent. Yu-Hsin Lin: Nathan, I believe you've published on this a few times. Anything you want to add? Nathan L. Mata: No, no. I think Hendrik covered it very nicely. Yes, we did publish a review article recently, capping the prevalence of Stargardt disease, looking at it geographically across the world. And you can really look for that paper. It's published under my name and Hendrik's name just recently. But yes, so 53,000 in the United States and ex U.S., of course, more than that globally. So -- and again, the genetics really tells us what the prevalence are. That's what the data are based upon in terms of the publication that we recently submitted -- recently got accepted. Michael Okunewitch: And then just one more as a follow-up, if you don't mind. I wanted to see, do you expect that there would be any value in looking into patients younger than 12 years old? And are there any plans for this expansion? Nathan L. Mata: Yes. Let me just take that real quick. So we do have an approved pediatric investigational plan with EMA, which we plan to initiate in April of this year. So that's coming up very soon. That is a 2-year study looking at safety and efficacy in children 3 to 11 years of age. So we'll have to wait to see what the safety and efficacy data look like at the end of the 2-year study. But certainly, we do have plans to establish safety and efficacy in patients younger than 12. Yu-Hsin Lin: And Hendrik, I believe that you answered the same question as well in one of the medical conferences just a month ago. Hendrik Scholl: Yes, indeed. And we feel that although in DRAGON patients already had significantly lost vision on average, we feel that patients before losing significant vision will strongly benefit from Tinlarebant treatment. And that would typically be relatively young patients. So we feel that we absolutely must expand into the pediatric population. And as Nathan pointed out, it will be based on our findings in our pediatric study that we will start in the second quarter of this year. Operator: There are no further questions at this time. This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Good afternoon, and welcome to the Superior Group of Companies' Fourth Quarter 2025 Conference Call. With us today are Michael Benstock, Chief Executive Officer; and Mike Koempel, President and Chief Financial Officer. As a reminder, this conference call is being recorded. This call may contain forward-looking statements regarding the company's plans, initiatives and strategies and the anticipated financial performance of the company, including, but not limited to, sales and profitability. Such statements are based upon management's current expectations, projections, estimates and assumptions. Words such as expect, believe, anticipate, think, outlook, hope and variations of such words and similar expressions identify such forward-looking statements. Forward-looking statements involve known and unknown risks and uncertainties that may cause future results to differ materially from those suggested by the forward-looking statements. Such risks and uncertainties are further disclosed in the company's periodic filings with the Securities and Exchange Commission, including, but not limited to, the company's most recent annual report on Form 10-K and the quarterly reports on Form 10-Q. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements made herein and are cautioned not to place undue reliance on such forward-looking statements. The company does not undertake to update the forward-looking statements, except as required by law. And now I'll turn the call over to Michael Benstock. Michael Benstock: Thank you, operator, and thanks, everyone, for joining our call. I'll begin with an overview of our fourth quarter results, followed by a discussion around market conditions. I'll also cover at a higher level how each of our business segments is performing along with some of our go-forward strategies. Mike will then walk us through a more detailed financial review before we open it up for Q&A, for which we'll be joined by Jake Himelstein, President of our Branded Products business. For the fourth quarter, solid growth in our Branded Products segment helped drive SGC to an overall modest year-over-year increase in revenues, while we also lowered expenses despite this growth. As a result, we generated 19% higher EBITDA than the year ago quarter, and our EPS nearly doubled to $0.23. In addition, as expected, fourth quarter results reflected the back-end weighted nature of our business with revenues up 6% sequentially and diluted earnings per share up more than 28%. Our outlook for SGC for 2026 that Mike will share in a moment reflects solid growth expectations for the year, again, with a back-end weighted cadence due to expected order patterns and anticipated new customer growth in our Contact Centers segment. Turning to market conditions. There remained a degree of economic uncertainty amongst customers and prospects across all of our business lines. Nevertheless, we were able to grow consolidated revenues during the fourth quarter. Again, the progress we've made in driving efficiencies and containing costs, as you see from our bottom-line performance reported today, should prove beneficial once macro conditions normalize and stronger demand returns. Taking a step back, our overarching strategy is to emerge stronger from these currently uncertain economic and geopolitical times, with even greater market share as we have through past complex macro cycles. Our leadership team will accomplish this by continuing to strategically invest in growth while at the same time driving efficiencies and removing unneeded costs from the business. Moving on to our business segments. Branded Products, our largest segment, had 5% year-over-year growth during the quarter or a 14% sequential increase despite the challenging tariff environment's impact on customer order patterns throughout the year. Our pipeline and order backlog remains solid and have already generated some large new wins this year. Looking ahead, we'll be focused on growing our market share further in this attractive, highly fragmented market. Specifically, we anticipate further expanding our sales force as well as leveraging technology to make new and existing reps even more efficient. Turning to Healthcare Apparel. Revenue was off 5% year-over-year in the fourth quarter, which reflects macro uncertainty for both our wholesale-related consumer channels and institutional healthcare apparel. Similar to Branded Products, we're investing to grow demand, in this case, to support our Fashion Seal, Wink and Carhartt brands, while at the same time keeping a watchful eye on expenses. In fact, versus the year ago quarter, despite continued marketing investments, we were able to drive a slight decline in SG&A, resulting in a positive outcome for EBITDA. Going forward, we see opportunities to grow our digital and brick-and-mortar wholesale channels as well as our own direct-to-consumer channel, which continues to have momentum. Our third business segment, Contact Centers represents 15% of consolidated revenues and saw an 8% annual decline in the top line driven by the downsizing and loss of existing customers from earlier in the year that have not yet been outweighed by new customer growth. Prospective customers have been slow to commit given the economic uncertainties, but our pipeline remains solid even after producing customer wins early this year and should translate into further growth, particularly in the back half of 2026. In addition, we're again controlling what we can. We reduced SG&A for Contact Centers by nearly $1 million or 10% versus the prior year quarter, driven by streamlining our cost structure, including the strategic use of AI. In closing, we're cautiously optimistic about the year ahead, and our strong balance sheet that Mike will discuss allows us to intelligently navigate current market conditions, while positioning SGC for long-term success. We also brought back a significant number of shares during the quarter, reflecting our belief that our stock has a compelling long-term value. Mike will now take us through a more detailed review of fourth quarter results, then we'll open it up for Q&A with Mike, Jake and myself. Mike? Michael Koempel: Thank you, Michael, and thank you again, everyone, for joining today's call. During the fourth quarter, we generated consolidated revenue of $147 million, which was up 1% year-over-year and up 6% sequentially from the third quarter, demonstrating the back-end weighted cadence of our revenue as expected. Our largest segment, Branded Products grew revenue 5% over the prior year quarter to $97 million, primarily driven by revenue growth from the 3Point acquisition in December 2024, followed by modest organic growth. Sequentially, Branded Products grew quarterly sales by more than $10 million, fulfilling our back-end weighted expectations. Healthcare Apparel is our next largest segment, which produced revenue of $29 million relative to $30 million a year earlier as the macro uncertainty for wholesale-related consumer and institutional healthcare apparel channels that Michael mentioned continue to weigh on growth. Rounding out our segments, revenue for Contact Centers was $22 million as compared to $24 million in the prior year period as customer losses and reductions with existing customers exceeded gains from new customers, although, we have started 2026 with early momentum driven by a few conversions of our pipeline opportunities, as Michael mentioned. We are cautiously optimistic that additional new opportunities will provide meaningful benefit starting in the latter part of the second quarter and drive year-over-year growth in the back half of the year. Looking at the bigger picture, continued tariff and economic uncertainty notwithstanding, our business pipelines across all our business segments remain solid to end the year. And as mentioned, we have yielded some important new wins in early 2026 thanks to our attractive competitive positioning and the investments that we've made in sales talent and marketing strategies. Assuming macro conditions continue to normalize with some improvement in economic uncertainty ahead, we expect sales growth for all 3 segments in 2026, as I'll speak to in a moment. Moving down the income statement. Our consolidated fourth quarter gross margin of 36.9% was nearly flat with the prior year quarter's 37.1%. On a more granular basis, our Branded Products gross margin came in at 34.4%, up 50 basis points versus the prior year despite higher tariffs. Our Healthcare Apparel gross margin of 33.6% was nearly flat, off just 10 basis points. And for Contact Centers, gross margin was down about 2 percentage points to 52.6% due to higher agent costs and a shift in our revenue mix associated with the July closure of our lower-cost Jamaica center, which was more than offset by SG&A reductions. Overall, SGC made good progress reducing SG&A compared to the year ago quarter by about $1.4 million despite overall positive revenue growth. As a result, SG&A as a percent of sales came in at 33.2% for the fourth quarter, an improvement relative to 34.4% a year earlier. In fact, we were able to reduce SG&A across all 3 business segments. Putting it all together, our fourth quarter EBITDA of $8.6 million was up from $7.3 million in the year earlier period, with our EBITDA margin improving by 90 basis points to 5.9%. Turning to net interest expense. It was $1.3 million for the quarter, an improvement relative to $1.5 million in the fourth quarter of 2024, benefiting from a lower weighted average interest rate. Lastly, our fourth quarter net income of $3.5 million was up from $2.1 million in the prior year period, and this equated to $0.23 of diluted EPS, up from $0.13 in the year ago period. Shifting gears, our balance sheet remains solid with $24 million of cash and cash equivalents at year-end, which was up $5 million versus the start of the year. We generated $20 million in positive operating cash flow during the year, and we remain well within covenant compliance. Our total liquidity, including cash and availability under our revolving credit facility is over $100 million, allowing for the continued execution of our growth initiatives, while also returning significant capital to shareholders. In fact, during the fourth quarter, we paid out $2 million in dividends and another $2 million to repurchase our shares, which we consider a compelling value. We ended the year with approximately $10 million still available under our share repurchase authorization. Turning to our outlook for 2026. We're setting an initial full year revenue range of $572 million to $585 million, which assumes no significant change in macro conditions due to geopolitical or other events and implies 3% growth at the high end. Taking these factors into consideration, we are also expecting full year earnings per diluted share to be in the range of $0.54 to $0.66, suggesting significant improvement over $0.46 in 2025. Consistent with prior year, we expect a back-end weighted cadence to 2026 for both the top and bottom lines. We feel confident in our outlook given our recent momentum, competitive advantages, growing pipelines of new business and the attractive nature of the end markets we serve. And now, operator, if you could please open the lines, Michael, Jake and I will be happy to take questions. Operator: [Operator Instructions] And the first question will come from Michael Kupinski with NOBLE Capital Markets. Michael Kupinski: Congratulations on your quarter. A couple of questions. I know that you've been investing in your Wink and Carhartt brands for some time. And I was wondering if there are some green shoots on how those investments have been paying off. And so I was wondering if you can give us an update there. And in addition, can you give us an update on the market environment for the Healthcare Apparel sector overall, both from the standpoint of the direct-to-consumer side and also from the institutional uniform side of the business? Michael Koempel: Michael, this is Mike. I'll take your questions. What we're seeing on our Branded Healthcare Apparel, the Wink brand and then obviously, the license we have with Carhartt is still overall positive. I mean, we're continuing to see growth of those brands in our direct-to-consumer channel. I know at this point, we have not disclosed specifics on that. And at some point, we will down the road as it continues to get bigger. But we continue to see significant growth, again, in both of those product lines, again, largely within direct-to-consumer, but then also with our wholesale-based customers as well. We had a little bit of softness in Q4 with a couple of customers, which is why you saw the comp in Healthcare Apparel down in Q4, but we're seeing more positive momentum with those brands and in the retail environment as we started off for 2026, which is why, as I mentioned in my prepared remarks, our expectation is growth overall in the Healthcare Apparel segment. Michael Kupinski: Great for the color. And then on the Contact Centers side, it appears that the revenue stabilized in the quarter. And I know that you indicated that the pipeline has improved. Is there -- are we still seeing some macro-driven hesitancy there? I was just wondering are we starting to see some of that abate in the first quarter? Can you just kind of give us some sense of how new business is -- the environment is kind of improving there? I know that you're saying that it looks like it's back half weighted there as well, but I was just wondering if you can give us a sense of how the pipeline is improving for that segment. Michael Benstock: Mike, it's Michael Benstock. I'm going to jump in and say something then I'm going to turn it over to Mike, who I think will have a more direct answer. But overall, in all of our businesses, we're still seeing this whole pattern of customers' decisions, ordering, deal closing velocity, just to us seems constrained. I sat in a meeting with other CEOs yesterday, a large group of CEOs, and that was the consensus. Everybody is feeling the same constraints. And the constraints are coming from the geopolitical climate, obviously, and the economic uncertainty. And had I said that a week ago, you would have said, well, it's getting better. But in the last week, a lot has happened to probably elevate that uncertainty for even a longer period of time. I think customers are waiting for clear market signals before making decisions. Now having said that, we're seeing some very positive signs on the Contact Centers business. I'll let Mike get into that a little bit. Michael Koempel: Sure. I would say, Mike, the best way to put it is we're cautiously optimistic. I mean, we certainly don't want to get ahead of ourselves, but I think that we -- as you know, from following us quarter-to-quarter in 2025, there was a significant amount of hesitancy and we weren't seeing that pace of new customer growth that we had seen historically yet, again, as we spoke about in multiple quarters, had a really strong pipeline. So we're encouraged by some of the movement we've seen here at the beginning of the year on the new customer front. We're feeling also, at the same time, right now positive about the status of our existing customer base. Again, you might recall last year, we did have some challenges with respect to bankruptcy, some bankruptcy customers in the Contact Centers space. Again, as of this point, we don't see that type of risk. So we're cautiously optimistic. And as I mentioned in my prepared remarks, we would expect to see some growth in the latter part of Q2, which would then bode well for us to drive a stronger growth in the back half of the year. Michael Kupinski: Got you. One last question. On the Branded Products side, you mentioned about expanding the sales force. And I was wondering, we saw some nice growth in this quarter. I was wondering in terms of the increase in revenue that we saw in the quarter, was that a result of the expanded sales force? Or were there other things at play in the revenue growth that we saw in the quarter? Jake Himelstein: Michael, this is Jake Himelstein. To answer that question, it's a variety of factors. It certainly is part of our recruiting efforts to bring in additional salespeople. We've talked about it before, but we're a very desirable landing spot for salespeople in our industry. There's 100,000 people that sell products -- Branded Products across the country, and we are a very desirable landing spot because of the breadth of capabilities we have. But it was also because of some really good underlying fundamentals. We had great program wins, really strong orders. Our Q4 does tend to be traditionally a very strong quarter in the Branded Products segment because of employee holiday gifts, and this year was no exception. Operator: The next question will come from Jim Sidoti with Sidoti & Co. James Sidoti: I think the most impressive part of the quarter was you were able to basically double your EPS on flat revenue. So it shows you have done a pretty good job adapting to the current business environment. But looking ahead, you expect to grow revenue maybe about 2% or so next year, and you're looking for some pretty healthy EPS growth. Where do you expect the margin expansion to come from on the gross margin or on the SG&A line? Or can you give us a sense? Michael Koempel: Jim, this is Mike. I'll take the question. We'd expect it to see it in 3 areas. We do expect some gross margin improvement. We expect to see some of that improvement really in each of the business segments. So I think gross margin expansion will drive some level of improvement. A little bit of improvement on the SG&A line. I think that, obviously, there are some variables at play there depending upon the level of revenue that we drive and the investments we might need to make in marketing as well as in some human capital. But then I'd say, the third piece is we are expecting lower interest expense as well. We expect to drive, again, some continued improvement in working capital. We know that we can bring inventories down, which we've demonstrated in the past can drive a lot of cash flow. So we're expecting to get a benefit out of lower debt outstanding as well as interest rates versus 2025. James Sidoti: I did notice your accounts receivable ticked up in the fourth quarter. Has that already started to come down? And do you think that will come back to historical levels in Q1 and Q2? Michael Koempel: Yes, there's nothing unusual there, Jim. It's really just the timing of sales. I mean, December was a really strong month for us. And so it's really just the timing of orders year-over-year. And so we'll collect those receivables within our normal pattern and will be cash flow positive for us here in the first half of the year. James Sidoti: And can you comment on what the acquisition environment looks like? Or are there more targets out there than there were 12 months ago or less? Or is it pretty much the same? Michael Benstock: It's a deck a day. It's quite a robust field out there. And Jake, in particular, is fielding a lot of these. Most of them, quite frankly, we have no interest in. They're either too small or they're too broken, and they have no great value to us. But we are always looking. And we -- I can't say we're in really serious discussions right now with anybody on that side or -- and the same thing is true on The Office Gurus' side. We have companies that we like. We have companies that we're talking to. We have companies we're digging into a little bit. And particularly, as we said, with The Office Gurus in the Philippines, we do want a presence there, and we have been looking for a path for that. Absent finding that path, we will open up our own center in the Philippines, but we feel like we can do it faster and cheaper by purchasing another company. But it's a very robust market out there. I think everybody is worried. It's not only the macro environment. It's people worrying about how AI is going to impact their business because they've invested nothing in it. And they see us as a way, a path forward because they know we have and feel like we'll be one of the last men standing in this race in all of our businesses. So it's a good time. It's definitely a buyer's market at this point. James Sidoti: All right. And then last one from me. CapEx has been around $4 million or $5 million the past couple of years. Do you anticipate any big expenditures this year? Do you have to make any big investments? Or do you think that's kind of a good run rate for 2026? Michael Koempel: We're not -- Jim, we're not expecting any major departure from what we've been running. We're planning for something in '26 that's a little bit higher. But again, there's nothing that I would call at this point that's individually significant in nature. I think that we made a big investment a few years ago, which we're able to leverage. And so again, not expecting anything significant next year. Operator: The next question will come from Keegan Cox with D.A. Davidson. Keegan Tierney Cox: I just wanted to ask, you kind of talked about the AI piece of the business, especially helping improve sales and then in your Contact Centers business. So I guess, what kind of AI tools are you guys currently using across the platform? Michael Benstock: We're using many tools, some we wouldn't disclose on this call. We don't necessarily need all of our competition knowing what tools we're using. Some of them are proprietary. But essentially, we're monitoring just about every call that we're taking, which are hundreds of thousands of calls a week, and we're able to score them immediately. We're able to coach the agents on the spot as the call is progressing. We're able to set up all kinds of coaching opportunities afterwards. We're doing accent smoothing. We're doing noise cancellation. I mean we're doing a lot, but some of which I really would prefer not to disclose. I mean, obviously, when we get into customer presentations or prospect presentations, we do disclose it because that's what helps us win the business. But I can tell you, we are not behind the curve at all when it comes to AI and call centers. Most people are talking a good game about what they should do and are having a terrible time trying to implement their -- the different solutions that they found. We, in fact, have become the implementation partner for a couple of AI companies to help them implement it in other places that are not competitors of ours. And that -- and only because we've done it so many times. You can imagine that when we implement an AI solution or a group of AI solutions to our centers, we're doing to 20, 30, 40 customers, and every one of those is unique. Remember, they're all operating on different technologies. They bring their own technology to our center. So our implementation has to integrate with their technologies, and we've been able to do dozens of these. So they see us as a great path to creating a better implementation, which is what most people are struggling with right now. Keegan Tierney Cox: And then a follow-up. I just wanted to talk a little bit about the margin improvement in Branded Products. As I look, it's almost 250 basis points, 300 basis point improvement sequentially, better gross margins on a full year basis than in 2023 despite tariff pressure. I was just kind of wondering if you could parse out how much of the margin improvement you guys are seeing is on pricing versus cost reduction? Jake Himelstein: It's both, right? I don't think you can really split it out between the 2. And it really does come from both. We are aggressively going out and searching for not just the lowest cost, but the best vendors globally. So when the tariff environment changes in one region or another, we'll move production between regions, and we do that better than just about anyone out there on the Branded Products side. So Keegan, we definitely see it as it relates to the cost side, but we're also really purposeful about exploring price ceiling and making sure that we're selling at the highest price we can. And not all business is good business. And the clients that work best for us, the ones that see the value in what we're able to do and ones that appreciate what we do. And so we're not in a race to the bottom. And that's not our business model on the Branded Products side. But yes, it really does come down to both things you said. It's making sure that we're selling at a fair but the highest price that we can offer and then also negotiating the best possible cost globally with our supplier network. Keegan Tierney Cox: Got it. And then the last question is on, if you guys are expecting any margin impact from investing in salespeople in the Branded Products segment. I guess, how do you balance adding salespeople with ongoing cost saving SG&A reductions? Jake Himelstein: Yes. So Keegan, the best way to think about it is there's 2 types of salespeople that we look at. Some are commission only, which means that they only get paid if they sell, and there are some that are salaried. And as we bring on people with salaries, which we have done and will continue to do, there is an investment period. And that investment ramp up can be a year to 18 months until they're actually seeing revenue come in the door. We are constantly bringing on new salespeople, both commission only and salaried to build that base of salespeople, right? The more people we have out there selling our product, the more opportunities we have with large enterprise opportunities. So you hit the nail on the head. We are actively investing in new salespeople and sales management to be able to grow our future sales. And again, that doesn't pay off today. It pays off 12 to 18 months from now. Operator: The next question will come from David Marsh with Singular Research. David Marsh: Congratulations on the quarter. It's really, really good print. So yes, I just wanted to run through each line and a couple of specific questions. On the Branded Products side, I mean, it's a really nice year-over-year number. I mean, could you talk about how that breaks down between like new customer wins and share with existing customers in terms of growth with existing customers? Michael Koempel: We really look at growth across the board. And the reason I say that, is if you get to these large, large companies in our space, we're talking like Fortune 100 companies, a lot of them, we have so much potential to sell more to them that you get to a new department or to a new buyer, and it's almost like bringing on a new client. And so a lot of times, when we're talking to our sales team, we're telling them the best new client is an existing client. We can grow so much with existing, and there's so much opportunity there. But the other side of that is we are actively involved in RFPs to bring on new logos. So we are preaching both. It's expand share of wallet with existing, right, might be selling them uniforms, but we also want to sell them promotional products. We also want to sell them point of purchase and point-of-sale displays. But we also are actively involved in RFPs and trying to bring on new logos. Our pipeline is really, really strong relative to recent periods. Exiting Q4, our RFP pipeline was meaningfully higher than the same period last year. And the good news is that the skew is like -- mix of the skew of it is towards larger enterprise programmatic clients. That's the clients we want, ones that are spending significant money, we're building programs for them. So we've already seen some of these RFPs in the pipeline convert in Q1, and we expect a couple more to convert, which will drive revenue growth through 2026. Michael Benstock: Let me add to that. David Marsh: That's great color. Michael Benstock: Yes. I don't know if you've -- in the last few quarters, we've said that our average order size has actually come down. But we are -- we've actually been able to grow the business. So when you look at that, I mean, the only conclusion you can draw from that, if your average order size is coming down, but somehow you've grown the business, yes, some of that could come from pricing for sure. But most of that is just increased market share. And we should see when things get back to normal, all these customers who are ordering less, ordering less expensive items, ordering fewer items, they get back to normal, we should be cranking on all cylinders. David Marsh: Appreciate that, Michael. That's -- that's great color. Turning to the Healthcare side. Can you just talk about the state of the business? I mean, it just feels like this business at some point needs to show some growth overall. I mean, can you just talk about your assessment of your own market share and kind of the behavior of your competition in the marketplace? And I mean, we have to be adding more nurses and more doctors, I would think. And you think you would see some growth here overall in the market. Just talk about what your expectations are there and the market dynamic? Michael Koempel: Sure. I mean, we're still very positive about the market overall. As you said, there's a shortage of healthcare workers, which is certainly going to be a benefit to this business over time. And we feel there's an opportunity for us to get an additional portion of that market share. What we've seen more recently, as I mentioned, I think with an earlier question, we've seen a little bit of softness on the retail side of the business, with a couple of customers in the digital space in the fourth quarter. We see that actually starting to improve here as we start 2026. So feeling more encouraged by that. And then we have, I think, over the last couple of quarters, seen some pressure on the institutional healthcare side where spending by hospitals has been a little bit constrained just given some of the uncertainty and some of the government actions that have taken place. And so we're hopeful that that improves on that side of the business as we head into 2026. But we're focused on continuing to drive brand awareness for our Wink brand. As I mentioned before, we're very happy with our exclusive license with Carhartt and the growth of that business, and we believe we can continue to grow those brands. And again, as I mentioned before, we're starting to see some of the retail challenges that we experienced in Q4. We're starting to see some, I guess, you would call green shoots in terms of positive change in trend as we're heading here into 2026. David Marsh: Got it. Appreciate that. And then just lastly on the Contact Centers business. In terms of -- just in terms of kind of overall business outlook for that segment, obviously, you guys took a hit with a customer bankruptcy, but it seems like -- I'm guessing that the rest of the portfolio has held up pretty well. But I mean, you just having a tough time backfilling that significant customer loss? And just could you just kind of assess kind of overall competitive dynamic of that marketplace? Michael Koempel: Sure. We have had the challenge with not having the pace of new customer growth that we've historically had to offset some of the losses. There's always going to be a level of churn in the business, as you would expect in any business. And we had 2 challenges. We had a higher level of turnover due in part to the bankruptcies than we've seen before and just the decision-making of prospective customers had just been extremely slow. Two dynamics we had not seen before in that business happening at the same time. Again, as I mentioned in prior remarks, we're seeing that shift. We believe that the base of our customers is more stable. We don't foresee any major bankruptcies or things of that nature based on what we know today. And we've already had some conversions of what we call pipeline opportunities, which, again, we believe will lead to growth starting in the latter part of the second quarter into the second half. So like I said, we're cautiously optimistic. We're encouraged, whichever words, I guess, you prefer. But I think we're happy to see that we're seeing a shift here as we start the year, and we're going to stay focused on converting as many opportunities as we can in that market. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Michael Benstock for any closing remarks. Michael Benstock: Thank you, operator, and thanks, everyone, for joining us today. As always, we appreciate your interest in Superior Group of Companies. You heard today that, we will continue buying back our stock as we believe it is grossly undervalued, and it's in our shareholders' best interest that we do so. I want to thank our hardworking team for their outstanding efforts in a really challenging macro environment. They just have done a wonderful job to continue making the most of what they were able to of 2025 and now into 2026. And of course, we thank our loyal customers for the business they give us and the trust they have in us each and every day. As a firm, we will always try to do what we can do in our attractive businesses to create significant shareholder value. We look forward to seeing many of you during upcoming conferences and road shows. And in the meantime, please don't hesitate to reach out with any additional questions. And thank you again for your interest in SGC and enjoy the evening. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Thank you for standing by, and welcome to the On Holding AG Fourth Quarter and Full Year 2025 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. If you would like to ask a question, please press 1 on your telephone keypad; to withdraw your question, press 1 again. Thank you. I would now like to turn the call over to Liv Radlinger, Head of Investor Relations. You may begin. Liv Radlinger: Good afternoon and good morning to our investor community. Thank you for joining On Holding AG’s 2025 Fourth Quarter Earnings Conference Call and webcast. With me today on the call are On’s Co-Chairman and Co-Founder, David Allemann, and CEO, Martin Hoffmann. Before we begin, we will briefly remind everyone that today’s call will contain forward-looking statements within the meaning of the federal securities laws. These forward-looking statements reflect our current expectations and beliefs only and are subject to certain risks and uncertainties that could cause actual results to differ materially. Please refer to our 20-F filed with the SEC earlier this morning for a detailed discussion of such risks and uncertainties. We will further reference certain non-IFRS financial measures, such as adjusted EBITDA and adjusted EBITDA margin. These measures are not intended to be considered in isolation or as a substitute for the financial information presented in accordance with IFRS accounting standards. Please refer to today’s release for a reconciliation to the most comparable IFRS measures. We will begin with David, followed by Martin, leading through today’s prepared remarks, after which we are looking forward to opening the call for a Q&A session. With that, I am very happy to turn the call over to David. David Allemann: Good morning, everyone, and a very warm welcome from Knoe—this time, not to itself, but the New York Stock Exchange. Standing here always brings me back to the day where we rang the bell for our IPO almost five years ago. That moment was never just about becoming a public company; it was about sharing a dream that the brand built on innovation and design and human energy could grow into the most premium global sportswear brand. Looking at where we are today, I feel both proud and deeply grateful to the global communities who choose to move with us every day. At the beginning of 2025, we set ambitious expectations for strong, profitable growth. What followed went well beyond them. Demand for our brand accelerated faster than we had planned, and for the first time, sports brand On cleared the CHF 3.0 billion revenue hurdle in 2025. Sales grew 36% at constant currency; we delivered our highest ever gross profit and adjusted EBITDA margins. For me, this outperformance is deeply meaningful because it shows our premium strategy is working, and our elevated offer is resonating with consumers even stronger than anticipated. In fact, we see an acceleration in key areas. Let me zoom out, as this acceleration happens on the backdrop of a profound societal shift. The traditional leisure class is giving way to the movement class. Old signifiers of bells, sedentary comfort, and overconsumption are being replaced by desire for vitality. You see this shift in the declining sales of self-indulgent categories. Today, status is an investment in the self. Health is the new wealth; longevity is the ultimate luxury. For this new ageless athlete, sportswear has shifted from utility to identity, capturing a massive share of their life and their spending power. The traditional volume-driven sportswear model is simply not built to cap this discerning consumer. This societal shift has blown the market wide open for new generational premium brands like On. So we have to ask, what does the movement class demand from us? We see three defining answers driving our acceleration. First, relentless performance innovation. We do not just talk about innovation; we engineer it. In the past five years, we scaled our R&D team by 1,000%. Today, over 400 experts—sports scientists, robotic specialists, and AI engineers—operate out of our Zurich labs. It is all about performance and feel for the movement class. In 2025, our engineers have made several industry-changing innovation breakthroughs. On Labs in Zurich is home to the only advanced foam competence center outside of Asia, and thanks to this competitive advantage, we are the first brand able to combine structural engineering with super foams. The immediate result is the upcoming Cloud Surfer 3, which is 15% lighter, 20% softer, and provides 15% more energy in push-offs. Over the next couple of years, we will bring this technology to a wide range of almost everyday running shoes, making cutting-edge innovation accessible for many of our fans. But our crown jewel is LightSpray. We are completely rewriting the future of manufacturing by changing the very nature of how an upper is constructed. We are no longer building uppers; we are spraying them. A robotic arm spins a 1.5-kilometer continuous filament into a perfect-fit upper in exactly three minutes. We took 200 assembly steps and reduced them to one. It generates 75% less CO2, and the entire shoe weighs just 170 grams, making it one of the lightest elite super shoes ever to compete in a marathon. The proof is on the podium. Bearing the Cloudboom Strike LightSpray, Hellen Obiri did not just win the marathon in New York in November; she shattered a 22-year-old course record. And now we scale. Last week, we opened our newest LightSpray facility in Busan, South Korea, increasing our production capacity 30-fold compared to 2025. And later this month, we will scale this elite, recuperating technology to everyday runners everywhere with the launch of the LightSpray Cloudmonster 3 Hyper. Second, premium inspiration. For the movement class, movement is not just a workout; it is their identity. They are buying into a brand that intersects with fashion and the zeitgeist. We are not following trends; we are co-creating culture. Take our collaboration with Loewe, now in its fifth year. We just launched our eighth drop featuring the Cloudtilt Solo at $750. The consistent and strong demand we see at this premium price point is a profound validation of our premium pricing power. The global energy is electric. At Paris Fashion Week, our high-fashion collaborations soared with younger consumers from APAC to London. We are pushing the boundaries of what sportswear can be, like our highly sought-after ballerina shoe with SK Twix. And the ultimate cultural catalyst is Zendaya. We are shifting from a partnership to true co-creation, leading to our first fully co-created collection for Spring/Summer 2026. Expect an important moment from On x Zendaya and Academy Award-winning director Barry S—. Here is what matters to our long-term success: this cultural heat translates into undeniable revenue. We opened 18 new stores this past year. You see it in the queues outside our doors. The proof is in the hard numbers. Tokyo Ginza became a top-10 global store despite only opening in September. Sales rocketed into the top 10 in its first months. Our retail footprint will scale to close to 20 countries in the next few months. It proves that when you intersect clinical innovation with cultural relevance, the commercial results are extraordinary. A premium brand does not stop at the physical product. It defines the entire experience. That is why we are applying our Swiss engineering directly to our digital ecosystem. We recently deployed a conversational AI layer across our customer service platforms. This is not about processing returns; it is about having deep, personalized conversations with our community at massive scale. But this is just step one. We are building the digital engine for our future. Over the next few years, you are going to see this AI blueprint transform how we operate. It will elevate our premium experience and drive efficiency from the moment we design a shoe to how we run our global supply chain. Third, a complete expression of the brand from toe to head. Performance footwear will always be our anchor, but to truly serve this community, we are building a complete sportswear house. And the breakthrough is happening right now. In 2025, our apparel business delivered an incredible 76% net sales growth at constant currency, proving we can build a highly profitable multi-category business. We saw apparel share of sales climb across every single region and every single channel, driven primarily by our direct-to-consumer business. Our foundation is running, but the movement class lives in our gear long after the run is over. They demand our performance in the gym, on the streets, and across entirely new sports. We are capturing these everyday hours with female-focused innovations like our new SenseTech fabric. The ultimate proof for this multi-category power: tennis. Demand across all our apparel business was outstanding last year, and tennis was our fastest-growing category. This was fueled by extraordinary moments on the court, like Iga Swiatek winning Wimbledon and Ben Shelton taking the Masters 1000 in Toronto. But it is also combined with our off-court storytelling. By bringing Burna Boy into our tennis lifestyle brand, we are successfully redefining courtside space for a younger demographic. And we are taking the same youthful energies straight into the global padel boom. In January, we brought on the youngest world number one in history, Arturo Coello. Arturo is not just an athlete on our roster; he is a co-creator driving our padel-specific innovation. So what we have built, courtside, is a blueprint. Wherever sport and culture collide on a global stage, you can expect On to be there. Let me be clear. We are not just building a better performance footwear company. We are building a lasting premium house for the movement class. Our premium growth strategy is working, and our global momentum is accelerating. And our foundation for the future is broader and stronger than ever. With that, it is my great pleasure to hand the baton to our CEO, Martin, to walk you through the numbers and the details of a historic foundational year. Martin, please. Martin Hoffmann: Thank you, David. I am incredibly proud of what we achieved as a team in 2025. For the first time, On crossed the CHF 3.0 billion net sales mark, a milestone that in a single year matches our total sales from our first two full years as a public company combined. Growth reaccelerated. A 30% year-on-year growth rate on a reported basis and 35.6% at constant currency proves that today, On is the best version of itself it has ever been. Beyond the top line, our performance is anchored in operational health and power. We delivered a record gross profit margin of 62.8% and adjusted EBITDA margin of 18.8%, already exceeding our 2026 aspirations. Our cash flow generation strengthened further, lifting our cash position to more than CHF 1.0 billion. These results are the fuel for us to dream bigger and bolder than ever before. What stands out to me is the power of our vision to be the most premium global sportswear brand, writing our own playbook, growing the addressable market for premium performance. At the same time, this has created a powerful financial engine. Our premium positioning generates high gross margins, which we partially reinvest into product innovation, brand experience, and our culture and our team, which in turn fuels future growth and even greater profitability, strengthening this position while remaining the most authentic brand. And maintaining our defining operational excellence remains our North Star. Because we are so clear on who we are and where we are going, we were able to take a huge step forward as an organization. We expanded our reach meaningfully, with global awareness now approaching 30%, still leaving 70% untapped growth opportunity. We saw our communities responding. New fans are building full looks, basket sizes are growing, and, crucially, customers are choosing On at full price across every region. At the same time, we became a more integrated and focused operator, strengthening our operational backbone and elevating the platforms that support our long-term growth. This process is visible in the broad-based strengths we see across all regions and channels. Our D2C share increased globally to 41.8%, a rise of 110 basis points, reflecting our deepening direct connection with our fans. While maintaining strong momentum in the Americas, we saw a strategic acceleration across EMEA and APAC. The result is a more balanced regional distribution, providing a significantly broader base for our future expansion. We ended the year with a global footprint of 67 retail stores, representing a net addition of 18 locations since 2024. These premium brand hubs showcase our fullest assortment through an elevated aesthetic. Our focus on larger, high-impact spaces—with 2025 store openings nearly 40% bigger than our existing estate—is yielding exceptional results. Despite the relatively early stage of our retail rollout, these more experiential formats are driving further gains in our market-leading sales productivity, which increased by around 20% during the year. The resonance is evident across categories, with apparel and accessories now contributing 15% of our total retail net sales, with many flagship stores achieving an even higher share. Complementing this direct footprint, our select franchise and distributor partners operate 45 mono-brand stores within our wholesale business. With its superior margin profile and the highest average item value across all channels, our retail network has solidified its position as a strategic cornerstone of our premium growth strategy. Multi-category expansion remains a standout driver of our performance too. On a constant currency basis, apparel grew by 75.5% and accessories by 135.1%. Today, they now represent 7% of our total net sales, a meaningful increase of 190 basis points year over year. With the majority of these sales—over 60%—flowing through our high-margin D2C channels, this category growth is structurally improving our premium mix and overall business profitability. All of this is only possible through the passion of our nearly 4,000 team members globally—our countless partners, ambassadors, athletes, our fans—thank you all so much. On a personal note, this was my first year as sole CEO. Spending time with our teams and communities has only deepened my belief in our unique combination of ambition and humility. I am deeply grateful to our finance team for their support during this transition, and I am incredibly excited to welcome Frank Sluis as our new CFO in May. Frank’s global experience and shared values make him the perfect partner to help elevate On to the next level as we continue to chart our own course. Our Q4 results are a direct reflection of the strong momentum of the On brand globally. The final month of the year is always a true reflection of the work done in the preceding quarters. We held our discipline and our commitment to premium execution across all regions. Even during Black Friday and Cyber Monday, new customer acquisition was led by full-price purchases. Despite being less promotional, we outperformed our growth expectations. Net sales reached CHF 743.8 million, increasing 22.6% year on year and 30.6% at constant currency, significantly ahead of our updated guidance in November. Our direct-to-consumer channel delivered another outstanding quarter. Net sales reached CHF 360.6 million, growing 21.7% reported and 30% at constant currency—an impressive result on top of a very demanding prior-year comparison. Our globally coordinated holiday campaign amplified brand heat, attracted new customers, and drove high repeat engagement, while disciplined full-price execution was clearly visible across all regions. Our retail network continues to express the brand at its highest standards. During the quarter, recent openings including Tokyo Ginza, Madrid, Stanford, and our two Seoul locations performed strongly, with many exceeding expectations and ranking among top-performing locations in our store network. Across the existing fleet, productivity rose further, even as the network expanded, with particularly strong performances from stores in Paris, Miami, and Hong Kong. This sustained productivity growth reflects both the strength and the scalability of our retail strategy. Wholesale also delivered exceptional results, outperforming our expectations, driven by strong sell-through numbers and sustained demand from key accounts in the Americas and EMEA. Together with strong momentum across our distribution markets in South Asia, net sales reached CHF 383.2 million, increasing 23.4% year on year and 31.2% at constant currency. Looking across regions, the Americas delivered net sales of CHF 434.3 million, growing 12.8% reported and 21.3% at constant currency. Close to 50% of net sales were driven by our D2C channels. Even during the most promotional period of the year, our full-price execution held firm and demand remained strong. Within D2C, we saw particular strength in our core running franchises, which grew their share of sales by over five percentage points. Our performance in D2C was complemented by exceptional demand across wholesale, where our key account partners are leaning further into the brand, expanding space, elevating presentation, and driving strong sell-through. Europe, Middle East, and Africa maintained excellent trajectory, with net sales reaching CHF 183.0 million, increasing 24.2% year on year and 27.5% at constant currency. Growth was broad across markets and channels. Momentum in the German-speaking region built further into year-end, the UK remained very strong across all channels, and Southern Europe continued to scale rapidly. The opening of our first store with a distributor partner in Riyadh in November marked an important milestone and is already driving incredibly strong consumer response. Asia Pacific delivered another exceptional quarter, further solidifying its role as a key growth driver for the brand. Net sales reached CHF 126.5 million, increasing 70.8% reported and 85.1% at constant currency. We continue to see deep resonance and incredibly high demand across the entire region and in all channels. We saw outstanding results from our Double 11 execution in China. In December, we ranked top five on Tmall for footwear over $140. This momentum carried into a very strong Chinese New Year performance, with in-store traffic in China more than doubling relative to our baseline. During the holiday, we saw our highest productivity globally in two of our Hong Kong stores and a stellar performance in our recently opened Shenzhen flagship, our largest retail store in China. This location is capturing a high share of Gen Z consumers and delivering an over 20% apparel share. With Asia Pacific now surpassing the CHF 1.0 billion mark for the full year 2025, we are proving that scale and premium can and do go hand in hand. Across product categories, it is inspiring to see how we are earning our place across the full spectrum of our fans’ day, and that is happening not just on their feet, but on their bodies as well. Net sales from shoes reached CHF 687.3 million, increasing 20.8% reported and 28.8% at constant currency. Performance running maintains strong forward progress, supported by the Cloudsurfer franchise and the strong launch of the Cloudsurfer Max earlier in the year. We continue to strengthen our connection with both dedicated and everyday runners in Q4. Across other verticals, franchises such as Cloud, Cloudtilt, and The Roger also delivered excellent momentum. Apparel continues to become an increasingly important entry point into the brand. The share of new customers acquired through apparel grew from 6% to 10%. Net sales reached CHF 45.1 million, growing 38.3% reported and 46% at constant currency against a tough prior year comparative. Growth was particularly pronounced in D2C, where power-forward store concepts are delivering measurable improvements in key retail KPIs, including conversion. Performance running and training led growth, supported by strong reception of new court and courtside collections in performance tennis. Turning to profitability, we delivered another outstanding gross margin, reaching a new Q4 high of 63.9%. That is up 180 basis points year on year and materially ahead of our latest guidance. This result reflects our strategy at its best—an unwavering commitment to disciplined, full-price execution supported and strengthened by sustainable operating efficiencies. This powerful combination, alongside favorable foreign exchange dynamics, allowed us to fully absorb external pressures like higher US import tariffs and still expand our profitability. Clear proof of the strength of our execution. SG&A, excluding share-based compensation, was 50.9% of net sales, up 40 basis points year on year. This modest increase reflects a conscious and decisive choice. Our relentless focus on operational excellence is generating significant savings, particularly in distribution. We are strategically redeploying those savings to fuel our biggest growth drivers—our global retail expansion and brand building. This is a key tenet of our philosophy: our growth is self-funding. It demonstrates our commitment to scaling this discipline by delivering strong top line and bottom line growth. Moving to our balance sheet, our commitment to disciplined, high-impact growth is clear. We continue to demonstrate remarkable capital efficiency. In Q4, capital expenditure was CHF 28.6 million, representing 3.8% of net sales, up 50 basis points year on year, reflecting significant targeted investments in our retail expansion, innovative infrastructure, and supply chain capabilities. Our year-end inventory stood at CHF 419.8 million, with net working capital improving to 18.9% of net sales. As in prior quarters, the underlying volume of products grew faster than the reported value due to the negative currency translation. Volume growth is more aligned with our sales expectations for 2026. We are also very pleased with the composition of our inventory across all channels, putting us in a strong position ahead of our Q1 launches, Cloudrunner 3 and Cloudmonster 3. Driven by our strong profit and precise planning, we generated CHF 359.5 million operating cash flow in 2025 and ended the year with a milestone moment—crossing the CHF 1.0 billion mark in cash. This is the strongest cash position in our history, providing us with the power and flexibility to continue investing into our future. Now looking ahead, 2026 will be defined by our commitment to premium growth, by exciting brand moments, and a very strong product pipeline rooted in innovation and performance. As I mentioned earlier, our vision is powered by a unique financial engine. Our strong brand momentum combined with high gross profit margins allow us to dream bigger, accelerate product innovations, and reinvest into standout customer experiences and our culture while consistently delivering strong adjusted EBITDA growth. David highlighted the pinnacle projects that will reshape our industry, but I want to emphasize the operational groundwork behind them. Throughout 2025, our engineers and scientists laid the foundation for market-first advances in technology. With the upcoming launch of the Cloudsurfer 3 in the second half of the year, we will introduce a world first in foam development. The combination of our unique CloudTec engineering with the new Surreal foam delivers a step change in performance. We are also innovating in how we manufacture at scale. With the opening of our new LightSpray facility in South Korea last week, we increased our production capacity for this revolutionary technology. This moves LightSpray from a breakthrough concept to a meaningful commercial reality, starting with the Cloudmonster franchise. This trajectory of performance excellence is already visible in our recent launches and a strong start into 2026. The successful introduction of the Cloudrunner 3 in February reinforced our momentum. Furthermore, pre-launch activations for the Cloudmonster 3—one of our largest franchises—generated exceptional consumer engagement, for example, at a marathon in Tokyo. The strength of our now complete Fall/Winter 2026 order book, which exceeded our expectations, reflects high partner confidence in our product pipeline and our long-term trajectory. Apparel remains central to this evolution in 2026. We will deepen its performance credibility, bringing proprietary and innovative materials to more consumers and unlocking the women’s opportunity through refined studio and training collections. We will elevate our premium expression across all touchpoints, from higher-productivity retail flagships to more immersive brand worlds within our key wholesale partnerships. This disciplined scaling ensures that our growth remains both brand accretive and highly profitable. All of this builds the foundation of our continued journey of sustainable growth as we enter the final year of our three-year strategy, and it allows us to perform materially ahead of our 2026 growth and margin aspiration that we laid out almost three years ago at our Investor Day. In 2026, we expect net sales to grow at least 23% at constant currency. It is important to recognize that this now factors in a significantly higher base following our Q4 results and therefore represents a further elevation of our ambition, reflecting the compounding strength of the On brand as we continue to grow at an exceptional rate. Our continued outperformance has fundamentally shifted our trajectory, now implying a three-year constant-currency CAGR from 2023 to 2026 of at least 30.5%. The opportunities ahead are compelling, underpinned by the continued strength of demand we see across the entire business. We anticipate robust, high-quality growth to persist across all regions. Furthermore, our relentless innovation in footwear and apparel is engineered to drive an even more premium mix, leading to D2C outperforming wholesale. As part of this category expansion, we expect apparel to meaningfully outpace overall growth. This further elevation of our D2C share is a strategic catalyst. It allows us to expand our member base and engage more directly with our fans, leveraging the unique opportunities created by our ongoing investments in technology. By fostering deeper connections, we are positioned to achieve increased engagement, significantly higher repeat purchase rates, and ultimately stronger customer lifetime values. As we grow, we remain intentional about every step forward, ensuring we build a lasting premium community. We are navigating an exceptional currency environment. At current spot rates, we anticipate a reported net sales target of at least CHF 3.44 billion. These foreign exchange fluctuations do not affect the underlying health or strength of our business. Alongside the raise of our 2023 to 2026 top-line CAGR, we expect a full-year gross margin of at least 63%—above our 2025 result—despite the additional impact from tariffs. The sustained desirability of our brand, the continued expansion of our premium full-price offer, cumulative benefits of our operational efficiencies, and an ongoing shift towards our D2C channel, alongside some foreign exchange tailwind, are expected to drive new highs to our margin. As outlined in our last call, the combination of strong net sales growth and exceptional gross profit generation allows us to accomplish three strategic objectives simultaneously: offset material foreign exchange headwinds on our Swiss franc-heavy cost base; accelerate targeted investments into our brand, technology, and innovation pipeline; and elevate our profitability outlook for the year. We now expect an adjusted EBITDA margin in the range of 18.5% to 19%, significantly beyond the 18% target set at our Investor Day in 2023. We are confident that when we look back at 2026 in a year from now, we will be able to share that we have built the foundation for something much bigger, through our relentless innovations, incredible products, unique brand moments, but most importantly, through an even larger and more powerful team. With that, thank you to our investment community for your continued trust over the past year and as we look to the horizon. Operator, we are now ready to open the line for Q&A. Operator: Thank you. We will now begin the question-and-answer session. If you would like to withdraw your question, simply press 1 again. Your first question today comes from the line of Jonathan Komp from Baird. Your line is open. Jonathan Komp: Yeah, hi. Good afternoon. Thank you. Martin, could you talk a little bit more about your expectations for growth across regions at a high level for 2026? And maybe more specifically, when you look at North America, what are some of the key drivers that stand out to you? And how are your partners accepting some of the new innovation as they build out their assortments? Martin Hoffmann: Hi, John. Thanks for the question. The On brand is extremely hot in every part of the world, and I think if we look into 2026, we have clearly the strongest product pipeline in terms of innovation and performance that we ever had. We will redefine how a running shoe performs and feels. LightSpray is not just a manufacturing revolution; it is a revolution on how upper materials allow us to provide a new sensation for runners in terms of lightness and feel. With the Cloudmonster and the Cloudrunner, we are relaunching two of our three most important franchises in the category. You see the amazing success that we have with apparel as a growth engine on an ever-growing base. And then when it comes to our premium position, we are so clear on where we are and where we are going and how we are charting our own way. This is a global story. This is the momentum that we have all around the world. As a result, we are seeing a much broader demographic coming into the brand. The growth with the 15 to 35 is the strongest across all the demographics. And so we expect very strong growth rates in each of the regions. As we said, we expect a stronger growth rate in our D2C channel given the innovations and investments that we also made in technology and our expansion of owned retail. We had a good start into the year across all the different regions. We expect that the first half of the year is growing slightly higher than the full year. We leave some cushioning for the second half of the year. We indicated that we have a very strong order book, which puts us in a good position also for the second half to deliver additional growth. So I think the momentum that you have seen in our numbers in 2025 and especially also in Q4 just reflects the momentum of the brand. David Allemann: And, John, this is David. I believe you have been at The Running Event in San Antonio and have seen all the behind-the-scenes innovation that is coming. We are really also extremely excited at how the run specialty community is reacting to that. I think they voted us the most innovative and memorable booth at TRE. That probably speaks to the excitement, and you already see how we are winning share in running. This will continue with all the exciting innovation that comes from us in CloudTec, but also in super foams, and then of course in uppers and the whole manufacturing revolution in LightSpray. Jonathan Komp: That is great. Martin, David, thank you. Operator: Your next question comes from the line of Janine Stichter from BTIG. Your line is open. Janine Stichter: Hi, good morning. Thanks for taking my question. Just on the wholesale distribution, I think you said that you are in 40% to 50% of your major wholesale doors with your US partners. Wondering how you are thinking about expanding that this year. Do you see the opportunity to add more doors, or is it more shelf space and category-driven? And then just broadly, if you could give us some insights as to how you are planning global expansion this year. Thank you. Martin Hoffmann: Hi, Janine. Thanks for the question. I think the important way to look at this is we still have 50% opportunity to expand in basically all of the key accounts all around the world, and we are so laser-focused on growing our brand in a very premium, very durable, long-standing way. At the same time, the opportunity is right there. We could grow at a higher pace, but we are fully committed to elevating that customer experience and also driving a higher share of apparel sales in our key accounts. If you look further out, there are many opportunities to expand our product portfolio to then drive additional growth even on the same store base in the stores that we are in. While wholesale remains an incredibly important partner, as I said, we expect that our D2C channel continues to outgrow our wholesale channel, allowing us to deepen the direct relationship with our consumers and, at the same time, really showcase the brand in a more premium way, elevate our premium assortment, and reach new price points, like David alluded to with the Cloud Solo and the Loewe collections. I think what we are doing with the brand and the direction where we are going will allow us to grow comp stores, expand in new stores, and then drive incremental D2C share into the brand. Janine Stichter: Okay, great. Thanks so much. Operator: Your next question comes from the line of Anna Andreeva from Piper Sandler. Your line is open. Anna Andreeva: Great, thank you so much, and congrats, guys. Nice results. You mentioned coming into 2026 in a position of strength and pipeline of innovation, the best you have ever seen. Should we think strong momentum from the holiday is continuing so far into 2026? Just a little bit of color on that. And with the expectation for DTC to outperform wholesale again in 2026, just curious, can you talk about what kind of growth did you see in your database in 2025? And any color on the new customer adds, specifically with the younger consumer? Thank you so much. David Allemann: So, probably just talking to D2C and retail expansion. It is fantastic to see how our brand becomes really super multidimensional across regions, across channels, across product. Retail is a super important factor in that because, as the most premium global sports brand that we want to be, it is about really serving our consumer—this movement class that I have been speaking about—in a very premium way. We can do that in our D2C channel; we can especially also do it in our retail channels. That gives us the opportunity to present our product in the most exciting way. And so, how we are presenting apparel is very, very exciting to consumers. You also understand why now this becomes a very important entry point, especially also for our young consumer. Also, when it comes to basket adds, often it is the fastest way how consumers add additional items in apparel in our D2C channel. And, of course, the way how you can experience TriTech, SensTech, but then also all the new innovation in our footwear product, is very, very exciting in retail. Martin Hoffmann: This development goes hand in hand with being more attractive to a younger consumer group. Again, this is not a replacement; it is an additional consumer group that comes into the brand. At the same time, we know there is still a huge untapped opportunity with the younger male consumer that we are clearly going after in the near-term future. We expect the next drop of our co-created apparel products with Zendaya two months from now. Clearly, those are products that very strongly resonate with a younger female consumer. The Cloudsurfer—those are products that are skewing much stronger to the younger consumer. So this is an important pillar of growth. At the same time, as said, with all the innovation that comes in the running space, we clearly expect an acceleration of winning share on the key running grounds all around the world. Anna Andreeva: Terrific. Thank you, Martin. Operator: Your next question comes from the line of Unknown Analyst from Bank of America. Your line is open. Unknown Analyst: Yes, thank you very much. Good afternoon, gentlemen. Three questions from me. First, do you confirm that you will organize a CMD in the second half? And if yes, what do you think are the key investor questions that you want to address in this CMD? Secondly, you expect about a 10-point slowdown, if I am not wrong, of the organic growth rate for the group this year. It is pretty large. Can you tell us what regions and what categories do you expect will drive this drop? And lastly, on the LightSpray product, you highlighted how much lateral production capacity you are going to have this year with the South Korean opening. Can you give us an idea of the percentage of volume that will be under LightSpray in 2026 and in 2027 approximately, please. Martin Hoffmann: So, just on the Investor Day, we clearly will do an Investor Day to outline our big aspirations that we have for the years to come. We are currently looking into the dates. We are trending a bit more towards first quarter of next year. Also, given that Frank is just starting as the new CFO, I think it would be important to develop that journey together. So at the moment, we expect it more to be in early next year. David, you want to talk a bit about LightSpray? David Allemann: Yes. Hey, I mean, LightSpray is fast developing. 2024 was when we had proof of concept, Hellen Obiri winning the Boston Marathon; 2025 is when we really expanded with our athlete community. The Cloudboom Strike LS has been at the feet winning gold medals, world champion titles, and Hellen Obiri winning the New York Marathon. Now this is clearly the year where we are scaling. You have seen how we opened the 30-fold increase in terms of capacity, so going from thousands of shoes to hundreds of thousands of shoes, and so it really leads to the democratization of this technology, now also with the Cloudmonster 3 LightSpray coming along. So it is really broadening out. This is not just a product for athletes. This is really a product for the wide market, and if you have just seen how the Cloudboom Strike that we now made for the first time available to a broader user base, out in two weeks. So we are very, very positive about the momentum of this technology. Martin Hoffmann: And then when it comes to the rate by region, as said before, we expect strong momentum across all the different regions. Very clearly, the Americas is our strongest region, our largest region, and we will not be able to put out such a strong growth outlook without full confidence in that region. Asia Pacific had an amazing run, more than doubling quarter over quarter. I think the fact that this is now a CHF 500 million business—we also need to be realistic on the speed of growth and maintaining the premiumness of growth. So I think being more conscious on the growth rates here is just super important in the benefit of this multibillion opportunity that is there for the years to come. And we are super excited about Europe because the momentum there—from the UK to Southern Europe, but also the accelerated momentum in Central Europe—I think is huge. So, again, it is going to be a continuous story of strong growth across all the different regions and all product groups and channels. David Allemann: I think probably a last point: what is really important is we are building a brand not just for the next years, but for the next decade. We see incredible demand. You have just seen how our awareness lifted from 20% to 30%. So demand is incredible, but we are very, very disciplined in how we fill it, in terms of which channels we go, how we also add stores, how we add to our digital community, and how we also make sure that we build long-lasting franchises. Unknown Analyst: Okay, thank you. Thank you. Operator: Your next question comes from the line of Cristina Fernandez from Telsey Advisory Group. Your line is open. Cristina Fernandez: Hi, thanks for taking my question. I have two. I wanted to see if you could give more color on the 30% brand awareness you mentioned the brand has gotten to—how it differs by region and customer demographic, if you can share those details. And, two, on the gross margin for the year, should we expect a higher gross margin in the first half or better strength, just given your comment on the sales growth being better earlier in the year? Thank you. David Allemann: Hey, I mean, awareness is just through the roof. The good thing is there are also still 70% of people that do not know us, so there is a lot of potential as well. Of course, we are seeing in specific hubs even higher awareness. So this is the overall awareness number. But if you look at what we are going to build out this year, with an incredible first co-created partnership with Zendaya and an Academy Award-winning director doing that together with us, with all the partnerships that continue with Roger, with Loewe—so you can expect a lot of cultural relevance and heat that is going to continue to drive this awareness. Martin Hoffmann: And then on the gross margin, really, the strength in the gross margin is fundamental, and we expect this to be very strong throughout the whole year. Of course, Q4 was the highest D2C share we usually will see, or is expected to see, also the strongest gross margin. What really is a strength is deeply embedded in the business and will positively benefit each quarter. Of course, compared to last year, the strongest upsides are then in the first February. And very important, the guidance that we have given—the 63% and more—is still based on the tariff regime that we have seen before the Supreme Court ruling. So it is still embedded on the 20%. Now all our inventory, of course, is behind customs, so all customs changes always come in with a bit of a delay of two to three months. But if we are now seeing that the 15% or 10% incremental tariffs are becoming the new norm, there is even upside to the guidance that we have given. And then there are also no refunds embedded into our guidance at the moment, although this would come incremental and would just give us so many more opportunities to accelerate some of the strategic projects for the future. Operator: Your next question comes from the line of Aubrey Tianello from BNP Paribas. Your line is open. Aubrey Tianello: Hey, thanks for taking the questions. I would love to hear more about EBITDA margin, and specifically how we should be thinking about the distribution and G&A line items in your guidance for 2026, but also how these two line items should develop longer term beyond this year, especially after seeing some really nice leverage there in 4Q? Thanks. Martin Hoffmann: I think we really see the incredible work that the operations and supply chain team is doing there, together with our partners—continuing to automate our supply chain and driving efficiencies. We have seen a huge improvement on the distribution line this year, and we expect that there is more upside in the future. As we reiterated many times in the past, our focus is to drive incremental profitability in a very controlled way and to really reinvest into the brand, into building a much bigger business for the future while driving incremental profitability. If you look into Q4, you see how this is working out, and the ability that we had to reinvest into bigger brand stories into our holiday campaign clearly is driving the strong momentum and then also the positive outlook. We will continue to do this—really combining the strong profitability and increasing profitability with those reinvestments. Operator: Our last question comes from the line of Jay Sole from UBS Financial. Your line is open. Jay Sole: Great, thank you so much. David, my question is for you. You talked a lot about building a community on a global basis in multi-categories as well. Can you talk about how you think about the total size of the addressable market that you are going after given the community that you see, also maybe what market share you think you have of that total addressable market today and where you can go? And then maybe, Martin, just to follow up on gross margin: you talked about some efficiencies that are going to be positive drivers of gross margin in fiscal 2026. Can you outline what some of those efficiencies are? That would be helpful. David Allemann: Jay, thank you for the question. Let me probably zoom out here a little bit. I spoke about the movement class and that this is not just a trend, but it is really a societal shift. We believe that investing in oneself is becoming much more important, and we have seen that over the last 10–15 years, and we have been part of that story. Even if you look outside of our market—how you invest in yourself when it comes to travel, when it comes to food—just look at hotel prices or restaurant prices in the US and how this has been expanding 3x, 4x. So we feel there is a complete white space opening beyond how you traditionally think about the sportswear market. This is where we are tapping into. This is a huge growth opportunity, and we are best positioned to actually fill this demand because we are not just about utility, but we are very much about identity. You see that in the margins. You see it in the willingness of people to invest in our innovation, to invest into the cultural relevance of On, and now increasingly also to invest into toe to head, which is an additional growth opportunity for us—and you see the growth rates behind it. Martin Hoffmann: And then to the gross profit margin, really, the fundamental driver here is our premium position and, with that, the pricing power that we have. We were able to increase the average selling price of our products quite substantially, and this is not driven by price increases, but it is driven by the mix and the ability to bring the customer into higher price points as well, which links to the opportunity that David just mentioned. Besides that, you see that our inventory position is very strong, so we can fully focus on full-price sales. We made huge steps forward in planning our business, reducing the share of air freight, and we are still scaling. We are scaling with our factories, which also gives us additional opportunities to have a wider spread between purchase and selling price. Jay Sole: Got it. Thank you so much. Operator: And this concludes today’s conference call. Thank you for joining. You may now disconnect.
Operator: Good afternoon, ladies and gentlemen, and welcome to the TDUP Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] This call is being recorded on Monday, March 2, 2026. I would now like to turn the conference over to Lauren Frasch, Head of IR. Please go ahead. Lauren Frasch: Good afternoon, and thank you for joining us on today's conference call to discuss ThredUp's Fourth Quarter and 2025 financial results. With me are James Reinhart, ThredUp's CEO and Co-Founder; and Sean Sobers, CFO. We posted our press release and supplemental financial information on our Investor Relations website at ir.thredup.com. This call is being webcast on our IR website, and a replay of this call will be available on the site shortly. Before we begin, I'd like to remind you that we will make forward-looking statements during the course of this call. Such statements are based on current expectations and assumptions that are subject to a number of risks and uncertainties. Actual results could differ materially. Please refer to our earnings release, the supplemental financial information in our Forms 10-K and 10-Q for more information on these expectations, assumptions and related risk factors. We undertake no obligation to update any forward-looking statements. During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of non-GAAP to GAAP measures is included in today's earnings press release and supplemental financial information, which are distributed and available to the public through our Investor Relations website located at ir.thredup.com. Now I'd like to turn the call over to James. James? James Reinhart: Good afternoon, everyone. I'm James Reinhart, CEO and Co-Founder of ThredUp. Thank you for joining our fourth quarter earnings call. Today, we'll discuss our financial results for the fourth quarter, along with a review of our performance for the full fiscal year 2025. I'll start by reviewing highlights of our first full year back as a streamlined U.S.-focused business and how this focus has allowed us to drive record gross margins and more predictable growth. I'll then discuss our product innovation wins in 2025 and how these investments in our marketplace can translate into compounding advantages in 2026. I will also provide our perspective on the current macro environment, and how we believe our strategy uniquely positions our marketplace model to thrive as consumers continue to look for both value and delight as they allocate their discretionary spending budgets. Finally, I'll turn it over to Sean Sobers, our Chief Financial Officer; to walk through our financial results in detail and provide our initial guidance for Q1 and the full year 2026. We'll conclude the call with a question-and-answer session. First to the results. We're pleased to report that Q4 revenue grew 18.5% year-over-year, while gross margin was 79.6%, and adjusted EBITDA was 3.7% of revenue. In particular, our top line outperformance was driven by our deliberate investments in customer acquisition and new listings. This drove a noticeable surge in both new buyers and customer engagement. To that end, we're pleased to report that new buyer acquisition increased 57% year-over-year, while active buyers for the trailing 12 months were up 30% year-over-year. For the full year 2025, our performance was a testament to the durability and scalability of the infrastructure we've built over the last decade and the fundamental strength of our marketplace model. We delivered record revenue of $310.8 million, representing 20% year-over-year growth, while maintaining our premium gross margin profile at 79.4%. These results were driven by a record 1.7 million active buyers, a 30% increase over the prior year and a record 21.1 million items processed, representing volume growth of more than 17%. Importantly, this operational scale, combined with expense discipline, allowed us to generate $14 million in adjusted EBITDA or 4.4% of revenue. I'm especially proud of the underlying consistency we maintained to achieve this, delivering adjusted EBITDA every single quarter over the past 2 years, and delivering positive free cash flow for the full year in 2025. As I look back on the past 12 months, I'd characterize 2025 as a year where we successfully returned to the core fundamentals of our marketplace and then rapidly built on top of this foundation. This was our first full year operating as a dedicated U.S.-focused enterprise without the complexities of our former European operations. It also marked the completion of our multiyear accounting transition to a fully consignment-based model with more than 90% of our business now on consignment. By removing these historical headwinds and accounting transitions, we've clear the path for the higher-margin scalable growth you see today. I believe this establishes the financial baseline for our business moving forward, predictable growth and exceptional gross margin profile and the operating leverage required to generate consistent free cash flow. In addition, 2025 demonstrated the unique defensible advantages of our marketplace model. During the large tariff disruptions of 2025, we experienced little impact given our supply is wholly on consignment and U.S. sourced. We were able to launch new ways to grow supply, first with premium listings at the beginning of the year, and following up the direct listings at the end of the year. These innovations expand the types of customers we can attract to our business over time. Given our legacy of investments in infrastructure, automation and technology, we rapidly took advantage of emerging AI models to improve product search, discovery, ad buying, recommendations, photography, measurement and flaw detection. I honestly can't remember another time when the business took such giant leaps forward on behalf of the customer. With the surge of innovation across our business, we then executed a well-received rebrand in the fall that better positions ThredUp for years to come as a marketplace for fashion forever. Before we dive deeper into our strategy for 2026, I want to address the broader consumer landscape. I've said for a number of quarters that I think the American consumer may be weaker than headline data would appear to indicate and that recent data validates some of the [indiscernible]. In 2025, job growth was anemic with the DLS revising numbers down by the largest factor in 20 years. At the same time, the New York Fed confirmed that nearly 90% of the 2025 tariff burden fell directly on firms and consumers. This is on top of an affordability crisis where nondiscretionary costs like rents and insurance have structurally reset at higher levels, effectively shrinking the wallet share left over for apparel and other discretionary goods. All this taken together, I think it's fair to say that the macroeconomic environment for discretionary spending remains uncertain, and the American consumers understandably approaching the year with a degree of caution. However, we believe these circumstances allow us to offer a differentiated approach. While traditional apparel retailers may face headwinds in a value-driven environment, our managed marketplace is uniquely built to capture upside demand as consumers prioritize both the stretch of their dollar and the liquidity in their closets. As we enter 2026, our focus of ThredUp is to build on our path towards sustained profitable growth by enhancing the structural drivers of our marketplace flywheel; full-funnel buyer growth, high-quality supply and AI-driven innovation that meaningfully reduces friction in shopping secondhand, all while maintaining our expense discipline. This strategy is threefold. First, we are focused on this full-funnel growth in early life cycle engagement. Our success in 2025 was fueled by record-breaking customer acquisition capped off by a 57% year-over-year surge in new customers during Q4. This momentum proves that our brand and value proposition are resonating at increased scale. As we move into 2026, our priority is evolving from pure acquisition to deepening our relationship with these new cohorts. Our LTV to CAC ratio reached all-time highs in 2025, but we think there is more to do to build multiyear LTV expansion. We recognize that early life cycle engagement is our highest leverage growth driver. By prioritizing retention alongside acquisition, we're building a more predictive, high LTV buyer base that fuels our long-term growth engine. Second, in 2025, we proved that we could scale supply volume meaningfully with kit requests up 36% year-over-year. This wasn't just about quantity. It was about obtaining the right supply, driven by a few key initiatives. A primary driver of this increase can be attributed to our premium kit offering. We launched this product in early 2025 and has scaled into a material contributor to our supply, representing 17% of supply for the year. We will continue to invest in expanding our premium kit offering through new channels as well as evolving the sets of incentives we offer customers. Specifically, we developed a supply approach for capitalizing on the momentum of TikTok shop. While selling unique secondhand SKUs on TikTok shop is challenging, our cleanup kits, premium, regular or otherwise, can be skewed and sold effectively. In January, we sold over 100,000 cleanout bags through TikTok shop with 97% of these orders being brand-new suppliers on our platform. In light of this early success, we are now actively experimenting with TikTok Live and created affiliates to capitalize and convert these new sellers into long-term customers. Our Resell-as-a-Service footprint has expanded to include a handful of beloved brands since our last call, including Lands' End, Steve Madden and Betsy Johnson. We continue to see RaaS as a broad ever extendable platform for adding high-quality supply channels. We are now several months into our direct listing data. I mentioned on our last call that we would be very deliberate in how we rolled out this initiative to meet a market need. Thus, we are focused on growing the business by approximately 10% per week as we observe and learned. There are now thousands of buyers and sellers involved in our beta, providing rich data to test and learn from. Some of the early data has confirmed our hypotheses, while other behaviors have surprised us. Sellers who choose to take advantage of direct listings are listing 10x more items than we expected. This suggests there is enormous closet share left for us to take as we provide more ways for our customers to monetize the full depth of their wardrobes. Sell-through has been as expected. While the average selling price is much, much higher, more than $70, we believe that scaling these higher ASP listings will allow us to further capture a more premium shopper consistent with the launch of our premium kits last year. Customers have also reacted very positively to the seamless nature of using our infrastructure to handle returns, giving them confidence to shop direct listings when they might not have previously done so. We are continuing to roll out new updates to the experience weekly. Most recently, we enabled the bulk import of listings. This way, customers can move their closets over more easily from competitor sites. Already 50% of new listings are now coming from bulk import, which we think is one indicator that we're building the right tools for sellers to consolidate their selling on ThredUp. We launched direct messaging that sellers can communicate and just this week, an offer function, so buyers and sellers can more easily find the market clearing price without ThredUp's direct involvement. Finally, we are leveraging AI to build a structural advantage across our entire business. Our goal is to use technology to remove the friction inherent in resale, both for our customers but also for our bottom line. Following the launch of our AI-powered shopping suite last year, we doubled down with features like the daily edit in the trend report. These tools use proprietary embeddings to move us toward a segment of one where the marketplace feels custom-built for every individual. Looking ahead, we are going to use Agentic AI to transform the ThredUp experience into a much more personalized end-to-end discovery and shopping journey. We are also redefining the post-purchase experience with Dottie, our AI customer service agent. In a relatively short amount of time, Dottie has evolved from a simple question-and-answer tool into an agentic engine capable of facilitating the resolution of customer issues that previously required representatives. By reducing the human escalation rate of customer service inquiries, Dottie allows our team to focus on higher-value interactions and more nuanced customer requests. More importantly, this shift to instant resolution has driven a meaningful increase in our customer satisfaction scores directly supporting our overall customer growth goals. By embedding AI into everything from discovery to service, we are building a marketplace that is not only more enjoyable for the consumer, but structurally more profitable to operate. In closing, as we look ahead, we believe ThredUp is transitioning from a period of recovery to one of compounding progress. The data-driven infrastructure we've built, supported by our commitment to operational excellence and our foundational AI architecture is transforming our marketplace into a more efficient, scalable and personalized ecosystem than ever before. We've often said that marketplaces are hard to build. But when you get the flywheel spinning, they are very hard to stop. By continuing to redefine the buyer experience with emerging AI tools, while expanding our addressable market through supply innovation, we're demonstrating that our model could scale more widely and effectively over time. I'm confident in our team's execution as we work toward our goal of making secondhand, the preferred choice for consumers everywhere and building a generation-defining company that endures. With that, I'll turn it over to Sean to talk through the financials in more detail. Sean Sobers: Thanks, James. I'll begin with an overview of our results and follow up with guidance for the first quarter and full year of 2026. I will discuss non-GAAP results throughout my remarks. Our GAAP financials and a reconciliation between our GAAP and non-GAAP measures are found in our earnings release, supplemental financials and our 10-K filing. We are extremely proud of our Q4 and 2025 results in which we exceeded our internal expectations for revenue, gross margins and adjusted EBITDA. For the year, we delivered 20% revenue growth, adjusted EBITDA profitability and our first year of positive total cash flow and set company records for revenue, new buyer acquisition and total active buyers. For the fourth quarter of 2025, revenue totaled $79.7 million, an increase of 18.5% year-over-year. Our performance was driven by investments into new buyer acquisition, continued LTV to CAC efficiencies and inbound processing that drove our marketplace flywheel. These drivers resulted in another strong quarter for new buyer acquisition with new buyers up 57% year-over-year. We also benefited from repeat purchases by new buyers acquired earlier in the year as well as reduced churn. We finished the quarter with a record 1.7 million active buyers for the trailing 12 months, up 29.5% over last year, while we had 1.6 million orders in the fourth quarter, up 27.3%. For the fourth quarter of 2025, gross margin was 79.6%, an 80 basis point decrease versus the same quarter last year. Our outperformance versus our expectations was driven by higher average selling prices due to the growth in our premium supply offering. Adjusted EBITDA was $2.9 million or 3.7% revenue for the fourth quarter of 2025, outperforming our internal expectations. Our Q4 results represented a 370 basis point decline over last year when our revenue outperformance occurred later in the quarter, and we were unable to accelerate our spend efficiently to keep pace with our top line performance. This year, as we gained confidence in our ability to drive future growth, we were pleased to be able to appropriately invest to better set us up for 2026. Turning to the balance sheet. We began the year with $52.8 million in cash and securities and ended the year with $53.1 million. We are proud to have reached a major milestone for the company in 2025, generating our first year of annual free cash flow, having invested $10.5 million on CapEx in 2025. We continue to expect similar levels of CapEx in 2026 with expanding free cash flow. Now I'd like to provide a bit of context for our guidance. Our 2025 strategy represented a return to our marketplace fundamentals disciplined investment in active buyer growth, supply processing and product innovation while maintaining rigorous expense control and leveraging our legacy investments. This approach generated success beyond our expectations. In 2026, our plan is to extend our commitment to this core strategy, prioritizing scalable, sustainable growth and methodical EBITDA expansion. As discussed earlier, the leverage to our marketplace flywheel are marketing dollars to drive buyer growth, inbound processing of high-quality supply to fuel revenue and customer experience investments to improve conversions. As our volume scales, margin profile benefits from strong flow-through inherent in our marketplace model, but simply the more we grow, the more EBITDA dollars we generate. Similar to our approach in 2025, we plan to flow through any incremental dollars above our guide back into these growth-driving opportunities. With all that said, as James discussed earlier, we remain cautious on the current consumer environment and are taking a measured approach to our outlook. In addition, it is important to consider our typical seasonality. We expect the year to follow a similar quarterly cadence of 2025. To be explicit, we expect Q1 to be the smallest quarter in terms of both revenue and EBITDA dollars. This is because we normally experienced some hangover from the Q4 holiday while at the same time we ramp supply processing and marketing to accelerate revenue growth from Q1 onwards. That growth acceleration then drives EBITDA expansion through the year. We expect revenue dollars to be the largest in Q2 and Q3, followed by a seasonal step down in Q4. With all this in mind, in the first quarter, we expect revenue in the range of $79.5 million to $80.5 million, representing 12% year-over-year growth at the midpoint, gross margin in the range of 78% to 79% and adjusted EBITDA of approximately 3% of revenue and basic weighted average shares outstanding of approximately 128 million shares. For the full year of 2026, we expect revenue in the range of $349 million to $355 million reflecting 13% year-over-year growth at the midpoint, gross margin in the range of 78% to 79%, adjusted EBITDA of approximately 6% of revenue, representing over 150 basis points of expansion versus last year and basic weighted average shares outstanding of approximately 130 million shares. In closing, we are extremely proud of the milestones we achieved in 2025. This year, we are more confident than ever in the fundamentals of our marketplace flywheel, our operational consistency and our strategy as we pursue predictable growth, expanding profits and accelerating cash flow. James and I are now ready for your questions. Operator, please open the line. Operator: [Operator Instructions] Your first question comes from the line of Irwin Boruchow from Wells Fargo. Irwin Boruchow: Congrats on the good end of the year. I guess maybe for James or Sean, not sure, but just talk about the guide. You've got a lot of momentum coming out of the year, guide in the low double-digit range for Q1. Anything you're seeing in the business or anything notable to call out? Or is this just you guys taking a conservative approach to start? And then maybe, Sean, can you help us more with the revenue and EBITDA expansion pacing through the year? Anything we should kind of keep in mind for the models? James Reinhart: I'll start. No, I don't think that we're seeing anything materially different in the business. I think there's just enough uncertainty out there in the world that we continue to invest in Q1, and we want to print the quarters, not guide the quarters. And so I just -- I think we're being appropriately thoughtful around what the next year could look like given the puts and takes. I think if you go back to where we were a year ago, we ran a very similar playbook investing in Q1 and watching those returns come in Q2, Q3 and Q4. And I think if we could have a repeat of last year -- this year, I think that would be a great result. And so we feel good about the momentum in the business coming out of Q4. And I'll turn it over to Sean to talk a little bit about the cadence and the sequencing in the quarter because I think that's more helping folks understand what ThredUp looks like in a more normalized operating environment. So I'll let Sean handle that. Sean Sobers: Yes, I'll go through a little more detail there. So we expect Q1 to be our smallest quarter in both revenue and EBITDA dollars as well as EBITDA margin. Then we'd expect Q2 revenue growth rate to reaccelerate to the highest of the year and then kind of step back a little bit moderating for Q3 and Q4. And then on the EBITDA side, we would expect sequential EBITDA expansion into Q2 and then second half EBITDA overall will be greater than first half EBITDA. James Reinhart: And I think that's the pattern that you're going to see, Ike, for the business, not just this year, but I would expect in '27 and '28. That's, I think, the stand-alone U.S. business is that sequencing. Irwin Boruchow: Sorry, just a follow-up, Sean. When you say 2H greater than 1H on the EBITDA, are you talking just dollars or rate expansion year-over-year... Sean Sobers: Rate. Dollars as well. Rate and dollars. Operator: Your next question comes from the line of Matt Koranda from ROTH Capital. Matt Koranda: I guess I just wanted to hear a little bit more about the line items you expect to leverage in '26, just given the EBITDA margin expansion guidance crossed up with, I guess, the gross margin slight decline year-over-year. Are we getting more leverage on the operations line, OP&T. It sounded like you're willing to invest in marketing anything over and above the target range of 6% for the year. Just wanted to hear you confirm that as well. Sean Sobers: Matt, this is Sean. Yes. I think marketing will be a similar percentage of revenue for the year, meaning we're going to leverage SG&A and OP&T to gain that 150 bps on the EBITDA line. But I think on the gross margin side, to touch on that a little bit is like way back when, when we did the IPO, we said our kind of our long-term target 75% to 78%. We've been outpacing that for the last couple of years and feel pretty good about the range of 78% to 79%. And the reason that gives it a little lower than some of the stuff we've done recently is give us a little bit of leverage to improve customer satisfaction or do things that we haven't done historically and James pointed out on the call, like on the TikTok shop. That's something that we can do that's a little of a bit of a headwind to GM, but it's really good for the overall business. Matt Koranda: Okay. That makes sense. And then maybe just speak to the level of confidence that you have in the acceleration in top line in the second quarter. I guess, is there something in recent customer acquisition in terms of the new customers you've acquired that gives you better visibility to see that acceleration in the second quarter. Just wondering where that comes from, just given the commentary around some of the softness that you see in the macro as well. James Reinhart: Matt, it's James. Yes. I mean I think, again, I just want to emphasize how much sort of the sequencing and pace of the business. I think we're operating in this new normal. And I think that you should always see this sequential increase from Q1 to Q2. But that's really driven by just how the business attracts customers and delights customers over time. We always have this small hangover effect in Q1 as people digest their holiday spending. So they digest their holiday spending, then they make new resolutions, shopping more sustainable, being more thoughtful, cleaning out their closets. All that kind of New Year's resolution stuff, that then creates opportunities for us to capture some of their attention and mind share and then that produces some momentum into Q2. Matt, if you go back and look at 2025, the same thing, right? If you see Q1 growth rates in '25 going from Q1 to Q2, it's the same pattern you're seeing in '26. In fact, if you [indiscernible] Q1 this year over Q1 last year, it's actually accelerating growth. We grew 10% in Q1 of last year, and we're guiding to 12%. So anyway, I think that's just the normal cadence of the business. Operator: Your next question is from the line of Dylan Carden from William Blair. Dylan Carden: I kind of have a related question. So if you think about the 50-plus percent new buyer growth, the strong active customer growth that you printed, can you kind of remind us the lag effect or speak to any churn as far as sort of the guiding the go-forward revenue growth where you've put it? James Reinhart: Yes, Dylan, I mean -- it's James. I mean, we always have churn in the business, but I think it's more, again, helping investors and others understand the patterns in the business because last year, Dylan, was the first sort of -- I would characterize that as a clean year for us being U.S. only. And you typically see acceleration Q1 to Q2 to Q3 and then the seasonal step back in Q4 that was exactly the pattern in '25. And even prior to going public, that was a very common pattern for the business. So I think we're just getting back to that normal cadence. And so it's less about new buyer growth or churn, it's more of as customers come back in the market, how the business performs. So hopefully, that helps set some context. Dylan Carden: Yes. And then any commentary on sort of customer acquisition costs. I know that sort of tends to be or has emerged as a hot button topic for you guys, efficiencies, players in the market. James Reinhart: Yes. I mean customer acquisition, we have customer acquisition costs going up a little bit this year just as we continue to invest in marketing and scale spend. But we're still expecting to acquire at least as many customers this year as we acquired last year, especially with spend incrementally up. So I expect another very strong year on the customer acquisition side for new buyers. Obviously, we're lapping, Dylan, very different set of comps around total new buyers. But I expect strong momentum. And then I think the real secondary emphasis is expanding those 3- and 5-year LTVs. And I think a lot of the product work that we're doing in '26 is really focused there, which is a little bit different than in '25, which was much more focused on reaccelerating kind of first in new buyer growth. But I think that will create some of the momentum as we move throughout the year. Operator: Your next question comes from the line of Dana Telsey from Telsey Group. Dana Telsey: As you talk about the product and the premium assortment that you've been having lately, what did you see in ASPs? Did the premium portion of the business differentiate from the earlier quarters in the year? Anything that you're seeing there? And also how you think about the health of your customers? James Reinhart: Dana, it's James. Yes, I think we're very pleased with the trajectory of premium in the business. It's a product for sellers that we launched over a year ago at this point, but it grew to be high teens, 17%, 18% of the business by Q4. I think you even saw more of it from a mix perspective, ASP start to flow up because of holiday handbags, more expensive dresses, shoes, those types of things. And I think it really speaks to us continuing to move, I think, where the sweet spot is for customers and making sure that we don't have too much exposure to the lowest income demographic, which I think can be challenged in this economy. And so I think to answer the second part of your question, I think we have been on this multiyear journey to stepping up the mix of goods, the ASPs, the price points. And I think 2025 was a big step forward. I think '26 will continue some of that. And then the last piece on this is, we launched the direct listings piece at the end of the year in '25. And as I mentioned in the prepared remarks, I've been quite surprised by the price points in the direct selling business being more than double what we were seeing in the core. And I think, again, that will allow us to touch a slightly more affluent customer and I think drive appropriate margins. So I think we feel very good about where the assortment is headed and the types of customers that we can attract and delight. Dana Telsey: And James, any color on category performance, what you saw? James Reinhart: Dana, no. I hate to be a broken record. It's more of the same. We're still selling tons of dresses. I do think though that Q4, again, we had another very successful year with our holiday shop, the business growing 18% year-over-year on top of Q4 last year was actually like the first quarter reacceleration. So what I would say is that the customer is starting to -- or secondhand is starting to resonate more with customers around the holidays. And I think that's a place we want to continue to push in the years ahead. Operator: Your next question comes from the line of Bobby Brooks from Northland Capital Markets. Robert Brooks: James, I think you mentioned in a couple of questions ago that 2026, there's a lot on the slate for product enhancements focused on expanding the 3- and 5-year LTVs of customers, and that's exciting news just thinking about how successful you guys integrated AI into the search piece, so just was curious if we could here get a little bit more granular detail on those plans of trying to drive the long-term LTVs higher. James Reinhart: Yes. Bobby, Yes. I mean I don't want to get too far ahead of ourselves. I think you'll definitely hear us put some things in market over the next couple of quarters. But what I would sort of say at a high level is we're really emphasizing customers choosing to go to ThredUp first for all of their needs. I think historically, people would -- ThredUp would be one of, say, a handful of places in their consideration set around where they might shop. They might shop discount retail, they might shop off-price. I think what we're really trying to do is emphasize that we can really serve all of your closet needs by building this robust personalization experience. And that started with the Daily Edit, which we talked about last quarter. But I will tell you that the Daily Edit momentum is growing, you're seeing customers come back every day and sort of checking what's new, and that's allowing us to refine the mix of goods that we can put in front of you. And so I think the focus really is how do we move you from -- the average customer might buy 12 items a year, right? But we know that, that is still only 25% of her closet. I think what we're really trying to attack, Bobby, is the other 75%. And so a lot of the investments are to make sure that ThredUp is top of mind for all of our needs. And so I'm very excited about what I'm seeing from the team around these types of investments. And I do think if we get this right, you can see real expansion in LTV. And I think if you do that, you can really then change the acquisition mix over time. Robert Brooks: Absolutely. Looking forward to hearing more on that. Then it was great to hear the -- I think you called out you sold 100,000 cleanout bags through the TikTok shop, which was really impressive. And maybe even more impressive was the 97% were folks new to the -- new to ThredUp. Just curious like how are those -- how was it being -- how did those folks get to the TikTok shop to buy the cleanup bag? Was there specific like advertising campaigns? I was just kind of curious to hear that. And when I think of the 100,000 bags, like were those -- were the majority of those all already sent in and now going to the supply chain? Just curious to hear more there. James Reinhart: Sure. I mean, it was -- it started as a campaign with some influencers, some affiliates. But the thing about TikTok is it can take on a life of its own. And so we truly went viral there for a little bit with influencers and affiliates talking about the cleanout kit value. And so that was great. We -- it was a ton of new sellers. We're now in the process of processing those bags to really understand the mix of goods, right, because, obviously, it's not just quantity, we want high-quality product coming through. And we've been tweaking exactly how we're trying to work with influencers and affiliates to get the right stuff. But I think it's super exciting because it really shows how the brand that we've built, specifically the rebrand and the service offering can resonate at that type of viral scale. And so I think it's more now of us getting it all the way dialed in, Bobby, but I think it's really -- it could be a real unlock for our supply goals over the next -- not just over the next year, but over the next several years if we can really get this right. And then we also want to learn for how we can translate it into some of the work we can do on buyer development, some of the work we can do on direct selling. So it's an exciting opportunity, and I'm thrilled it was really driven by just a handful of great products and engineers and marketing folks coming in to drive that. Robert Brooks: Got it. And then one more for me is on the bulk import with the peer-to-peer selling. That was really interesting. And I just wanted to hear more. Is it as simple as them turning over their seller page from a different platform and then it's just like a click of a button and everything gets integrated into the ThredUp platform. I was just curious to kind of hear that cycle a little bit more. James Reinhart: Yes. I think the engineers would berate me if I said it was just that easy. But yes, the idea is that the customers can, with just a handful of clicks, kind of export and import their listings. And we always believe this would be a really important tool to reduce switching costs, right? With any marketplace where seller reputation matters, switching costs are a really important thing. But I think our thesis on direct selling was that the barriers out there in peer-to-peer and the switching costs are getting lower and lower with the improvement in AI technology. And so I think the combination of technology improvements independent of ThredUp as well as our strategy to make it as easy as possible for you to list and kind of the convergence of those 2 has been successful. And -- so you're really seeing established sellers on these other platforms say, oh, well, I'll give ThredUp a try because it's so easy. And so I think that's an exciting development. And we're going to keep doing things like that to make ThredUp really the easiest way to consolidate all of your selling. Operator: Your last question comes from the line of Oliver Chen from TD Cowen. Julia Shelanski: This is Julia Shelanski on for Oliver Chen. I was curious if you could provide a snapshot of the percentage of fixed versus variable costs within OPT and SG&A today and how you expect that mix to evolve as you gain operating leverage? And second, I'm curious how rising ASP influences your payback mass across cohorts and particularly within newer customer acquisition channels such as TikTok. James Reinhart: Yes. I think I'll take the second one and then I can let Sean provide a little bit of color on the mix. I think as you have ASPs go up on premium listings, you do have more potential contribution margin that flows through as those items sell and therefore, that contribution margin can flow into the LTV math that would allow you to pay higher tax. But I think that's generally how our -- the engine has worked over the past few years. And so I do think premium helps us acquire some more customers. And I think our strategy is to provide more premium product in '26 relative to '25. So I think that engine can kind of work together, but we also recognize that the ad markets are dynamic. And so we got to be thoughtful around making sure that we're honest with the LTV to CAC payback math. But as for the other stuff, OPT and SG&A, I'll let Sean kind of comment. Sean Sobers: The SG&A is pretty easy because it's mostly almost like 97%, what you would kind of consider fixed. The only piece that goes through SG&A is like the payment processor fees which are like 3%. And on OP&T, it's more like 60-40 fixed variable. The other way around variable fixed -- sorry, 40-60. Operator: There are no further questions at this time. I would now like to turn the call back to James Reinhart for closing comments. Sir, please go ahead. James Reinhart: Well, thank you all for joining our 2025 full year results call. Looking forward to a great year. I want to thank all the ThredUp teammates for all their hard work in '25, and I'm excited about the opportunities in the business in '26. And look forward to talking to all of you in just a couple of short months. So thanks. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you very much for your participation. You may now disconnect.