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Operator: Good day, and thank you for standing by. Welcome to the Q4 2025 MasTec, Inc. 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. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Chris Mecray, Vice President of Investor Relations. Please go ahead. Chris Mecray: Good morning, and thank you for joining us for MasTec, Inc.’s fourth quarter full year 2025 financial results conference call. Joining me today are Jose Mas, Chief Executive Officer, and Paul DiMarco, Chief Financial Officer. We have prepared slides to supplement our remarks, which are posted on MasTec, Inc.’s website under the Investors tab and through the webcast link. There is also a companion document with information and analytics on the quarter and a guide summary to assist in financial modeling. Please read the forward-looking disclaimer contained in the slides accompanying this call. During this call, we will make forward-looking statements regarding our plans and expectations about the future as of the date of this call. Because these statements are based on current assumptions and factors that involve risks and uncertainties, actual performance and results may differ materially from our forward-looking statements. Our Form 10-Ks include a detailed discussion of risks and uncertainties that may cause such differences. In today’s remarks, we will be discussing adjusted financial metrics reconciled in yesterday’s press release and supporting schedules. We may also use certain non-GAAP financial measures in this conference call. A reconciliation of any non-GAAP financial measures not reconciled in these comments to the most comparable GAAP financial measures can be found in our earnings press release, slides, or companion documents. I will now turn the call over to Jose Mas. Good morning, and welcome to MasTec, Inc.’s fourth quarter earnings call. First, some quarterly and full year highlights. Jose Mas: Revenue for the quarter was just shy of $4 billion, a 16% year-over-year increase, bringing the full year to $14.3 billion, also a 16% increase for 2025 and a new record high. Adjusted EBITDA was $338 million in the fourth quarter, a 25% year-over-year increase, which was an acceleration from the 20% growth in the third quarter. We exceeded guidance with strong operating execution across segments. Full year EBITDA of $1.15 billion was an increase of 14% from the prior year. Adjusted earnings per share was $2.07, a 44% increase versus $1.44 in the prior year quarter. In summary, we exceeded guidance again in revenue, EBITDA, and EPS, highlighting another strong execution quarter and year for MasTec, Inc. This strong result is in part a testament to the scale and diversification MasTec, Inc. has achieved over time, and we are excited about our outlook for 2026 and beyond given the clear long-term positive market conditions across all of the end markets we serve. While I am proud of our financial results, I would like to highlight a few positive developments both in the fourth quarter and in early 2026. First, it is important to highlight our significant backlog growth. On a full year basis, backlog was up over $4.5 billion, a 33% annual increase. Sequentially, backlog was up over $2 billion, representing a 1.6 times book-to-bill. More importantly, we see our business and the opportunities in front of us accelerating. As impressive as the total number is to me, I am more excited about the backlog mix. While every segment was up considerably year over year, our pipeline segment saw backlog slightly drop sequentially. Yet, I would argue that our visibility in that segment is as good as it has ever been. While we expect double-digit growth in 2026 in our pipeline segment, we have been very vocal about our expected growth acceleration of that business in 2027 and beyond, reaching and hopefully surpassing historical high revenues in that segment. That potential, coupled with the continued backlog growth across all of our non-pipeline segments, positions MasTec, Inc. for considerable long-term multi-year growth. Our long-term visibility is better than it has ever been, and coupled with the margin opportunities we have, MasTec, Inc. is in a great position to deliver consistent long-term earnings growth. I am also pleased to report that included in our fourth quarter backlog growth there is nearly $1 billion of data center-related work. These awards include the type of work we have been doing over recent years and also include our first construction management agreement of a turnkey site. While most of the work on that project, which started in the fourth quarter, will be subcontracted, the opportunity for MasTec, Inc. will be our ability to self-perform a greater scope of work on future jobs. Demand for both the skill set that MasTec, Inc. has developed in construction management coupled with the capabilities we have in civil, power, telecom, and maintenance provides us the opportunity to exponentially grow this part of our business. We believe these opportunities are a result of our customer solution approach where we can provide a range of services from full-scale EPC to a specific function on any project. In addition to our backlog growth, while we have focused heavily on organic growth over the last couple of years, our strong cash flow generation gives us the ability to allocate capital to further enhance our growth profile. Accordingly, I would like to welcome the NV2A family to MasTec, Inc., which we acquired during the fourth quarter. NV2A is a construction management services firm whose principals we have known for decades, with a preeminent reputation for construction management of complex commercial projects, and well known for its work on aviation and C Corp projects. Prior to the acquisition, NV2A was our joint venture partner on our $600 million Miami Airport expansion project, which is the first phase of an estimated $9 billion construction program. NV2A deepens our expertise in construction management capabilities as we grow this sector, including data centers, and other mission critical facilities. During 2026, MasTec, Inc. also acquired McKee Utility Contractors, a third-generation family business and leading water infrastructure service provider. We believe water infrastructure is another structurally growing theme and are very excited about both McKee’s near and long-term prospects. I would like to welcome the McKee family to MasTec, Inc. These deals complement and enhance our existing infrastructure capabilities, and represent exactly the type of transactions that we target over time: firms led by strong management teams who see the value in joining MasTec, Inc. to scale their platform and enhance the solutions they can offer customers. We are excited to welcome our new partners to the MasTec, Inc. family, and expect them to hit the ground running and contribute to MasTec, Inc.’s near-term success. Turning to some segment highlights. In our Communications segment, fourth quarter revenue increased 23% year over year and EBITDA increased 16%, all organic, bringing our full year growth rates for revenue and EBITDA to 3241%. The telecommunications infrastructure market continues to evolve, with MasTec, Inc.’s customers pivoting rapidly with significant investments to support broadband delivery to enable enhanced artificial applications, while still working actively to support residential and commercial customer demand for broadband access via wired fiber optic and wireless mobility delivery nodes. Fourth quarter revenue was solidly above plan, including contributions from multiple top customers with robust funding for infrastructure deployment nationally, including upside in both wireless and wireline construction. The margin rate for the quarter was moderately below our expectations due largely to ongoing start-up costs on certain programs. We are confident that the trajectory of profit rates will be positive in 2026, in part due to the maturity in new programs and initiatives during the coming year. Turning to Power Delivery. Fourth quarter segment revenues increased 13% year over year and EBITDA grew by 9%, all organic. EBITDA margins were moderately below prior year at 8.2% versus 8.5% in 2024, which included mix headwinds from lack of storm-related revenue in 2025 and lower than planned Greenlink project volumes due to permitting-related delays that persisted through year end. Regardless, we are pleased with overall Power Delivery results for the full year of 2025, where we saw 16% top-line growth and solid 12% EBITDA growth despite those headwinds. We have strong confidence in the Power Delivery market outlook and for our ability to deliver strong growth in 2026. Fourth quarter backlog for Power Delivery increased an impressive 17% versus the prior year and 9% from the third quarter, ending the year at $5.6 billion, which is a new MasTec, Inc. record and continues a positive trend of unbroken backlog increases in Power Delivery since 2023. Additionally, and probably most importantly, during the first quarter, we received the go-ahead to restart the portion of the Greenlink project that has been stalled by permitting delays. This restart is happening earlier than we anticipated, and coupled with last quarter’s announcement that our Transmission and Sub group was awarded its second largest project ever, it provides us great visibility and confidence in achieving strong double-digit organic growth in this segment. Turning to our Clean Energy and Infrastructure segment, fourth quarter revenue and EBITDA were slightly ahead of our expectations in the quarter. For the full year, revenue growth was a strong 15% and EBITDA margins grew by 110 basis points to 7.4% versus 6.3% in the prior year. Total Clean Energy and Infrastructure backlog at year end increased 30% sequentially to $6.5 billion, which is also a step change of 53% higher than the prior year and book-to-bill 2.1 times. For the renewables group, we saw a tenth straight sequential increase in backlog, which increased by double digits in the fourth quarter. Turning to our Pipeline Infrastructure segment. We saw revenue increase 50% year over year for the quarter as business volumes continued to ramp sequentially since 2025, including an uptick from third quarter’s typically seasonally strong period. Also as expected, fourth quarter saw continued sequential margin improvement with an 18.5% margin, representing a 310 basis point lift from the third quarter, on strong operating execution and overall positive business mix. Finishing the year strong, we have confidence that 2026 will see further increases in both volume and profit dollars, and we are really excited about the market opportunity and pipeline for years to come. I said last quarter that I expect 2026 to be a solid growth year versus 2025, and our guidance includes this assumption. I remain even more excited, however, about the volume opportunities developing for 2027 based on current capacity planning discussions with our customers. With that, I will reiterate that we are very pleased with both our fourth quarter and full year results, and we are excited about the outlook for this year given the breadth of demand drivers for MasTec, Inc.’s businesses. While last year was successful overall, we remain committed to margin optimization on our existing business base and our 2026 guidance reflects this. We assume double-digit margins in Communications this year, around 100 basis point improvement in both Power Delivery and Pipeline, and fairly stable margins in Clean Energy and Infrastructure even with the inclusion of significant construction management volume in that segment this year. So further improvement in the core margins there as well. We are excited about the opportunity for MasTec, Inc. and our investors over the coming years, and thank you for your continued interest and participation. As always, our success as a company depends first on the commitment and dedication of our team, and I would like to thank the entire MasTec, Inc. team for their continued embrace of our corporate values of safety, environmental stewardship, integrity, and honesty, and for their focus on serving our customers with integrity and diligence to ensure great results. We win together. I will now turn the call over to Paul DiMarco for our financial review. Thank you, Jose, and good morning. As Jose mentioned, we are pleased with our strong fourth quarter results driven by continued organic revenue strength and solid execution across our operating segments. Looking ahead, our customers are increasingly relying on MasTec, Inc.’s broad service offerings to meet their rapidly expanding infrastructure development goals, giving us high confidence in the growth trajectory that we are outlining today and guidance for 2026. What is really compelling for us now is that our customer growth and investment plans intersect across virtually all of MasTec, Inc.’s businesses, and this reinforces our positive outlook. A few more notes on the fourth quarter and 2025 segment performance. Our Communications segment continued its trajectory of strong revenue growth in the fourth quarter, exceeding guidance by $139 million with 23% year-over-year growth for Q4 and 32% for the full year. This was driven by broad-based strength across both wireless and wireline, and included some contribution from middle mile work that we expect to further develop positively into 2026 and beyond. Fourth quarter EBITDA margin was 8.5%, a slight pullback from last year’s 9% result, reflecting our prior comments on the short-term impact of ramping new business volume. We are confident that as these investments mature they will translate to positive margin outcomes as reflected in our initial 2026 guidance, with double-digit Communication margins. Despite ongoing growth this year, we are beginning to mature some of these new businesses that came on stream in 2025. Fourth quarter Communications backlog totals $5.5 billion, which is an 8% sequential increase and a notable 20% year-over-year increase. Clearly, growth visibility is strong and continues to improve. Telecommunications end market broadly has numerous demand drivers, and our focus is on being selective with the opportunities we pursue to optimize returns. Success for MasTec, Inc. is no longer a function of just volume sourcing, but increasingly a focus on growth management. In that regard, as we grow our Communication service offerings, we are careful to nurture our legacy customer relationships while creating the space to serve new customers and new opportunities. This includes both residential and commercial end user markets, and making sure we are allocating resources efficiently. Jose provided a good overview of our Power Delivery performance that I will not repeat, but I would add a couple of points. First, we see a clear path to margin expansion in 2026 and currently expect year-over-year margin expansion in each quarter. Our base utility and distribution business continues to perform well, providing a solid foundation on which we can build operating leverage as volume grows. Second, our Power Delivery segment is contributing meaningfully to our supportive data center infrastructure, working for utility clients, data center developers, and hyperscalers on this front. We also expect Power Delivery to be a key beneficiary of our new role leading turnkey data center construction. The Clean Energy and Infrastructure segment, total Q4 revenue of $1.3 billion represented a 2% increase from the prior year inclusive of solid double-digit growth in the renewables business and slightly exceeded our segment guidance. Infrastructure and Industrial revenue was also in line with expectations, and we saw significant new business development for this group during the quarter to provide a very notable volume pivot for 2026. On a full year basis, revenue for CE&I was $4.7 billion, or a 15% year-over-year growth rate, including even stronger renewables growth for the year. Fourth quarter CE&I EBITDA margin was in line with our expectations at 7.2%, but somewhat lower than 8.3% in the prior year, which benefited from favorable project closeouts in our Industrial that were not repeated in 2025. Renewables margin was stable sequentially and up slightly year over year, as expected at the high single-digit levels, while Industrial and Infrastructure also saw solid overall performance. As Jose noted, CE&I saw a step function increase in backlog during the fourth quarter, reflecting significant contract signings across the segment. Infrastructure drove the 2.1 times book-to-bill achieved in the quarter with multiple large project wins, including the data center general contractor award discussed by Jose. These projects are expected to deliver substantial revenue contribution in 2026, also now factored into our guidance. The data center project will be executed under our general buildings vertical, still within the CE&I segment, but we may refer to this group’s results more specifically in the future. Renewables also continued its impressive streak of backlog growth, which now stands at over $3 billion for the eighteen-month period. Our visibility for renewables project activity extends much further, with projects under contract for work beyond the next eighteen months or under limited notice to proceed totaling over $4 billion incremental to our backlog. Although acquired backlog contributed approximately $300 million to the year-end CE&I totals, organic book-to-bill was still an impressive 1.9 times. Regarding the Pipeline Infrastructure segment, fourth quarter revenue of $644 million represented our highest quarter in the past two years. We finished the year with $2.1 billion in total revenue for the segment, which was notably stronger than our initial guide of $1.8 billion as the business inflected positively earlier in the year. EBITDA for the quarter of $119 million was driven by strong overall execution and project mix. Fourth quarter EBITDA margin of 18.5% is indicative of the steady-state margins this segment is able to generate in an expansion cycle. Regarding our overall progress with margins, we are pleased to have finished at a consolidated margin of 8% for 2025, with our non-pipeline segment generating margins of 8.2% versus 7.6% in 2024. As a reminder, full year 2025 margins reflected a slower start to the year, particularly in Pipeline, as well as certain headwinds we noted in the back half, particularly with Power Delivery. We still accomplished a strong outcome last year and met our guidance objectives. We regard this as a testament to our focus on execution and the strategic diversification and scale of MasTec, Inc. Everything does not have to go right in every period to deliver on our overall goals. We have highlighted a midterm goal of double-digit consolidated EBITDA margins; we are pleased that 2025 sets us up positively for further margin performance in 2026. As a side note, we are adding meaningful volumes to construction management contracts, including the new data center business we won in the fourth quarter. This business mix represents lower margins, but a high return-on-capital opportunity that we are very proud to execute. We also expect to subcontract many of the construction activities internally at margins comparable to work performed with external clients. We will work to provide some level of visibility into the margin progression of the base business from 2025 to the extent that our mix evolves materially going forward. In addition to the margin expansion efforts, over the past few years, we have highlighted our increased focus on return on invested capital, and we are proud to see this metric meet our weighted average cost of capital hurdle for the first time since 2021. We believe the growth and margin expansion opportunities presented by our portfolio of service offerings, coupled with disciplined capital allocation, will continue to drive returns higher in the years ahead. We generated cash flow from operations of $373 million in the fourth quarter and free cash flow of $306 million in the period, bringing the full year total to $546 million and $342 million, respectively. This was somewhat below guidance due primarily to our revenue beat for the quarter and associated working capital investment, as well as higher capital expenditures also to support accelerated growth. We ended the year with total liquidity of approximately $2.1 billion and net leverage of 1.7 times, well within the terms of our financial policy and criteria to maintain our investment grade credit ratings. We are pleased that our strong balance sheet provides ample flexibility to pursue a disciplined, return-focused capital allocation strategy. We plan to support our best-in-class organic growth opportunities, execute opportunistic and accretive acquisitions that complement our existing service lines, and deploy capital to share repurchases opportunistically, as has been our longstanding practice. We believe the recent M&A transactions are consistent with this approach and our multi-decade track record of solid M&A execution. Moving to our 2026 guidance. A supplemental guidance document for segment and other financial details is now posted to our IR website. For 2026 full year, we expect revenue of $17 billion, or about 19% growth this year on top of the 16% growth produced in 2025. Notably, organic growth is still expected in the mid-teens. Our 2026 revenue profile includes strong results from all segments, with meaningful growth in CE&I of around 35% driven in part by the expansion of our data center work. Pipeline Infrastructure is expected to grow revenue by 17%, Power Delivery about 11%, and Communications just under double digits, coming off the approximately 30% organic growth achieved in 2025. For adjusted EBITDA, we are forecasting $1.45 billion, or an 8.5% margin, representing 26% year-over-year profit growth and 50 basis points of margin expansion on a consolidated basis. This reflects margins of low double digits for Communications, mid-teens for Pipeline Infrastructure, approaching double digits for Power Delivery, and fairly steady margin at the high single digits for CE&I, with improving renewables margin performance offset by the higher percentage of construction management services. Adjusted EPS is forecast to be $8.40, an increase of almost 30% versus the $6.55 in 2025. Our guidance assumes acquisitions contribute approximately $500 million of revenue at high single-digit EBITDA margins for 2026. Cash flow from operations is anticipated to exceed $1 billion for 2026, consistent with our stated target of 70% EBITDA conversion. We expect about $200 million of net cash capital expenditures in 2026 as we continue to procure additional equipment to support planned growth. Our 2026 first quarter outlook reflects the concerted efforts we have made to continue to improve Q1 performance, with revenue expected to grow by 22% and adjusted EBITDA margins of just over 7%, 130 basis points higher year over year. We currently expect sequential revenue growth from Q2 and Q3, followed by the typical seasonal revenue decline in the fourth quarter. Q2 and Q3 should be our highest adjusted EBITDA margin quarters for the year. This concludes our prepared remarks. I will now turn the call over to the operator for Q&A. Operator: Press 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press 1-1 again. And our first question will come from Julien Dumoulin-Smith of Jefferies. Brian Russell: Yeah. Hi. Good morning. It is Brian Russell on for Julien. Good morning. Good morning. Hey. I was just wondering if you could elaborate on the new language on Power Delivery segment of approaching double-digit margins. What initiatives are ongoing to get there? Is it enhanced MSA or project work, or is it just a contribution of these higher margin transmission projects? Paul DiMarco: We have been consistent that we think the goal for our Power Delivery segment is double-digit margins. So this is just a continued progress towards that. There has been a lot of focus on execution of the base business, which, as I mentioned, is performing well. And then we had some starts and stops last year that obviously caused some inefficiency and eroded some of the margin appreciation that is achievable. So we are not foreseeing those this year. We think the base business is performing well. I think we will get operating leverage as some of the larger projects begin to materialize in a more meaningful way. And we think it is the natural step towards our stated goal of consistent double-digit margins for the segment. Brian Russell: Okay. Great. And then just second on CE&I and the turnkey data center project. Could you elaborate? You mentioned $1 billion, but over what time frame? And, you know, who is kind of the customer, and is this the first of many to come? Jose Mas: Yeah. Sure. So a couple things. The $1 billion was not all the turnkey jobs. So we have been doing a lot of other data center work. Right? So we have really focused on our civil power infrastructure businesses that have been doing data center work for years. So, you know, hundreds of millions of the billion were related to that. Obviously, the turnkey site helped move that. We are not in a position to be able to disclose much details around the project or the customer. We expect that job to be concluded in 2027. So between 2026 and 2027, those revenues will be earned. And we do think it will, you know, as the job progresses, we think there is tremendous opportunity for us to continue to grow on that type of business, and we think the market for that right now is incredibly strong. Brian Russell: Great. Thank you very much. Operator: Our next question will be coming from the line of Andrew Kaplowitz of Citi. Andrew, your line is open. Andrew Kaplowitz: Good morning, everyone. Morning, Jose, so it seems like you are still as or more confident regarding your pipeline business. But, obviously, as you said, going to be more book and burn moving forward. So just did you see any delays in terms of project timing versus what you have been thinking? And then on the margin side, given the second half 2025 performance in pipeline and the higher estimated revenue in 2026, is not mid-teens margins for 2026 conservative? You know, if the market kind of develops as you think? Jose Mas: Yeah. I will start with the second part of the question. Right? I think we have always guided mid-teens in our pipeline business. I think that is the appropriate level to come out with the guide. I think our objective is to beat that. I think historically, we have outperformed that and hopefully, the opportunity is there to do it again. As it relates to revenue with pipeline, I would argue that the our visibility is actually improving. So to me, the number of opportunities, the number of verbal awards, the number of negotiations that we are in the middle of, I think every quarter that passes, our confidence just grows in our ability to continue to grow that business and see a really much longer term of elevated levels than we probably initially expected. Andrew Kaplowitz: It is helpful then. Obviously, you are still putting out strong growth in Communications and expect to do so in 2026. When you think about breaking down that growth between sort of traditional fiber to the home, do you have anything in BEADs for 2026? And, you know, how should we be thinking about that fiber to the data center opportunity or middle mile broadband? Is that also getting to be bigger than you expected? Is that in 2026 at all? Jose Mas: The short answer is yes. Right? I think, you know, breaking it down we do not have tons of BEADs built into 2026. I think BEADs, I think what we are seeing there is we are becoming more bullish on BEADs. I think BEADs is going to be much larger than we had originally anticipated, and the opportunity is going to be larger for us. But I think that will predominantly be 2027. One of the opportunities that we have is some of that stuff does push into 2026. That could be very constructive to the business. But, you know, look, we are seeing every one of our customers pursue multiple business strategies. Obviously, everything that is happening around data centers and connectivity to data centers is an important driver for that. We are getting our share of that, and we think that the market is growing substantially for that as well. So very broad-based opportunities. We had an incredible year of growth in Q2 2025. We are assuming a more moderate growth profile in 2026. But, you know, we were surprised in Q4 with the level of activity. I think revenues were about 20% higher than what we guided for Q4. So, you know, got a lot of good opportunity to outperform in 2026. Andrew Kaplowitz: Thanks, Jose. Jose Mas: Thanks, Andy. Yeah. Operator: And our next question will be coming from the line of Jamie Cook of Truist Securities. Your line is open, Jamie. Jamie Cook: Hi, good morning, and congratulations on multiple fronts. I guess two questions for you, Jose. The first question is just the visibility that you have beyond the eighteen-month backlog that you report. You know, I am just trying to understand how great that is and which segments do you have above-average visibility. And then I guess my second question, I think on the call you mentioned that you saw the pipeline business being able to achieve or exceed prior peak, which I think was $3.5 billion. Under what time frame do you think that would be reasonable? Thank you. Jose Mas: Sure. Thank you, Jamie. So a couple things. I would say, you know, maybe with the last part of the question first, we have talked about hitting historical highs in pipeline revenue as early as 2027, so in the near term. Again, we see that business shaping up incredibly well. When we think about backlog in general, right, I think Paul alluded on his prepared remarks about the $4 billion of notice to proceeds that we have in renewables that are not in backlog. Right? So we actually have more in LNTPs than we do in actual backlog, which is a remarkable statistic. And I think that visibility is amazing. Right? I think even within stated backlog, we have projects. I think we won our largest project ever in the renewables business at the end of last year. Only a portion of that project is in backlog, only the eighteen-month portion of it. When we think about Comms and, you know, what we are currently seeing in BEADs and the potential there, I think it is going to lead to significant backlog expansion as we think about 2026. In Power Delivery, the level of transmission jobs that we are seeing and the demand for transmission is just off the charts, which I think is going to also lead to some pretty sizable increases in backlog as the year progresses. So overall, when we look at all the segments, we are just really optimistic again, not just about 2026, but what the future holds. Jamie Cook: Thank you. Operator: Our next question will be coming from the line of Philip Shen of Roth Capital Partners. Your line is open, Philip. Philip Shen: Hey, guys. Congrats on the great results here. Wanted to talk about Greenlink and to get a little bit more color there. Jose, could you share, like, the relief that you got, was that all that you are looking for? Meaning, this project is a full go now, or are there other milestones that we should be thinking about in terms of permitting relief or milestones in general? Thanks. Jose Mas: Sure. So on Greenlink, in 2025, obviously the first portion that we really started on ended up being delayed with permitting. Those permits have been fully cleared. So the beauty of that is we get to go back to work on that initial phase that we were supposed to start. It is a long-term job, so not all permits are in. So there are some permits for the latter part of the jobs that still have to come in. I think the level of confidence around those, especially with clearing this issue, has increased significantly. So we feel really good about the progress on that job, what we think needs to happen for us to ultimately complete that on time. And I think this is just, again, it happened a little bit earlier than we thought in the year, so we are excited about it. And I think it bodes really well for, again, not just 2026, but how that job is going to set up for the next few years. Philip Shen: Great. Thanks, Jose. And then back on the data center job, of the billion dollars, how much do you think you guys self-perform versus outsource? And then just as a follow-up, you know, how much more is there behind this? I know you may have touched upon this a little bit earlier, but do you think we could see more of these billion-dollar general contractor jobs later this year, or do you think we have to wait till next year? Thanks. Jose Mas: Yes, so a couple of things. I would say that, again, you take the $1 billion, you break it out between what we have historically done, which is a couple of hundred million dollars. I would say all of that is self-perform, which is the work that we have been doing. When you look at the balance of that on this particular project, we were brought in kind of late where a lot of the actual work functions had been selected with different contractors, so we kind of took them over. So our ability to self-perform on this first project was somewhat limited. Again, we think, you know, one of the beauties of this is we think we have got a huge competitive advantage and we are one of the very few contractors in the U.S. that has significant experience in construction management and civil and power and telecom and maintenance and all of the attributes that you need to make up a data center job. So I think that, you know, customers are beginning to see that. We are getting a lot of opportunities related to full turnkey work with the ability to self-perform, which really changes the margin profile of those jobs on a go-forward basis. I think we are going to responsibly grow into it. This is hopefully the first of many. And we do expect further wins in 2026. Philip Shen: Great. Thanks, Jose. Jose Mas: Thanks, Phil. One moment for our next question. Operator: Our next question will be coming from Sangita Jain of KeyBanc Capital Markets. Your line is open. Sangita Jain: Can I ask a question on the large transmission project that you booked in the fourth quarter? Can you help us with some details on how long you think that project will take to burn? I know for Greenlink that target was four years. I am just trying to see if it is a similar duration or shorter. Jose Mas: Hi, Sangita. So it is a smaller project. It will be a shorter duration. It starts, you know, probably the second part of the summer in this year, and it will probably go on for about two years. Sangita Jain: Got it. Helpful. And then on a broader level, can I just ask about margins? Your revenue growth has obviously been very strong. Margins are expanding, but they are kind of lagging your expectations. So I am wondering if there is a structural barrier that prevents operating leverage from coming through. If it is labor productivity or I do not want to prejudge. I want to, but I would love some color from you. Jose Mas: Yeah. Look. We have talked a lot about it during the year. I think, which I think is one of the positives as well, right, is that most of our growth in 2025 was organic. And when you grow organically, it takes a lot to open new offices, to build, to grow your workforce base, to invest in not just working capital, but in the equipment necessary to grow. So, you know, we think we put up, you know, mid-teens growth rate both for 2025 and even on an organic basis what we expect 2026. Even if you back out the acquisitions in 2026, we are expecting, you know, mid-teens organic growth in our business. Those create challenges. They create challenges to optimize margins in a period. I think as we get bigger and we see some of those initial businesses start to mature, which we are already seeing, margins kind of take care of themselves. So we are very bullish about our ability to improve our margins in things like telecom, which, quite frankly, you know, again, we beat fourth quarter revenue by 20% versus our guidance, which is just, again, another remarkable number, but that slightly impacted margins negatively. Right? When we look at this year with some of the things that we were expecting to happen on Greenlink and did not come through, it slightly impacted the margin capabilities we had in that business. But when you look at 2026 guidance for both of those, you know, strong growth years from a margin perspective in both of those. Our CE&I, right, I think is progressing incredibly well. We were up 110 basis points on a year-over-year basis from 2024 to 2025. If you take the base business, we are expecting further margin gains in 2026, but it is offset by some of the construction management and data centers. And then when you look at Pipeline, right, it is all a function of size and how we are going to build up to where we think we can get to. If you take just Pipeline growth, if we get back to historical highs in revenues, quite frankly, you know, it almost, because of the mix, it almost takes us to double digits as a total company. Now, you know, total company margins on the longer term are going to be somewhat dependent on mix, are going to be somewhat dependent on how much we grow certain portions of our business and where they land. And we are paying a lot of attention to that. Right? And we are really trying to maximize the returns on our investment and our ability to execute at a high level. But look, as happy and as excited as we are about the growth story, we are super focused on the margin improvements across the company. And I think we have got real potential. I think we have got real potential to significantly impact those. And I think that creates as much, if not more, value than the revenue growth that we are going to deliver. Sangita Jain: Perfect. Thank you, Jose. Thank you. Operator: Our next question will be coming from the line of Steven Fisher of UBS. Your line is open. Steven Fisher: Thanks. Good morning and congrats on a successful 2025. And just to follow up on Sangita’s question there, but keep it more specifically focused to the Communications segment. Could you just give a little bit more detail on the better margin expectations you have there? I know you mentioned about certain elements of the business that are maturing. Can you talk about which aspects of the Comms opportunities are seeing that maturing? Is that overpull work? Or is it the BEAD work? Or, I guess you say you do not have a lot in there. But what are the key initiatives that you are talking about that could really help margins? And what are you doing with the hiring in the Comms business? Because it seems like maybe some of the absorption there is maybe a bit of a drag. Jose Mas: Yes, Steve. I would push back a little bit. Right? Because I would say if we look at Comms in 2025, the business was up on a full year basis. We were up 32% in revenue, organically. The most mature business in MasTec, Inc., the longest business in MasTec, Inc., was up 32% organically in revenue in 2025. And margins improved 60 basis points year over year on 32% growth. Now we would have liked to have seen margins improve more, no question about it. But we still saw improvement. When you look at 2026 guidance versus where we ended up in 2025, we have got just shy of a 100 basis point improvement in that business yet again, on what will be strong growth. So, you know, I would argue that we have done a really good job of managing the growth and improving margins along the way. But this is where we have made significant investment, opened new offices, and it takes time for some of those businesses to mature. This is why we are starting to see the maturity of those businesses. We are starting to see the improvement of those margins, which on a year-over-year basis, margins improved 60 basis points. Yes, fourth quarter was a little lighter than we expected, but, again, we beat revenue expectations there by 20% versus what we guided. So I think we are well on our way. I think the business mix is perfect. I think, you know, we have got, again, tremendous opportunities. And, by the way, we talked about BEADs being a huge opportunity going forward. I think we see that in 2027. I think we have yet another really, really strong growth year in 2027, probably much stronger than 2026 because of what is going to happen in BEADs. But we are super focused on margin appreciation there. I think we delivered some of that in 2025, and we will deliver more of that in 2026. Steven Fisher: Okay. That is fair. And then just in terms of the overall 2026 plan and how it is covered in backlog, obviously, you had some really good backlog growth here. Just curious, how well covered do you think on your 2026 plan you are covered at the moment? Where do you think you still need to see more bookings? I know we have talked about on the Pipeline business, it is sort of closer to the burn when you book it, but just kind of what still has to happen to deliver the plan? Jose Mas: I mean, when we look back for, you know, as far back as I can remember, I do not think we have ever been in a better position going into a year based on revenue guidance versus where we stand with backlog. So I would argue that this is, you know, I am not going to use the word conservative, but I think this is one of the best big plans that we have got relative to what our revenue expectations are with what we currently have in hand. Steven Fisher: Sounds good. Thank you. Operator: And our next question will be coming from the line of Justin Hauke of Baird. Your line is open. Justin Hauke: Oh, great. I have got one more on the margin questions. I guess, to add the mix. But, you know, overall, you are calling for 50 basis points of margin expansion. I guess I was just curious. I mean, you are going to tell me all your segments are, you know, going to see expansion this year. But is there anything, you know, in particular, you know, mix-wise, you would say, you know, some higher and some lower, you know, given the moving pieces, maybe the construction management stuff on the data center work that you said, you know, lower margin. Anything to kind of help think about, you know, the trajectory in 2026 with the segments. Thanks. Jose Mas: Yeah. So again, I mean, we expect, you know, Comms and Power Delivery to be up on a year-over-year basis from a margin. I think we have been very specific as to what the, you know, what the opportunities are in 2026 versus what it was in 2025. The Pipeline business is obviously growing. Again, we have a step change function there in 2027 from a revenue perspective. So while margins will be good in 2025, they will not be optimal because we will be making a lot of investments—oh, I am sorry—in 2026 we will be making a lot of investments into what is coming in 2027. So that is kind of why we have guided to where we have guided. Then when we think about, you know, Clean Energy and Infrastructure, I mean, we are not, that is probably the one business where we are not calling out, you know, margin appreciation on a year-over-year basis. It is more flattish. While the base business is improving, the construction management business will be a drag on that relative to the total margins of the segment. So I think, you know, keeping margins there flattish is a good story with the opportunity of, you know, further growing our self-perform opportunities around that new business and then enhancing through that. So I think that is how 2026 is going to shake out. Justin Hauke: Yep. Perfect. No. That is helpful. Second one, pretty easy one here, but I just want to clarify. In the guidance, there is a big uptick in the non-interest. I assume that is the water/wastewater acquisition you did post quarter, but I just wanted to clarify that there was not anything else that was driving that. Paul DiMarco: That is the change for 2026. Yes. Justin Hauke: Perfect. Thanks. Jose Mas: Thank you, Justin. One moment for our next question. Operator: Our next question will be coming from Ati Modak of Goldman Sachs. Your line is open. Ati Modak: Hey, good morning. Jose, can you talk about the vision you have with these acquisitions, the NV2A, how that integrates into the data center market? And then the decision to step into water infrastructure, what is your vision with that? You know, how big is it today? How big could it get? And should we expect you to remain acquisitive in these areas? Jose Mas: Yeah. So let us start with NV2A. Well known to us. They were our partner on a big project we currently have. You know, it was an opportunity that presented itself where one of the partners was interested in selling, and that started a dialogue where we ended up deciding to acquire the entire business. Tremendous opportunities on the current projects we have with the size of what those projects will be in the future. That in and of itself made an enormous amount of sense for us to pursue those acquisitions. And then I think as that develops, you know, obviously, some of these other construction management opportunities presented themselves, and we think they have incredible depth and strength and bring a lot to the table that are going to help us there as well. So we think fundamentally, just based on their historical business, it was a great deal. And when you look at all the complements that we get in addition to that, we think it is going to be a fantastic deal for MasTec, Inc. On the water side, look, we think water is a theme that is going to grow like crazy. I think we are going to have all kinds of issues this year with, you know, some of the snow patterns and where they fell and where, you know, there are going to be a lot of markets that are going to have water issues. A lot of what we are seeing around data centers across the country are demanding more water use, which is forcing municipalities to rethink how they are providing water and the revenue opportunity for them to provide water into new projects. When we look at their business, they have had tremendous growth. But, quite frankly, when you look at their outlook and the opportunities that they are chasing, their growth potential is probably as good or better than anything else we have in all of MasTec, Inc. And we are going to support them and help them achieve that, and we are super excited. We think it is a great management team that has built a great company. And we are really looking forward to supporting them. I think that, you know, again, we think it is a great theme. As the theme develops, as we get a better understanding of that market, I think there are going to be a lot more opportunities there to grow off of. Ati Modak: Very helpful, Jose. And then what would you highlight in terms of the expectations we should have with the Investor Day in May? Jose Mas: Look. We are excited to do it. We have not done one in a really long time. I think we are going to talk a lot more about, you know, longer-term outlooks, maybe longer-term targets relative to what we do on these calls. So, you know, we are excited to do that. You are going to get an opportunity to meet a significant portion of our management team and really understand, you know, how we are thinking about the mid and long term as a business. Ati Modak: Awesome. Thank you. Operator: And our next question will be coming from Manish Samaya of Cantor Fitzgerald. Your line is open, Manish. Manish Samaya: Thank you. Good morning. Jose, first question for you. You gave us your margin outlook for 2026. And I was wondering, you know, when you look at your daily, weekly dashboard, what are some of the things that you are looking at by segment to ensure that everything is on track? Jose Mas: Yeah. Look. At the end of the day, our business is not that complicated. Right? Everything starts at a field level. It starts with a widget that is getting installed. And our ability to enhance the productivity of those widgets is what really changes profitability as an entity. So, you know, how we measure and how we incent at that level is the most important thing that we do as a company. I think, you know, Paul has talked a lot about a lot of the technological advancements that we are trying to make to further provide better information, more real-time information, which I think makes a big difference. But, you know, that is our team’s focus every single day. And I think that, again, you know, we have got a lot of balls in the air. We are growing very rapidly from a top-line perspective, but we cannot take our eye off what, you know, makes us money each and every single day. And I think our team is doing a great job of being focused on that and are really trying to improve that on a day-to-day basis. Manish Samaya: Second question for you and Paul. Paul, maybe if you can just help us bridge the operating cash flow from 2025 to 2026. And then, Jose, obviously, you are guiding to leverage in the low 1s. How should we think about capital allocation between, obviously, tuck-in acquisitions, as well as share buybacks and other initiatives you might have? Paul DiMarco: Yeah. So on the operating cash flow question, Manish, it is really just going to follow the cadence of revenue growth. And we expect to have, as I mentioned, you know, sequential growth Q2 and Q3 followed by a fall-off in Q4. We are not assuming any major change in DSO from year end at 65 days for 2025. And so it is just the expectation around working capital investment relative to the revenue generation. And the year-over-year impact really from Q4 2025 to Q4 2026 is, you know, a big piece of that. So there is not a major change in our expectations from where we finished the year. It is just about timing of current expectations of revenue timing that drives the $1 billion cash flow from operations. And, again, it is consistent with what we have stated for a long time, which is that we think we can do 70% EBITDA conversion to operating cash flow consistently. You know, this year, the growth, the timing of the growth, put a little bit of headwind on that, and we think it normalizes in 2026. Jose Mas: Yeah. Maybe to the second part of the question, you know, I would say, look, first and foremost, we are focused on taking advantage of the organic growth opportunities in front of us and investing in those. I think that when we think about, you know, really adding to the platform of MasTec, Inc. and bringing in partners, there is tremendous opportunity. Right? I think there is so much demand in our industry today that our ability to meet it enhances with looking at M&A and, you know, I think we are going to continue to do that. I think we took a period of a couple of years post some very large acquisition for us in Infrastructure and Energies—Henkels & McCoy and IEA—where, you know, a lot of our focus was consumed on the integration of those acquisitions. I think that is well past us. I think we have demonstrated that. And I think that, you know, we are in a position today where we can take that on and really make that additive to MasTec, Inc. So if anything, I think you will see us be more acquisitive rather than less, and for sure more than the last couple years. It has been part of our story since inception and something that, you know, you will probably see us do more regularly than you have in the last couple of years. Manish Samaya: Any specific segment, Jose, as far as tuck-ins? Jose Mas: Yeah. Look. Again, I think there are areas of every segment that we are in that we think make sense for us. So it is measuring the opportunity, quite frankly, versus being opportunistic in those. So, you know, the values are also high. Right? People’s expectations of values have increased significantly. So finding the right balance between those two is what we are going to try to achieve in MasTec, Inc. Manish Samaya: Okay. Thank you. Thank you. Operator: Our next question will be coming from Joseph Osha of Guggenheim Partners. Your line is open. I am sorry. Guggenheim Partners. Joseph Osha: Hello. Can you hear me? Operator: Yes. We can hear you. Joseph Osha: Yep. Yeah. Hey. Good morning. Thanks. Two questions. Following a little bit on some previous ones, looking at the data center opportunity in particular, I am wondering if there are any particular skill sets or capabilities you feel like you might want to fill in? And then looking at Communications, there has been some wireless infrastructure rip and replace in that segment in the past. I am wondering how much of that is there going forward, or whether we are mostly looking at FTTH and obviously BEAD in 2027. Thank you. Jose Mas: Yeah. So a couple of things. On the data center side, obviously, we do not have the functions today to self-perform everything. But I think that we have the ability to self-perform a lot, more than most, I think, again, gives us a tremendous advantage. To the extent that the opportunity is there to consider doing more there, we would. On the wireless side, you know, I think we are in the midst of that rip and replace for our large customer. I think we are going to see a lot more deployment starting in 2027 relative to new spectrum, which is going to help that industry considerably. So we are, you know, we are still as excited about wireless as we have always been. Joseph Osha: Okay. Thank you. Operator: And our next question will be coming from Brian Brophy of Stifel. Your line is open, Brian. Brian Daniel Brophy: Yeah. Thanks. Good morning, everybody. Thanks for squeezing me in here. I guess I will just go with a quick one. CapEx is notably lower than a year ago. Can you talk about the drivers there? Or the 2026 expectation, excuse me, is notably lower than a year ago. Paul DiMarco: Yeah. I mean, I think it is just a function of where the growth is coming from. We talked about investing a lot in Pipeline ahead of the cycle. A lot of the jobs we are working on right now kicked off in the back half of 2025 and current equipment related to those. Clean Energy segment, where we are seeing the highest growth in 2026, is the least capital intensive. So some of it is just a function of that. You know, we are obviously prepared to continue to invest, and that is our view today. To the extent that project needs or demand opportunities require more CapEx, we have got the flex to do it. Brian Daniel Brophy: Appreciate it. I will pass it on. Operator: Our next question will be coming from the line of Mark Strouse of JPMorgan. Your line is open, Mark. Mark Strouse: Yes. Good morning. Thanks for squeezing me in here. Maybe just on that last point on renewables. Clearly, you are seeing very strong growth. Just curious, can you talk about your market share, your win rates? Is this a function of kind of just the number of opportunities increasing? Or do you think kind of a function of projects getting bigger and more complex that you are taking share as well? Thank you. Jose Mas: I think it is a little bit all of the above. Again, coming off of the IEA acquisition, we took a lot of time to really focus our efforts around going after customers that we thought we could build meaningful relationships with that would matter over time, and I think we have done that. You know, we have got alliance agreements now with what we think are some of the best developers in the business that have, you know, long-term plans that are very solid, and our ability to have integrated within their systems and really build an expectation of both our labor and their work over a long period of time gives us tremendous visibility. So I think that has helped us. Right? I think today we are a top-tier contractor for both wind and solar. And we are very bullish about the long term of that business. Obviously, at times, it becomes very political. We think there is tremendous visibility through 2030. And we think that as we see the prices and what some of the new generation is pricing at, we actually think that renewables are going to be competitive on a price basis long after 2030. So we think it is a great market. We think it is a market that has got tremendous potential and, again, as Paul alluded to earlier, we have got, you know, a ton of what we would call shadow backlog, which is backlog we know we are going to convert. So, you know, we actually think backlog in that business could increase in 2026. Operator: And our next question will be coming from the line of Liam Burke of B. Riley Securities. Your line is open. Liam Dalton Burke: Thank you. Good morning, Jose. Jose Mas: Good morning, Liam. Liam Dalton Burke: Jose, your projects have become larger and more complex. Are you seeing less competition and better, more favorable terms as you renegotiate or enter into some project agreements? Jose Mas: Well, I think the whole industry is. Right? Customers understand the challenges that they face relative to labor. I think, you know, obviously, we have always said we think terms improve before pricing does, and I think we have seen terms improve considerably over the last few years. And I expect that to continue and, you know, as we are all dealing with the demand, I think pricing is also getting better. So I think we are in a good place as an industry. Liam Dalton Burke: Great. Thank you. And really quickly, you highlighted middle mile activity in the telecom segment. Is that data driven, or what is driving that activity? Jose Mas: Yeah. Look. I think our customers are looking to grow. Our customers are looking for all the opportunities in front of them. So some of it is data center driven. Some of it is onshoring driven. There is, you know, lots of demand for connectivity. And to the extent that our customers win that demand, it requires large infrastructure buildouts for them, and that is kind of what we are talking about. Liam Dalton Burke: Great. Thank you, Jose. Thank you. Operator: And our last question will be coming from Maheep Mandloi of Mizuho. Your line is open, Maheep. Maheep Mandloi: Hey. Thanks for squeezing me in. Congratulations on the quarter here. Maybe just two quick ones. First, just on Communications. Can you maybe guide how much of that would be exposed to office buildings or commercial customers? And secondly, on M&A, it kind of laid out pretty well on previous questions here. But just curious if you have any thoughts on spending some of the equipment yourself which might be in tight supply in the market here? Jose Mas: Yes. So relative to office buildings and commercial buildings, obviously, they are customers of our customers. So I think, you know, I do not think that has been a key driver of the business. I do not think there have been large expansions of either of those across the country over the last couple years. But, obviously, connectivity is important for everybody and to the extent that anybody needs connectivity, it is a potential customer for our customers. From an M&A perspective, look. We have not looked at getting into manufacturing. We think, you know, our business has been strong. We have really strong demand and really good partners that can support us in that. So we have not seen the need to do that. Maheep Mandloi: Appreciate it. Thank you. Operator: And I would now like to turn the conference back to Chris Mecray for closing remarks. Chris Mecray: All right. Thank you, everybody. That concludes today’s call. Thanks for participating. And as a reminder, visit our Investor website for a replay and transcript, which will be posted when available. Have a great day. Operator: And this concludes today’s program. Thank you for participating. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Globalstar, Inc. Fourth Quarter and Full Year 2025 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 the session, you will need to press *11 on your telephone. 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, Rebecca S. Clary, CFO. Please go ahead. Rebecca S. Clary: Thank you, operator, and good morning, everyone. Before we begin, please note that today's call contains forward-looking statements intended to fall within the safe harbor provided under the securities laws. Factors that could cause results to differ materially are described in the Risk Factors section of Globalstar, Inc.’s SEC filings, including its most recent Annual Report on Form 10-Ks and its other SEC filings, as well as today's earnings release. Also note that management may reference EBITDA, adjusted EBITDA, free cash flow, or adjusted free cash flow on this call, which are financial measures not recognized under U.S. GAAP. As required by SEC rules and regulations, these non-GAAP financial measures are reconciled to their most comparable GAAP financial measures in the earnings release, which is available on our website. Today, I will walk through our fourth quarter and full year 2025 financial results, then discuss liquidity and our 2026 guidance. Starting with the full year, total revenue reached a record $273,000,000, a 9% increase over 2024 and in line with our guidance. This marks our fourth consecutive year of record revenue. Service revenue was $257,300,000, up 8%, driven primarily by increased wholesale services. Subscriber equipment revenue was $15,700,000, up 24%, reflecting a higher volume of commercial IoT device sales. Turning to profitability, we generated income from operations of $7,400,000 compared to a loss of $900,000 in 2024. This improvement was due to higher revenue, as previously discussed, partially offset by increased operating expenses, including personnel costs to support our next-generation buildout, continued investment in XCOM RAN development, and higher legal and professional fees. During the year, operating expenses benefited from $3,900,000 in employee retention credits received under the CARES Act, which were allocated between cost of services and SG&A. Net loss improved to $7,600,000 from $63,200,000 in 2024. This improvement was due primarily to the prior year reflecting a non-recurring non-cash loss on extinguishment of debt related to the paydown of the 2023 13% notes. We also benefited from favorable foreign currency remeasurement on intercompany balances and non-cash gains on the quarterly mark-to-market adjustment of our derivative asset. These items were partially offset by higher non-cash imputed interest related to the 2024 prepayment agreement. Adjusted EBITDA reached a record $136,100,000, representing a 50% margin, in line with our guidance. This increase over 2024 reflects higher revenue, partially offset by higher operating expenses, primarily due to investment in growth opportunities. Specifically, while we continue to enhance and develop our XCOM RAN product and service offerings, we incur costs in advance of revenue. Turning to Q4, total revenue was $72,000,000, including $67,400,000 of service revenue and $4,600,000 from equipment sales. Service revenue increased 17% and equipment revenue increased 31% compared to Q4 2024. The revenue increase was driven primarily by wholesale services, including performance bonuses earned in the quarter and additional service fees associated with network cost reimbursement. We also saw contributions from growth in commercial IoT subscribers and device sales and revenue under our agreement with Parsons, partially offset by Duplex and SPOT subscriber churn and lower XCOM RAN sales. Q4 loss from operations was $400,000, a meaningful improvement from a $4,200,000 loss from operations in Q4 2024. I would also note that cost of subscriber equipment sales included a $1,100,000 charge related to tariffs on equipment imported and then re-exported to foreign subsidiaries where previously recorded duty drawbacks are no longer deemed probable of recovery. Q4 net loss was $10,600,000 compared to $50,200,000 in the prior year, with the improvement largely attributable to the same non-cash activity that impacted the full year period. Q4 adjusted EBITDA was $32,400,000, up 7% from the prior year's quarter. Turning to the balance sheet, we ended the year with $447,500,000 in cash and cash equivalents, up from $391,200,000 at year-end 2024. Operating cash flows during 2025 were $621,700,000, which included $430,600,000 received in connection with the infrastructure prepayment. Capital expenditures were $550,400,000, primarily related to our commitments under the updated services agreements for the deployment of the replacement satellites as well as the extended MSS network, which includes a new satellite constellation, expanded ground infrastructure, and increased global MSS licensing. Adjusted free cash flow for the year was $171,500,000, up from $131,900,000 in 2024. 2025 benefited from $45,000,000 in accelerated service payments and higher ongoing service fees, partially offset by increased operating cost. Our principal debt balance was $410,000,000 at year-end, down modestly from $417,500,000 at the end of 2024, reflecting scheduled recoupments of $34,600,000 under the 2021 funding agreement, partially offset by $27,100,000 in new issuance under the 2023 funding agreement. Looking ahead to 2026, we expect total revenue between $280,000,000 and $305,000,000 with an adjusted EBITDA margin of approximately 50%. This outlook reflects our confidence in the continued growth trajectory of the business as we scale our next-generation infrastructure and expand our commercial opportunities. With that, I will turn the call over to Paul. Paul E. Jacobs: Thanks, Rebecca, and good morning, everyone. Great to be with you today, and I appreciate everyone joining us for our fourth quarter and full year 2025 update. 2025 was a transformational year for Globalstar, Inc. We closed the year with record full-year revenue of $273,000,000, representing a 9% increase year over year, and delivered an adjusted EBITDA margin of 50%. These results reflect strong execution, operating discipline, and continued progress across every major dimension of our business. Throughout the year, we focused on scaling the core business while laying the foundation for our next phase of growth, and we believe our financial performance clearly reflects that balanced approach. From a strategic perspective, we made meaningful advances across product innovation, infrastructure expansion, regulatory progress, and market diversification. One of the most important milestones during the year was the launch of two-way satellite IoT capabilities and the completion of the commercial rollout of our RM-200MS module. This represents a significant expansion of our IoT portfolio, moving beyond one-way monitoring to enable reliable command and control for enterprise, government, and industrial customers. Two-way IoT meaningfully expands our addressable market, strengthens our partner-led go-to-market model, and enables higher-value use cases where resilience, reliability, and confirmation are mission critical. At the same time, we continue to accelerate diversification across end markets. During 2025, we secured early government and defense wins, expanded our presence in agriculture, wildfire response, industrial IoT, and public safety, and built momentum across multiple verticals. This diversification strategy is intentional and increasingly important as it reduces reliance on any single market while positioning Globalstar, Inc. to serve a broad range of customers with complex connectivity requirements. In the government and defense sector specifically, we achieved several important milestones. With our partner Parsons, we completed a successful proof of concept, began customer trials, and are expanding our relationship to include private 5G solutions for the federal market. We also completed and are continuing to invest in XCOM RAN-based 5G research to evaluate high-capacity private wireless architectures for defense applications. Additionally, we are also pleased to highlight a recent development validating the strength of our broader connectivity platform. Fireworks, which was formerly XCOM Labs, was awarded a Phase II Small Business Innovation Research contract worth $1,900,000 from the Office of the Undersecretary of War to develop an advanced 5G system for challenging RF environments. As part of that effort, Fireworks selected Globalstar, Inc. as a technology partner, leveraging our XMRI5 platform. This collaboration underscores the growing relevance of our technology beyond traditional satellite services and reflects the confidence in our ability to support mission-critical communications. These initiatives reinforce the relevance of our architecture for defense and government use cases and demonstrate growing confidence in our ability to support high-priority mission requirements. Taken together, we believe these efforts are a meaningful expansion of our government and defense footprint, and we expect this area to become an increasingly important contributor to our business over time. More broadly, we continue to see steady demand for our products and services, with new customers and emerging use cases coming online as we execute against a clearly defined go-to-market strategy focused on scalable long-term growth. That growth is underpinned by our continued investment in our infrastructure. During the year, we made significant progress expanding our global ground station network across multiple continents. We believe these investments will strengthen capacity, improve redundancy, and enhance readiness for our next-generation services, including our C3 constellation. In parallel, we advanced our ITU financial commitments, completing 50% of the investment we pledged. These efforts are foundational and are expected to prepare our network to support future satellite capacity and expanded service offerings. We also continue to advance the XCOM RAN ecosystem. Boingo completed a proof-of-concept trial demonstrating the ability for XCOM RAN to support next-generation private 5G deployments, and we believe the integration of our platform into Boingo's private network portfolio highlights growing partner engagement and commercial relevance. From a team standpoint, momentum remains strong throughout the year. Average commercial IoT subscribers increased 6% year over year, while IoT hardware sales revenue grew 50% year over year. This growth reflects sustained demand across asset tracking, monitoring, and safety applications, as well as increasing adoption of higher-value solutions enabled by two-way connectivity. We believe these trends demonstrate both the durability of our IoT business and the upside potential as new capabilities continue to scale. The progress we made in 2025 reflects disciplined execution across multiple fronts, from infrastructure and regulation to product innovation and market expansion. We are moving decisively from groundwork to growth, and we believe we have a strong foundation in place as we enter 2026. Looking ahead, we remain confident in the strength of our strategic roadmap and our ability to execute against it. With key authorizations for C3 and continued progress across our ground network, commercial momentum for two-way IoT capabilities, and growing traction for XCOM RAN, we believe Globalstar, Inc. is uniquely positioned to deliver differentiated connectivity solutions that combine satellite innovation, licensed spectrum, and proprietary wireless technology. Finally, there has never been a more exciting time to be in space and the broader connectivity ecosystem. As demand continues to grow for resilient, interoperable solutions that bridge satellite and terrestrial networks, we believe Globalstar, Inc. is ideally positioned to benefit from the convergence. One factor became increasingly clear last year: proprietary, globally harmonized spectrum matters. Our licensed MSS spectrum remains a core differentiator and a foundational asset as the market evolves. Whether it is traditional satellite communications, IoT, or D2D, our dedicated global space spectrum can enable flexibility, reliability, and resiliency. The progress we achieved in 2025 reflects the talent and dedication of our global team, and we are energized by the momentum we are carrying into the year ahead. Thank you again for joining us today and for your continued support of Globalstar, Inc. We look forward to updating you on our progress in quarters to come. I will now turn the call back to the operator for Q&A. Operator: Thank you. We will now open for questions. Please press *11 on your telephone and wait for your name to be announced. Operator: And our first question comes from Edison Yu of Deutsche Bank. Your line is open. Edison Yu: Thank you for taking our questions. Congratulations on progress, and apologies about any background noise. First, I want to bring up a topic to you, Paul. There has been a lot of excitement about data centers in space. I think it is probably something maybe not something you would tackle directly as a company, but just curious on your thoughts about the idea of doing this and potentially some ancillary opportunities that could evolve from that. Paul E. Jacobs: I mean, obviously, we are very focused on direct-to-cell and IoT and not really on the data center side. And obviously, with all the demand for compute and AI and the difficulties people are having building data centers and power being an issue, I understand why people are excited about it. And it certainly creates another reason for needing launch capacity, which there is going to be increasingly more launch capacity as new vendors come online. So I understand how the industry is excited about it. I think there are a lot of technical challenges to it. Obviously, maintenance is a lot harder, upgrades are a lot harder, cooling and so forth are hard in space. But this is a great technical challenge for people and certainly an interesting thing. And if you are a science fiction fan, it kind of maps out to a lot of things people have talked about over the years about what humanity will do in space. So it is exciting, but it is definitely not our focus area. Edison Yu: Understood. And then switching gears, what should we think about as the next milestones for the C3 constellation? Is there anything this year that you would call out that would be of particular importance? Paul E. Jacobs: We just did the critical design review, so that is a very important portion of making sure that the system design, and holistically the entire system, is designed well. We will continue to do a lot of work in terms of ground network buildout. Obviously, there is a lot of work going on on the regulatory side, and discussions are advancing well, and regulators are excited about the capabilities that Globalstar, Inc. has already brought to market either by ourselves or our partners. There are a lot of SOS and emergency capabilities, and it has been demonstrated over and over. So as we go to C3, things only get better: more capabilities and more satellites in orbit. We are continuing to tick off and grind away on all these items. It is not a high-level thing; you have to be on top of every single little detail, and that is what the teams have been doing. It is not one thing; it is many, many things across the board to get done. Edison Yu: Indeed. And last one for me, just on XCOM RAN. You made some progress since last quarter with Boingo. Can you remind us what specific customer KPIs were validated or that you found to be very encouraging as part of this process? And is this giving more confidence in getting future pipeline? Paul E. Jacobs: The kinds of things that people are looking for include the ability to get a lot of throughput in a dense environment. That was the thing that we always touted about the technology in the beginning. With Boingo, one of the other things that is really cool is that we can run the system over DAS—distributed antenna systems—so we can overlay that. A DAS system generally just gives you more coverage, but not more capacity, but because we can process the data from each radio node or head, we can actually increase the capacity in the system as well. Then there are other things that we have demonstrated in warehouse automation in terms of ease of deployment and the fact that if you cluster users in a given area, it does not take down the capacity of the whole system; it still shares the capacity of all the radio nodes that are there. Those kinds of capabilities and KPIs are important. And then, obviously, just getting to commercial hardening. We have been testing the system under difficult circumstances, and we have been able to prove to very demanding customers that this system is commercially ready. In terms of the pipeline, we focused on warehouse automation, and now we are looking at what are the other use cases. Is it with CBRS, is it military use cases, and with Boingo, we are talking about other stadiums, convention centers—places where there is high density of users—and not to mention military bases as well. The pipeline is one we are excited by, as are the go-to-market partners that we have. Edison Yu: Thank you. Paul E. Jacobs: Thank you. Operator: Thank you. Our next question comes from Mike Crawford of B. Riley Securities. Your line is open. Mike Crawford: Thank you. Good morning. Could you help walk through the utility of having both MSS and terrestrial 5G flexibility with your S-band spectrum and as well as perhaps maybe how we should think about any potential interference issues? Paul E. Jacobs: We have talked about the fact that in the future, there is a lot of synergy between warehouse automation and the fact that you can track using IoT—satellite IoT—anywhere you go and cover a complete supply chain and logistics. Those kinds of things are interesting, but it is also the fact that because of a global system, we have spectrum globally, and so for companies and partners that are looking to have some kind of terrestrial capability anywhere in the world, the fact that we have that spectrum means we really believe that we can go get those opportunities to the extent that our partner is interested in that as well. It is a nice synergy due to the global, harmonized nature of it. From an enterprise standpoint, the idea is that if you are in cellular coverage or running a terrestrial network on that spectrum, if a device is not immune, we can manage which frequency bands are being used, which time is being used, and what system data the end user needs to use at a given time. Our satellite modem started out—the first version of the two-way modem does not have multimode capability—that is what we are working on right now. That is going through certification, and they will have multimode capability very quickly and be able to manage both and, of course, support terrestrial modes. Mike Crawford: Okay. Thank you, Paul. Actually, it is a little difficult to hear you because your line is breaking up a little bit. I will just ask one final question. Can Globalstar, Inc. share any targeted launch windows for the replenishment satellites this year? Paul E. Jacobs: We are not updating beyond saying second quarter this year for the first launch and second half for the second launch. Mike Crawford: Excellent. Thank you. Paul E. Jacobs: Thank you. Operator: Thank you. As a reminder, if you have a question, please press *11. Operator: And our next question comes from Gregory R. Pendy of Clear Street. Your line is open. Gregory R. Pendy: Hey, guys. Thanks for taking my question, and congrats on 2025. I just wanted to zero in on the IoT offering. Can you remind us when your services went live for two-way communications? I believe it was somewhat mid-quarter. And, in addition, it looks like from your ARPU, you have not changed pricing. Is that correct, and is that likely to continue going forward? Thanks. Paul E. Jacobs: What is going on with the two-way system is that our customers are actually building out their solutions right now, so you will not see revenues from two-way IoT in any significant amount right now. These customers are in process of validating their end-to-end systems and so forth. The module went commercial; it is tested, it is hardened, it is in mass production now, and we are waiting on customers to finish their applications because these are built into some other device. Gregory R. Pendy: So is it fair to say that that was not benefiting the subscribers in the quarter because you had decent growth? Paul E. Jacobs: That is still one-way systems predominantly. Gregory R. Pendy: Okay. Very helpful. Thanks a lot. Paul E. Jacobs: Sure. Operator: Thank you. Operator: And our next question comes from Logan W Lillehaug of Craig-Hallum. Your line is open. Logan W Lillehaug: Hey, guys. Logan on for George here this morning. You mentioned the contribution from Parsons in the quarter. I was hoping you could just talk kind of broadly about how the government pipeline has shaped up over the past few quarters and just what you are seeing there. And on that note, as we think about the longer-term guidance, how would you frame what is considered in there in terms of government contribution? Paul E. Jacobs: The pipeline has two aspects. There are things that we are already talking about and working with them on, and then there are newer opportunities that we are still in the process of evaluating and contracting. The pipeline is very large, and I am really busy, pretty much with a focus on the near-term opportunities there. We have not made any announcements about new awards beyond what we have said. The near-term revenue comes from the idea that we will expand over other regions, and we get payment as other regions come online. That is the near-term. Then, as they shift their solution into the devices, we get the revenue from that. Predominantly today, it is the buildout of the network to support other regions of the world. Logan W Lillehaug: Got it. Just one other really quick one. Can you remind us where you are on the upgrade of the ground infrastructure for the longer-term MSS network? Paul E. Jacobs: We committed to the ITU to spend $2,000,000,000 on extending the network, and we are halfway through that. That includes money that went into the satellites as well, but it gives you a sense of how far along we are. Those buildouts are going quite well on the ground side. The company is experienced in doing these kinds of things. We had to do it for the original launch of the original wholesale business for our current customer. We know how to do this pretty well, and we have been making continuous announcements as different countries come online. You can see a list if you look through the press releases of all the places that are up and going now. Logan W Lillehaug: Yep. Okay. Got it. Thank you. Paul E. Jacobs: Sure. Thank you. Operator: Thank you. I am showing no further questions at this time. I would like to turn the conference back to Paul E. Jacobs for closing remarks. Paul E. Jacobs: Thanks, everybody, again for joining us. It was a great year, a lot of stuff going on, and I really want to say thank you to our partners, our customers, and to all the employees at Globalstar, Inc. You have done an excellent job this year, really focused on getting stuff done, and that obviously reflects results that our investors are looking for. We will continue to execute and look forward to talking to you about progress and our growth going forward. Thanks, everybody, again. Operator: Thank you. We apologize if you experienced any technical issues today. This concludes today's conference call. Thank you for participating, and you may now disconnect.
Operator: Greetings, and welcome to the Alpha Metallurgical Resources, Inc. Fourth Quarter 2025 Results Conference 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 your host, Emily O'Quinn, Senior Vice President, Investor Relations and Communications. You may now begin. Emily O'Quinn: Thank you, Rob, and good morning, everyone. Before we get started, let me remind you that during our prepared remarks, our comments regarding anticipated business and financial performance contain forward-looking statements, and actual results may differ materially from those discussed. For more information regarding forward-looking statements and some of the factors that can affect them, please refer to the company's fourth quarter 2025 earnings release and the associated SEC filing. Please also see these documents for information about our use of non-GAAP measures and their reconciliation to GAAP measures. Participating on the call today are Alpha Metallurgical Resources, Inc.'s Chief Executive Officer, Andy Eidson, and our President and Chief Operating Officer, Jason E. Whitehead. Also participating on the call are J. Todd Munsey, our Chief Financial Officer, and Daniel E. Horn, our Chief Commercial Officer. With that, I will turn the call over to Andy. Andy Eidson: Thanks, Emily, good morning, everyone. Today, we released our definitive fourth quarter financial results, which include adjusted EBITDA of $28,500,000 and 3,800,000 tons shipped. This closes out a year that presented a number of challenges and continued market weakness. However, 2025 was also a year of markedly improved cost performance across the company and resilience in the face of difficult circumstances. Now in 2026, we look to build on that perseverance and continue improving. Since our last earnings call, we issued 2026 guidance and announced 3,600,000 tons in sales commitments to domestic customers. We have since added another 500,000 contracted tons, bringing Alpha Metallurgical Resources, Inc.'s domestic commitments to a total of 4,100,000 tons for the year at an average price of $136.30. Especially in volatile times like these, having a solid base of committed tons to North American customers supports cash flow planning and business needs since the rest of the sales book is subject to market risk, which carries uncertainty. As we stated in our preliminary announcement and again today, recent upward movement in coal markets has been largely concentrated within the Australian Premium Low Vol (PLV) Index. Much of the shift was due to supply-related issues resulting from flooding that occurred in Queensland in December and January, meaning the impacts were likely isolated and temporary. This conclusion is further supported by the significant divergence between the Aussie index and those priced on the U.S. East Coast as well as the trend lower in recent weeks. Additionally, growing oversupply of high-vol coal seems to be contributing to the widening spread between low-vol and the high-vol A and B coals. Given our usual quality mix, if the current pricing environment for high-vol persists, it would likely exert downward pressure on our realizations for the year. In light of these supply-related forces, we continue to look for durable improvements to global steel demand as the catalyst needed to improve met markets across the quality spectrum in a sustainable way. All of this is important market context as we look at what is ahead for 2026. While the high-vol market remains crowded on the supply side with incremental tons coming from Alabama and Northern Appalachia, we are looking forward to completing development at the Kingston Wildcat low-vol mine, which Jason has additional detail to share about shortly. As always, we are going to do everything we can to mine coal safely and efficiently, and our sales team will aim to maximize the value of every pound of coal that we mine. However, we are also clear-eyed about the persistent market weakness, especially with regard to high-vol, and are maintaining our focus on a strong balance sheet and safe, efficient operations as a recipe for success in these challenging times. I will now turn the call over to Todd for additional information on our fourth quarter financial results. J. Todd Munsey: Thanks, Andy. Adjusted EBITDA for the fourth quarter was $28,500,000, down from $41,700,000 in the third quarter. We sold 3,800,000 tons in Q4, down from 3,900,000 tons in the third quarter. Met segment realizations increased quarter over quarter with an average realization of $115.31 in Q4, up from $114.94 in the third quarter. Export met tons priced against Atlantic indices and other pricing mechanisms in the fourth quarter realized $106.13 per ton, while export coal priced on Australian indices realized $114.96 per ton. These results are compared to realizations of $107.25 per ton and $106.39 per ton, respectively, in the third quarter. The realization for our metallurgical sales in Q4 was a total weighted average of $118.10 per ton, up from $117.62 per ton in Q3. Realizations in the incidental thermal portion of the met segment decreased to $77.80 per ton in Q4, down from $81.64 per ton in the third quarter. Also, coal sales for our met segment increased to $101.43 per ton in the fourth quarter, up from $97.27 per ton in Q3. Lower coal volumes in the fourth quarter, along with the reduction in coal inventory value, were the primary drivers of the increase. SG&A, excluding non-cash stock compensation and nonrecurring items, decreased to $10,900,000 for the fourth quarter as compared to $13,200,000 in the third quarter. Reduced professional services spend and lower labor costs were the primary contributors to the reduction. Moving to the balance sheet and cash flows, as of December 31, we had $366,000,000 in unrestricted cash, and $49,600,000 in short-term investments, as compared to $408,500,000 of unrestricted cash and $49,400,000 in short-term investments as of September 30. We had $183,700,000 in unused availability under our ABL at the end of the fourth quarter, partially offset by a minimum required liquidity of $75,000,000. As of December, Alpha Metallurgical Resources, Inc. had total liquidity of $524,300,000, down from $568,500,000 as of September. CapEx for the quarter was $29,000,000, up from $25,100,000 in Q3. Cash provided by operating activities was $19,000,000 in Q4, down from $50,600,000 in the third quarter. As of December 31, our ABL facility had no borrowings and $41,300,000 of letters of credit outstanding. In terms of our committed position for 2026, at the midpoint of guidance, 37% of our metallurgical tonnage in the met segment is committed and priced at an average price of $134.20. Another 53% of our met tonnage for the year is committed but not yet priced. The thermal byproduct portion of the met segment is 77% committed and priced at the midpoint of guidance at an average price of $73.17. I will now turn the call over to Jason to provide an update on operations. Jason E. Whitehead: Thanks, Todd, and good morning, everyone. At the end of each calendar year, we evaluate every Alpha Metallurgical Resources, Inc. operation against a set of criteria to determine the David J. Stetson Best in Class awards. These winning teams meet or exceed certain thresholds measuring their safety, environmental stewardship, and efficiency throughout the year. I am pleased to congratulate our Raven Mill Prep Plant and Marmet River Dock on their selection as 2025 Best in Class winners. We appreciate all the hard work and daily attention to detail that contributes to these successful operations. I want to also recognize the good work accomplished at the remaining mines in our operating portfolio. Even though 2025 was a challenging year, our teams came together to overcome obstacles and continue pushing each other to be better. That drive for continuous improvement is inherent in our culture of safe production. Turning to our new low-vol mine, Kingston Wildcat, I want to remind everyone that in September 2025, our Wildcat slope intercepted the Sewell coal seam. Since then, we have continued to make progress in underground development production while installing key infrastructure in and around the mine and the Mammoth preparation plant. At Wildcat, the two-mile power line and tap construction is complete and the mine is now on its permanent utility power. The stockpile reclaim tunnel and raw coal railroad loadout are complete, and the overland belts that serve the loadout from the mine stockpile are expected to wrap up in Q2. The mine ventilation shafts have both been bored, and the lining and ventilation work continues. At Mammoth, the railcar off-loaders are complete and functioning, and the raw coal transfer belts that report from the rail to the plant are also complete. We are forging ahead as planned, and we currently expect to produce roughly 500,000 tons from the mine this calendar year as we ramp up Wildcat's full productivity capacity, which we believe is nearly 1,000,000 tons per year. With that, I will now turn the call over to Dan for some details on the market. Thanks, Jason, and good morning, everyone. Daniel E. Horn: As Andy mentioned, supply-related issues, including the December and January flooding in Queensland, Australia, impacted metallurgical markets in recent months. Due to constraints on Australian met coal supply, a divergence between the Australian-linked indices and the U.S. East Coast markets significantly expanded, with spreads also widening between the premium grade low-vol coal and high-vol coals. Despite these supply-related shifts in the indices, the global metallurgical coal markets are still structurally influenced by steel demand as linked to economic conditions, policy decisions, geopolitical tensions, tariffs, and ongoing trade negotiations, all of which could impact met coal pricing. Metallurgical coal markets experienced varied movements across the indices during 2025. Of the four indices that Alpha Metallurgical Resources, Inc. closely monitors, the Australian Premium Low Vol Index represents the largest jump, an increase of 14.6%. The Australian Premium Low Vol Index increased from $190.20 per metric ton on October 1 to $218.00 per metric ton on December 31. The U.S. East Coast Low Vol Index rose from $177.00 in October to $185.00 per metric ton by December, an increase of 4.5%. The U.S. East Coast Low Vol averaged roughly $178.00 over the course of the fourth quarter. By contrast, the U.S. East Coast High Vol A index was effectively flat during the quarter, dropping slightly to $150.50 per metric ton at the end of the year, and the U.S. East Coast High Vol B index was similarly flat, ending the quarter at $144.20 per metric ton. Since the quarter close, all four indices have increased, although to very different degrees. The Australian PLV has increased to $237.00 per metric ton as of February 26, a 9% increase, while the U.S. East Coast Low Vol index was $196.00 per metric ton, an increase of 6%. High Vol A and High Vol B indices measured $159.00 and $149.00 per ton, respectively, as of the same date. In the seaborne thermal market, the API2 index was $94.55 per metric ton as of October 1 and increased to $96.90 per metric ton on December 31. Since then, the API2 has increased to $106.75 per metric ton as of February 26. Turning to logistics, Dominion Terminal Associates will undertake a four-week planned outage beginning in March during which portions of the terminal will be unusable while significant equipment upgrades occur. Similar to past outages, DTA management has carefully planned the order of events so as to disrupt operations as minimally as possible. Our team within Alpha Metallurgical Resources, Inc. has also been planning for this downtime, and we do not anticipate any material negative impacts from the outage. Rather, we look forward to these important terminal upgrades to strengthen our shipping capabilities for the future. With that, operator, we are now ready to open the call for questions. Operator: Thank you. We will now open for questions. Our first question comes from Nick Giles with B. Riley Securities. Your line is now live. Nick Giles: Maybe my first one is more of a clarifying nature. Could you just help us understand your mix within your domestic tonnage versus more seaborne-based tons? I am really just trying to kind of better capture your sensitivity on the low-vol side with your uncommitted tons? Daniel E. Horn: Yes, Nick, this is Dan. Good morning. On the domestic, I cannot give you exact numbers, but on the domestic side, probably half of our domestic volume is high-vol, while the other half of it would be low and medium vol. And then on the seaborne side, we have some of our existing low-vol production available to sell into the seaborne market. And then as the, when the 1,000,000 tons or so of low vol that would be available for that market as well. Nick Giles: Perfect. Dan, that is really helpful. I appreciate it. Maybe my second question is just on the cost side and how should we kind of think about cost cadence over the course of the year? I know volumes will be slightly lower here in Q1, which is pretty typical. Just any kind of incremental color you can give us on cost progression as the year goes on? Andy Eidson: Hey, Nick. It is Andy. Good morning. I will hit at a high level and Jason can add any detail he would like to. But Q1, as we mentioned, we had some weather impacts and it is going to be a slightly lower productive cadence for the quarter. So that will lead to elevated costs. Second and third quarters are typically when we are all systems go. Fourth quarter is typically the same issue as the first: a little bit of weather, but you have got miners’ vacation and holidays that tend to bring down our output just a bit. So, usually, it is kind of a barbell: first and fourth will be your higher cost quarters; in the middle we do a little bit better. Although this ’25 was, I think, an exceptional quarter from a cost perspective. So it just depends on how that works out. But typically, that has been the trend. Nick Giles: Got it. Thanks for that, Andy. Maybe one more if I could and I can jump back in the queue. But, Dan, would just be great to get some more color on the broader market. How are you seeing things in kind of more traditional markets like Europe or South America? And do you think that any upcoming recovery is really dependent on incremental demand from South Asia, or do you think there will be other important contributors as well? Daniel E. Horn: I guess the steel market globally is still pretty weak, with the exception of the U.S., and even the U.S., the volumes there—steel pricing here in our markets are good, but the volumes probably could be better. There are still some blast furnaces that could ramp up here. Atlantic Basin, though, yes, I think we see probably a little more optimism than we had the last couple of years in Europe, South America, that the effect of the global trade wars is starting to sink in and different governments are beginning to take some action that I think will benefit met coal exports to those markets. Asia remains kind of tough. It is tough even in the best times; it is a very competitive market when the Australians are producing well. We have that to compete with. And of course, Andy mentioned the increased production; we are seeing more competition along the high-vol coal. So I hope that answers your question. Nick Giles: That does. I appreciate it, Dan. Guys, I will turn it over for now, but thanks a lot and continue the best of luck. Operator: Our next question comes from Nathan Martin with The Benchmark Company. Your line is live. Nathan Martin: Thanks, operator. Good morning, everyone. You know, I am thinking about total liquidity, over $500,000,000 at year-end, nice cushion over your minimum target of $250 to $300 million. Obviously, the market was quite weak last year. Maybe things are at least seemingly moving in a positive direction the last few months. I guess, Andy, maybe it would be great to get your thoughts on what you see as the best uses for Alpha Metallurgical Resources, Inc.’s cash at this stage. Andy Eidson: Yes. Hey, Nate. Good to hear from you. That is a great question. I mean, particularly in markets like this where we are dealing with such volatility, the question still goes back to how sustainable is the recent bump in the PLV and when do we start seeing a collapse of the massive margin that is built between Atlantic Basin and the Australian pricing. Because, again, we have got a good portion that goes on Aussie pricing, but the vast majority of our coal is going on Atlantic Basin, which has remained relatively depressed for a while now. So we think that having that buffer, that liquidity, is very good to just keep the balance sheet strong. We are still utilizing some of that cash for the share buyback to keep that moving along at a measured pace. And we remain hanging around the hoop on all kinds of different opportunities that may arise. I mean, as usual, I like to kind of be cagey around any M&A comments. But there are some things available out there. Some of them are attractive, some of them maybe not. But we continue to keep our eyes open and will look at literally anything that comes across the desk to see if there is a way that we can add value to the enterprise without bringing extra risk to what we have already built. Nathan Martin: Alright. That is very helpful, Andy. Nathan Martin: I guess, the cost side of the business. You guys put your guidance out originally in December. You know, I know usually you kind of assume, you know, a forward curve for your price within that guidance. I mean, that has probably improved about $10 or so since then. So any thoughts on what net price range you are assuming in that guidance? And then you talked as well about the 45X tax credit. What kind of benefit does that represent in your guidance range? Andy Eidson: Yes, I will answer the first part of that, and I will let Todd cover the 45X piece. Yes, our guidance when we put it out in December was, of course, as it is every year, it is informed mostly by the strip for the following year, which was a bit lower than where we have actually landed in January and February. So that is contributing to higher sales-related costs rolling through Q1, and so that would contribute to something above the upper end of our guidance likely for Q1. We do think that that will normalize—the trend typically winds off a little bit; we get into the quote-unquote shoulder season rolling into the second quarter. So I think our cost guidance is still pretty solid, even though coming out of the gate we will probably be a little bit above that. Todd, 45X impact? J. Todd Munsey: Yes. Hey, Nate, the range we gave out previously, I think if you look at the midpoint of our volume, you will get around, call it, $2 per ton benefit, maybe a little bit more. I mean, it is a new calculation. We are still working through what qualifying costs mean. But as we work through the year, we will get more precision around that. But I would say a good way to think about that is it is around $2 a ton. Nathan Martin: Great. Makes sense, guys. And then maybe one more. You know, appreciate seeing the tonnage now for committed and priced volume. I do not really remember seeing that before. And, Andy, you mentioned adding, I think, roughly half a million tons of domestic commitments since last guidance. Only a small decrease in average price there. As we look at what is open, do you guys think there is any more opportunity for domestic sales out there, or do you expect the rest of your open tons to go export? Daniel E. Horn: Yes, Nate, I think it is fair to assume most all of them will go export. If the aforementioned blast furnaces would ramp up and our need to produce a little more coke here in North America, they might come out and do a little more shopping. I think largely that domestic market is put to bed. So the answer would be go seaborne. Nathan Martin: Got it then. Alright guys, very helpful. I will leave it there. Appreciate the time, and good luck in ’26. Operator: Thank you, Nate. Our next question comes from Nick Giles with B. Riley Securities. Please proceed with your question. Nick Giles: Hey, thanks for taking my follow-up. Andy, I just found your comments interesting there around the M&A piece and just wanted to clarify: would you only be looking at met opportunities, or, just given some of the kind of constructive thermal dynamics going on, would you be willing to look at thermal coal as well? Andy Eidson: Yes. I do not know that anything is off the table necessarily. Look, we are a met coal company and that is kind of strategically where we made our move. We made that move for some obvious reasons. We exited a couple of our largest thermal assets that did not quite fit what we were wanting to accomplish. But the world changes. So again, when I say we will kind of look at anything, we really will, but it does have to fit certain categories. And, you know, those categories are not necessarily related to the fundamental nature of what the asset is, but it is more around guarding against unnecessary risk and also seeing upside to make the juice worth the squeeze, so to speak. Nick Giles: That makes sense. I appreciate that. Maybe one last one, if I could. Just anything from a U.S. supply perspective that you have seen over the past few months? I mean, I know that I have heard rumblings of some smaller operations curtailing over the past year. And curious if you have any updates on that front and whether you think there is really that much more supply that could come offline, or if those that are still able to operate today might be better positioned from a balance sheet perspective and kind of the higher-cost players are probably out of the market at this time? Andy Eidson: Yes. It is always hard to tell because, particularly with smaller producers, we do not have a lot of visibility into how strong their balance sheets are. But we have all seen, even in the past couple, three weeks, we have seen some furloughs of operations that are going into care and maintenance—could be prepping sale, could be doing any number of things—but those mines are not currently producing in Central Appalachia. So if you kind of add up those numbers, you get to, you know, 1,000,000, 1,500,000, maybe 2,000,000 tons of potential annual production that is coming offline. For Central App, that is a decent number. Globally, it is not necessarily a needle mover. And then that does not take into account the ramp-ups of other mines that are out there. And again, when we look at Alabama and Northern Appalachia, a lot of those mines have not hit their stride yet. So there is potential for even more tons to come online. So at this point, it still feels like there are probably some folks out there, the smaller producers, that at this market level—these prices—probably will not be able to continue producing for much longer. But I do not know that it is enough to hit critical mass and make a material impact to the market. Nick Giles: Got it. Understood. And I lied. I will sneak in one more, if I could. I think maybe just another high-level question around pricing. I think when investors look at prices on paper, I think realizations in the market can be a very different story. So do you think there is maybe a better way that pricing could be reflected, whether for users of coal or investors? Or are there any improvements out there that could kind of add transparency, if you will? Andy Eidson: Well, let me ask you a clarifying question. Are you talking about the presentation of the indexes, or the derivation of the indexes, or how we all individually refer to our realizations? Because I think there is more so industry— Nick Giles: Yeah. Sorry. Yeah. I mean just on the indices. Yeah. Daniel E. Horn: Nick, yes, the indices—we sell coal into liquidity truly around the world using five, six, seven, eight different indices. The buyers largely dictate which indices you use. In Asia, the Asian buyers prefer to use the Aussie-linked indices; in the Atlantic Basin they use the U.S. East Coast indices. As I have said on this call before, in a good market, a strong market, a seller’s market, we can sell at a premium to those indices, and in a weaker market we sell at a discount to those indices. When I started in this business we did fixed price for a year and we did three- and five-year contracts. A lot of the coal that we sell, we still have contracts, but we sell more and more a vessel at a time. And that is largely driven by the way the Asian customers prefer to buy the coal. And so it is a challenge for us to say the least. And I always say the ton of coal at Hampton Roads does not know where it is going. And we, I guess, feel that our coal can be undervalued at times. People refer to the spread between High Vol A and Low Vol, for example, in that relativity. I am not a disciple of that, frankly. Each coal has its own value and has its own drivers. So I guess the answer is, could there be a better way? Possibly, but, you know, the customers largely dictate how we sell our coal. Nick Giles: Understood. I really appreciate the perspective, as always. I will turn it over, but thanks again. Good luck. Operator: Our next question comes from Matthew Key with Texas Capital. Please proceed with your question. Matthew Key: Hey, good morning, everyone. Most of my questions have been addressed, but I will ask a quick one just on the macro. We also got some announcements on the U.S. tariffs recently. While it sounds like those will be replaced by, you know, other means, does that impact the macro thesis on met coal at all, in your view? Or is it kind of just continuation? Andy Eidson: I think the challenge—Matthew, it is good to talk to you, by the way—I think the challenge here is the constant state of flux in the tariff structures. I think it has got a lot of buyers, a lot of people who could be doing infrastructure projects or big buildings or any kind of development that could require a lot of steel—I think it has got a lot of people sitting on their hands waiting to see where things fall out before they make big moves. And that degree of lethargy is part of the problem. You look at this market—there is just not a lot of, not enough volume flowing in any discernible direction, being able to predict where that goes. So I think a lot of folks are continuing just to wait and see where it lands so they can really derive the cost of whatever projects they are wanting to do. And that leaves us—we are the tail end of the cycle for that—and that leaves us in a state of uncertainty. Matthew Key: Got it. No, that is helpful color. That is it for me. Best of luck moving forward. Andy Eidson: Yes. Thank you very much. Operator: We have reached the end of the question-and-answer session. I will now turn the call over to Andy Eidson for closing remarks. Andy Eidson: We appreciate everyone's time this morning. Thank you for joining us, and we hope everyone has a great weekend. Operator: This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.
Operator: Good morning, and thank you for joining us today for Concentra Group Holdings Parent, Inc. earnings conference call to discuss the fourth quarter and full year 2025 results. Speaking today are the company's Chief Executive Officer, Keith Newton, and the company's President and Chief Financial Officer, Matt DiCannio. Management will give you an overview and then open the call for questions. Before we get started, we would like to remind you that this conference call may contain forward-looking statements regarding future events or the future financial performance of the company, including, without limitation, statements regarding operating results, growth opportunities, and other statements that refer to Concentra Group Holdings Parent, Inc.'s plans, expectations, strategies, intentions, and beliefs. You are hereby cautioned that these forward-looking statements may be affected by the important factors, among others, set forth in Concentra Group Holdings Parent, Inc.'s earnings release and in reports that are filed or furnished to the SEC. Consequently, actual operations and results may differ materially from those discussed in the forward-looking statements. These forward-looking statements are based on the information available to management today, and the company assumes no obligation to update these statements as circumstances change. At this time, I would like to turn the conference over to Mr. Keith Newton. Keith Newton: Thanks, Operator. Good morning, everyone. Welcome to Concentra Group Holdings Parent, Inc.'s fourth quarter 2025 earnings call. Hopefully, everyone had a chance to review our prerelease that we furnished to the SEC on January 28, which included certain operational and financial results for the fourth quarter and 2025 fiscal year, including visits, rate, revenue, adjusted EBITDA, net income, and EPS, amongst others. We have no material changes to report to any of our previously released financial or operational metrics. Q4 earnings prerelease was published at the same time as our fiscal year 2026 guidance in our investor book. The detailed investor book provides a comprehensive primer on our business and industry. We recognize that Concentra Group Holdings Parent, Inc. is a unique company and therefore may necessitate additional foundational information for some investors to gain a better understanding of our fundamentals. We touched on everything from the patient journey in our centers to customer value proposition to our company performance through various economic cycles, to the workers’ comp ecosystem and rate setting mechanisms, to financial highlights, including cash conversion and return on invested capital, and much more. We have gotten positive feedback on it thus far and expect that it will continue to resonate with the market. I would also like to add that we recently completed additional validation studies on workers’ compensation claims that we treated that support and validate our considerable value proposition to our employer customers and ecosystem partners. The additional studies produced strong results consistent with our previously published studies. Adding the results to the previously published data, we now have reviewed and analyzed more than 550,000 claims from 2020 to 2025, in partnership with employers and payers, and we have found that the average total workers’ compensation claims cost for those treated by Concentra Group Holdings Parent, Inc. is 25% lower than non-Concentra providers, and that the average claim duration is 65 fewer days when treated by Concentra Group Holdings Parent, Inc. We believe our specialized clinical approach and fully integrated medical model drive these strong outcomes for injured workers and their employers. With our unmatched nationwide access, technological capabilities, data interconnectivity, and excellent patient satisfaction metrics, which are at all-time highs, we continue to prove to employers why we are the best solution for creating the most value for all their occupational health needs. Moving on to our financial results. We had a strong finish to an overall solid year for the company, exceeding the high end of the range of our previously issued full year 2025 guidance for both revenue and adjusted EBITDA, as well as coming in better than our guidance on leverage. Solid growth in both visits and rate within the Occupational Health Centers operating segment, prudent cost management across G&A and cost of services, and continued double-digit organic growth in the On-Site business operating segment all contributed to the outperformance during the fourth quarter. Total company revenue was $539.1 million in Q4 2025 compared to $465.0 million in Q4 of the prior year, representing 15.9% growth year-over-year. Excluding contributions from the Nova and Pivot acquisitions, revenue was $493.8 million in Q4 2025, resulting in a 6.2% increase over the prior year. For the full year 2025, revenue was $2.2 billion compared to $1.9 billion in 2024, representing 13.9% growth year-over-year despite one less revenue day. Excluding contributions from Nova and Pivot, 2025 revenue was $2.0 billion, resulting in a 6.4% increase over the prior year or a 6.8% increase on a per-day basis. Total patient visits increased 9% to more than 51,000 visits per day in the fourth quarter, which is always our lowest volume quarter of the year due to the seasonal holidays and colder weather. Our workers’ compensation visits per day increased 9.1%, and the employer service visit volume increased 9.4% relative to prior year. Excluding the impact from the acquisition of Nova, total visits per day increased 2.6% in the fourth quarter. Workers’ compensation visits increased 3.4% and employer service visits increased 2.3%, both continuing the strong momentum from 2025. I would note that we were largely unimpacted by the government shutdown during the quarter, given limited exposure to the federal government from an employer customer standpoint. Full year 2025 visits per day increased 7.7% year-over-year to over 53,000. Workers’ compensation visits increased 7.7% and employer services visits increased 8.1%. Excluding the impact from the acquisition of Nova, total 2025 visits per day increased 2.2% with increases in workers’ compensation visits of 2.8% and employer service visits of 1.8%. We sustained relatively strong performance over the course of 2025 despite a lot of debate around the state of the broader labor market. Following the recent BLS jobs revisions to 2025, we now know that across the economy, the U.S. labor market grew at a relatively anemic clip, up 0.1% in 2025. However, the blue-collar economy, which largely encompasses production and nonsupervisory workers, which represent about 80% of the private labor market and is more indicative of the labor force we serve in our occupational health centers, added more than 450,000 net jobs over the course of the year according to the BLS and grew at a rate of 0.4% in 2025. We remain positive on the long-term outlook for the U.S. labor market. According to the most recent employment projections by the BLS published in August 2025, the U.S. is expected to add 5.2 million jobs from 2024 through 2034, with a large subset of these jobs in physically demanding occupations with higher incidence rates. Additionally, we anticipate that there will be upside to those employment projections if the proposed capital commitments made in conjunction with the broader reshoring initiative continue to be converted into large construction projects and more manufacturing jobs are added to the economy. Overall growth in employment combined with a stable injury incidence rate across industry sectors and an aging workforce with increased comorbidities that result in increased severity of injuries should continue to provide strong tailwinds to our business over the long run. With respect to our rates, revenue per visit grew 3.1% during the fourth quarter relative to the prior year. This growth was driven by a 4.1% increase in workers’ compensation and a 1.2% increase in employer services revenue per visit. Compared to earlier quarters in 2025, year-over-year growth in employer services rate in Q4 2025 was down primarily due to a shift in mix between the lower dollar drug screens and higher dollar physicals. For full year 2025, revenue per visit was 4.3% higher than 2024, with workers’ compensation revenue per visit increasing 5.3% and employer services revenue per visit increasing 2.7%. Adjusted EBITDA was $95.3 million in the quarter versus $77.5 million in the same quarter prior year, or a 22.9% increase. Adjusted EBITDA margin increased 100 basis points from 16.7% in Q4 2024 to 17.7% in Q4 2025. For the full year 2025, adjusted EBITDA was $431.9 million compared to $376.9 million in 2024, representing 14.6% growth year-over-year despite one less revenue day. We are really happy with the results that we have seen over the last eighteen months. Since our IPO in July 2024, we have grown adjusted EBITDA by approximately $67.0 million, constituting an 18% increase. While the Nova and Pivot acquisitions certainly contributed, the majority of this growth has been organically driven, which again is a testament to the continued execution of our entire team. For full year 2025, adjusted EBITDA margin increased to 20.0% from 19.8% in 2024. As with previous quarters, we are comparing against prior year margins that were burdened with less public company and separation costs, indicating even greater margin performance if you were to compare on an apples-to-apples basis. With respect to the separation with Select, we are tracking very well and have hired more than 80% of the total expected FTEs, including all senior level positions. We expect to finalize hiring and complete the majority of the remaining separation activities by the summer, well ahead of the November 2026 expiration of the transition services agreement with Select Medical. Adjusted net income attributable to the company was $36.1 million and adjusted earnings per share were $0.28 for the fourth quarter 2025, representing significant growth over prior year adjusted net income attributable to the company and adjusted earnings per share of $22.2 million and $0.17, respectively. Adjusted net income attributable to the company was $176.0 million, and adjusted earnings per share was $1.37 for full year 2025. For full year 2024, adjusted net income attributable to the company was $168.5 million and adjusted earnings per share was $1.48. During the fourth quarter, we opened two additional de novo sites in Southern California and Miami, resulting in seven total de novos in 2025. We have a strong pipeline heading into 2026, having already opened another new location outside of Atlanta in January, executed leases on another five locations across Arizona, Florida, Missouri, and Idaho, which will be a new state for us, and identified several other attractive sites that could push us into the high single-digit de novo openings in 2026. On the M&A front, we plan to continue with smaller bolt-on acquisition opportunities. We have often said that these deals are highly accretive for us due to the top line and cost synergies we are able to achieve. The acquisition of the three net incremental centers in California in January aligns with this approach. I will now turn the call over to Matt to provide additional details on our financial results for the quarter and our growth outlook for 2026. Thanks, Keith, and good morning, everyone. I will start by going through some more details on our Q4 results and our three operating segments. Matt DiCannio: In our Occupational Health Center operating segment, total revenue of $490.6 million in Q4 2025 was 12.2% higher than the same quarter prior year. Total visits per day increased 9.0% over the same quarter prior year. Revenue per visit increased 3.1% from $145 in Q4 2024 to $150 in Q4 2025. Workers’ compensation revenue of $328.5 million in Q4 2025 was 13.6% higher than prior year. Work comp visits per day increased 9.1% from prior year during the quarter, and work comp revenue per visit increased 4.1% versus prior year during the quarter. Within employer services, revenue of $151.9 million increased 10.7% in Q4 2025 from prior year. Employer services visits per day increased 9.4% from prior year during the quarter, and employer services revenue per visit increased 1.2% versus prior year during the quarter. As with past quarters, here are the same stats for Q4 excluding the impact of Nova to help isolate core business from our Q1 2025 acquisition. Total revenue within the Occupational Health Center operating segment was $461.9 million in Q4 2025, a 5.7% increase over the prior year. Total visits per day increased 2.6% over the same quarter prior year, and revenue per visit increased 3.1% from $145 in Q4 2024 to $150 in Q4 2025. Workers’ compensation revenue of $309.0 million in Q4 2025 was 7.2% higher than prior year. Work comp visits per day were 3.4% higher than prior year during the quarter, and work comp revenue per visit was 3.7% higher than prior year during the quarter. Within employer services, revenue of $142.2 million in Q4 2025 increased 3.7% from prior year. Employer services visits per day were 2.3% higher than prior year during the quarter, and employer services revenue per visit was 1.3% higher than prior year during the quarter. Moving on from our Occupational Health Centers, our On-Site Health Clinics operating segment reported revenue of $36.2 million in Q4 2025, a 112% increase from the same quarter prior year. This was largely driven by the acquisition of Pivot On-site Innovations in Q2 2025. Excluding the impact from Pivot, organic growth in our On-Site Health Clinics operating segment was 14.6% year-over-year during the quarter, the third consecutive quarter with double-digit organic growth. For the full year 2025, our On-Site Health Clinics operating segment reported revenue of $110.2 million, a 72% increase over full year 2024. Excluding the impact from Pivot, the On-Site operating segment revenue grew 11.6% over full year 2024. We have a robust prospective On-Site customer pipeline and expect to continue to see strong organic sales growth in this operating segment in 2026. In particular, our advanced primary care product offering has gained a lot of traction within the broader market, and we expect that to serve as a key growth driver for the business. And finally, Other Businesses generated revenue of $12.3 million in Q4 2025, a 12.6% increase against the same quarter prior year. For the full year 2025, Other Businesses grew 8.7% over full year 2024. Now moving on to expenses. Cost of services was $398.4 million, or 73.9% of revenue, in Q4 2025, an improvement from 74.2% of revenue for the same quarter prior year. For the year, cost of services was 71.7% of revenue, a decrease from 72.2% in 2024. The improvement year-over-year is really a testament to our operators and staffing efficiencies they were able to garner within the centers. The year-over-year improvement is also despite headwinds from one-time integration costs we incurred as a result of the Nova transaction, which totaled more than $2.0 million over the year. Our total general and administrative expenses were $50.8 million, or 9.4% of revenue, in Q4 2025 compared to 9.8% of revenue in the same quarter prior year. Excluding items that are added back for the purposes of calculating adjusted EBITDA, including equity compensation expense, one-time Select separation costs, and M&A transaction costs, G&A expense was $45.8 million for the quarter, or 8.5% of revenue, compared to 9.4% of revenue in the same quarter prior year. The year-over-year outperformance in Q4 2025, despite incurring additional separation costs, was partially driven by the reduction in certain nonrecurring expenses that we incurred in Q4 2024. For the full year 2025, G&A expense as a percent of revenue was 9.4% compared to 8.2% for the full year 2024. Excluding items that are added back for the purposes of calculating adjusted EBITDA, including stock comp expense and one-time transaction costs, G&A expense as a percentage of revenue was 8.4% in 2025 compared to 8.0% in 2024. The year-over-year increase was largely due to incremental costs resulting from our separation from Select and emergence as a stand-alone public company in July 2024. Adjusted EBITDA margin increased from 16.7% in Q4 2024 to 17.7% in Q4 2025, and adjusted EBITDA margin increased from 19.8% for the full year 2024 to 20.0% in full year 2025. We are pleased to have achieved margin improvement year-over-year despite the incremental separation and public company costs. Again, I would highlight the strong efficiency gains within cost of services as well as the smooth execution of our separation hiring plan within G&A as key drivers of the improvement we saw in 2025. Now to touch on cash flows. In Q4, our seasonally strongest cash flow quarter within any given year, we generated $118.7 million in operating cash flow. This compares to $93.7 million in 2024, with the year-over-year increase resulting from materially higher earnings in 2025. For the year, we generated $279.4 million in cash flow from operations, which represented a slight improvement over 2024 cash flow from operations of $274.7 million, despite significantly more cash interest expense incurred in 2025 due to the IPO recap in July 2024. Investing activities used $20.1 million of cash in the fourth quarter and were driven by investments in center de novos, relocations, renovations and maintenance, as well as IT investments. The year-over-year increase from $16.7 million of spend in Q4 2024 was largely due to an additional $4.0 million of one-time CapEx related to the Nova integration. We expect to incur minimal incremental capital cost in the Nova integration going forward since most of the work was finalized as of the end of the third quarter. For the year, we used $414.9 million in cash from investing activities, as we executed business combinations totaling $303.3 million and invested $82.3 million in CapEx over the course of the year. This was a significant increase over cash used in investing activities in 2024 of $71.3 million when we did not have larger acquisitions like Nova and Pivot. Free cash flow, or cash flow from operations less cash flow from investing activity excluding business combinations and acquired customer relationships, totaled $98.6 million, an increase from prior year fourth quarter free cash flow of $77.0 million. For the full year, we generated free cash flow of $197.8 million. Free cash flow conversion, which we define as free cash flow divided by net income, remained healthy for the year at 114%, about the same conversion rate we have seen on average over the course of the past five years. Finally, financing activities during the quarter resulted in cash outflows of $68.6 million as we repaid the entirety of the $35.0 million outstanding balance under our credit facility, executed share repurchases totaling $22.4 million, and paid $8.0 million in dividends in conjunction with our standard dividend program. Over the course of 2025, we made principal payments on our senior debt totaling $92.1 million, including $7.1 million of mandatory amortization payments and $85.0 million in payments on our revolving credit facility. We also executed share repurchases totaling $22.4 million and made dividend payments of $32.1 million. The remainder of the free cash flow was largely used in conjunction with M&A activity. We will continue to be opportunistic executing on our share repurchase program in 2026 while simultaneously working towards our year-end 2026 leverage target of approximately 3.0x. At the end of the fourth quarter, we had approximately $80.0 million authorized by the Board of Directors remaining under the repurchase program. We ended the quarter with a total debt balance of $1.57 billion and a cash balance of $79.9 million. Our net leverage ratio per our credit agreement at December was 3.4x. We expect to continue making meaningful progress towards our 3.0x target following Q1. I would just note that Q1 is our seasonally slowest free cash flow quarter due to coming off our seasonally lowest visits quarter in Q4, interest payments associated with our bonds in Q1, and typically elevated working capital requirements in Q1. Next, I would like to touch more broadly on the forward outlook. With respect to our growth efforts, we are largely through the integration process for both the Nova and Pivot acquisitions and have captured the majority of synergies that we expect to capture at this point. In fact, we have come in comfortably ahead of underwriting in terms of total synergies achieved across the two deals. As Keith mentioned, we are going to continue to stay active on the de novo and bolt-on M&A front. We are targeting seven to nine de novos in 2026, which would be a record for us, and potentially double-digit new sites in 2027. As a reminder, these are very accretive for us with payback typically occurring in under three years. With respect to M&A, we are not anticipating any larger deals over the near term, but are continuing to work our pipeline of small one to five center deals. We recently finalized the Reliant acquisition from MBI in January, and our goal is to continue developing the pipeline and executing on smaller M&A. Switching gears to developments out of the state of New York related to their workers’ compensation fee schedule. If you recall, we have no centers in the state due to their exceedingly low fee schedule but believe we could add dozens of locations or more across the state if the fee schedule is revised sufficiently higher. The state board published revised rates in mid-January that increased evaluation and management codes, which generally cover primary injury care, excluding physical therapy, by approximately 50%. This is a good first step. However, both the proposed E&M and PT workers’ comp codes are still below where we feel they should be in order to commit the capital to enter the state in a meaningful way. The public comment period, which we will be actively participating in, goes through mid-March and we expect new rates to be implemented starting around 01/01/2027. In our On-Site Health Clinic operating segment, we will continue to evaluate inorganic growth opportunities of both occupational health-focused on-site groups like Pivot as well as advanced primary care-focused groups. Valuations in that space have remained elevated, with platforms largely trading based on revenue multiples over recent years. We will continue to patiently monitor the market and look for ways to be opportunistic here in the future at attractive valuation. Moving on to our full year 2026 guidance, which we released at the end of January. We have set our revenue target at a range of $2.25 billion to $2.35 billion, our adjusted EBITDA target at a range of $450.0 million to $470.0 million, our CapEx target at a range of $70.0 million to $80.0 million, our free cash flow target at a range of $200.0 million to $225.0 million, and our leverage target remains approximately 3.0x by the end of 2026. In our January 2026 investor presentation, we laid out our key assumptions, including approximately 3% rate growth within the Occupational Health Centers operating segment. We have a relatively high degree of confidence around rate guidance since the majority of states, including our largest states like Texas, California, Florida, and Pennsylvania, have now finalized their 2026 fee schedules. We also stated we are assuming low single-digit visit growth, excluding Nova. Included in our guidance is the January three-center acquisition and six de novo sites with executed leases as of the guidance date. On the cost side, we are anticipating stickiness with efficiency gains captured in our centers over the course of 2025, and cost of services as a percentage of revenue to remain relatively consistent with 2025. With respect to overhead, we will incur incremental separation costs in 2026 relative to 2025 as we hire the remaining colleagues in 2026 and annualize the impact of colleagues hired in 2025. All in, we expect adjusted EBITDA margin in 2026 to remain relatively constant with 2025 at around 20%, with potential for additional margin expansion thereafter once the separation is fully complete. We expect an overall decrease in CapEx in 2026 relative to 2025 as approximately $15.0 million in one-time Nova integration CapEx rolls off. As a reminder, the majority of our typical annual CapEx spend is related to positive ROI projects, including de novos, IT investment, relocations, and strategic renovations. A small portion constitutes true maintenance capital. Finally, we are pleased to announce a continuation of our dividend this quarter with Concentra Group Holdings Parent, Inc.’s Board of Directors declaring a cash dividend of $0.0625 per share on 02/25/2026. The dividend will be payable on or about 03/19/2026, to stockholders of record as of the close of business on 03/12/2026. Now back to Keith for a few closing comments. Keith Newton: Thanks, Matt. Another strong quarter to cap off a great year. We have good momentum heading into 2026 and are confident in our ability to deliver on our outlook. That concludes our prepared remarks, and we thank everyone for the time today. We would like to turn it back over to the Operator and open the call for questions. Operator: Certainly. At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment while we poll for questions. Our first question for today is from Benjamin Rossi with JPMorgan. Benjamin Rossi: Hey, all. Good morning. Thanks for taking my questions here. I appreciate the details on your 2026 outlook. You have the steady volume growth in the low single digits, steady rates, maybe some lift during 1Q from last year. It is no big deal. Follow-through, maybe some similar contribution in February from Pivot, you have the de novos and any additive M&A. Just thinking about your guidance impacts, how are you contemplating things like weather or potential elevated respiratory activity to start the year? Keith Newton: I will take it, Matt. This is Keith Newton. I would say from a weather standpoint, we have weather every year. It has not really impacted us this year. We definitely had some weather last year, so I think it kind of flushes out. So we are not anticipating much of an impact from that perspective. As far as the respiratory, that would typically impact our urgent care visits, which are basically less than 1,000 a day out of the 50,000 visits a day we see. So it is not going to be material either way if it does tweak up or tweak down. So I am not anticipating really any impact from that either. Benjamin Rossi: Understood. This as a follow-up, this might be a little bit more close-up, and I know I might be asking to look under the hood here a bit. But I have noticed your preference to highlight return on invested capital in that low teens range when you are evaluating new opportunities to deploy either for de novos or M&A. Could you just walk us through your thought process here on maybe how you assess projects and things like hurdle rates in consideration of break? Matt DiCannio: Yeah. Sure. Good morning, Ben. So we obviously follow that very closely, the ROIC metric. We know it is very important to investors. And we look at all sorts of return hurdles and valuation metrics when we are looking at de novos and acquisitions, and I think as we have stated publicly in some of our materials, we have had a long track record of successful M&A and de novo execution. And so, typically, all of those types of transactions are accretive and have strong ROICs. Benjamin Rossi: Great. Thanks. Operator: Your next question for today is from Ann Hynes with Mizuho Securities. Ann Hynes: Great. Thank you so much. Thanks for all the detail on the New York opportunity. Can you give us a little bit more detail about what you were looking for and what was not in the rule and maybe what you are fighting for? And if it does change, how fast could you get into the market and start developing? Thanks. Keith Newton: I can take that one. Really, what they focused on so far was just the evaluation and management codes, which is really what the physicians actually utilize as far as coding and charging. But there are a lot of other codes that impact the total reimbursement, physical therapy being a big one, and then a lot of others that they did not necessarily address on this go-around. So what we are looking at is more of a full comprehensive look at the fee schedule, not just one component of that. That said, they did take a good first step wherein we are in a period of being able to have a discussion period, and before they publish the final rule, they may address some of that. If not, then that will be the focus to continue to push on that going forward. As far as how quickly we can move, we feel we can move very quickly. We have spent quite a bit of time evaluating where we want to be. We can initiate discussions if necessary. But a lot of the workers’ comp treatment that is taking place in that state right now is in ERs, hospital-based facilities, things like that. There are some transactions that could take place that we can move pretty quickly on. But I could see us doing a lot of just de novo projects. We have been very successful at that. It allows us to put the center exactly where we want it to maximize the opportunity, build it like we want our center to be built, versus trying to retrofit an existing facility. But we have spent a lot of time, so I think we are in a position to move pretty quickly once that happens. Ann Hynes: Great. Thank you. Operator: Your next question is from Justin Bowers with Deutsche Bank. Justin Bowers: Hi, good morning everyone. So just in terms of the 2026 outlook, can you call out any specific items or seasonality or days dynamics that we should be thinking about and the cadence for the year, any divergence from last year? That is number one. And then number two would just be how you are thinking about de novo investments for 2026 as well. Thank you. Matt DiCannio: Yeah. Sure. Good morning, Justin. So from a guidance standpoint, we outlined the visits and the rate assumptions included, and also made some comments about cost of services and G&A. We have got the Reliant transaction that was closed included in the guidance, and we have six de novos. There is pretty good potential that we will have more than six de novos this year. They will be pretty spread throughout the year. We are working through permitting and construction and things like that, but we will try to spread them out throughout the year. In terms of seasonality, pretty similar to prior years. The only real exception is that we have a pickup in Q1 from Nova and Pivot when we did not have both of those assets in the prior year. So we closed the Nova acquisition on March 1, so January and February we will have a pickup. And then we closed Pivot on June 1, so we will have a pickup there through most of the first half of the year. As far as days, it is the same number of days in 2026 versus 2025. So there are no changes there. Hopefully, that helps. Justin Bowers: Yeah. It is helpful. Thank you. Appreciate that. And the updated investor book as well. Operator: Your next question for today is from Benjamin Hendrix with RBC Capital Markets. Benjamin Hendrix: Thank you very much. Just to follow-up on that last question, is there any gains consideration related to the expiration of the Select Services Agreement? I know you mentioned that you had the pull-forward of hiring. Is that additive or anemic to margins in terms of that timing? And then do you expect to get any kind of margin pickup in the in 4Q as that agreement rolls off? Matt DiCannio: Thanks. Yeah. Sure. Good question, Ben. And I think that is really the only thing I would touch on from my prior comments with Justin. So, yes, we are hiring the remainder of the FTEs that we need to complete the separation process. As of today, we are slightly above 80% of our hires. And we made some hires in Q3 and Q4, obviously, to close out the year. So from now through, call it, May or June, we will complete the remainder of the hires. And then we will work with Select and reduce the TSA cost. So we expect the TSA cost to ramp down close to zero by, call it, mid-year 2026. And so the net of both of those will be some incremental cost early part of 2026. So that is all part of our guidance. And we are obviously close to the finish line with the separation process. Benjamin Hendrix: Thank you very much. Operator: Your next question for today is from Stephen Baxter with Wells Fargo. Stephen Baxter: Hi. This is Mitchell on for Steve. What are you seeing on the labor front in your clinics? How is retention trending and what type of wage inflation is built into the guide? Thank you. Keith Newton: As far as our labor, pretty much normal as we have talked about in the past. Our labor force from wage inflation trends pretty similarly to inflation, 2% to 3%. We are not a hospital, so we do not feel quite the impacts that have been felt and seen within those industries. So far, it is pretty much in line with what we have experienced historically. So really nothing unusual from that standpoint. Matt DiCannio: Yeah. And Stephen, I will add just from an openings and hiring and turnover standpoint. We are trending in a favorable direction. Our turnover is coming down, fewer open positions, and so we like what we are seeing to have more stability with the workforce. Stephen Baxter: Got it. Thank you. Operator: Your next question is from Joanna Gajuk with Bank of America. Joanna Gajuk: Hi, good morning. Thanks so much for taking the questions. So first one, the workers’ comp organic volumes were at 3% this year, or the 25% rate. Then employment services organic growth was also pretty good in 2% in 2025. So those growth rates are about where you would think the industry may be growing. So my question is, who are you taking market share from, and is that a kind of sustainable growth? And I guess how much of that 3% to 2% was from de novo? Keith Newton: Well, as far as the market share component, we did a lot this last year relative to our go-to-market and how we are trying to capture additional customers. We developed additional technologies or deployed additional technologies within our sales group both for identifying potential customers out there and also creating better efficiency and higher output by our sales folks. So we think that is really starting to gain some traction for us. We feel good about where we are heading with that group, and I think that is really supported the growth. We have developed some tools and we are in the process of continuing to modify those tools relative to retention itself of existing customers and deeper penetration of those, not just necessarily going after incremental new customers, but how do we identify potentially customers that had reduced their usage of us and try to project those-type customers. We are trying to deploy some AI initiatives in that area to help us identify, for lack of a better description, early warnings of existing customers that we need to engage with quickly. A lot of our customer base are very small and it is very tough to touch them consistently from an account management standpoint. So what we are trying to do is identify through technologies how we can better support those smaller customers that utilize us very sporadically and make sure that we stay engaged with them, because we typically do not lose customers as a result of service issues. Probably one of the biggest reasons we lose a customer is because of turnover at the customer decision maker where the new decision maker comes in and is not really aware of Concentra Group Holdings Parent, Inc. And so we have to figure out better ways to make sure that we stay engaged, identify when those trends potentially are going to take place, and engage appropriately. Matt DiCannio: On de novos, they contribute less than 1% on both of those. And keep in mind, we are only doing a single-digit number of de novos per year, and they start at zero visits. So it takes a little bit of time to ramp. Joanna Gajuk: Thank you. And a follow-up on the topic around New York, so that just brings a question. Are there any of your existing states where you would expect some changes to rates or reimbursement or such? I mean, I know California has that link to the physician fee schedule, but give us maybe a little bit of color if any outliers or if all these states are tracking along with sort of inflation. Thank you. Matt DiCannio: Yeah. I can take that one, Joanna. So California is definitely going to be a good rate year for us. And for the rest of the country, all those are tracking in line with our expectations. So there is no real outlier across the rest of the country. And back to New York, just a couple comments I wanted to add on that. It is a step in the right direction. We are going to continue to work with the state and provide our public comments. But we have a full pipeline across the rest of the country—30 different locations that we are looking at to fill out the rest of our pipeline for 2026 and for 2027. So plenty of growth opportunities, but we are excited about the potential down the road in New York as well. Joanna Gajuk: Thank you. Operator: Once again, if you would like to ask a question, please press 1. This concludes today’s conference, and you may disconnect your lines at this time. Thank you for your participation.
Operator: Good day, and thank you for standing by. Welcome to the Fourth Quarter 2025 Frontline Ltd. Earnings Conference Call and Webcast. At this time, all participants are in listen-only mode. After the speakers' presentation, there will be the question and answer session. To ask a question during the session, you need to press star 11 on your telephone keypad. You will then hear an automatic message advising your hand is raised. To withdraw your question, please press star 1 and 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mr. Lars Barstad, CEO. Please go ahead. Lars Barstad: Thank you very much. Dear all, thank you for dialing in to Frontline Ltd.'s quarterly earnings call. In discussions with the market actors in recent weeks, a recurring phrase has been heard, people basically saying, what a time to be alive. Frontline Ltd. has been around through many cycles, but the tanker markets do actually evolve over time. We will argue that we have never been in a cycle like this, where indices and freight derivatives weigh so heavily in the freight pricing mechanism. This fuels almost violent moves as we proceed. For every $200,000 per day fixture done physically, there is an exponential number of contractual obligations that are triggered, giving this market a new dimension and very exciting dynamics. Before I give the word to Inger, I will run through the TCE numbers. So let us move to Slide three in the deck. In the fourth quarter of 2025, Frontline Ltd. achieved $7,074,200 per day on our VLCC fleet, $53,800 per day on our Suezmax fleet, and $33,500 per day on our LR2/Aframax fleet. So far in 2026, 92% of our VLCC days are booked at $107,100 per day, 83% of our Suezmax days are booked at $76,700 per day, and 67% of our LR2/Aframax days are booked at $62,400 per day. Again, all numbers in this table are on a load-to-discharge basis, with the implications of ballast days at the end of the quarter this incurs. However, for the VLCCs, there is little mystery left with such a high percentage in the book. I will now let Inger take you through the financial results. Inger Klemp: Thanks, Lars. Ladies and gentlemen, good morning and good afternoon. Let us then turn to Slide four. We report profit of $228,000,000, or $1.20 per share, and adjusted profit of $30,000,000, or $1.03 per share, in 2025. The adjusted profit in this quarter increased by $188,000,000 compared with the previous quarter, and that was primarily due to an increase in our TCE earnings from $248,000,000 in the previous quarter to $424,500,000 in this quarter, and that again was a consequence of higher TCE rates. We also had some decrease in finance and ship operating expenses, and also some calculations in other income and expenses. Ship operating expenses, in particular, decreased $7,100,000 from previous quarter, mainly due to an increase in supplier rebates of $7,100,000. Let us then look at the balance sheet on Slide five. The balance sheet movements this quarter were mainly related to ordinary items and also prepayment of debt under revolving reducing credit facilities. Frontline Ltd. has a solid balance sheet and strong liquidity of $7.00 $5,000,000 in cash and cash equivalents, and that includes undrawn amounts of revolver capacity, marketable securities, and also minimum cash requirements as of 12/31/2025. We have no meaningful debt maturities until 2030. In January 2026, we sold eight of our oldest first-generation eco VLCCs for a total sales price of 831,500,000.0, and after commissions and repayment of existing debt on the vessels, the transaction is expected to generate net cash proceeds of approximately $477,000,000. In parallel, we acquired nine latest-generation scrubber-fitted eco VLCC newbuildings from an affiliate of Herman for an aggregate purchase price of 1,000,000,224 billion dollars. We will pay approximately 25% of the purchase price in 2026 and 75% is due upon delivery of each vessel. The company intends to finance this acquisition with cash and then 60% long-term debt financing. Let us then look at Slide six. That is the fleet composition and cash breakeven rates and OpEx. Our fleet consists of 41 VLCCs, 21 Suezmax tankers, and 18 LR2 tankers, has an average age of 7.5 years, and consists of 100% eco vessels, whereof 57% are scrubber fitted. We estimate average cash breakeven rates for the next twelve months of approximately $25,000 per day for VLCCs, $23,700 per day for Suezmax tankers, and $23,800 per day for LR2 tankers. That gives a fleet average estimate of about $24,300 per day. This number includes drydock cost for five VLCCs, two Suezmax tankers, and eight LR2 tankers, and the fleet average estimate excluding charter cost is about $23,300 per day, or $1,000 less. We recorded OpEx, including drydock, in the fourth quarter of $9,600 per day for VLCCs, $7,600 per day for Suezmax tankers, and $12,400 per day for LR2 tankers. This number includes start-up of three VLCCs and three LR2 tankers. The Q4 2025 fleet average OpEx excluding drydock was $7,600 per day. Lastly, let us look at Slide seven, cash generation. Following that, we entered into one-year time charter agreements, and we also had fleet renewal in the first quarter. The spot days for the next twelve months is about 24,400 days. Frontline Ltd. has substantial cash generation potential with 27,700 earnings days annually. As you can see from this slide, the cash generation potential basis currently, TCE, rates and TCE as of February 27, is $2,800,000,000, or $12.51 per share, which provides a cash flow yield of 34% basis to the current share price. And a 30% increase from this current spot market will increase the cash generation potential to $3,700,000,000, or $16.84 per share. Likewise, a 30% decrease from current spot market will decrease the cash generation potential to $1,800,000,000, or $8.19 per share. With this, I leave the word to Lars again. Lars Barstad: Thank you very much, Inger. So let us move to Slide eight and look at the current market highlights. Oil demand seems to be growing healthily outright but with key focus on non-sanctioned molecules, creating substantial year-on-year changes in trade, as shown on the illustration or the graph on the right-hand side of the slide. We have a very politically laden market environment. We talk about U.S.-India trade, U.S.-Iran-Israel discussions, and U.S.-EU-Ukraine-Russia talks. With an earlier liberation and further pressure on Russia in addition to Iran tension creates strong tailwinds for us operating in the compliance market of oil transportation. We are also in an environment where weakening U.S. dollar is supportive of global oil demand, and the inflationary economic environment is supportive of the commodities in general. Asset prices for ships are appreciating firmly. Order books are building materially in 2029 and onwards, but with the twenty-year age cap observed, future supply remains manageable. Let us move to Slide nine and look at the flow. Global crude oil in transit continues to be at elevated levels. On the graph on the right, we have added the TD3C Baltic index that some refer to as the Dow Jones of the freight market, and there you can see how sensitive this index seemingly is to the oil trading on the seven seas. In this picture, we see sanctioned crudes moving slower, particularly for the Russian barrels, or being stored, particularly for the Iranian barrels. This creates an increased dark fleet utilization, and the dark fleet then needs new capacity or attracts new capacity into the dark vessel pool. These vessels are pulled out of the compliant fleet. OPEC Middle East exports are growing firmly, and that also adds to this increased demand for compliant and approved tonnage. But despite the oil, water, and freight levels we are facing right now, we see very few charters, in fact none, breaking this twenty-year age cap. This supports the case that we have been arguing for years. Strong import growth to Far East and India contradicts the energy transition narrative and especially for China. I think people are starting to get familiarized with the energy addition, not transition, term. Long-haul ARBs are challenged, and just to explain what an ARB is, that is basically the price difference between one continent to another in respect of oil, which basically, if it is at a wide enough point, a trader or an oil major can make a profit moving the oil over long distances and selling it in a different market. Freight is, of course, the key component in this, and by example, if the freight for a VLCC from U.S. Gulf to China is $18,000,000, the charterer is actually exposed to $9 per barrel freight, and basically, this spread between the two oil markets needs to accommodate that. This has put some pressure on these ARBs, and we have seen fairly little volume moving from the U.S. to the Far East. But, again, if oil needs to move, or when it needs to move, these differentials will just have to price to accommodate this spread. The incremental marginal barrel is now compliant. We have also discussed this in previous calls, that we do not see any kind of fantastic production growth in Iran. We do not see any kind of fantastic production growth coming out of Russia. But we do see compliant oil production and exports growing. The big factor is, of course, OPEC reversing cuts, but then you have countries like Brazil and Guyana performing extremely well, and these are the new molecules coming to market, and they need compliant ships. Let us move to Slide nine and look a little bit at the fleet development. The order book continues to grow. We are basically in the market where decades-high prices for modern tonnage, if tonnage is even there for sale that is on the water, meaning that the vessel can trade straight away, are so high that it pushes actors into the yards. Other asset classes such as LNG and containers continue to pop yards' order books, but we do see tanker ordering accelerating for 2029, especially in China. As the chart on the top right-hand side indicates, it shows basically the efficiency loss of a vessel as it ages, and the curve starts to dip around 10 years of age and then further deteriorates into almost ignorable when it gets to 20 years. With this in mind, as we move forward and move into 2029, we are going to meet the generations of ships that were delivered around 2010 and onwards, and this is a large population of ships that then again will be 20 years of age and exposed to this deteriorating efficiency curve. With that in mind, although ordering is accelerating and we have a high amount of ships expected to come in 2029, and it is basically being added for every day, it is not alarming with this in mind considering the age of the fleet and the fleet profile. We see it as we have two to three years of a very good runway before the supply could become a worry. We also expect going forward that yard capacity will grow, and especially in China. It is not necessarily new yards, but it is yards that have not built tankers or at least not been specialized in tankers, but they are now adding berths in order to cater for this industry. We believe there is another trend that will evolve as we proceed here, considering or assuming this rate environment is sustainable, that Korea and Japan will increase their focus on building tankers in general, and VLCCs in particular, as the margins on these contracts start to compete with what they can achieve for containers or LNGC. Let us move into Slide 11, where we have the familiar tables. I am not going to spend too much time on this slide, only to say that in our methodology, and we try to be consistent, we use data that is based on when an IMO number is registered. This means that these statistics will always be a little bit slow to react. The general assumption in the market is that the order book-to-ratio for VLCCs is probably already at 20%, but this will become more and more evident as these contracts are being registered and the IMO numbers are being created. With that, I think we move on to the summary. I have changed the headline here. So we also see take the center stage, Suezmax and Aframax to follow, question mark. It is actually not much of a question mark because the Suezmaxes are already on the way, and the Aframaxes are boiling. We are in a fundamentally tight market condition that yields extreme volatility. Oil demand and supply are developing positively but especially for compliant molecules. The global tanker fleet age profile and efficiency loss tighten the supply-demand balances. Asset prices are on the move, and both spot and period markets support the investment decisions. The volatile political landscape fuels energy insecurity, conditions where tankers tend to thrive, and Frontline Ltd.'s efficient business models tend to produce material shareholder returns as we proceed. Thank you very much. We will now open for questions. Operator: Thank you so much. Dear participants, as a reminder, if you wish to ask a question, please press 11 on your telephone keypad and wait for your name to be announced. We will now open for questions. We are going to take our first question. It comes from the line of Jonathan Chappell from Evercore ISI. Your line is open. Please ask your question. Jonathan Chappell: Good afternoon. Thanks very much. Lars, so many things to ask you, but I am not going to be greedy. I will keep it to two. So the first thing is, obviously, we are in a parabolic situation right now. We have seen this once or twice before, but as you said, the underlying factors seem to be very different this time. But rates do not go to the moon. There is a certain point where there is a ceiling. So what is the catalyst to provide a plateau and maybe a little bit of an easing from here? Is that a geopolitical event? Is it a seasonal event? Is it a Sinacor event? What takes a little bit of the frost out of the market, which would still be very fantastic rates but maybe lower than where they are moving this week? Lars Barstad: It is an extremely good question. I think the answer is kind of seasonality. There is also normal seasonality. We are actually not unused to having fairly poised markets during this time of the year, many times due to U.S. refineries going into turnaround allowing for more barrels to be exported, and we are kind of actually going into that phase now. So there will be potentially a few more months where we actually can sustain these rates, depending on how the flows work. But then there is going to be a summer low, and it is almost inevitable. But whether it is a summer low that moves from $200,000 per day to $100,000 per day, that is almost impossible to gauge. Also, I think one needs to know that there is one major importer in this market, being China, and they have built an enormous amount of inventory over the years. They could, for any reason, choose to basically turn down the speed a little bit for a period of time, and this will also create volatility. I expect this to occur, but it is extremely difficult to say when something like that might happen. Jonathan Chappell: Definitely. Thanks for that. The other one is also maybe a bit difficult, but it is just something I have been wondering about. Nobody has done what your Korean friends are doing right now for, like, seemingly 50 years, and that includes your shareholder who many people probably would have anticipated would have been the one to try this. Why has not anyone tried to corner the VLCC market in the past and where could it go spectacularly wrong for them? What are the risks, I guess? And the final thing is how do you position Frontline Ltd. so that you are not affected if it does go spectacularly wrong for this player? Lars Barstad: It is a good question, and you are right, it has not really been done in a material manner in the tanker market for at least longer than I can remember. But there is a parallel story from the mid-2000s involving a certain person from Taiwan, but this was in the dry bulk space. Key to his success in dry, and the potential key to the success that the Korean actor might have, is actually that you go in a market that is already fundamentally tight, and then you do not need much to weigh or to slow the supply side of tanker capacity before you get these violent moves. Also, as most people are familiar with, if you look at how freight prices just empirically, the minute you go from 90% utilization to 95%, the moves are exponential. That would be my explanation for why this is possible. I am not going to comment on why Mr. Fredriksen has not looked at this, but the thing is, we are a stock-listed public company. This is, of course, easier to do if you are a private entrepreneur in this market and, of course, willing to risk a substantial amount of money in such a game. Where can it go wrong? In these situations, and we have seen them before, potentially to a smaller scale, it ends up being a game of chicken, who can hold the longest. This is what makes me extremely excited over the months to come and the summer and so forth because we will see some very interesting dynamics come to play, but one thing I am 100% certain of is that there will be volatility. Jonathan Chappell: That is all very helpful. Thank you, Lars. Operator: Thank you. We are going to take our next question. The next question comes from the line of Sherif Elmaghrabi from BTIG. Your line is open. Please ask your question. Sherif Elmaghrabi: It seems like charterers are seeing what you are seeing and willing to take more ships on term. Would you say that is the case and the TC market is more active, or is it just that rates have risen to a level that shipowners are more comfortable with? Oh, that is very interesting. Something else that I thought was interesting was your comments specifically about new tanker yard capacity coming online, and so I apologize if you have mentioned this and I missed it. Do you have a sense of what the turnaround time on these projects might be and when first ships might hit the water? Lars Barstad: I think, as I touched upon in the introduction today, this market has evolved quite a lot in the last 20–25 years. If you, by example, look at the Middle East market for VLCC transport from the Middle East to Asia, this market used to have a lot of physical liquidity. What happened over the years is that more and more actors are using the index itself to price the freight, basically doing floating contracts that price off the Baltic index quote, to the point where very little liquidity is actually transacted in the market. So price visibility has been quite difficult sometimes. To do a parallel, for every physical barrel of Brent oil that is produced, it tends to trade tenfold on paper, and we have seen a little bit of the same tendency or trend in freight. This becomes a problem if everybody is pricing their freight off an index that runs out of control, and then suddenly you need to hedge and you need to access the paper market, or you need to buy back hedges for the guys who have taken ships on time charter and basically hedged parts of the curve in that exposure and so forth, and you end up with a very vibrant FFA market, which every FFA broker today would testify to. You get these ebb and flows out on the curve, from panic to some sort of quiet until the panic kicks in again. Over the last couple of weeks, you see the index is just relentlessly printing what is physically being done, but it is not like 10 cargoes are fixed a day; it is two to three cargoes maybe fixed a day, but the amount of pricing exposure around that quote is enormous, and this triggers this almost self-propelled move going forward. I think it is important to note, this is not manipulation, but the market is fundamentally extremely tight. You could argue that maybe freight rates are moving ahead basically due to this tightness as the panic ebbs and flows. As for new tanker yard capacity coming online, it is 2029. A yard that is now marketing a new berth that they are going to build—it is not like a greenfield because the yard exists—but they are just introducing a new berth that can accommodate the VLCC build. That is 2029, so three years. Sherif Elmaghrabi: Got it. Lars, thank you for your time. Thank you. Operator: Thank you so much. Dear participants, now we are going to take our next question. It comes from the line of Devon Sangoy from Tetch Investments. Your line is open. Please ask your question. Devon Sangoy: Hi, Lars. I just want to ask you, what will be your strategy on spot versus time charter as you go through these interesting times? That is my first question. The second is regarding the dark fleet which we have been struggling with, and finally it is coming with sanctions and whatever was needed to be done has been done now. In this, though the probability is 50%, if Russian crude oil and if the war stops and the sanctions are lifted, it is also going to get into a compliant fleet. Do you foresee in such a scenario what will happen to the market? And the last problem is that if this sustains and, obviously, and you do the best to make out of the cash, it becomes a cash pile. Obviously, you are paying out a large part of it. But do you think at what point in time you will start deleveraging the balance sheet, or will you stay levered? Lars Barstad: It is a good question. As we said before, our proposition to our investors is to give you spot returns, so basically you do not have to buy a ship; you can just buy Frontline Ltd. At times we will choose to use elevated markets to try and secure revenues. We do not have a policy or anything, but we have a golden rule of one-third, so in theory, our board would be comfortable under certain conditions that we get up to time charter coverage of 30%. As you have seen from the stuff we did, we reported the seven one-year time charters. In the report today, we also reported another one that was done a week later. We are in this modus operandi to try and secure some longer-term income. But we are so constructive about this market that we are not really engaging yet, at least in the longer term, maybe because we actually do believe that there is still some to go for the longer-term contract, but they are also appreciating quickly. I am not going to exclude anything, but you will not find Frontline Ltd. in a situation where we have put 50% of our exposure on time charter because that is not really what our investors are after, we believe. If you asked me this in September 2022 regarding sanctions and the dark fleet, I would have said it would be an immediate bearish proposition, but so much time has passed. If the Russian barrel becomes a compliant barrel, you will probably get half of the capacity back into the compliant fold on the shipping side, but the other half will actually be disqualified basically due to age, and this is the same for servicing the Iranian oil. There are a lot of ships, yes, but these are ships that were supposed to be recycled years ago basically due to age, so very few of them are actually going to come back into compliant trade. Also, the scrutiny in the compliant market on a ship's history is extremely tough, so it is not very easy to whitewash a tanker that has been involved in illicit trades. One point I need to make: we have actually seen this before when sanctions were eased towards Iran in 2016. They have a national tanker company, NITC, and any part of a sanctions-lifting solution will also involve nationally controlled shipping companies. For Russia, that would be Sovcomflot and potentially others. But again, just analyzing those fleets, age is the problem. So, actually, we would welcome these molecules into the compliant fold. As for leverage, our intention is to stay levered because for every share you buy in Frontline Ltd., you get a 1.4 ship exposure equivalent basically due to our leverage. We still believe that is the model. Obviously, I cannot rule anything out, but we have no inclination to delever apart from what actually happens when you pay down debt. The point of cash is actually going to you. Devon Sangoy: Okay. Congratulations, and all the best for the future. Lars Barstad: Thanks very much. Operator: Thank you. Dear participants, just a quick reminder, if you would like to ask a question. Dear speakers, there are no further questions for today. I would now like to hand the conference over to your speaker, Lars Barstad, for any closing remarks. Lars Barstad: Thank you very much for listening in, and I hope you are as excited as I am about what the future is going to bring. I think it is the tanker market's turn now, so let us enjoy the ride. Thank you very much. Operator: This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.
Operator: Thank you for your continued patience. Your meeting will begin shortly, and a member of our team will be happy to help you. Thank you for your continued patience. Your meeting will begin shortly, and a member of our team will be happy to help you. Please standby. Your meeting is about to begin. Good morning, ladies and gentlemen, and welcome to the Arcosa, Inc. Fourth Quarter and Full Year 2025 Earnings Conference Call. My name is Chloe, and I will be your conference call coordinator today. As a reminder, today's call is being recorded. Now, I would like to turn the call over to your host, Erin Drabek, Vice President of Investor Relations for Arcosa, Inc. Ms. Drabek, you may begin. Good morning, everyone, and thank you for joining Arcosa, Inc.’s Fourth Quarter and Full Year 2025 Earnings Call. Erin Drabek: With me today are Antonio Carrillo, President and CEO, and Gail Peck, CFO. A question-and-answer session will follow their prepared remarks. A copy of the press release issued yesterday and the slide presentation for this morning's call are posted on our Investor Relations website, ir.arcosa.com. A replay of today's call will be available for the next two weeks. Instructions for accessing the replay number are included in the press release. A replay of the webcast will be available for one year on our website under the News and Events tab. Today's comments and presentation slides contain financial measures that have not been prepared in accordance with GAAP. Reconciliations of the non-GAAP financial measures to the closest GAAP measure are included in the appendix of the slide presentation. In addition, today's conference call contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements 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 SEC filings for more information on these risks and uncertainties, including the press release we filed yesterday and our Form 10-K expected to be filed later today. I will now turn the call over to Antonio. Antonio Carrillo: Thank you, Erin. Good morning, everyone, and thank you for joining us for a discussion of our fourth quarter and full year 2025 results and 2026 outlook. 2025 was an outstanding year for Arcosa, Inc., demonstrated by our exceptional financial performance and significant advancement of our strategic transformation. Our key growth businesses, Construction Materials and Engineered Structures, grew year-over-year, supported by cyclical expansion in both barge and wind towers. For the full year, we achieved record revenues of $2.9 billion, up 12%, record adjusted EBITDA of $583 million, up 30%, and record adjusted EBITDA margin of 20.2%, up 280 basis points. Importantly, we accomplished these results safely, recording the lowest annual safety incident rate in Arcosa, Inc.’s history. Our expanded disclosures further highlight the momentum underpinning our key growth businesses. Within Construction Products, we began separately disclosing revenues and unit statistics for the aggregates business. Representing approximately 60% of our Construction Materials revenues, aggregates achieved 10% growth in cash unit profitability in 2025, led by strong pricing gains and the accretive impact of Stavola. Within Engineered Structures, we separated the revenue and backlog disclosures for utility and related structures and wind towers. This better highlights the underlying strength within utility structures where backlog levels remained at or near record highs throughout the year, supported by robust end market demand. We exited 2025 with great momentum. Fourth quarter adjusted EBITDA increased 13% and margin expanded 90 basis points, with all segments contributing. Our earnings strength and positive cash flow enhanced our balance sheet, and we ended the year comfortably within our long-term leverage target. Overall, I am extremely proud of the dedication and contribution of the entire team. Earlier this week, we announced we entered into a definitive agreement to sell our barge business for $450 million in cash. With a strong backlog that provides production visibility deep into 2026, and market fundamentals supporting a healthy replacement cycle, we believe this is the right time to transition the barge business to an owner aligned with its long-term growth plans. We expect the sale to close in 2026, subject to regulatory approval and other customary closing conditions. I want to thank our talented leadership team, dedicated employees, and long-standing customers for their significant contributions to Arcosa Marine. The barge transaction further reduces portfolio complexity and cyclicality, raises our overall margin profile, and enhances the long-term resiliency of the company. Upon completion of the divestiture, Arcosa, Inc. will be fully focused on Construction Materials and Engineered Structures, both well-aligned to benefit from long-term infrastructure and power market tailwinds in the U.S. Before Gail goes over our financials in more detail, I want to acknowledge Jess Collins. Jess, who has served as Group President of Arcosa, Inc. since our spin-off, will be retiring in a few weeks, and his strategic insight and commitment have helped shape our success and strengthen our foundation for the future. We thank him for his outstanding service and congratulate him on his retirement. I will now turn the call over to Gail to discuss our fourth quarter segment results in more detail. Gail Peck: Thank you, Antonio, and good morning. Starting with Construction Products, fourth quarter segment revenues decreased 2%. Excluding freight, which is a pass-through in our Construction Materials business, revenues increased 4%. Adjusted segment EBITDA grew 3%, and margin expanded 140 basis points. On a freight-adjusted basis, adjusted segment EBITDA margin was roughly flat. As a reminder, segment performance this quarter is all organic, as Stavola hit its one-year anniversary on October 1, at the start of the quarter. For aggregates, freight-adjusted revenues increased roughly 8%, driven by 5% pricing growth and 2% volume improvement. Two consecutive quarters of volume growth give us optimism on continued volume recovery in 2026. Adjusted cash gross profit increased 6% and adjusted cash gross profit per ton increased 3%. Many of our regions had double-digit growth in unit profitability, particularly our natural aggregates and stabilized sand operations in Texas and our aggregates operation in the East Region. This performance, however, was partially offset by lower unit profitability in our Gulf Region, which was impacted by less favorable product mix, and the West Region, which had lower cost absorption on declining production volumes as we align inventory levels to demand. For the full year, volumes increased 6% due to the inorganic contribution from Stavola, and organic volume improvement in the back half of the year partially compensating for first half weather challenges. Full year freight-adjusted sales price grew 8% and adjusted cash gross profit per ton increased 10%, led by the accretive impact from Stavola. Turning to Specialty Materials and Asphalt, revenues decreased 5% primarily due to lower freight revenue for asphalt. Excluding freight, revenues were roughly flat, while adjusted EBITDA and margin declined slightly. Within Specialty Materials, strong profitability gains in lightweight aggregate were offset by volume-related decline in our specialty plaster business. In our asphalt business, revenues increased slightly as solid pricing gains offset lower volumes, resulting in modest unit profitability gains. Finally, revenues and adjusted EBITDA for our trench shoring business saw a double-digit increase year over year and had strong margin expansion driven by higher volumes and improved operating leverage. Moving to Engineered Structures, segment revenues increased 15% led by a 20% increase for our utility and related structures businesses, while wind tower revenue increased 3%. For utility structures, volumes increased double digits while pricing was up high single digits. Steel pass-through was roughly flat year over year. Adjusted segment EBITDA increased 22% and margin expanded 100 basis points to 18.5%, driven by strong revenue growth and operating efficiencies in utility structures. This business executed well throughout the year, resulting in sequential margin improvement in each quarter of 2025. For wind towers, adjusted EBITDA was roughly flat as we focused on rightsizing the business for lower production levels in 2026, resulting in a slight decline in margin year over year for the business. We ended the year with backlog for utility and related structures of $435 million, up 5% from the start of the year, providing solid visibility for 2026. Customer reservations for utility structures that have not yet hit backlog remain strong, providing additional confidence in the demand outlook. For wind towers, we received orders of $190 million during the quarter, primarily for 2027 delivery. We ended the year with backlog of $628 million and expect to recognize 42% in 2026 and 53% in 2027. Turning to Transportation Products, revenues were up 19% and adjusted segment EBITDA increased 24% primarily due to higher tank barge volumes and a more favorable mix, resulting in 90 basis points of margin expansion, building on the meaningful improvement delivered in the prior year. I will now provide some comments on our cash flow performance and improved balance sheet position. During the quarter, we generated $120 million of operating cash flow. As expected, this is down from last year's fourth quarter, which benefited from significant customer deposits in our wind tower and barge businesses for shipments delivering in 2025. Excluding advanced billings, which can be uneven, net working capital days have improved sequentially each quarter in 2025 as we remain very focused on cash management. CapEx for the fourth quarter was $64 million, resulting in full year CapEx of $166 million, which was above the high end of our guidance range. The increase was driven by deposits placed on some long lead-time equipment and the timing of spend on the wind tower plant conversion within our utility structures business. Free cash flow for the quarter was roughly $60 million and was $22 million for the full year. Our strong free cash flow generation in the second half of the year allowed us to repay $164 million of term loan debt during the year, which is prepayable at no cost. We ended the year with net debt to adjusted EBITDA of 2.3x, comfortably within our target leverage range. This is down from 2.9x at the start of the year. Our liquidity remains strong at $915 million, including full availability under our $700 million revolver, and we have no material near-term debt maturities. We are pleased to have achieved our leverage goals quarters ahead of schedule and are focused on balanced capital allocation. For the full year 2026, we expect CapEx to be between $220 million and $250 million. Our guidance includes $70 million to $80 million of growth CapEx and $150 million to $170 million of maintenance CapEx, including approximately $25 million of plant moves and IT-related initiatives in Construction Materials. Within the growth category, we have a good mix of projects within Construction Materials and Engineered Structures, the largest of which is the conversion of our Illinois wind tower plant. We anticipate the cadence of spending to be more first half–weighted based on the expected project timelines. I will wrap up with a few final comments for modeling purposes. For the full year, we expect depreciation, depletion, and amortization expense to range from $230 million to $240 million, slightly ahead of the annualized fourth quarter run rate as we expect to complete and capitalize large projects. Net interest expense is expected to range from $88 million to $90 million, down from $102 million last year, primarily reflecting debt reduction that occurred in 2025 and opportunistic debt paydown in 2026. For 2026, we expect an effective tax rate of 17.5% to 19.5%. We will update this guidance as needed following the anticipated close of the barge divestiture. I will now turn the call back to Antonio for more discussion on our 2026 outlook. Antonio Carrillo: Thank you, Gail. For 2026, we anticipate revenues to be in the range of $2.95 billion to $3.1 billion and adjusted EBITDA to be in the range of $590 million to $640 million, excluding any impact from the barge divestiture. As outlined in the earnings press release, our guidance for barge includes full year revenues of $410 million to $430 million and adjusted EBITDA of $70 million to $75 million. We will update our full year guidance once the divestiture closes. Our 2026 guidance incorporates another record year for our growth businesses, Construction Materials and Engineered Structures, with combined double-digit adjusted EBITDA growth and margin uplift. At the same time, we expect a short-term step-down in wind towers before recovering in 2027. In our outlook comments today, we will focus on the Construction Materials and Engineered Structures segments. Beginning with our first quarter 2026 results, we expect to eliminate segment reporting for Transportation Products and report results for the barge business as discontinued operations. In Construction Products, we anticipate another record year of revenues and adjusted EBITDA. In our guidance range, we anticipate mid- to high single-digit adjusted EBITDA growth. For the aggregates business, we anticipate low single-digit volume growth and mid single-digit price improvement. With our cost expectations generally in line with inflation, we anticipate solid gains in aggregate unit profitability. Our outlook is supported by solid infrastructure demand, which drives roughly 45% of our segment revenues. IIJA funding combined with strong state fiscal health is expected to support volume growth in 2026. Roughly half of the IIJA funding has not been spent, and there is progress on advancing a multiyear surface transportation reauthorization. Our shoring products business has record backlog, a positive indicator of the underlying infrastructure demand. In Texas, our largest natural aggregates and liquid market, public infrastructure demand remains fundamentally healthy. While highway lettings have been trending off peak levels, the outlook for state spending growth over the next several years is very positive and remains at historically elevated levels. In New Jersey, our second largest regional exposure, the demand outlook is also favorable as both the Department of Transportation and the Transit Authority approved budget increases for 2026. As a reminder, Stavola operations are highly skewed to infrastructure and replacements. Our Stavola operations performed very well in 2025, and we anticipate a solid year of growth in 2026. Stavola has added additional seasonality to our results, particularly in the first quarter. We anticipate that impact to be slightly more pronounced this year as the Northeast has been affected by very cold temperatures and significant snowfall in the first quarter. Turning to private nonresidential market, volumes continue to benefit from data center development, reshoring activity in certain areas, and overall demand for new power generation. Additionally, we are optimistic about future LNG opportunities. Residential remains challenged by affordability, and our outlook incorporates flat residential volume in aggregates. While we continue to experience positive activity in Texas, particularly in the Houston market, residential volumes remain weak overall, notably in the Phoenix and Florida markets. In our specialty plaster business, which serves multifamily construction, we anticipate a stronger second half of the year based on customer backlog and sentiment. Even though we are in an attractive state for residential development, we expect our businesses to benefit when the housing market recovers. Moving next to Engineered Structures. Our businesses play a pivotal role in strengthening American infrastructure, from wind towers that support much-needed new power generation, to utility structures that connect energy to the grid, and lighting, traffic, and telecom structures that address basic infrastructure needs of our expanding nation. I have said before, we believe our Engineered Structures platform is strategically positioned to capitalize on attractive long-term trends. Turning to the U.S. power industry, the expansion of data centers and the rising electricity consumption across the U.S. continues to drive a significant and sustained increase in power demand. Multi-year capital plans underscore our utility customers' commitment to significant power investments along with ongoing efforts to modernize the grid. During 2025, we maintained at or near record backlog levels for our utility structures, and the outlook remains very positive. Industry capacity is constrained, lead times are extended, and we are optimizing pricing and focusing on operational excellence. We are making solid progress on the conversion of our idled wind tower facility in Illinois to produce large utility poles and expect to be operational in the second half of 2026. Additionally, we have placed deposits on long lead-time equipment to maximize output in our existing plants. Our new galvanizing facility in Mexico will complete its first dip this quarter, which will allow us to improve our cost structure and help offset start-up costs in Illinois for this year. For 2026, we anticipate another year of strong double-digit adjusted EBITDA growth and higher margins. Meeting expanded U.S. power needs will require leveraging all available sources of power generation. Cost-competitive wind energy can play a critical role in meeting future energy needs quickly and efficiently. We remain optimistic about the long-term demand for wind towers despite near-term policy uncertainty impacting our anticipated volume for 2026. During the fourth quarter, we received wind tower orders for $190 million, primarily for 2027 delivery. Coupled with orders we received in 2025 and the shift forward of 2027 backlog, we have solid production visibility in 2026, albeit with reduced volumes from 2025. At December 31, our wind tower backlog scheduled for 2026 was $260 million, indicating a decrease of roughly 25% in anticipated wind tower revenues. Importantly, we expect to return to growth in 2027, supported by our current backlog for that year of $330 million. There is still time remaining in the year to book additional 2026 orders, though our customers are focused on 2027 and beyond. Factoring in competitor announcements and the potential for additional moves, third-party research estimates a capacity shortfall existing in 2027 for utility structures. The flexible and strategically located network of facilities within our Engineered Structures platform provides us with the ability to adapt and increase capacity quickly without significant capital investments. As a result, we are currently preparing for a transition of our Tulsa, Oklahoma facility from wind towers to utility structures. At Tulsa, our wind tower backlog stretches through 2027, and we have the ability in that facility to roll both product lines in parallel. As wind tower orders are being finished, we will be moving our people to produce utility poles. Reducing our wind tower capacity to two facilities right-sizes the business and redirects our resources to the higher multiple, higher margin utility structures with a sustained runway for growth. As it relates to our capital allocation priorities, we are focused on investing in our growth businesses, both organically and through acquisitions. We have an active pipeline of additional bolt-on opportunities, both in natural and recycled aggregates, and expect to deploy capital towards the highest value opportunities. We also anticipate reducing debt in the interim to lower interest expense. Our unused $700 million revolver provides ample additional liquidity. In closing, we enter 2026 as a more resilient company. The divestiture of our barge business is a significant milestone in our company's evolution and will sharpen our focus on our key growth businesses, Construction Materials and Engineered Structures. We will now move from our transformation phase to being completely focused on growth as we look to create additional value for our shareholders. We are now ready for your questions. Operator: Thank you. Press 1 on your keypad. To leave the queue at any time, press 2. Once again, that is 1 to ask a question. We will move first to Ian Zaffino with Oppenheimer. Your line is open. Ian Zaffino: Hi. Great. Thank you very much. Congratulations on the barge sale. Thank you. Now as far as the proceeds, how are you thinking about redeploying those, what areas and maybe geographies, or any other kind of color you could give us on that, and the multiples you are seeing out there? Do you have to use that for any—I mean, that is why. Thanks. Antonio Carrillo: Let me give you color on that. As Gail mentioned in her script, first, once we close this transaction—and we expect it to be in the second quarter—there might be some debt reduction in the short term. After that, we have a very active pipeline of opportunities for M&A. Right now, we are looking at mostly within our current footprint, but we do have some opportunities that take us to some new MSAs where we are not present. M&A, as mentioned in the past, has no timing because these things sometimes take time and are mostly family-owned businesses. It takes time to get there. We have a really active pipeline in both our current MSAs and a few new ones. That would be our primary focus to try to accelerate our M&A pipeline, mainly bolt-on acquisitions. These are not enormous things. I have mentioned before, bolt-ons are where we really get excited about margin expansion. We also have significant organic CapEx going on. Gail mentioned a few plant movements within our aggregates business, more reserves, finishing the Illinois facility, the galvanizing facility. I just announced that we are transitioning our Tulsa facility from wind towers to transmission over time as we finish our wind tower orders. That facility is very large and has the ability to do both product lines. The big message here is now that we are a simpler company, we will focus our full attention on deploying the capital to generate additional value for our shareholders through both inorganic and organic opportunities. Ian Zaffino: Okay. We are losing you. What should we expect there? I know we are pretty close to being almost exclusively noncyclical at this point, but any other kind of moves that you intend to do or not do? What should we expect going forward? Thanks. Antonio Carrillo: The cyclical business that we are left with is the wind tower business. As you know, current policy uncertainty creates noise. I mentioned in my remarks that we are very optimistic about the future of the wind industry because, for the first time since we have been building wind towers, we actually need them. The power demand increase is real. I am optimistic about wind. We expect a slower 2026 and a return to higher volumes in 2027. As we enter 2028, that is where we need to start focusing on 2028 and beyond. At the same time, we recognize the policy uncertainty. We have another business that is growing fast, which is utility structures. That is why the transition of our Tulsa facility to more utilities. There is some uncertainty. As we get into 2027, let us see. I am very optimistic about 2028 and beyond for wind. Rightsizing the business to two facilities really reduces our exposure. If the wind industry recovers fast, we will see what we do. For the moment, we will be very focused on growing in utility structures. Long answer to your short question. Ian Zaffino: That is really helpful. Thank you very much. Good quarter. Thank you. Operator: We will move next to Trey Grooms with Stephens. Your line is open. Ethan Roberts: Hey, Antonio and Gail. This is Ethan on for Trey. Thanks for the question. Starting off with utility structures, clearly expected to be a pretty large growth driver in 2026. Revenue was up 20% in the fourth quarter. The magnitude of growth here is pretty impressive, and guidance seems to imply pretty solid double-digit EBITDA growth. So just curious if this may help offset what is expected to be lower volume in wind in 2026, and perhaps any more color on the growth or demand expectations for utility structures in 2026? Thanks. Gail Peck: Good morning. I will take the first part of that question. You are correctly identifying a lot of underlying strength within utility structures. As we look to 2026 and think about our guidance for the Engineered Structures segment, we do see a path to that strong utility compensating for the step-down in wind. We gave a rough estimate for where we are right now for wind backlog, which translates to revenues for 2026. You do see roughly a 25% step-down in wind revenues. Given where we are with utility and the strength of the double-digit volume increases and pricing increases that we have had—and as I said in my script, we saw margin expansion for utility in every quarter year over year throughout 2025—we have strong expectations for the business next year, and we see a path to flat to maybe slight growth within the segment for next year. Antonio Carrillo: From the industry perspective, the numbers reflect what we are seeing in the industry. We are seeing very solid demand. We are seeing very long lead times. We are seeing a move towards larger utility poles, and that is why we are moving our wind tower facilities to utility poles. The big picture for us is we are very excited about the industry. Perhaps how should we think about the implications of our new galvanizing facility in Mexico starting this quarter? The facility already has orders and customers assigned to it. We are going to be ramping up with relative certainty around 2027 being a year where the facility starts contributing to the bottom line. The other facility is a longer-term process. We have orders until 2027, so this is a 2028 and beyond impact. The ramp-up in that facility will be a lot smoother because the first facility was idle, so we have to hire and train people and everything. The other facilities are a much easier transition because we already have people. People are the hardest thing to get and the most important resource for any one of our facilities. Moving people that already know how to weld and produce wind towers to transmission structures is a lot easier than hiring new people. Ethan Roberts: Got it. That is all very helpful. Thanks so much for the color, and I will pass on. Operator: We will move next to Garik Shmois with Loop Capital. Your line is open. Garik Shmois: Thanks. Just on the first quarter, I was wondering if you could maybe follow up a little bit more on the observations around weather in the Northeast impacting Stavola. Any additional perspective on Q1 and from a production standpoint, or the impact there—whether we should think about the percentage of EBITDA in the first quarter relative to the full year and how that is looking this year versus historicals? Gail Peck: Good morning, Garik, and thanks for the question. It has been a cold and snowy quarter up in the Northeast, which will likely impact the cadence of our Q1 as a percent of the total. If you look at last year, Q1 EBITDA for the segment within Construction was about 16% or so of the year. It certainly is a smaller contributor to EBITDA for the year. With the weather and the snow here recently, we will see that percentage share drop just a little bit. You will not see the same contribution as a percent of the whole as you saw last year. Garik Shmois: Okay. Makes sense. Thank you. And then maybe just on gross profit per ton expectations in aggregates for 2026. I know Q4 had some headwinds due to fixed cost absorption in some of the Western markets. How should we think about gross profit per ton for the segment overall for this year? Gail Peck: As I said in my comments, with mid single-digit price and low single-digit volume, and where we sit here today with expectations that costs are generally in line with inflation, we do see solid unit profitability gains for 2026. The cadence of that is always a little bit uneven with the seasonality. Q1 will likely have a tough comp in unit profitability year over year, but for the full year, we expect solid gains in gross profit per ton. Garik Shmois: Understood. Thank you very much. Operator: We will move next to Julio Romero with Sidoti & Company. Your line is open. Julio Romero: Good morning, Antonio and Gail, and congratulations to Jess on his retirement. I wanted to ask about the slope of the accelerating demand in utility structures. You are allocating resources there—Illinois in 2026, Tulsa in 2027. Could you dive a bit deeper into whether the acceleration in demand is being driven by a particular product line or geography? And then from an end use perspective, you said you are seeing demand skew towards larger utility poles. Should we infer that to mean that demand is being driven primarily by new transmission work versus substation? Antonio Carrillo: The slope we have seen over the last couple of years has become more pronounced. As we look at backlog, order intake, and customer reservations that are not yet in backlog, we see the need to accelerate our capacity expansion because our customers need it. In this industry, like in every other one, if we do not do it, someone else is going to do it. We need to be there for our customers. We are a company that has a significant share of our revenues tied to longer-term contracts, and we have had very long-term relationships with our customers, so we have the obligation to respond to their needs, and that is really exciting to us. It is not a regional thing. We see it all over the country. That is why one plant in Illinois and one plant in Tulsa give us further coverage. The overall sentiment is very positive. We did not do this just on hopes of good demand. We had a market study by a third party analyze utility investment over the next five to ten years, and we see this slope continuing to accelerate at least from here to 2030. We have to acknowledge it, plan for it, review it frequently, and make sure that every step we take has the basis to make the right choices and the right capital allocation. We do not do it just based on our gut feeling. We have solid data behind our thinking. On those customer reservations, our customers are mostly utilities. We have a few customers that are EPCs, and for the most part, we do not sell to a hyperscaler. Our customers are the people who supply power to developers and hyperscalers. It might take years. If someone is trying to build a data center right now, it might take two to three years for us to start seeing any noise around it. The move to larger poles that we have seen over the last couple of years has to do with that increase in loads in certain areas. It has to do with permitting, and it has to do with rights of way. It is easier to put a big pole rather than a lot of small poles. It takes less space. You see it also in the conversation on the 765 lines, the very large lines. Bigger lines with higher voltage add resiliency to the grid. The whole country is reconfiguring to people who have higher loads and higher demands, and everyone is trying to adapt to that. We are part of the mix, but it might take us years to see the orders from the time someone develops a data center. Julio Romero: Excellent. Very exciting. I will pass it on. Thank you. Operator: We will move next to Brent Thielman with D.A. Davidson. Your line is open. Brent Thielman: Thanks. On Engineered Structures, you have been in a pretty tight range of margin throughout 2025. I want to get a sense of whether those sorts of levels are sustainable into 2026. It sounds like you could have a bit of a different mix within the segment. Does that have a material impact through the year? Maybe just help us understand that piece. Gail Peck: Good morning, Brent. Great question. There are two different stories going on within Engineered Structures for 2026. We feel very comfortable with the visibility we have in wind, but with that revenue step-down, and some lost absorption, we will see a margin impact on the wind side. Does utility fully compensate for that margin impact? There is a chance. We do see utility with good year-over-year progression in margin. The way I would say it right now is wind is going to have an impact for sure. A path to flat margins for the segment looks achievable, but we will have to see how the year progresses. Antonio Carrillo: To add some color, there is a path to compensate for that big of a drop in wind. The quality of our EBITDA in 2026 is going to be a lot better than 2025 because we are changing tax credit EBITDA for utility structures EBITDA. The quality of our EBITDA is going to be better in 2026 and beyond as utility structures grows. Brent Thielman: As a follow-up, you have been a patient seller with respect to the barge assets. It has been something that has been discussed for a long time. Congrats on getting something to the finish line here. Could we presume that you built up an M&A pipeline that you really want to act on, and now was just the right time to get this done? I am just trying to think around what finally got this to the finish line. Antonio Carrillo: I have mentioned M&A has its own timing, and we needed to get the barge to a point. I am convinced that the buyer, Winchurch Capital, is going to do very well with this asset because it is at the right spot to sell it. The backlog is there. The trends in the industry are really good. The replacement cycle is coming. They are going to have a really good business to run. I am very excited for our team and for them to buy this business. The timing is right to sell it. Could it have been better six months ago or a year from now? I cannot tell you. Right now, it is as good as we have seen it, and that is why we waited to do it at the right time. There is a long runway for it. At the same time, we have been building our pipeline, and we are excited about some of the opportunities we have going on. I am excited about all these opportunities. At the same time, you have seen us act in the past. The money is not going to burn a hole in our pocket. We are not going to deploy capital to things that we do not think are the best that generate value for our investors. We are not going to pay incredibly high multiples that we cannot afford. We are going to be very disciplined in our capital allocation. The goal is to build a pipeline that we can act on while staying disciplined with our capital allocation. We are going to be a disciplined capital allocator going forward, focused on growth. Brent Thielman: One more if I could. With some of the investments you are making on the utility structure side, including the conversion of the wind facility, could you level set us on how much revenue capacity comes on in 2026 or into 2027? Just trying to think about what you are doing internally and what that adds for you in terms of thinking about growth rates for utility structures. Gail Peck: In terms of 2026, as we have said on the conversion for the wind tower facility, that is the second half of the year where that is going to start contributing. From a steel structure perspective, that would be our seventh steel utility pole plant. That gives you a sense of what type of capacity it is adding. We would see that as more of an impact from a full-year perspective in 2027. The other investments we are making, as Antonio said, include a new galvanizing line down in Mexico. That is not a top-line impact; that is a cost saving as we are bringing galvanizing in-house down in Mexico. From a P&L perspective, as we ramp the Clinton facility in the U.S., the benefits from that galvanizing cost savings should offset that ramp impact in 2026. So, half-year benefit from the top-line perspective for the Clinton plant in 2026, and then you get the full-year impact in 2027. Antonio Carrillo: Okay. Thanks, Gail. I appreciate it. Thanks all. Operator: Thank you. This does conclude the Q&A portion of today's event, and this also brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.
Operator: Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press 0, and a member of our team will be happy to help you. Thank you for your communication. Your meeting will begin shortly. Please standby. Your meeting is about to begin. Hello, and welcome, everyone. Joining today's Bain Capital Specialty Finance, Inc. Fourth Quarter and Fiscal Year Ended 12/31/2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. During the question-and-answer session, you will have the opportunity to ask questions. To register to ask a question at any time, please press star-1 on your telephone keypad. Please note this call is being recorded. We are standing by if you should need any assistance. It is now my pleasure to turn the meeting over to Katherine Schneider, Investor Relations. Please go ahead. Katherine Schneider: Thanks, Nikki. Good morning, and welcome everyone to the Bain Capital Specialty Finance, Inc. Fourth Quarter and Fiscal Year Ended 12/31/2025 Conference Call. Yesterday, after market close, we issued our earnings press release and investor presentation of our quarterly and annual results, a copy of which is available on Bain Capital Specialty Finance, Inc.’s Investor Relations website. Following our remarks today, we will hold a question-and-answer session for analysts and investors. This call is being webcast, and a replay will be available on our website. This call and webcast are the property of Bain Capital Specialty Finance, Inc., and any unauthorized broadcast in any form is strictly prohibited. Any forward-looking statements made today do not guarantee future performance; actual results may differ materially. These statements are based on current management expectations, but include risks and uncertainties, which are identified in the Risk Factors section of our Form 10-Ks that could cause actual results to differ materially from those indicated. Bain Capital Specialty Finance, Inc. assumes no obligation to update any forward-looking statements unless required to do so by law. Lastly, past performance does not guarantee future results. I will now turn the call over to our CEO, Michael Ewald. Michael Ewald: Thanks, Katherine. Good morning, and thanks to all of you for joining us on our earnings call today. In addition to Katherine, I am joined today by Mike Boyle, our President, and our Chief Financial Officer, Amit Joshi. In terms of the agenda for the call, I will start with an overview of our fourth quarter and 2025 full-year results, and then discuss the broader market environment and our positioning. Thereafter, Mike and Amit will discuss our investment portfolio and financial results in greater detail, and we will leave some time for questions at the end as usual. Beginning with our financial results, net investment income per share for the fourth quarter was $0.46, representing an annualized yield of 10.6% on equity. Our net investment income covered our base dividend of $0.42 per share by 110%. Q4 earnings per share were $0.43, representing an annualized return on equity of 9.9%. For the full year 2025, net investment income per share was $1.88, or an 11.1% return on equity. 2025 earnings per share were $1.53, representing a 9% return on equity. We are pleased to report that these results reinforce the consistency of our positive performance for our shareholders. Over the prior three-year and five-year periods, BCSF consistently delivered an annualized ROE of 10%, driven by strong earnings supported by healthy credit performance and fundamentals across our portfolio. Subsequent to quarter end, our Board declared a first quarter dividend equal to $0.42 per share, and payable to record date holders as of 03/16/2026. This represents a 9.8% annualized rate on ending book value as of December 31. Turning to the market today and how we are navigating the current environment, under the backdrop of some of the recent private credit headlines surrounding credit quality and software/AI disruption risk, we have been pleased to see new deal activity levels pick up throughout 2025 and into the fourth quarter, driven by higher new LBO activities and continued add-on activities, as underlying economic indicators have remained constructive for new investments. In today’s market, BCSF continues to benefit from Bain Capital’s private credit platform’s longstanding presence in the middle market. Consistent with our long-term focus, we have been staying active within our market segment in the core middle market where we believe we can demonstrate a greater spread premium and maintain tighter underwriting standards with control of our debt tranches. As the markets have continued to be competitive, our longstanding presence in this segment has positioned us well with our sponsor relationships to be a trusted partner and capital provider. We have been able to achieve a greater spread premium while maintaining conservative capital structures and tight documentation. The weighted average spread on our new first lien originations during the quarter was 535 basis points, with net leverage of 4.6 times. The weighted average spread on our new originations during 2025 was 560 basis points. Our spread levels compared favorably to the average sponsored middle market first lien loans, which were approximately 500 basis points both in the fourth quarter and throughout the year. Importantly, we have maintained discipline with our capital base across our private credit platform, which has allowed us to pick the spots where we want to invest across the market. The cornerstone of our investment philosophy continues to be rigorous, fundamental due diligence at the industry, company, and individual security level. BCSF benefits from not only our dedicated private credit investment team that brings deep experience and specialization across industries, regions, and capital structures, but also from expertise across our firm that drives collaboration and deeper industry insights to source, diligence, and underwrite investments, bringing the power of the Bain Capital platform to our investors. When underwriting and managing across our portfolio, this approach leads us to lean in and out of certain sectors over time, and not be left beholden to investing just in sectors that may be driving the highest new deal volumes in the market. For example, our investors may recall that BCSF has historically had lower exposure to healthcare investments such as physician practice management companies, as we shied away from many of these deals in the private credit markets during a period of high volumes, as these transactions typically came with less favorable terms and structures in our view. Today, software and technology have been top of mind given the increased volatility in the public sector due to potential AI disruption. It has also been one of the largest sector allocations across the private credit market and garnered a lot of recent private market headlines, so we wanted to spend some time touching on our exposure and approach. This is a sector that Bain Capital has been investing in for quite some time, but notably also one in which we maintain a selective underwriting approach. Bain Capital Credit has dedicated professionals that focus on technology within our private credit group, further supported by dedicated industry research resources across our broader credit team and the firm more broadly, as we seek to harness the insights and knowledge across other business units such as Ventures, Tech Opportunities, Private Equity, and more. High-tech industries is one of our top sector exposures; however, it only comprises approximately 11% of BCSF’s total portfolio. Our focus within the sector over the years has been on systems-of-record software and/or highly specialized vertical software. We generally look for and support tier-one enterprise software assets that provide mission-critical products that have demonstrated value propositions, exhibit strong growth on a recurring revenue base across a highly diversified customer base, have several viable exit strategies, and are led by talented management teams able to effectively grow the business. We also seek to partner with private equity sponsors with extensive tech and software expertise and clear value creation plans to generate positive cash flow through their ownership, and we tailor our loan terms and structure to mirror those plans. Software categories have always had wide variability in levels of certain types of risks or credit attributes. The discourse about AI disruption over the last few years is largely focused on LMMs, or large multi model multimodal models, which increasingly excel at summarizing and analyzing disparate sets of data. While this potential for AI disruption is not a new phenomenon, given the recent volatility across public software markets, we have reevaluated each of our portfolio companies by qualitative criteria regarding the risk of AI replacement. Overall, we believe our portfolio has low risk to AI disruption and is, in fact, more likely to be a natural beneficiary of AI functionality than other types of software, and has many of the positive credit attributes for which we have historically screened. Our software companies have demonstrated strong credit fundamentals, where we have seen healthy levels of earnings growth across our borrowers since underwriting. As of year end, median LTV is approximately 34%, even adjusting for current enterprise value multiples since close, and these borrowers have demonstrated healthy interest coverage of 1.7 times. Turning to our broader portfolio, credit fundamentals across our underlying companies have remained resilient. At year end, median net leverage across our borrowers was 4.7 times, unchanged from the prior quarter and stable from 4.8 times on a year-over-year basis. Median interest coverage is also healthy at 2.0 times. Watchlist names comprise approximately 5% of our overall portfolio at fair value, which is also consistent with recent quarters. These names have also remained relatively stable and include a handful of companies that have been facing ongoing challenges in recent years due to various headwinds such as navigating through certain end-market cyclicality, continued COVID headwinds, and various idiosyncratic underperformance. Our position in the process name is comprised largely of first lien loans, so we feel confident about our positioning within those capital structures. Nonaccruals remain low across our portfolio at 1.5% at amortized cost and 0.8% at fair value as of year end. This was stable quarter over quarter, and no new companies were added to nonaccrual during the fourth quarter. Taking all of this together, the overall health and credit quality of our portfolio remains on solid footing, and we believe there is a disconnect versus where the market trading valuations are today in the BDC sector, especially with regard to BCSF. Looking ahead, we believe the company is well positioned to drive attractive earnings for our shareholders given our platform’s positioning and investment discipline in the core middle market as well as stable credit performance. We believe BCSF can maintain its regular $0.42 per share dividend in the current environment. While we expect to face earnings headwinds ahead from a lower rate environment and the maturities of our lower-cost unsecured notes, we believe there are several future growth levers for the company to help offset this, including higher earnings from select joint venture and ABL investments and other types of income as new M&A deal volumes increase. We also have healthy levels of spillover income totaling $1.29 per share, equal to over three times our regular dividend level. I will now turn the call over to Michael John Boyle, our President, to walk through our investment portfolio in greater detail. Michael John Boyle: Thank you. Good morning, everyone. I will start with our investment activity for the fourth quarter and then provide an update in more detail on our portfolio. New investment fundings during the fourth quarter were $167.9 million into 93 portfolio companies, including $68.0 million into 11 new companies and $99.6 million into 82 existing companies. Sales and repayment activity totaled approximately $193.2 million, resulting in net sales and repayments of negative $25.3 million quarter over quarter. For the full year, investment fundings were $1.3 billion. Total sales and repayment activity for the year were $1.2 billion. As a result of this activity, the size of our portfolio is relatively stable year over year. Our investment activity was split between new and existing portfolio companies, with new companies representing 41% of our total fundings versus 59% to existing companies. This quarter, we remained focused on investing in first lien senior secured loans, with 89% of our new investment fundings in first lien structures, 1% in subordinated debt, and 10% in preferred and common equity. New investments during the quarter continued to benefit from Bain Capital’s deep industry expertise. We favored defensive industries such as healthcare and pharmaceuticals, business services, and other more niche sectors such as environmental industries and aerospace and defense. As Michael highlighted earlier, we continue to favor core middle market size companies given attractive terms and structure, combined with a large market opportunity of high-quality borrowers, consistent deal flow, and more favorable competitive dynamics versus other market segments. The median and weighted average EBITDA across our new companies during the quarter was approximately $31 million and $41 million, respectively. Turning to some more detail on the investment portfolio, at the end of the fourth quarter, the size of our portfolio at fair value was approximately $2.5 billion across a highly diversified set of 203 portfolio companies operating across 30 different industries. The average position size across our single-name portfolio companies is approximately 40 basis points. Our portfolio primarily consists of first lien senior secured loans, given our focus on downside management and investing at the top of capital structures. As of December 31, 64% of the investment portfolio at fair value was invested in first lien debt, 1% in second lien debt, 4% in subordinated debt, 6% in preferred equity, 9% in equity and other interests, and 16% across our joint ventures, including 9% into the International Senior Loan Program and 7% into the Senior Loan Program, both of which have underlying investments in those joint ventures consisting of first lien loans. As of 12/31/2025, the weighted average yield on the investment portfolio at cost and fair value was 10.8% and 10.9%, respectively, as compared to 11.1% and 11.2%, respectively, as of 09/30/2025. The decrease in yields was primarily driven by a decrease in reference rates across our portfolio, as 92% of our investments bear interest at a floating rate. Moving on to portfolio credit quality trends, fundamentals across the portfolio have remained healthy. Median net leverage across our borrowers was 4.7 times as of quarter end, consistent with the prior quarter. Median EBITDA was $44 million across the portfolio, versus $46 million as of the third quarter. Watchlist investments have also remained stable quarter over quarter as indicated by our internal risk rating scale. These investments include our risk rating three and four investments, which comprise 5% of our portfolio at fair value. Our portfolio companies within this category have remained relatively stable in recent quarters, and we have not seen a large migration of any new names onto our watch list. Investments on nonaccrual represented 1.5% and 0.8% of the total investment portfolio at amortized cost and fair value, respectively, as of December 31, compared to 1.5% and 0.7%, respectively, as of September 30. I will now turn it over to Amit to provide a more detailed financial review. Amit Joshi: Thank you, Mike, and good morning, everyone. I will start the review of our fourth quarter results with our income statement. Total investment income was $68.2 million for the three months ended 12/31/2025, as compared to $67.2 million for the three months ended 09/30/2025. The decrease in investment income was primarily driven by the decrease in reference rates during the quarter, which reduced the interest income. The quality of our investment income continues to be high, as the vast majority of our investment income is driven by contractual cash income across our investments. Interest income and dividend income represented 98% of our total investment income in Q4. PIK interest income represented 11% of our total income in Q4. Notably, the vast majority of our PIK income is derived from investments that were underwritten with PIK, totaling 88% of our total PIK income. Only a small portion of our PIK income is related to amended or restructured investments. Total expenses before taxes for the fourth quarter were $37.7 million, as compared to $37.2 million for the third quarter. The increase in expenses was driven by higher incentive fees resulting from our three-year lookback on our incentive fee hurdle rate, partially offset by lower interest and debt fee expenses. Net investment income for the quarter was $29.7 million, or $0.46 per share, as compared to $29.2 million, or $0.45 per share, for the prior quarter. Net investment income for the full year 2025 was $1.88 per share. During the three months ended 12/31/2025, the company had net unrealized and realized losses of $1.9 million. Net income for the three months ended 12/31/2025 was $27.8 million, or $0.43 per share. Moving to our balance sheet, as of December 31, our investment portfolio at fair value totaled $2.5 billion and total assets of $22.7 billion. Total net assets were $1.1 billion as of 12/31/2025. Our net asset value per share was $17.23 as of 12/31/2025, down $0.17 per share from the prior quarter, when it was $17.40 per share. This decrease was primarily due to a one-time special dividend from excess spillover income earned in the prior period. During the quarter, our Board of Directors declared a $0.15 per share special dividend payable to the record holder as of 12/31/2025, plus an additional $0.03 per share special Q4 dividend that was previously announced. Excluding the impact of these special distributions, which totaled around $0.18 per share, our NAV change quarter over quarter was relatively stable. As of December 31, approximately 59% of our outstanding debt was in floating rate debt, and 41% was in fixed rate debt. Subsequent to year-end, we issued $350 million in aggregate principal of 5.95% notes due in 2031. Our liability management efforts remain disciplined. By conducting an unsecured issuance last year and another issuance this year in Q1 2026, we have prefunded and mitigated our maturities in 2026, while simultaneously extending debt maturity and preserving financial flexibility. For the three months ended 12/31/2025, the weighted average interest rate on our debt outstanding was 4.6%, as compared to 4.8% as of the prior quarter end. The weighted average maturity across our debt commitments was approximately 3.6 years at 12/31/2025. At the end of Q4, our debt-to-equity ratio was 1.32 times, as compared to 1.33 times at the end of Q3. Our net leverage ratio, which is total principal debt outstanding less cash and unsettled trade, was 1.24 times at the end of Q4, as compared to 1.23 times at the end of Q3. Liquidity at quarter end was strong, totaling $690 million, including $604 million of undrawn capacity on a revolver credit facility, $58.9 million of cash and cash equivalents, including $32.7 million of restricted cash, and $26.7 million of unsettled trades, net of receivables and payables of investments. With that, I turn the call back over to Michael Ewald for closing remarks. Michael Ewald: Thanks, Amit. In closing, we are pleased to deliver another quarter and solid year of attractive net investment income and healthy credit fundamentals across our middle market borrowers. Bain Capital Credit brings over 25 years of experience investing in the middle market and has demonstrated solid credit quality with low losses and nonaccrual rates since our inception. We remain committed to delivering value for our shareholders by providing attractive returns on equity and prudently managing our shareholders’ capital. We will now open for questions. Nikki, please open the line for questions. Operator: Thank you. To leave the queue at any time, press 2. Once again, that is star-1 to ask a question. I will pause for just a moment to see if anyone would like to ask a question. And once again, if you would like to ask a question, please press star-1. We will pause for another moment. Michael Ewald: Great. It looks like there are not any questions on this call, but thanks, everyone, for your time and attention, and we will look forward to speaking with you all again soon. Thanks. Operator: Thank you. This brings us to the end of today’s meeting. We appreciate your time and participation. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the FTAI Infrastructure Inc. Fourth Quarter 2025 Earnings Conference Call. At this time, participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 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, Alan Andreini, Head of Investor Relations. Please go ahead. Alan Andreini: Thank you, Shannon. I would like to welcome you all to the FTAI Infrastructure Inc. earnings call for 2025. Joining me here today are Kenneth Nicholson, the CEO of FTAI Infrastructure Inc., and Buck Fletcher, the company's CFO. We have posted an investor presentation and our press release on our website, which we encourage you to download if you have not already done so. Also, please note that this call is open to the public in listen-only mode and is being webcast. In addition, we will be discussing some non-GAAP financial measures during the call today, including adjusted EBITDA. The reconciliation of those measures to the most directly comparable GAAP can be found in the earnings supplement. Before I turn the call over to Kenneth, I would like to point out that certain statements made today will be forward-looking statements, including regarding future earnings. These statements by their nature are uncertain and may differ materially from actual results. We encourage you to review the disclaimers in our press release and investor presentation regarding non-GAAP financial measures and forward-looking statements and to review the risk factors contained in our quarterly report filed with the SEC. I will now turn the call over to Kenneth. Kenneth Nicholson: Thank you, Alan, and good morning, everyone. Welcome to the call. As we typically do, we will be referring to the earnings supplement, which you can find posted on our website. I am going to get right into it starting on page three. Adjusted EBITDA for the fourth quarter was a new quarterly record, coming in at $80,200,000, up from $70,900,000 for 2025, and $29,200,000 for 2024. The $80,200,000 of fourth quarter EBITDA excludes a $9,000,000 gain in the quarter from a write-up of one of our non-core investments in Clean Planet Energy. Since we do not necessarily expect that gain to continue in the periods ahead, we are excluding it for purposes of this discussion. For the full fiscal year of 2025, adjusted EBITDA was $232,300,000, up substantially from $127,600,000 in fiscal 2024. Reflecting on the 2025 year, it was an extremely active one for FTAI Infrastructure Inc., with many of the transactions we completed setting the stage for what we expect to be a highly productive 2026 ahead. It is important to note that as a result of the specific timing of closing of a number of investments during the year, our 2025 annual results reflect only a partial financial contribution from those events. In February, we purchased the 49% of Long Ridge that we did not previously own and started reflecting 100% of Long Ridge’s results. In August, we purchased the Wheeling and Lake Erie Railroad, a transformative transaction for our Rail segment. And in November, we commenced activity under a new 15-year ammonia export contract at our Jefferson terminal. As a result of these events, we exited the year at an EBITDA run rate of just over $320,000,000 annually, meaningfully higher than our reported figures. Flipping to slide four, I will briefly talk through the highlights at each of our segments. In our Rail segment, adjusted EBITDA was $41,300,000, with Q4 representing our first full quarter of ownership of the Wheeling. We took active control of the Wheeling at the end of December and have begun to integrate its operations into our existing Transstar business. Of the total $41,300,000 of adjusted EBITDA, $22,000,000 was attributable to Transstar and $19,300,000 was attributable to the Wheeling. I will talk more about the Wheeling and our integration process here shortly, but we are thrilled with the Wheeling’s early progress, and business continues to exceed our financial expectations. At Long Ridge, EBITDA for the quarter was $36,200,000, representing a new quarterly record. Q4 results included our planned October outage of 8.5 days as well as an additional one-time outage of 19 days in December for steam turbine repair. We estimate that the additional outage impacted EBITDA by approximately $3,500,000 for the quarter. Gas production for the quarter averaged approximately 105,000 MMBtu per day, also representing a new record for Long Ridge. The macro in the power space continues to be extremely strong, and we have been advancing several growth properties that should drive continued upside for the business in the years ahead. At Jefferson, EBITDA for Q4 was $13,600,000 and included approximately one month of results from our new ammonia transloading contract. Going forward, our results will include the full impact of that contract, so we expect Jefferson to continue to post growth in the first quarter ahead. And at Repauno, construction of our Phase 2 transloading project continues to progress on plan. Once Phase 2 is operational early next year, we expect 80,000 barrels per day of natural gas liquids generating approximately $80,000,000 of annual EBITDA. Moving to slide five and our capital structure. Yesterday, we announced the closing of a new term loan of approximately $1,300,000,000, net proceeds of which were used to repay in full the bridge loan we issued in connection with the Wheeling acquisition last year. The new term loan represents the only debt at our parent level and carries a coupon of 9.75%. The loan is prepayable at any time at a premium that reduces over its two-year term. And more importantly, any proceeds from the potential sale of Long Ridge, which we will discuss further in a bit, will be used for repayment of the loan at a lower premium than would otherwise be payable. The net result of the financing is a stable balance sheet with potential for meaningful deleveraging in the coming months and a path to more substantial free cash flow as we progress through the year. 2025 was a highly productive year. And now with the refinancing behind us, we have a handful of important priorities we are focused on, and we briefly list those on slide six. The integration of Transstar into Wheeling is off to a great start. We will provide some more detail on the specifics. Year to date, we have already implemented a little bit more than half of our total targeted cost savings of $20,000,000 annually. The remaining cost savings should be implemented over the course of the first half of this year. Second, our plans to monetize Long Ridge continue to progress. It is a great asset and a great market environment for exploring a sale. Given the sensitive nature of the sale process, I am not going to comment in detail other than to say that the process is continuing within our expectations. We plan to report additional information to the market on our progress in the coming months. And finally, we are focused on driving continued growth across our portfolio. Activity in the Rail M&A market is picking up. We are currently pursuing a total of four opportunities that represent very good fits for our existing Rail business. In addition, we have been advancing negotiations for new contracted business at Jefferson, which we expect to complete in the coming months and can contribute meaningfully to revenues and EBITDA with no additional capital requirements. And with development permits in hand for Phase 3 of Repauno, we are making good progress in advancing commercial activity and construction planning. Moving to slide eight, we will dig a little deeper into the quarterly results and the activity at each of our segments, and we are going to start with the Rail segment. We posted revenue of $86,400,000 and adjusted EBITDA of $41,300,000 in Q4, compared with revenue of $61,700,000 and adjusted EBITDA of $29,100,000 in Q3. At Transstar, carloads, average rates, and revenues for the quarter were stable. Coke volumes came in at slightly lower levels for the quarter, resulting from the incident at U.S. Steel’s Clairton production unit that required the unit to remain down for the entire duration of the fourth quarter. Clairton returned to full operations in January, and coke volumes have now recovered to normalized levels. Transstar’s operating expenses also continued to be stable, as fuel costs and other material cost items have been largely unchanged. But the story for the quarter was at the Wheeling, where revenue and EBITDA came in at levels exceeding our early expectations. Total Wheeling fourth quarter revenue of $43,000,000 was up 8% year over year, while Wheeling’s adjusted EBITDA for Q4 of $19,300,000 was up 34% year over year. We really just started our integration efforts after receiving FTB approval for control in the final days of December, so we plan to continue to see favorable year-over-year comparisons for the Wheeling in the quarters ahead. Looking to slide nine, I will talk a little bit more about our integration plans for the Wheeling. Integration of the two companies is underway, and I am pleased to say that we are off to a promising start. We expect the combination of the two companies to result in two sources of financial gains: first, cost savings, which we expect to impact our results in the near term, and second, new revenue opportunities, which we expect to occur over the longer term. In terms of cost savings, we have broken out the totals into two components: those that have already been implemented and those we plan to implement during the first half of this year. Implemented savings represent $10,000,000 of annual incremental EBITDA, while savings in process represent the remaining $10,000,000 of annual savings. More importantly, on the revenue side, we continue to grow the list of opportunities now that the two railroads are operating as one. At U.S. Steel’s Edgar Thompson Works facility, the first of a series of investments by Nippon Steel is underway with an announced $100,000,000 investment in a new slag recycling unit. While it is a small investment compared to the total $2,400,000,000 committed by Nippon and U.S. Steel’s Mon Valley complex, the new recycling unit is a rail-intensive one and will generate important incremental volumes and revenues for Transstar. Also, additional propane carloads are planned to start early next year when Repauno’s Phase 2 commences operations. Additional carloads of propane should be substantial, given the volumes originate on the Wheeling and move to Repauno. And finally, the list of additional revenue opportunities on the combined system continues to grow. In total, we are now estimating over $50,000,000 of incremental EBITDA potential from the various new sources of revenue manifesting in the future. Next, on to Long Ridge. Long Ridge generated $36,200,000 of EBITDA in Q4 versus $35,700,000 in Q3. Power plant capacity factor of 81% was impacted by the outages that I described earlier. But away from the outage, the fundamentals continue to be very strong, with power prices averaging $45 per megawatt hour for the quarter and capacity revenue continuing at historically high levels and unaffected by the outage. We averaged approximately 105,000 MMBtu per day of gas production versus the 70,000 MMBtu per day required at the plant, and we expect to maintain production significantly in excess of plant requirements and generate continued revenues from excess gas sales in the quarters ahead. Importantly, we continue to push forward a number of initiatives to drive further growth. The 20-megawatt upgrade in our power generation continues to advance. Adding 20 megawatts of generating capacity at today’s power prices adds $5,000,000 to $10,000,000 of annual EBITDA to the P&L. And with a strong macro environment driving historic demand for power against the limited supply of modern, efficient power plants, we are advancing a number of opportunities that can provide substantial upside. We continue in detailed negotiations with a potential purchaser of our land holdings, which represent value creation from the land monetization as well as potential new revenue streams from on-site generation. In addition, we have been approached by parties seeking long-term PPAs at prices well above the current market, and potential partners have invited Long Ridge to co-develop new plants on sites within our region. With so much activity underway, we are confident that during the course of the year ahead, we can act on one or more of these opportunities and drive incremental growth for Long Ridge. More importantly, these opportunities generate momentum for the sale process, which continues to progress. Jefferson, we reported $23,500,000 of revenue and $136,000,000 of adjusted EBITDA in Q4 versus $21,100,000 of revenue and $11,000,000 of EBITDA in Q3. Volumes at the terminal averaged 210,000 barrels per day, and revenue came in at a new quarterly record driven by the startup of the new ammonia export contract, which commenced in late November. We are in advanced negotiations for three new contracts with multiple parties to handle conventional crude and refined products as well as renewable fuels. Each of these three opportunities are with existing customers and involve expansions of services we currently provide. Our customers have been investing heavily in their nearby facilities to increase production and market reach, which would require more products to flow through Jefferson. We hope to execute on all three opportunities during this year and commence revenue shortly after execution. In total, the three opportunities represent in excess of $50,000,000 annual incremental EBITDA and utilize existing assets requiring little to no incremental investment or CapEx. In closing out with Jefferson, Phase 2 construction is proceeding as planned and toward our goal of construction completion by 2026, with revenue commencing shortly thereafter. We have long-term contracts in place for a substantial portion of our capacity and are seeing high demand for the remaining available space. Based on the conversations we are having, we expect to commence revenue in early 2027 at full capacity. In the aggregate, we can handle a total of just over 80,000 barrels per day, representing $80,000,000 of annual EBITDA for the combined assets Phase 1 and Phase 2. While completing construction and commencing services are a priority, we are quickly turning toward commercial discussions for Phase 3. Having received the permit during Q4 last year is a very big step toward advancing Phase 3 and achieving full build-out at Repauno. The permit allows for two storage caverns to be built, each capable of storing 640,000 barrels of liquids. So Phase 3 is currently planned to be twice the size of Phase 2. In conclusion, we are extremely happy with our team’s progress during the fourth quarter, and we are very enthusiastic about 2026 ahead. We look forward to reporting updates on each of our key priorities, and now I will turn it back to Alan. Thank you. Alan Andreini: Shannon, you may now open the call to Q&A. Operator: Thank you. Star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Our first question comes from the line of Giuliano Bologna with Compass Point. Your line is now open. Giuliano Bologna: Good morning, and congratulations on another great quarter of execution there. It is great to see Jefferson really starting to ramp up during the fourth quarter. Can you expand on the business development opportunities that you are seeing at Jefferson and the upside related to some of the contracts, like the ammonia contract that should flip to a full quarter of impact? Kenneth Nicholson: Yes, definitely. Good morning, Giuliano. Yes, it does feel like all cylinders are firing. We are excited about the year ahead, and Jefferson is an important cylinder. We really see a pickup in the commercial interest and activity level at Jefferson. What we particularly like about it, as I said, is these are all expansions of existing services. So these are opportunities that do not require the capital to build new infrastructure and take the time to build out new infrastructure. One of the stories with Jefferson has been timing-based, among other things, but this would be quick, no capital, and just incremental volumes through existing assets. They break into three categories. The first is more ammonia. The ammonia system now at Jefferson South is fully built out. The additional ammonia volumes that we are talking about would roughly double the quantities that we are currently handling. So that is somewhere between $10,000,000 and $15,000,000 of incremental EBITDA just for that opportunity. The second is for additional refined products leaving by rail. More gas stations are being built in Mexico, and therefore, there is more demand for gasoline and diesel, and we expect to increase volumes through that contract in the coming months. That could represent meaningful additional EBITDA, another $10,000,000 to $15,000,000. And then finally, Utah crudes. There is a lot of investment in the two major refineries in Beaumont in handling and producing various products for which Utah crudes are the ideal input. And so we expect to significantly increase inbound volumes of Utah crudes. We have expanded the existing contract. That could be substantial, another $25,000,000 of EBITDA. So we are very focused on it. It is certainly subject to execution, but having had a series of conversations with all these players over the years, we feel like the probability for each of these is as high as it has ever been. Giuliano Bologna: That is very helpful. It is great to see the progress on all fronts, and I will jump back in queue. Operator: Thank you. Our next question comes from the line of Brian McKenna with Citizens. Your line is now open. Brian McKenna: Hey. Thanks. Good morning, guys. Just a couple of quick questions on Repauno to start. I think Phase 2 was previously expected to be operational by the fourth quarter of this year. It looks like that has been pushed out a little bit here to 2027. So just kind of curious about some of the puts and takes there. And then on Phase 3, I appreciate the detail in your prepared remarks, but it would be great just to get some additional color on what is going on behind the scenes here in terms of planning. What are the next few major milestones in the process? And then can you remind us when you expect to break ground and when that construction is expected to be completed? Kenneth Nicholson: Good morning, Brian. The timing: we have always been end of this year for Phase 2. And whether we commence operations December 31 or January 15, it is not a precise science. There is going to be some commissioning of that whole system. If you went to Repauno today, you would see the tank largely built, so a lot of the important work that would typically cause any meaningful delays or cost overruns is behind us. All the geotechnical work and driving of piles is done. So we are at a point where I think we have de-risked a fair amount of that construction. I do not see a lot of risk in any meaningful delays, but we will need to commission it, and as we have been talking about it, we want our customers thinking about very early 2027 rather than late 2026, just to be a little cautious there. But no change. The good news is we are expected to be fully utilized when we commence operation. There has been significant demand, and this feeds into your second question—what is driving that demand? The simple answer is more supply and a need for accessing more demand markets. Natural gas production in the Marcellus and Utica continues to grow, and with the gas comes liquids. Demand for things like propane in the Northeast is stable but not growing as significantly as production. So producers are looking for more outlets, more demand markets. There are only two terminals in our area, Repauno and the Sunoco Logistics terminal at Marcus Hook, that these guys can really access for large volumes over time. And so we are getting a lot of interest, and it has caused us to really refocus and push on Phase 3. At this stage, there are a number of things we need to do to put a shovel in the ground on Phase 3. We are finishing up construction estimates and all of the planning around construction. We obviously have the permits in place. And then the commercial development—those conversations are underway. I do not see us starting construction and building Phase 3 on spec. We are going to want to have some anchor customers. So our goal would be to have some anchor customers over the next six months while in parallel we are advancing all the construction elements. And hopefully sometime later this year, potentially pretty late this year, we are starting construction. Brian McKenna: That is great. Thanks, Ken. And then just switching gears a little bit, going to the Rail segment. You highlighted you are actively pursuing multiple new additional M&A opportunities. I think you said there are four there. I think this makes sense longer term, and you have talked about transitioning FTAI Infrastructure Inc. to more of a pure-play freight rail company. But it is still early days of the Wheeling integration and driving synergies there. It sounds like there is great momentum. And then, looking at the balance sheet, you have made great progress there as well. But the capital structure still has some moving pieces. I think there are still some opportunities to enhance that. So why not focus entirely on execution and integration this year, start to drive EBITDA and cash flow even higher, deleverage with any excess capital, and then look to do some of this M&A in 2027 and beyond? Kenneth Nicholson: The M&A opportunities—good observation. We are a higher-leveraged business than we expect to be in the coming years, and we are very focused on deleveraging. I think there is a lot of equity value to create as we deleverage and reduce our cost of capital. We have a higher cost of capital than we hope to have in a couple of years, and deleveraging is going to drive that. The Long Ridge transaction, if successful, which we are expecting, will go a long way in deleveraging at the parent level. Make no mistake about it: priority number one is to maximize the benefits of the combined Wheeling and Transstar, for sure. And management is doing a phenomenal job every day focused on that. That said, M&A opportunities come to us. And when some of them are in the no-brainer category—and maybe they are smaller situations but even more accretive—we are definitely going to look at those. Something that is local, that is connected to the Wheeling or Transstar, where we think we can acquire assets at a five times, six times, seven times EBITDA multiple feels like we have a duty to do that because it is just so accretive. Double, triple EBITDA out of the targets. We agree with you. We have our priorities of deleveraging and optimizing the railroad we own today before we start growing. But we certainly are going to look at additional rail properties as they come up, particularly if we think they are a very good fit for us. Brian McKenna: Thanks so much. I will leave it there. Operator: Thank you. Our next question comes from the line of Sharif El Megravy with BTIG. Your line is now open. Sharif El Megravy: Hey. Good morning. Thank you. Sticking with Rail for a second, I think you gave some very nice color about your ideal acquisition targets. But can you talk about the M&A market for rail a little bit more broadly? How many opportunities are there that kind of bolt on geographically to your existing footprint? And could you look at anything else maybe a bit further away? I think there is a rail line in Texas, for example. Kenneth Nicholson: The M&A market in rail—we have been doing rail stuff here for 20 years. It comes in waves, and it feels like the wave is coming at us and not going away from us. We are looking at four opportunities. They are all very actionable. Three actually are smaller properties that are very natural fits for the Wheeling and Transstar, meaning they connect or are nearby. One is not connecting. I really hope we can be the best bidder on the things that are close to us because we can certainly perceive the most value. They are not huge dollars, but they are highly accretive, and so they are certainly worth doing. And they are easy to integrate. Management will not be distracted, and this is in their backyard, and so they are pretty much no-brainers. But as more opportunities come—there was a big transaction announced earlier this week and that was in a slightly different space, more like rail services and switching. A couple of great companies that we have a lot of respect for. My understanding was that transaction occurred at pretty sporty multiples. So if you can acquire businesses at single-digit multiples and own a portfolio that trades at mid–double-digit multiples, that has to be a smart thing to do. We are staffed up, and we are going at it. Our goal, as Brian said earlier, is to increase the scale of our rail portfolio over time at FTAI Infrastructure Inc., and I think we have a good shot at doing that. Sharif El Megravy: Got it. Very helpful. And then shifting gears a bit, the Sustainability and Energy Transition business contributed $9,000,000 of EBITDA this quarter. Do you have a sense of what is going on there, and if that business is something that will become a regular EBITDA contributor? Kenneth Nicholson: I am glad you asked, actually. The answer to your last question is yes. We have a handful of investments we do not talk about much in non-core entities. Some of the investments are minority stakes. Clean Planet Energy is a fantastic company that is in the waste-to-energy business. They are based in the U.K. It is a global company. Years ago, we invested in a U.S. subsidiary. We set up a JV to build waste-to-energy facilities in the United States. That market, no surprise, has slowed down. And so we had an opportunity to exchange our 50% interest in the U.S. JV to a 49% stake in the global company. That was a great transaction. It resulted in a write-up of our holdings in Clean Planet Energy. I am super bullish on Clean Planet Energy. They have a great management team, and I think they are focused on the right markets. Waste-to-energy is a huge business globally. It is not seeing a lot of activity in the United States right now, but across Europe and other regions, there is a lot to do there. And at Clean Planet, there is one facility under construction, two under advanced development. Yes, those will contribute EBITDA over the coming years, and we will record our portion of EBITDA. So I do think we will be reporting EBITDA. Given this single transaction, the exchange from an interest in the U.S. entity to the global parent, that is not going to happen again, and so when we were describing EBITDA for purposes of this call, we excluded that as a one-time gain. But I do think Clean Planet will be a contributor in the quarters ahead starting in 2027. Sharif El Megravy: Got it. Thanks for taking my questions. Operator: Thank you. Our last question comes from the line of Craig Shere with Tuohy Brothers Investment Research. Your line is now open. Craig Shere: Good morning. Thanks for taking the question and congratulations on the good quarter. To start with, is your asset sales process at Long Ridge impacting the data center discussions you are talking about? Obviously, if it can make progress there, it would certainly help with the value of any ultimate sale. Can you give us any more color about the timing of the monetization process? Would you expect any serious tax implications to it? If you had, you know, call it $4,500,000,000 in net proceeds, what are your thoughts about allocating something like that? Kenneth Nicholson: All good questions, and I am going to do my best within the limits of what we would like to say on this call as it relates to the sale process. Your first question about the level of activity in data developments: no, there is no impact. The parties that are looking at Long Ridge are all very well capitalized and interested in data center development and other land uses and on-site generation. And any party we are talking to about utilizing the land would be very comfortable were someone else to own Long Ridge, as long as it is a well-capitalized counterparty. So we are pushing hard to advance all the opportunities. I completely agree, of course. As those opportunities advance, the visibility of value creation at Long Ridge becomes that much more clear, and so it is nice to have commercial momentum when you are in the midst of a monetization process. In terms of timing, our goal would be to have an announced transaction in the first half of this year. In terms of what the transaction would mean, it would be significant for us, hundreds of millions of dollars of net proceeds. I am not going to go beyond that in terms of quantifying our expectations, but we set out with a certain expectation, and so far, we are certainly trending in line with those expectations. There would not be much of a tax drag on the sale. The beauty of being in the development business is, for better or for worse, you generate a fair amount of net operating losses over the time of developing assets. And so we do not expect there to be much tax leakage. So most of the gross proceeds, after debt repayment, should flow to FTAI Infrastructure Inc. And finally, what do we do with those proceeds? I think we will probably deleverage, mostly. It would be a really good thing for us. It may give us an opportunity to actually refinance this loan we put in place. We deliberately put a loan in place that is not of a very long-term duration and that limits the prepayment premium. And we negotiated an even lower premium with proceeds from the Long Ridge sale. So it gives us the flexibility to deleverage initially. Brian asked about some of the rail acquisitions, so obviously we will be—needless to say, we are focused on deleveraging. I think you should assume we use proceeds from the Long Ridge sale to deleverage high-cost debt. Craig Shere: Gotcha. And how far down does new Phase 3 underground storage cavern development have to go—how far down the road does it have to go—before thinking about monetizing that business as well? Kenneth Nicholson: I think the closer we get to operational completion, the more value any buyer would perceive. It is not a precise science. I think you certainly need construction underway and commercial contracts. Then you have the certainty. I think the team at Repauno has done a great job delivering on constructing, and I think any buyer of Repauno would give us credit for being able to get the job done. But at a minimum, we have to get through the next six to nine months and be under construction and at least have anchor customers for Phase 3 before we would be considering monetizing that asset. Craig Shere: Right. So if that is a 2026 goal, the idea that this could monetize, I do not know, by the first half of next year is not unthinkable. Kenneth Nicholson: Correct. Yep. I think that is a good way to think about it. Craig Shere: Great. Thank you. Operator: Thank you. I would now like to hand the conference back over to Alan Andreini for closing remarks. Alan Andreini: Thank you, Shannon, and thank you all for participating in today’s conference call. We look forward to updating you again after Q1. Operator: This concludes today’s conference. Thank you for your participation. You may now disconnect.
Operator: Please standby. Your program is about to begin. Welcome to the MBIA Inc. Fourth Quarter and Full Year 2025 Financial Results Conference Call. I will now turn the call over to Gregory R. Diamond, Managing Director of Investor and Media Relations at MBIA Inc. Sir, please go ahead. Gregory R. Diamond: Thank you, Chelsea. And welcome to our conference call for the full year 2025 MBIA Inc. financial results. Excuse me. Hold on. I have it on here, it just went away. You do not have it yet. We have a copy of it? I do not have it. I have a copy. Oh, that is good? Yes. It is buried underneath this Outlook problem. Apologies. After the market closed yesterday, we issued and posted several items on our websites, including our financial results, 10-Ks, quarterly operating supplement, and statutory financial statements for both MBIA Insurance Corporation and National Public Finance Guarantee Corporation. We also posted updates to the listings of our insurance companies’ insurance portfolios. Regarding today’s call, please note that anything said on the call is qualified by the information provided by the company’s 10-Ks and other SEC filings, as our company’s definitive disclosures are incorporated in those documents. We urge investors to read our 10-K as it contains our most current disclosures about the company, its financial and operating results. The 10-K also contains information that may not be addressed on today’s call. The definitions and reconciliations of the non-GAAP terms included in our remarks today are also included in our 10-Ks as well as our financial results report and our quarterly operating supplement. The recorded replay of today’s call will become available approximately two hours after the end of the call. Now for our safe harbor disclosure statement. Our remarks on today’s conference call may contain forward-looking statements. Important factors such as general market conditions and the competitive environment could cause our actual results to differ materially from the projected results referenced in our forward-looking statements. Risk factors are detailed in our 10-Ks available on our website at mbia.com. The company cautions not to place undue reliance on any such forward-looking statements. The company also undertakes no obligation to publicly correct or update any forward-looking statement if it later becomes aware that such statement is no longer accurate. For our call today, William Charles Fallon and Joseph Ralph Schachinger will provide introductory comments, and then a question and answer session will follow. I will now turn the call over to William Charles Fallon. William Charles Fallon: Thanks, Greg. Good morning, everyone. Thank you for being with us today. We had lower net losses for our full year 2025 financial results versus full year 2024 and comparable net losses for the 2025 and 2024. Comparing the two years’ results, National recorded a benefit from losses and loss adjustment expense in 2025 versus incurred losses in 2024. For both years, National’s losses and LAE resulted primarily from changes to loss estimates for its PREPA-related exposure. The 2025 benefit largely resulted from the sale of a custodial receipt associated with National’s PREPA bankruptcy claims at prices better than National’s loss estimates, as well as a favorably revised estimate for losses on National’s remaining $425 million of PREPA gross par outstanding. Our priority continues to be resolving National’s PREPA exposure. In that regard, there has not been much substantive progress since our last conference call in November. Until the legal issues related to the members of the Financial Oversight and Management Board are resolved, it is unlikely that substantive progress will be made. Regarding the balance of National’s insured portfolio, those credits have continued to perform generally consistent with our expectations. The gross par amount outstanding for National’s insured portfolio has declined by approximately $3 billion from year-end 2024 to about $22 billion at the end of 2025. National’s leverage ratio of gross par to statutory capital was 24-to-1 at the end of 2025, down from 28-to-1 at year-end 2024. As of 12/31/2025, National had total claims-paying resources of $1.4 billion and statutory capital and surplus in excess of $900 million. I will now turn the call over to Joseph Ralph Schachinger for additional comments about our financial results. Joseph Ralph Schachinger: Thank you, Bill, and good morning all. I will begin with a review of our fourth quarter and full year 2025 GAAP and non-GAAP results and then provide an overview of our statutory results. The company reported a consolidated GAAP net loss of $51 million, or a negative $1.01 per share, for 2025 compared with a consolidated GAAP net loss of also $51 million, or a negative $1.07 per share, for 2024. When comparing 2025 and 2024, there were a few offsetting items. Lower revenues in our Corporate segment, which were primarily due to a decrease in foreign exchange gains, were offset by lower interest expense on MBIA Insurance Corporation’s floating rate surplus notes and lower operating expenses related to consolidated variable interest entities, or VIEs, at MBIA Insurance Corporation. The company’s adjusted net loss, a non-GAAP measure, was $12 million, or a negative $0.24 per share, for 2025 compared with an adjusted net loss of $22 million, or a negative $0.48 per share, for 2024. The favorable change was primarily due to lower losses and LAE at National, largely related to its PREPA exposure. For full year 2025, the company reported a consolidated GAAP net loss of $177 million, or a negative $3.58 per share, compared with a consolidated net loss of $447 million, or a negative $9.43 per share, for full year 2024. The lower consolidated GAAP net loss for full year 2025 was driven by lower expenses and, to a lesser extent, higher revenues compared with full year 2024. Our lower expenses were primarily driven by a loss and LAE benefit on our PREPA exposure in 2025 compared with an expense in 2024. The benefit in 2025 primarily resulted from our sale of PREPA bankruptcy claims at an amount that exceeded National’s loss recovery estimate and the impacts of adjustments to our PREPA loss scenarios. Contributing to our higher revenues were lower losses related to VIEs at MBIA Insurance Corporation. In 2024, VIE losses resulted from the repurchase of VIE debt and the deconsolidation of a VIE, with no comparable activity in 2025. In addition, we recorded lower fair value losses in 2025 on assets acquired in connection with recoveries of paid claims related to the Zohar CDOs, offset by higher foreign exchange losses as a result of the dollar weakening and lower net investment income. The company’s adjusted net income was $23 million, or $0.46 per share, for full year 2025 compared with an adjusted net loss of $184 million, or a negative $3.90 per share, for full year 2024. The favorable change was primarily due to the loss and LAE benefit at National in 2025 related to its PREPA exposure. MBIA Inc.’s book value per share decreased $3.28 to a negative $44.27 per share as of 12/31/2025. This decrease was primarily due to our consolidated net loss for full year 2025. In addition, included in MBIA Inc.’s book value as of 12/31/2025 is a negative $53.35 per share of MBIA Insurance Corporation’s book value. I will now spend a few minutes on our Corporate segment balance sheet. The Corporate segment, which primarily comprises the activities of the holding company, MBIA Inc., had total assets of approximately $653 million as of 12/31/2025. Within this total are the following material assets. Unencumbered cash and liquid assets held by MBIA Inc. totaled $357 million, compared with $380 million as of 12/31/2024. The decrease was largely due to the repayment of MBIA Inc. 7% debt that matured in December 2025 and the payment of operating expenses, partially offset by a dividend received from National. In December 2025, National declared and paid an as-of-right dividend of $63 million to MBIA Inc. In addition to these unencumbered cash and liquid assets, the Corporate segment’s assets included approximately $183 million of assets at market value pledged to Guaranteed Investment Agreement contract holders, which fully collateralized those contracts. Now I will turn to the insurance companies’ statutory results. National reported statutory net income of $5 million for 2025 compared with a statutory net loss of $10 million for 2024. The favorable variance was driven by lower loss and LAE in 2025 related to National’s PREPA exposure. For full year 2025, National reported statutory net income of $88 million compared with a statutory net loss of $133 million for full year 2024. The favorable change was primarily due to a loss and LAE benefit of $35 million in 2025 compared with an expense of $196 million in 2024. The loss and LAE activity in both years were mostly related to National’s PREPA exposure. National statutory capital as of 12/31/2025 was $937 million, which was up $25 million compared with 12/31/2024. The increase was largely due to National’s statutory net income for full year 2025, partially offset by the $63 million as-of-right dividend paid to MBIA Inc. As of year-end 2025, claims-paying resources were $1.4 billion. Now I will turn to MBIA Insurance Corporation. MBIA Insurance Corporation reported a statutory net loss of $7 million for 2025 compared with statutory net income of $4 million for 2024. The net loss for 2025 was driven by losses reclassified from surplus related to the dissolution of MBIA Insurance Corporation’s Mexican subsidiary and higher losses and LAE compared with 2024. In last year’s fourth quarter, losses and LAE related to RMBS exposure were mostly offset by a benefit related to recovery estimates on the Zohar CDOs. For full year 2025, MBIA Insurance Corporation reported a statutory net loss of $26 million compared with a statutory net loss of $64 million for full year 2024. The lower net loss in 2025 was primarily driven by lower losses and LAE, largely related to estimating recoveries of paid claims associated with the Zohar CDOs. As of 12/31/2025, the statutory capital of MBIA Insurance Corporation was $79 million, down from $88 million at year-end 2024, due to its net loss for full year 2025 partially offset by an increase in the value of investments recorded directly to surplus. As of year-end 2025, claims-paying resources totaled $317 million. MBIA Insurance Corporation insured gross par outstanding was approximately $2 billion as of 12/31/2025, down about 13% from year-end 2024. The decrease in gross par outstanding was primarily driven by regular amortization of the insured portfolio. We will now open for questions. Operator: If you have a question at this time, please press 1 on your telephone keypad. If you wish to remove yourself from the queue, press 2. We ask that when posing your question, you please pick up your handset to allow optimal sound quality. We will take our first question from Thomas Patrick McJoynt-Griffith with KBW. Please go ahead. Thomas Patrick McJoynt-Griffith: Good morning. The fourth quarter often presents a time or an opportunity for a special dividend, and that is based off of the special dividend that we saw out of National in 2023. This most recent fourth quarter, did you explore the potential for a special dividend? Are you having conversations with your regulators about potentially distributing some of the capital beyond just the as-of-right dividend? William Charles Fallon: Tommy, with regard to a special dividend, first of all, there is nothing in particular about the fourth quarter. National, just given its history, has only actually requested and had one special dividend, which happened to be in 2023. It is something that we are looking at all the time, as you know, and can appreciate. As the portfolio runs off, and in particular as our PREPA exposure comes down, which it did substantially in the second half of last year, the likelihood and the amount of a potential special dividend goes up. So it is something that we are looking at all the time. There is no information we have at this point. The information that we would provide is that we have received approval for a special dividend and have distributed to the holding company. But it is something that, again, we are looking at all the time, and I think since the last special dividend, circumstances have improved in terms of the likelihood of a special dividend. Thomas Patrick McJoynt-Griffith: Thanks for that. The other important story that people are focused on surrounds the strategic process potentially including a sale of the company. What are the latest updates there in that process as you explore that opportunity? And I have asked this before, and I will ask it again. Do you think in a scenario where there is a sale, does the company just sell National and then take the proceeds and sort of wind down the rest of the operation? Or would the strategic action be to sell the entire holding company and its subsidiaries included? Thanks. William Charles Fallon: As you know, and as a reminder to other people, we did look at selling the company a few years ago. Based on the feedback during that process, we concluded it would be beneficial for our shareholders for us to go get a special dividend and then distribute money to the shareholders and also to hopefully further resolve or make progress with regard to the PREPA restructuring. We were successful with the dividend, properly reduced our exposure. I cannot say that there has been much real progress in terms of resolving PREPA, but we are optimistic that something will develop this year. With regard to whether to sell the entire company or whether we would sell just National and then, to your point, deal with all the other pieces, whatever is best for the shareholders is what we will do. So in a sense, all options are on the table. To sell the company, in a sense, is the cleanest way to do it. But, again, if there is more value for shareholders by doing it via its components, then that is what we will do. Thanks. Operator: Thank you. Our next question will come from John Adolphus Staley with Staley Capital Advisors. Please go ahead. John Adolphus Staley: Thank you. Bill, I have a couple of quick questions. First of all, with regard to PREPA and the bonds that you sold, is there a bid out there to sell the rest of your exposure, and if so, how would it compare to the price you got the last time? William Charles Fallon: With regard to the PREPA exposure that we sold last year, John, those were fully paid CUSIPs. We are now in a situation where we really do not have much left. In fact, we have a maturity coming up later this year. We have the $425 million of exposure. That is not something that can be sold via the custodial receipt that we did last year in the near term. John Adolphus Staley: Secondly, with some of the political trends that are happening—New York, California, all the nonsense up in Minnesota—are you getting any pressure from your auditors of a higher valuation of reserves related to non–Puerto Rican credits? William Charles Fallon: The short answer is no. As you can appreciate, we look at everything in the portfolio constantly. We are quite comfortable with the way everything is proceeding at this point, and there has been nothing that has been identified. I understand what you are talking about, but nothing has been identified with regard to specific credits that would cause us to take additional reserves because of those activities that you referred to. John Adolphus Staley: And with regard to MBIA Insurance Corporation, it is dwarfed, where its statutory capital is, by its guarantees that are still out there—whatever it was, $2 billion or something like that. What has to happen for you to wrap that up so that it is no longer a part of—You have Puerto Rico, you have that subsidiary in which there is no liability back to MBIA Inc. But why do you not just get rid of it? Wrap it, liquidate it, or whatever you have to do, or is it that regulators will not let you do that? William Charles Fallon: There is some of both of those things. The runoff has occurred sort of as we expected. To your point, there is $2 billion left. There is one major restructuring in there, which is referred to as Zohar, which was a deal that we had wrapped. That one is going to take a little bit of time. Once that is resolved, then, to your point, there is not much left with regard to the remaining runoff of that company, and so there may be ways after that to accelerate the runoff of MBIA Insurance Corporation. John Adolphus Staley: So you are still managing a recovery process related to collateral with Zohar? William Charles Fallon: That is correct. John Adolphus Staley: I know that Judge Swain, as I understand it, is pushing for the private parties to resolve things. What is keeping this thing from being wrapped up? Puerto Rico is still being denied access to the municipal market, and electricity is still going off. It just seems so crazy. They are sitting there with all that money down there. I do not understand what is stopping it. Is it just politics? William Charles Fallon: I think in the near term, as I referred to in my comments, you have the situation with the Oversight Board, which is the one negotiating the PREPA restructuring on behalf of the Commonwealth. There are four board members. As you know, there was the administration action last year to remove six of the board members. Three took it to court and were reinstated. Either the four existing board members need to take the initiative and start negotiating again with the bondholders or, when the administration names people to those open three spots, perhaps then that will be the catalyst to restarting negotiations. That is really what the creditors are waiting for. As soon as that happens, I think you will see some real progress. John Adolphus Staley: Is there political pressure that you are aware of to get those six seats filled? Is there somebody who is an advocate for that in Congress? William Charles Fallon: There are two parts to it. With regard to the three that challenged their termination in court, there are lawsuits ongoing to remove those three still. I think the administration is taking the position that they should be removed and, therefore, those three spots perhaps are a little uncertain for a period of time. With regard to the other three spots, I do not have an answer for you as to when the administration will fill those. Again, we would hope it would be sooner rather than later. John Adolphus Staley: So the issue gets down again to presidential authority. William Charles Fallon: The President needs to approve all appointments to the board. John Adolphus Staley: Yes. But he also required them and said somehow some guys figure out that they still should be on the board. It is amazing to me. It must be driving you nuts. William Charles Fallon: We understand your frustration. Trust me. John Adolphus Staley: Thank you, Bill, very much. Thank you. Operator: Thank you. As a reminder, that is star one to ask a question. Our next question will come from Patrick Stadelhofer with Kahn. Please go ahead. Patrick Stadelhofer: Good morning. Good morning. Just a question on this extraordinary dividend. It has been seven months since the custodial receipts were sold and kind of de-risked the whole PREPA exposure. I am just curious, what is the gating item to actually trying to get one, given that you have said the circumstances have improved and you are looking at it? What is it going to take you from looking at it to acting on it, especially with other progress somewhat stalled in PREPA? Thank you. William Charles Fallon: As I mentioned, with regard to the special dividend, it is something we are looking at all the time. We do not get into where we are in the process, whether we started a process, or feedback from the regulator. Our view is those are discussions between us and our regulator. We talk to our regulator about lots of issues on a regular basis. When we have approval for a special dividend and when it has been distributed, as I mentioned earlier, we will announce that that has taken place. Again, the things to look at are the runoff in the portfolio and, in particular, the reduction in the PREPA exposure. For those people who are familiar, it is a process you go through with the regulator, which does take some time. Operator: Alright. Patrick, your line is still open. Did you— Patrick Stadelhofer: No. Thank you. Operator: Thank you. At this time, I am showing no further questions. I would like to turn the floor back over to Gregory R. Diamond for any additional or closing remarks. Gregory R. Diamond: Thank you, Chelsea. And thanks to those listening to our call today. Please contact us directly if you have any additional questions. We also recommend that you visit our website at mbia.com for additional information about our company. Thank you for your interest in MBIA Inc. Good day and goodbye. Operator: Thank you. This brings us to the end of today’s meeting. We appreciate your time and participation. You may now disconnect.
Operator: Good morning, everyone, and welcome to Docebo Inc.'s Q4 2025 earnings call. All participants are currently in listen-only mode. We will open up the lines for a question-and-answer session momentarily. I would now like to turn the call over to Docebo Inc.'s Vice President of Investor Relations, Mike McCarthy. Please go ahead, Mike. Mike McCarthy: Thank you, Julianne. Earlier this morning, Docebo Inc. issued its Q4 2025 results. The press release, which included a link to management's prepared remarks, and our quarterly investor slide deck, were all posted on our Investor Relations website. This morning's call will allow participants to ask questions about our results and the written commentary that management provided this morning. Before we begin this morning's Q&A, Docebo Inc. would like to remind listeners that certain information discussed may be forward-looking in nature. Such forward-looking information reflects the company's current views with respect to future events. Any such information is subject to risks, uncertainties, and assumptions that could cause actual results to differ materially from those projected in the forward-looking statements. For more information on the risks, uncertainties, and assumptions relating to forward-looking statements, please refer to Docebo Inc.'s public filings, which are available on SEDAR and EDGAR. During the call, we will reference certain non-IFRS financial measures. Although we believe these measures provide useful supplemental information about our financial performance, they are not recognized measures and do not have standardized meanings under IFRS. Please see our MD&A for additional information regarding our non-IFRS financial measures, including reconciliations to the nearest IFRS measures. Please note that unless otherwise stated, all references to any financial figures are in U.S. dollars. Now I would like to turn the call over to Docebo Inc.'s CEO, Alessio Artuffo, and our CFO, Brandon Farber. Julianne, can you open up the Q&A queue? Operator: Certainly. We ask that analysts please limit themselves to two questions and return to the queue for any follow-up. Thank you. Our first question will come from Ryan MacDonald from Needham & Company. Please go ahead. Your line is open. Ryan MacDonald: Congrats on a nice quarter. Alessio, maybe the first one for you. It was really interesting to read in the prepared remarks about the potential power of integrating Harmony Search with 365 Talents, as it seems like, over time, the search data that you can get from Harmony Search and identifying skill gaps, and then integrating that with 365 Talents, could potentially help close those skill gaps. I think, as the products are integrated, could you talk about where the integration efforts stand on 365 Talents? And do you also see a similar potential integration? And then, as we think about 2026, how close are we to that vision state? Is there a sales training to do that cross-sell motion going into place for this year? Thanks. Alessio Artuffo: Good morning, Ryan, and thank you for the question. First, let me tell you I am extremely excited to be able to talk about our acquisition of 365 Talents. It has been an important milestone for us. You are correct in saying that the integration between Docebo Inc. and 365 Talents is strategically relevant for us, if not because, among other reasons, it gives us an incremental data moat which, in the agentic era, is a very critical aspect of our strategy. When it comes to the integration, integration is designed to be a phase one. Let me ground it in the current times. We already have customers that we share. We already have an integration that is in production. We are aligned on our ideal customer profile. 365 Talents operated in the strategic enterprise segment, and their customers are very complex organizations with very complex people workflows. So, when it comes to integrating the data of Docebo Inc. and the data flow and the opportunities, there are many. What I would say is, one of the things that I loved about 365 Talents, and one of the reasons that led us to this acquisition, is also their AI-forward technology and thinking. To give you an example, they already have built agents that allow building entire job architectures—a job that would have required months with consultants even a couple of years ago—be done in an instant. Their agentic experience will accelerate our integration between the two platforms. You asked about our roadmap path and what it means for us. So a couple of examples of integrated work that we envision. Number one, imagine this skill architecture that, again, like I said, gets built via agents. This is available now. It is there. Learning programs execution happens within Docebo Inc. But as skill gaps are identified and detected as part of the regular workforce planning, skills are constantly assessed, and skills remediation happens in an integrated way with Docebo Inc. Imagine an agent that is capable of understanding where the workforce stands against certain business goals and the learning machinery, the agent that creates content to continuously produce the material that remediates and to get better. That is the power of the integration between Docebo Inc. and 365 Talents. Brandon Farber: Ryan, just on the second part of your question of the sales motion and the cross-sell. So, really, on day one, right after the acquisition, we started cross-training our sales staff. Our acquisition thesis remains that there are going to be three motions. We are going to continue to sell 365 Talents on a stand-alone basis. We are going to sell back to our existing customer base and net new customers. We are going to sell a combined Docebo Inc. and 365 Talents suite. We do expect our existing customer base to start attaching on 365 Talents in H2 of this year while we cross-train our staff in H1. Ryan MacDonald: Super helpful color there. And then, maybe, as we think about taking a step back on AI, clearly you have the product vision and roadmap out there. But, obviously, in the markets over the last several months, there have been plenty of fears and concerns about what AI can do in terms of disruption for broader enterprise software. I am curious if you are seeing any signs of market fears and reactions in the field. What are customers saying about AI and their internal initiatives, and how is that affecting the budgetary environment as you look ahead into 2026? Alessio Artuffo: The demand environment has been very strong. The field is constantly helping us better qualify how our customers in the L&D, in the learning management world, think about AI within their organization. There is no doubt we live in a transformation phase. But, in terms of the sensibility of our solution, I have done this for now over 20 years. I would say that there are a few things that I am absolutely clear and sure about. The number one thing that I am sure about is that what we have built at Docebo Inc., now combined with 365 Talents and the evolution of what we are doing, is incredibly hard to build and replicate. You just do not cloud code this stuff overnight. That is pure marketing speak for that type of concept. I will add to that. I do spend nights in cloud code. I stopped sleeping because of that. What I would say is when you go beyond the surface of your first 15% to 20% creation of a productive front end, the enterprise piping required to deliver at scale to hundreds of thousands and millions of users—things like unsettled things like database-specific multi-tenancy, role-based permission—all this stuff is what actually powers an enterprise application. I really like to emphasize that because beyond the surface, there is a lot of hard coding piping that folks do not talk about on LinkedIn. Second, I would say, Ryan, what we are hearing from customers reflects our thought and knowledge of the industry, which is that enterprises effectively are evolutionary and not revolutionary, and particularly in L&D. Radical change is slow to come by. Now we are not standing still. We own the data. We own the compliance data, the skills chart data, and no LLM owns any of that. That data becomes then what? The catalyst for those agents to take action. Agents are not magicians. An agent without data is like a Ferrari with no fuel. What we do is make sure that our data structure and data investments are very strong. On top of that, we build the agentic layer so that now we have the data moat, the agentic moat, and the combination of the two with our enterprise experience becomes the proof that we are going to be winners in this market. Ryan MacDonald: Really helpful color. Thanks again. Operator: The next question comes from George Sutton from Craig-Hallum. Please go ahead. Your line is open. George Sutton: Alessio, I wanted to talk about your DNA. So growing 9% in Q4 and guiding for 10% to 11%. My sense is the DNA of this company is built very differently for much more significant growth. So I wondered if you could discuss that—if anything has changed there. And then I wanted to pair that with your substantial issuer bid and your desire to buy a lot of stock down at these levels. Alessio Artuffo: Love the DNA question. I think your intuition is right in the sense that, over the years, we have continued to operate the company with a few drivers that, when you look at those distinctly, make up what you are seeing reflected in the data. What are those drivers? Number one, staying ahead of the curve in the market in terms of technology advance. That will fuel growth as a result. The investments in AI that we have made, not just now, but over the past few years, are aimed at that. This is not a story of roll-up. This is not a story of building a legacy business. It is a story of continued evolution. Second, disciplined execution. Innovating and building great products and being on the forefront of AI, in our point of view, should not be inconsistent with great financial discipline and focus on profitability. We believe that is something that we have gotten very good at, and we can be even better at. So I do love this nature of a business that has the technology and the fuel to accelerate growth moving forward while adding a rather strong profitability profile. And that is where I would end. Brandon— Brandon Farber: 2026, if we think about how we reaccelerate, how we beat our guide, we really look at our business previously in three ways and now four ways. Firstly, mid-market. Mid-market had a really strong 2025. We called it out for three quarters in a row. We expect that performance to continue, but that is not a real lever to reaccelerate growth. EMEA, again, had two strong quarters in a row. We do expect that to continue. Enterprise, this is the real lever for us to reaccelerate and beat our guide. To be completely transparent, we were not happy with our performance in 2025. Some of it was macro. Some of it was performance. Our guide does assume that we perform similarly in 2026 to 2025. We are seeing early signs that that business is turning. The demand environment is there. Execution is getting better. Really, Q1, it is time for us to just execute. We have the demand. We have the pipe. Alessio Artuffo: And now it comes down to execution. Brandon Farber: The last one—or, sorry, the last two—is government. We are still in the early innings of government. If I could use a hockey reference, the national anthem has not even finished singing. From partnerships to pipeline to RFPs, we are extremely early in this motion. We just became FedRAMP at the May. We are seeing pipeline exceed expectations. We have the pipeline to win some large whale deals in Q3. But when you think about how ARR converts to revenue, our baseline assumption is that ARR comes in September 30, and we really have three months of revenue. So not a significant revenue acceleration for 2026, more 2027. And then March, I would say we already have a fairly aggressive growth target embedded within the guide. So, really, going back, enterprise is the main lever to beat our guide. From an SIB perspective, if you really just take a step back, SIB is designed with all shareholders in mind. It provides every shareholder an equal opportunity to participate. We filed our circular in late January, early February. The view is clear, and it remains unchanged today. We believe the trading price of our shares does not reflect the underlying value of our business and our future prospects. From a mechanics perspective, the SIB is the most efficient path to meaningfully buy back shares. Under NCIB, due to our public float and the amount of shares traded daily, we are actually quite limited. To take out 3,600,000 shares, it would take over two years under NCIB. Brandon Farber: So, and lastly, I would just note that even after the SIB, even after the acquisition, our net leverage remains low. We still have flexibility to allocate capital. George Sutton: Wonderful. Great. Just one quick, more narrow question on your QSR win. Understanding that organization is doing this through franchises, I am curious if your deployment will be mandated by the entire system, or is this a hunting license situation? Brandon Farber: Sorry. Can you repeat that last point? George Sutton: Is this something mandated by the overall company so all the franchisees take it? Or is this a hunting license where you need to go sell individually to the franchisees? Brandon Farber: Nope. It is company-wide, corporate, and all franchisees. George Sutton: Super. Thank you. And you know the sandwich name, or we can see it? Operator: Our next question comes from Josh Baer from Morgan Stanley. Please go ahead. Your line is open. Josh Baer: Great. Thanks for the question. Brandon, you just mentioned not being fully pleased with 2025, but some of those same assumptions around that execution are embedded in 2026. Could you unpack that a little bit more? What exactly are you assuming in the 2026 guidance with regard to converting that pipeline, contribution from new customers, expansion from existing customers? If you could talk about the assumptions embedded in that guidance a little bit more? Alessio Artuffo: I think it is Alessio speaking. Our fundamental point of view is grounded on the observation of the work that our teams have been doing over the past few quarters and the leading indicators that are resulting out of that work. If you recall, a couple of quarters ago, we instituted a new leadership team in the go-to-market team. After Kyle Lacy joining Docebo Inc. as CMO, subsequently, a new CRO was appointed in Mark Kosoglow, and we have effectively reshaped our GTM motion as a result of these leaders coming in. In this new GTM, it brought improvements across the board. I would say that we have focused on a number of different areas where we thought we could do better: process reengineering, people optimization, and, notably, a deliberate strategy to focus on qualitative demand as opposed to quantitative demand. What that means is we have taken steps to be deliberate in the leads that we believe are most suited to win, that belong to our category, and have implemented processes to pass on to certified partners very small business leads that are not necessarily any more in line with the strategy of Docebo Inc. We are a mid-enterprise to strategic enterprise company, and we need to focus there. That exercise is paying off. We are seeing that in the leading indicators about enterprise pipeline. We are seeing that in the execution in the field. The comments from Brandon are the result of that observation. We have data, and that informs our belief that the enterprise segment and government will be catalysts for our reacceleration. Josh Baer: Okay. Thank you, Alessio. Just to follow up there with some of the refocused go-to-market, looking at the ACV for new customers, which was down, is there anything to read into that? Is that a result of the reshaped go-to-market? Or, obviously, just one quarter of that new customer metric can move around a lot. How should we think about that? Brandon Farber: It is really our mid-market team firing on all cylinders. When you look at that metric, it is heavily skewed by the number of customers you sign during a given quarter. Enterprise wins tend to be one unit at a high value; mid-market tends to be many units at a lower value. So the mix overall tends to skew it from quarter to quarter. Generally, we were actually quite pleased with all our segments in Q4. As mentioned in our prepared remarks, it was the strongest gross bookings we have had since 2021. The business performed. As everyone knows, we had some structural headwinds that masked the top-line ARR growth with the wind-down of Dayforce and the loss of AWS coming in effect in Q4. It is just really a matter of go-to-market performing really well in Q4. Operator: Our next question comes from Erin Kyle from CIBC. Please go ahead. Your line is open. Erin Kyle: Hi. Good morning, and thanks for taking the questions. I wanted to ask and dig into the net dollar retention for 2025, down year over year to 99%. I expect a lot of that was largely due to AWS. Can you unpack that number a bit for us? Brandon Farber: You are exactly correct. Excluding AWS, we actually would have been up 1% year over year, so we would have been at 101%. There are a lot of good trends within NRR. We saw sequential three-quarter improvements in net retention, excluding AWS, from Q2 to Q3 to Q4. When we look at 2026, from a retention perspective, we forecast four quarters out. Again, we are seeing strong trends in Q2, Q3, Q4 into 2026 as well. One thing is when we look at Q4, even with record gross bookings, we have talked about how typically our mix of gross bookings is 65% new logo, 35% expansion. In Q4 it was 60% new logo, 40% expansion. Our expansion delivered in Q4. Our ideal mix is 60/40 or even 45/55. As we all know, expansion is much more efficient from a cost perspective. Acquiring new logos is very expensive. We are really focused on the expansion perspective. 365 Talents really helps us accelerate that. We are focused on improving that NRR in 2026. Erin Kyle: Brandon, that is a lot of helpful color there. Maybe one more for you, or Alessio, if you can give us an update on the AI credit pricing model that you talked about last quarter. Is consumption pricing something you have been looking at moving towards more broadly? Or how should we think about that? Mike McCarthy: Hi, Erin. Alessio Artuffo: Yes, it is Alessio. One of my favorite topics. Let us go. AI credit pricing and, more broadly speaking, the topic of monetization are hot topics in the industry right now. We have spent a considerable amount of time lately thinking through this deeply. I will share my thoughts, including credits, but they need to be taken in the context, more broadly, of the overall AI monetization strategy that is becoming a very pervasive narrative these days. First, let me start head-on. We are testing AI credits at Docebo Inc. We have maybe a month and a half worth of data, so it is early days. The results of that work have been a mixed bag, frankly. In some instances, customers, particularly technology-first customers, are receptive to the idea. In other instances, and frankly more, there has been pushback—pushback that is CFO/CIO-led—resulting from their desire for predictability and discomfort with non-strict controls and forecastability. That is where we stand with credits. If that is okay with you, I would like to broaden that question to our point of view on the narrative on pricing because the argument that I am hearing a lot of people bring up is, “In this new AI-first era, per-seat pricing is the legacy model.” That is the general sound of it. We went and dug deep. We looked at over 30 companies. We analyzed AI-native LLMs, etc. What we found out has been really interesting. The number one pattern has been the majority of the companies across AI-native companies are using what we would call a hybrid model, which is what Docebo Inc. has today: a mix of per-seat pricing combined with credit pricing. The second finding was that a lot of AI-native companies actually do not have any concept of credit pricing or outcome pricing; they are per-seat only. We have been analyzing the why, and that is really simple. Customers will not buy it, and their use case and their industry do not lend themselves to a full outcome or a full credit-based model. I am really passionate about this topic. We are going to continue exploring new avenues. I do believe there is room for innovation on the pricing side in AI. I have learned over the past 20 years that the best pricing model is the one that meets the needs of the company with the business process of your customers. What we are not going to do—on the trend basis that everybody wants credits to be the same—is to shove a pricing model down customers' throats. Rather, we would work with customers to understand how their buying trends are, and we listen to the field. We do a lot of audience insights in our customers' calls. Great topic. More to come. We will report back on our findings as we continue to explore credits. Erin Kyle: Thanks, Alessio. That is a lot of helpful detail there. I will pass the line. Thank you. Brandon Farber: Thank you, Erin. Operator: Our next question comes from Robert Young from Genuity. Please go ahead. Your line is open. Robert Young: Hi, good morning. First question for me will be on the force reduction that is after the quarter. It seems both optimization and R&D, but I am trying to get a better idea of what the drivers are there—if that is just duplication after the acquisition of 365 Talents, or if it is a more permanent reduction. Are you preparing for a shift towards hiring up in AI? Maybe if you could talk about what that implies on the strong EBITDA margins you reported this quarter. Should we expect that to continue to grow higher on the back of this force reduction? Alessio Artuffo: Rob, good morning. Robert Young: Good morning. Alessio Artuffo: Our restructuring followed a few specific criteria. First, the most important fundamental is we continue to use performance as a strong mechanism to grade ourselves against our own expectations and against our shareholders' expectations. Our job is to continue to have the best people in season to deliver against those expectations. That is an evergreen rationale that applies here. Second, a more targeted action was taken to accelerate something that is not new, which is moving our product capabilities closer to our customers. As you very well know, over 70% of our customers are in North America, and very few people in product are in North America. That distance, that has accumulated between our customers and our product culture, is one that we believe needs to be remediated and addressed, and so we have taken steps to address that. We have chosen to collocate these teams in hubs like Toronto. Just to be absolutely clear, that does not mean that we are exiting or developing a decreased presence elsewhere; that remains foundational to our products. It does not mean that there is any action that has to do, as a derivative, with the March acquisition. We simply want to give our customers the confidence that we have a product team and organization that is also closer to them. As a result of that, we are not pausing anything to rebuild. We are accelerating. We have retained our core architectural leaders to ensure continuity. This transition will not delay—if nothing, will accelerate—our agentic roadmap. In general, as we tap into new markets and as we have the ability to hire people in new territories, we are also excited about the opportunity to improve our hiring profile and continue to augment the skills of the people at Docebo Inc. I think Brandon wants to add something on the EBITDA question. Brandon Farber: Hey, Rob. On the EBITDA side, as Alessio mentioned, the main goal of the reduction was not for cost-savings. Although we are expanding EBITDA margins, the main reason for that is discipline throughout the business while we grow it. When you look at the guide relative to how we performed on EBITDA in 2025, it is about 2% EBITDA leverage year over year. When I think about that at a really high level, there is going to be 1% leverage gained in G&A year over year. That is just continued discipline that we have talked about for years within G&A. Then roughly half a percent of leverage in sales and marketing and R&D, where we continue to focus on sales efficiencies and gaining leverage in R&D as we continue to use various tools that allow us to become more efficient. Robert Young: Okay. Thanks for all that. Second question, adding on to a previous question around the QSR and the casual dining traction. You have had a lot of traction in that space over the last five-plus years. Can you talk about how much opportunity is left and what the competitive dynamic looks within that specific end market? It seems to be driving a lot of new customer growth over the last couple of years. And, if I can, quick question. In the gross bookings metric you gave, the 12.5% growth, does that include Dayforce and AWS, or is that just Dayforce? And then— Brandon Farber: Alessio, I will let you answer the question. Sorry about that. Alessio Artuffo: I will start with the QSR part of the question, and then I will pass on to Brandon the gross ARR question. You are right. QSR is a relevant market for us, one in which we have continued to win landmark logos. That is really the result of a couple of things: a focused sales strategy and a better defined targeting of the accounts that have a higher likelihood to convert with Docebo Inc., and a deliberate product strategy that addresses some of the peculiar needs that this industry has. Some of those include the way they report the data. Others include the way they organize their personnel across franchisees and corporate offices, and that requires rather complex ways of mapping users across the geos, entities, and so on and so forth. By the way, let me use this example to reference back to the defensibility of a true enterprise-grade system. This stuff is really complex. It is multilayered. It takes years to build. Back to QSR, we believe the opportunity ahead of us is pretty significant. We have in-roadmap capabilities that further make us even more compelling. The QSR space requires a deep usage of adaptive and mobile technology. We are thinking and rethinking our mobile strategy in that regard to have more frontline workers technology readiness available. As part of that offering, let me finish by saying there is a module of Docebo Inc. called AI Virtual Coaching that is, still, rather early days but has the potential to become an absolute killer in use cases for front-end workers and QSR-like. We are very excited about it. We are investing in it. We are going to put more resources and more effort into it to accelerate its development. We believe the QSR opportunity is significant for us. Brandon Farber: Rob, if we think about the top 10 QSRs, we have about four of them as customers. There are still the top four largest QSRs that we do not have. There is still a large market opportunity for us to continue to gain. On your question on gross bookings, the 12.5%, that is actually just our total ARR, so it includes gross and churn. That includes AWS. If you are looking for a metric of our growth excluding both Dayforce and AWS, that was closer to 14.5%. Robert Young: Thanks a lot. Operator: Our next question comes from Richard Tse from National Bank Capital Markets. Please go ahead. Your line is open. Richard Tse: Yes. Thank you. With respect to the environment in general, has this AI narrative impacted your sales cycles at all? Is there a swell building as your prospective customers evaluate what they want to do? The environment is changing so quickly. I wanted to get your perspective on that. Alessio Artuffo: Richard, we really monitor our demand in multiple ways. If the question is, are you seeing headwind relative to this AI-first narrative, the answer is no. As far as our sales cycle and our velocity of execution, one of the metrics that I am keeping an eye on in that area is exactly how long it takes us in different segments to get a deal done—from qualification to close. The recent data is incredibly encouraging. We have shaved off weeks of sales execution, particularly in our mid-market and mid-enterprise space. When you do that, what it effectively means is you are almost gaining a month of selling action in the year. That has been very significant, and we are taking steps to improve that even further. Richard Tse: Okay. Thanks. With respect to capital allocation, with you continuing on the SIB, there is a high degree of conviction. Post that SIB concluding, if the stock does not move higher off the back of that, how are you thinking about capital allocation? Would you consider additional buyback programs? Or are you evaluating acquisitions? Ultimately, what is your comfort on leverage ratio here? Brandon Farber: It is a great question. On the acquisition front, doing an acquisition the size of 365 Talents in 2026 is unlikely. We have a lot of things to focus on for 2026. We want to focus on execution and reaccelerate Docebo Inc. organically, and really perform and execute on our acquisition of 365 Talents. From a buyback perspective, if our shares continue to trade at depressed valuations, we will continue to buy back shares under the SIB, even after the SIB. From a net leverage ratio, when we think about net cash to EBITDA, we certainly get very uncomfortable above 3. Under 3, we are more comfortable. So that is our line in the sand. Richard Tse: Okay. Thank you. Operator: Our next question comes from Ken Wong from Oppenheimer. Please go ahead. Your line is open. Alessio Artuffo: Fantastic. Ken Wong: Alessio, I wanted to touch on 365 Talents. This is the largest M&A at the company. M&A is not exactly a competency or a muscle that you guys have. What is your comfort in your ability to absorb such an acquisition? Any appetite for additional M&A beyond this? Alessio Artuffo: I would say a number of things on this. The discipline of skills intelligence is actually very adjacent relative to the learning space. There are obvious overlaps between the two. You are absolutely right in saying that the use cases and, in some instances, the persona buyer can vary. That is why we have taken a deliberate stance of maintaining, for a period of time, the 365 Talents entity and brand active as we implement both the integration from a product capability standpoint—that is priority number one—and, in parallel, we integrate the commercial motions. The enablement that is necessary to blend the organizations is ongoing and will take time. In the meantime, we have structured our organization at Docebo Inc. with resources that are going to be experts and are going to live within the 365 Talents world to become the translators of the value of 365 Talents in our market. The other thing that I would say about this acquisition is, as Brandon briefly mentioned earlier, that I think is really important: as we have this incredible base of over 3,500 customers active, one of the objectives was also to have an opportunity to differentiate and have another entry point other than LMS in these organizations that may already have an LMS in place. Dismantling an LMS setup from a large enterprise can be years' worth of work. Our opportunity here, with effectively our first true second product, is to knock at the door of organizations and offer a value that integrates with their existing LMS. As we enter that secondary door, we can then consolidate that account under a unified strategy. You can appreciate how the adjacency of the capabilities and the integration strategy—from a product and commercial standpoint—lends itself to what will be a very successful second-product story that will have an impact on our NDRR in the future. Ken Wong: Fantastic. Really appreciate the look into the strategic rationale. Brandon, maybe building on that. As we think about the fiscal 2026 guidance, any change in your philosophy here as you have to think through some of the moving pieces that go along with March? The ability to integrate, obviously operating two teams in parallel—how should we think about what prudence was baked in? Brandon Farber: From a March perspective, I would say we did not take a conservative approach. We had a very tight business case. We are factoring in high growth from that business, and we are expecting to execute on that. When we think about the different aspects of revenue, talking about Dayforce, it is going to be down to roughly 3% to 4% of our total revenues. We publicly disclosed that we will generate roughly $9,000,000 pro rata from 365 Talents. We continue to put no deals greater than $1 million ARR within our guide. We do have a number of those in our pipeline, but it has been over 12 months since we have closed one, so we feel like the prudent aspect is to exclude that from our guide. Just as I mentioned, government—while it is in our guide—it is only there for three months, given the seasonality of the Fed spend geared towards September 30. Those are the main aspects that I think of from a revenue perspective. Ken Wong: Got it. And then just a quick follow-up. Any top-line or bottom-line synergies between the two orgs that are factored in? Brandon Farber: Bottom line, no. Top-line synergies are really just what we talked about: going back to the Docebo Inc. base and selling 365 Talents to our current customer base. Ken Wong: Okay. Fantastic. Thanks a lot, guys. Operator: Our next question comes from Matt Van Vliet from Cantor Fitzgerald. Please go ahead. Your line is open. Matt Van Vliet: Yes. Good morning. Thanks for taking my question. Now that you have the go-to-market team reorganized like you wanted, but with the addition of the federal opportunity maybe being a little bit more wholesome than it was before, where do you feel like you are at in terms of sales headcount? What is the plan baked into the guide for 2026? Longer term, how do you think about headcount additions correlating with top-line growth? Or can you decouple those a little bit using AI tooling and other efficiency mechanisms? Brandon Farber: From a sales headcount perspective, on the government side, we invested in 2025 to get additional quota carriers in seats. We feel like, at the start of 2026, we are well set up from a quota perspective. The focus is to win more business with the same amount of headcount. We are really focused on sales productivity and sales efficiencies, using tools to improve those efficiencies. In 2025, I think we ended the year on a good note from a sales efficiency perspective. We started the year fairly inefficient in 2025. We are continuing to focus on it. We really look at our pipeline to indicate when we need to add quota carriers. While we have a budget, we do not stick to it. We do not hire just to hire. We hire based on pipeline, and we will continue to look at that on a quarterly basis. Matt Van Vliet: Very helpful. On the other side of the AI question, how much demand—or maybe even deals closing—are you finding as customers want to have a more complete platform to train their employees on the usage of those LLMs, how to get value out of them, how to protect the organization's data from not including overly proprietary things in prompts? Is it driving a fair amount of top-of-funnel demand and potentially even deal closing? Alessio Artuffo: I would say among the trends in the audience insights that we have, AI readiness is one of those trends. Specific companies in the tech sector are more concerned with advancing their people's AI capabilities. Conversely, what we are finding is that sectors that are more institutional—like manufacturing, healthcare, and data-sensitive—are, in an anticyclical way, asking us to put in place measures for AI to be deeply controlled, enabled, disabled, toggled off. Those controls capabilities have become an absolute must requirement. We are seeing evidence of that, unsurprisingly, in the government space. It is a very interesting phase in which you have the ones that are on the offense side and want to use our technology to get smarter about AI, and the ones that are on the defense side and are still skeptical of the downsides of AI, asking us for observability, controls, and compliance. We are playing on both fronts. Matt Van Vliet: Alright. Great. Thank you. Alessio Artuffo: Thank you. Operator: Our next question comes from Suthan Sukumar from Stifel. Please go ahead. Your line is open. Suthan Sukumar: Good morning, gents. For my first question, I wanted to touch on the competitive landscape. Aside from Workday buying Sana, I am not sure I am seeing any major moves in the industry. More broadly, how are you seeing competitors respond to AI and executing on this opportunity? Alessio Artuffo: I would say this. First, I will tell you where I stand philosophically on the topic of competition. While we get educated, I like to say to the team we are incredibly self-centric and self-focused. I do not want this company to chase the others. I want us to lead the pack, innovate, and be very focused on ourselves. That is the philosophy I take on competition. When I get education from the team about what they hear about the competitive landscape, I think your reflections are correct. There is not a high degree of innovation happening. Fortunately for us, companies in our state historically have taken more prudent approaches to R&D. I would say the biggest trend that we are seeing, that I am having evidence of, is what I would call AI by marketing. AI by marketing is the art of calling everything “agents” even when they are not. What I see is a bunch of pretty simple copilots defined as revolutionary agents, when they are not. An agent is an agent by definition; it should be studied what that definition is. An agent takes decisions. An agent solves complex business problems. We understand the difference between a copilot and an agent because we are building both. I would say the market is frothy. There is not a ton of real, disrupting value. I would say Sana acquired by Workday was that one startup that had an edge in that area. Certainly, it becomes challenging for a company like that to go at the same speed and pace within a machinery like Workday. None of my business. All I know is that when we go in the market and we introduce AI capabilities, we stand out big time. That is what we are keeping on doing. Suthan Sukumar: Great. For my second question, from more of a bookings and pipeline perspective, can you speak about how contribution has been trending in your pipeline from your SI partners, like Deloitte and Accenture? Any color on how deal sizes and deal scope have been evolving when partners like these are involved? Alessio Artuffo: Yes. Straight to your question, nearly 80% of our enterprise pipeline now has a system integrator attached to it. We work with a number of system integrators from the Deloittes and Accentures of the world to smaller, medium-sized system integrators that are either regional or leaders in their respective market. That work that has happened over the years is certainly paying off. Specific to system integrators, things that I can share: we recently announced that with Deloitte, we have completed a process to enable Deloitte plus Docebo Inc. to become a product that you can purchase through the Amazon AWS Marketplace. That means Deloitte customers that want to implement a learning platform can buy Docebo Inc. in partnership with Deloitte using their AWS credits, which is a very favorable vehicle of purchasing, especially for large enterprises that often have credits to be managed and spent on the AWS side. Everybody wins because Deloitte wins, AWS wins, and, ultimately, Docebo Inc. benefits from what is a very CAC-accretive type of sale. Additionally, we are working with Deloitte and other system integrators on their own academies. What we are finding is that these system integrators are implementing academies using Docebo Inc., which means they power their own customer academy using Docebo Inc. This is becoming a catalyst for very large organizations that are approaching the system integrators. Notably, it is happening with major airlines and major transportation groups that are going to the system integrators and saying, “I would really love to implement your academy.” When they scope out what they really want, this becomes less of a broad academy play and more of a direct deal with the system integrator. It also acts like a lead-gen opportunity for us. The work that our team is doing on system integrators is very good. There is more to be done, and there are more integrators that we are talking to that we plan to sign over the next few quarters. I am pretty excited about it. Suthan Sukumar: Okay. Great. Thank you for the color. I will pass the line. Operator: Our next question comes from Gavin Fairweather from ATB Capital Markets. Please go ahead. Your line is open. Gavin Fairweather: Just on 365 Talents. I am sure you had a base deal or a base understanding about upsell and bundled deals when you did that acquisition. I am curious what market feedback you are getting from clients and prospects and how that is making you feel about the opportunity vis-à-vis your original expectations. Alessio Artuffo: Gavin, relatively early days—we are a month plus in—and I can tell you that we had certain phases of the amount of opportunities that we would generate of companies that want to look at 365 Talents. I recently posted a webinar with Loïc, the CEO of 365 Talents, and close to 1,000 people registered for the webinar. A number showed up, and a big percentage of the people after the webinar asked for a demonstration and declared in the webinar that they were looking for a solution or looking to improve their current solution. The pervasive feedback that we are getting across all calls is that companies do have a skills strategy, but it is fragmented from a system standpoint—meaning, they may have a skills module in their HRIS or HCM system, but it is not connected to the learning execution strategy in the way that we plan to do it. When we tell them a story of this automated cycle across the skill gap—the skilled engine, their workforce planning strategy, their career development, the internal mobility use case—with learning attached to it in a seamless way, we demo that to them, their reaction is incredibly positive. We are a month in. Our integration is still relatively simple, all things considered. Imagine what will happen when we execute on our real vision over the next two to three phases of integration, which will occur within the next 12 months. All of that to say the leading indicators are incredibly positive. I would also say the other thing that excites me the most is it is clear we have an enterprise-first strategy. Complex organizations get the best out of the 1,000 employees and above, which we have set for this product. We are bang on in terms of the pain that is felt from the type of customers that we want. That is product market fit, and now we just need to execute. Operator: Our next question comes from John Chao from TD Cowen. Please go ahead. Your line is open. John Chao: Good morning. Thanks for taking my questions. You mentioned Docebo Inc. has the data moat. Could you break down that data moat to help us understand what data belongs to you versus your customers? Alessio Artuffo: I would say, most simple, compliance-related forms. Then you have data relative to external use cases. You have years of use of the Docebo Inc. platform to prove that, by enabling your customers and/or your partners to do the work that they need to do, or to buy more by educating them, they indeed deliver better experiences if they are partners, or they buy more, or they stick around longer if they are customers. That data is invaluable to any marketing organization, to any revenue organization. On top of all of this, we are adding the data moat of skills. Now we are talking millions of records, as very large companies have knowledge that an individual went from a certain skill set to a new skill set over different levels over the course of years. That data, again, is not available to third-party sources. The reason why all of that data is incredibly important is that, in order to operate automation and decision-making on top of it in the form of agents, agents are not ET aliens. They are fundamentally workflow executors. They execute workflows on clean, well-organized, structured datasets. Whether the agent lives in your LLM and is called via an MCP server, or the agent is a hyper-specialized agent that Docebo Inc. has the knowledge to create and solve the very specific problems in the LMS world, it does not matter. They can live in a number of different places. What they need in order to provide an outcome is the data that resides in our systems. I hope that helps. John Chao: Got it. Thank you. My second question is in terms of the customer spending. I understand that ACV is around $60,000 to $70,000. How does that number compare to your customer's corporate learning budget? Is it around 10%, or is it a much higher number? I am asking this because one of the key arguments for AI disruption is cost savings. Mike McCarthy: It is a very interesting question, but the learning tech stack is much wider than you would expect. Every company has, from HRIS systems to LMS to skills—the tech stack is wide. If you look at a graph of the number of SaaS companies that are in the L&D or CHRO tech stack, it is wide. LMS is not the biggest one. Obviously, HRIS is by far in the lead, and it is materially higher than the cost of an LMS. That is the reality. The average ACV of $60,000 to $70,000—that is really Docebo Inc. continuing to move up and upmarket. We really look at an enterprise ticket now at roughly $250,000. While there is competition in the enterprise space, Docebo Inc. is typically very competitively priced, maybe on the top end, but compared to our competitors, we are within the range. We continue to see enterprise willingness to spend that money. There has been no pushback on price—on renewals, on new prospects. Pricing is holding strong, and companies see the value in an LMS. John Chao: Thank you so much. That is all. Operator: Our last question will come from Kevin Krishnaratne from Scotiabank. Please go ahead. Your line is open. Kevin Krishnaratne: Hey there. Thanks for fitting me in. Just one question, maybe two parts, for Brandon. Brandon, you talked about in the prepared remarks reaccelerating organic growth. I think you did 9.5% subscription growth in Q4. Maybe you can help us on what the organic growth expectation is for Q1 after 365 Talents. It is coming down a little bit, but do you expect that to stabilize and grow in Q2? Or is there anything that we should be thinking about in Q2—whether that is anything from Dayforce churn or any renewals coming up in Q2 that we need to consider? I am wondering how we think about the organic growth trajectory here. Brandon Farber: The reacceleration organic we are modeling Q3, Q4 onwards. There are a number of factors. Number one, you look at Q1 and Q2—our enterprise performance was below expectations. As we lapse some of the quarters that had material impact due to Dayforce wind-down, which was Q3 and Q4, and as we lap AWS, our ability to reaccelerate growth becomes greater and greater. In our internal models, that acceleration starts in Q3 and continues in Q4. Kevin Krishnaratne: That is super helpful. Then last piece—you talked about strength in mid-market. Enterprise is going to be a driver. Can you talk about the SMB or the low end of your base and how much of that is in your ARR? Is there anything to think of there in terms of pressures or churn at those types of companies that are more on the low end of the customer profile? Brandon Farber: ARR below $50,000, which is generally the benchmark we consider commercial or SMB, is down to about 16% of our ARR. At the same time, it is interesting to note that our gross retention in that area actually improved year over year. We were always in the mid-80s, and we actually saw a sequential improvement in the commercial segment. It is an area that we have restructured how we manage it from an account management perspective. We have put a bit more focus, a bit more investment, and we are seeing that investment pay off. That is more from an account management perspective. As Alessio mentioned, from a new leads perspective, we have new benchmarks—some go to partners, some go to us. That existing customer base below $50,000 is actually a much healthier customer base than it has been in prior years. Operator: We have no further questions. I would like to turn the call over to Alessio Artuffo for closing remarks. Alessio Artuffo: Thank you, everyone, for being on the Q4 2025 earnings call. We are very excited about the trajectory of Docebo Inc. A milestone ahead of us is called Docebo Inspire in April in sunny Miami, and we look forward to seeing you there. Thank you. Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Ladies and gentlemen, thank you for joining us, and welcome to the 1stdibs.Com, Inc. Q4 2025 earnings call. After today's prepared remarks, we will host a question and answer session. If you have dialed into today's call and would like to ask a question, please press star 1 on your telephone keypad. To withdraw your question, press star 1 again. I will now hand the call over to Kevin LaBuz, Head of Investor Relations and Corporate Development. Kevin, please go ahead. Kevin LaBuz: Good morning, and welcome to the 1stdibs.Com, Inc. earnings call for the quarter and year ended December 31, 2025. I am Kevin LaBuz, Head of Investor Relations and Corporate Development. Joining me today are Chief Executive Officer David Rosenblatt and Chief Financial Officer Thomas Etergino. David will provide an update on our business, including our strategy and growth opportunities, and Thomas will review our fourth quarter financial results and first quarter outlook. This call will be available via webcast on our investor relations website at investors.firstdibs.com. Before we begin, please keep in mind that our remarks include forward-looking statements, including, but not limited to, statements regarding guidance and future financial performance, market demand, growth prospects, business plans, strategic initiatives, business and economic trends, and competitive position. Our actual results may differ materially from those expressed or implied in these forward-looking statements as a result of risks and uncertainties, including those described in our SEC filings. Any forward-looking statements that we make on this call are based on our beliefs and assumptions as of today, and we disclaim any obligation to update them, except to the extent required by law. Additionally, during the call, we will present GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in today's earnings press release, which you can find at our investor relations website, along with a replay of this call. Lastly, please note that all growth comparisons are made on a year-over-year basis unless otherwise noted. I will now turn the call over to our CEO, David Rosenblatt. David? David Rosenblatt: Thanks, Kevin. Good morning, everyone. 2025 was the year of accountability and focused execution. The hard work and operational rigor we applied across the organization throughout the year culminated in a landmark result. We exited 2025 as an adjusted EBITDA positive company. Looking ahead, our 2026 financial plan focuses on capitalizing on these gains while delivering sustained adjusted EBITDA profitability. In 2026, we expect to deliver a third consecutive year of positive year-over-year revenue growth alongside positive adjusted EBITDA and free cash flow. While we are not providing full-year GMV guidance, we anticipate a return to year-over-year GMV growth by the fourth quarter driven by the compounding impact of our product roadmap. Our confidence in this trajectory is rooted in the defensibility of the 1stdibs.Com, Inc. model. Even in an era of AI-driven content and commerce, we believe the high-trust, high-complexity world of one-of-a-kind luxury thrives on curation, scarcity, and the human expertise of our dealers. By leveraging AI to enhance discovery while maintaining the strength of our vetted seller network, the trust of our buyers, and our complex transactional infrastructure, we see AI not as a competitor, but as a catalyst that will help unlock the full potential of our unique catalog. In the fourth quarter, GMV was $90,200,000, at the low end of our guidance range. However, adjusted EBITDA finished above the high end of our range. This performance marks a major inflection point, our first quarter of adjusted EBITDA profitability as a public company. It is important to be clear: in 2025, we made a conscious trade-off to moderate near-term GMV growth in exchange for a significantly improved adjusted EBITDA profile. This shift to positive adjusted EBITDA is definitive proof that we do what we say. Reaching this milestone is the direct result of three specific commitments we made to you at the start of the year. First, organizational discipline. We exceeded our goal to hold headcount flat while rebalancing our talent base toward product and engineering. Second, operating leverage. In our initial 2025 outlook, we targeted generating leverage at mid-single-digit revenue growth. Despite a housing market at a 30-year low, our expense management allowed us to exceed our own leverage targets, proving that our asset-light model is now capable of delivering positive adjusted EBITDA even in a low-growth environment. Third, product velocity. By leaning into AI-assisted development, which now accounts for approximately 30% of our new code, we delivered our ninth consecutive quarter of conversion growth. With a profitable foundation now in place, we are turning our energy toward driving growth in 2026 while maintaining our rigorous expense discipline. Having continued to expand our market share in 2025, we enter 2026 from a position of strength. Our roadmap is designed to remove friction and modernize the platform across four pillars: discovery, pricing, shipping, and service. First, discovery. Our 2026 roadmap centers on transforming 1stdibs.Com, Inc. into a daily habit for design enthusiasts through a reimagined buyer experience. This plan includes deploying AI-powered semantic and image search to fundamentally change how buyers interact with our catalog. While many potential buyers have a deep appreciation for design, they often lack a collector’s specialized nomenclature. We are bridging this gap. Instead of needing an exact match, for example, “Hermès Birkin 25 bubblegum pink silver hardware,” a buyer can use natural language such as asking for “a Valentine’s Day gift for my wife.” While that query traditionally would have yielded limited results, our new AI-driven engine will understand the intent behind the request and surface rich, curated matches across categories, from jewelry to fine art. We are effectively removing the expert requirement from our search bar, making 1stdibs.Com, Inc. more intuitive for a broader audience. We are also initiating a major evolution of our personalization engine, centered on a reimagined home page and feeds that deliver curated recommendations across key buyer touchpoints. By synthesizing brand, maker, and price propensity data, we are creating a bespoke experience that anticipates intent, surfacing the right inventory at the right moment of inspiration, whether on our platform or through personalized emails. To amplify this work, we are launching 1stdibs.Com, Inc. Tastemakers, our first ever ambassador program and influencer network. This initiative anchors our transition toward a community-first content strategy. By partnering with a scaled network of authentic voices, from prominent collectors and designers to our own sellers, we are creating the emotional connections that drive daily engagement and fuel discovery. This program allows us to move at the speed of the zeitgeist. We have already seen the potential of this approach in early testing. This was the blueprint for our real-time response to Taylor Swift’s engagement. Within hours, we mapped the global interest in her vintage watch and unique Old Mine diamond ring to similar pieces in our inventory. By matching what the world is talking about with our one-of-a-kind supply, we are making 1stdibs.Com, Inc. more accessible and culturally resonant. Additionally, we are significantly expanding our sponsored listings program, which serves as a high-margin lever driving revenue growth. We believe there is headroom to scale coverage and increase ad density while maintaining our premium aesthetic. By providing sellers with more sophisticated tools to reach buyers, we are creating a more dynamic ecosystem while driving revenue growth that is independent of GMV fluctuations. In addition to expanding sponsored listings, we are exploring nascent advertising opportunities with external brand partners both online and offline. Second is pricing. We are focusing our efforts on helping buyers and sellers reach a shared understanding of value. Our goal is to foster faster consensus by providing both sides of the transaction with the data required for confident decision-making. Central to this effort is a fundamental investment in our negotiation and offer flows, our highest intent signal. We see significant opportunity to optimize the Make Offer experience, which is often the primary path to purchase for our highest value items. Our 2026 roadmap focuses on demystifying the negotiation process through better product marketing and more intuitive UI, ensuring that both parties can reach a deal with less friction. By streamlining these interactions, we are increasing marketplace liquidity and creating a more accessible and dynamic platform. Complementing this work is an initiative centered on price contextualization. Because our catalog is defined by rare, one-of-a-kind items, buyers often lack a clear benchmark for value. To address this, we are introducing historical price comps and market data directly into the buyer journey. By making this information more visible, we are providing the transparency required to validate an item’s value. Underpinning these initiatives is our expanded enforcement of price parity. In the fourth quarter, we made strides in increasing the volume of listings covered by our parity solutions, ensuring that our buyers find the most competitive prices on 1stdibs.Com, Inc. Looking ahead, we will incorporate AI to further automate and expand this coverage across our catalog. By leveraging technology to scale these protections and promoting our price match guarantee, we are ensuring that 1stdibs.Com, Inc. remains the definitive destination for value in luxury design. Third is shipping. We recognize that our current shipping program is too complex and costly, lacking the modern features such as flexibility, precise tracking, and reliable on-time delivery that our buyers expect. A primary source of friction is the lack of clarity around roles and responsibilities between 1stdibs.Com, Inc., our sellers, and our buyers. This ambiguity can add hidden cost to the transaction. To solve this, we are revamping our shipping experience to provide a clear, standardized framework for every participant in the value chain. We expect this move will allow us to streamline operations and lower shipping prices for buyers. This newfound efficiency will enable our move toward all-in price. By presenting a single, transparent, fully landed cost earlier in the funnel, we will remove the primary hurdle to conversion. We are also leveraging our historical data to develop dynamic shipping rates, providing instant and more competitive quotes globally. This is about eliminating sticker shock and elevating our shipping experience to match the premium nature of our inventory. Fourth is service. In 2026, we are evolving our service model through technology. Our plan involves integrating AI support to resolve routine inquiries. By offloading these high-volume, basic tasks, we can reallocate our client services team to prioritize more nuanced, high-value resolutions and increase our service levels. This shift ensures that our human expertise is focused where it has the most value, supporting our most loyal buyers and driving repeat purchases. We are also working to introduce an AI item upload assistant for our sellers. This tool will streamline the listing process and ensure that the most exceptional inventory hits our marketplace faster and with higher quality metadata, allowing us to scale our operations through technology rather than headcount. In summary, the story of 1stdibs.Com, Inc. right now is one of focused transformation. Reaching positive adjusted EBITDA this quarter was the culmination of a multiyear journey that began in 2022. We have spent four years reengineering our cost structure and refining our marketplace, and we have emerged with a financial foundation that allows us to focus entirely on driving GMV and revenue growth. As we look toward 2026, we are often asked about the risk of AI disintermediation. We believe that our position is uniquely protected. Our moat is built on a high-trust relationship and a physical collection of one-of-a-kind items—elements that cannot be replicated by an algorithm. We are leaning into AI to help our buyers discover the extraordinary rather than replacing the essential human expertise of our dealers. With a compelling roadmap in place, we are positioned for a GMV growth inflection point by 2026. We enter this next chapter as a more efficient, more resilient, and more ambitious company than at any time in our history. To discuss how this discipline is reflected in our fourth quarter performance and our expectations for the year ahead, I will now turn the call over to Thomas Etergino. Thomas Etergino: Thanks, David. Good morning, everyone. Our fourth quarter results marked a landmark inflection point for 1stdibs.Com, Inc., our first quarter of positive adjusted EBITDA as a public company. This achievement validates the strategic realignment we executed in September and proves that our asset-light marketplace is capable of delivering adjusted EBITDA profitability even in a constrained environment. A multiyear transformation is clear. We began reengineering our cost structure in 2022, accelerated that focus through 2023, and demonstrated early operating leverage in 2024. Today, we are exiting 2025 with fourth quarter adjusted EBITDA of $1,300,000 and a 6% margin, a 1,300 basis point expansion over the prior year. We have not only delivered on our commitment to reach adjusted EBITDA profitability, we have established a leaner, more resilient baseline for our future. This outcome is a direct result of the accountability David mentioned. Our 2025 plan centered on expanding operating leverage, and we have executed against that goal. We are exiting the year with a strong balance sheet and a business model optimized to generate positive adjusted EBITDA and free cash flow. To appreciate this inflection point, it is helpful to look at P&L transformation since 2022. Over the last four years, we have reduced annual operating expenses by 18%, or nearly $18,000,000, excluding one-time gains from the sale of Design, and lowered headcount by more than 30% from our peak. In a business with high operating leverage, the 7% revenue decline we experienced over this four-year period would typically lead to margin compression. At 1stdibs.Com, Inc., we have achieved a positive divergence. Comparing 2022 to 2025, gross margins have climbed from 69% to 73% and adjusted EBITDA margins improved by approximately 1,900 basis points. Significantly expanding margins during a period of revenue contraction is a significant operational feat, and we enter 2026 with the most efficient financial profile in our history. Turning to our fourth quarter funnel performance, GMV was $90,200,000, down 5%. While traffic headwinds increased across organic and paid channels, this was a direct result of our deliberate shift in marketing strategy. Starting in the third quarter, we aggressively tightened ROI thresholds, intentionally pruning lower-intent traffic to prioritize unit economics. This discipline resulted in order volumes declining 9%. However, this was partially offset by our ninth consecutive quarter of conversion rate growth and strong average order value expansion. The fact that GMV outperformed order volume by 400 basis points demonstrates that we are successfully capturing high-intent demand and higher-value transactions even with a significantly leaner marketing budget. Specifically, on-platform AOV reached nearly $2,600, up 5%, while median order value rose 4% to approximately $1,250. This performance was fueled first and foremost by returning buyers spending more per order than they did a year ago, along with a higher overall mix of orders from these repeat customers. We ended the quarter with over 80% of traffic from organic sources, up eight percentage points year over year. This organic strength is a critical competitive advantage, reflecting the enduring power of the 1stdibs.Com, Inc. brand. We saw a balanced performance across our buyer segments this quarter as both trade and consumer GMV declined at similar rates. Vertical performance varied by category. Jewelry showed the most resilience, with GMV down just 1%. Active buyers totaled approximately 60,700 at quarter end, down 5%. Regarding supply, we ended the quarter with approximately 5,700 unique sellers, down 4% as our seller base continues to normalize following our fourth quarter pricing adjustments. Importantly, while seller count consolidated, we saw listings grow 3% to nearly 1,900,000. Moving on to the income statement. Net revenue was $23,000,000, up 1%. Transaction revenue, which is tied directly to GMV, was approximately 73% of total revenue, with subscriptions making up most of the remainder. Take rates increased approximately 140 basis points year over year, driven by October’s pricing increases and continued growth in sponsored listings. Gross profit was $16,900,000, up 3%. Gross profit margins were approximately 74%, up one percentage point year over year. Sales and marketing expenses were $5,900,000, down 44%. This significant decrease is a direct result of the 2025 strategic realignment implemented in September, which reset our marketing organization and rationalized our performance marketing. Sales and marketing as a percentage of revenue was 26%, down from 46% a year ago. Technology development expenses were $6,000,000, up 9%, reflecting higher headcount-related costs as we rebalance our talent towards high-impact product and engineering roles. Within our flat headcount framework, we are reallocating resources to expand our product and engineering capacity, a transition set to conclude in the second quarter. We view this as our highest ROI lever, enabling us to deliver on our 2026 roadmap and deliver long-term conversion gains while maintaining a disciplined cost base. As a percentage of revenue, technology development was 26%, up from 24% a year ago. General and administrative expenses were $7,000,000, up 5%, due primarily to a one-time sales tax-related item. As a percentage of revenue, general and administrative expenses were 30%, up from 29% a year ago. Lastly, provision for transaction losses was approximately $400,000, 2% of revenue, down from 4% a year ago and at the low end of our historical 2% to 4% range. Total operating expenses were $19,200,000, an 18% decrease. This significant reduction is the direct result of the strategic realignment we completed in September and our previous cost-saving measures. We promised to fundamentally lower our cost base, and this quarter’s results prove that we have executed on that commitment. More importantly, this discipline has fundamentally improved our potential for operating leverage. We have lowered our breakeven threshold, allowing us to reach positive adjusted EBITDA despite the persistent macro headwinds in the luxury home category. Our ability to significantly reduce operating expenses while continuing to gain market share in 2025 demonstrates that we are not just running a leaner company, we are running a more productive one. This quarter represents a pivotal inflection point in our financial trajectory. Adjusted EBITDA was $1,300,000, a significant turnaround from a $1,600,000 loss in the prior year. This resulted in an adjusted EBITDA margin of 6%, representing an approximately 1,300 basis point expansion over last year. This is a direct outcome of the structural discipline we have embedded across the organization, allowing for any future top-line recovery to flow disproportionately to the bottom line. Moving on to the balance sheet. We ended the quarter with a strong cash, cash equivalents, and short-term investments position of $95,000,000, up from $93,400,000 sequentially. We maintain a robust cash position, and our future focus is on free cash flow generation. During the quarter, we repurchased approximately $1,600,000 of shares, with $10,400,000 remaining under our current $12,000,000 authorization as of December 31. Our continued execution of this program reflects our confidence in our long-term growth trajectory and our commitment to delivering value to our shareholders. Turning to the outlook, our guidance reflects quarter-to-date results and our forecast for the remainder of the period. We forecast first quarter GMV between $86,500,000 to $91,500,000, representing a year-over-year decline of 9% to 3%, net revenue of $22,100,000 to $23,100,000, or down 2% to up 2%, and adjusted EBITDA margin between breakeven and positive 4%. Our GMV guidance is driven by two primary factors: a deliberate strategic trade-off—the intentional impact of our sales and marketing reductions as we prioritize a structurally higher margin profile over short-term volume; quality-driven performance—while traffic remains a headwind, we expect continued growth in conversion and AOV. Our revenue guidance reflects the continued growth in sponsored listings and benefits of the seller subscription price increase, which took effect on October 1. Our adjusted EBITDA margin guidance reflects structural efficiency—realized gains from operating expenses following our September realignment; strategic reinvestment—a sequential increase in personnel expenses driven by the partial-quarter impact of annual merit increases effective in March and targeted hiring in product and engineering as part of our strategic realignment; gross margin expansion—we expect gross margins of 72% to 74%, an increase from our recent 71% to 73% range. While we are not providing full-year guidance at this time, our 2026 framework is centered on durable, profitable growth. We expect to deliver a third consecutive year of revenue growth, reflecting the resilience of our marketplace. We anticipate a return to positive year-over-year GMV growth by the fourth quarter, driven by the compounding impact of our product roadmap. We expect gross margins of 72% to 74%, up from 71% to 73% in 2025. We expect revenue take rates of 25% to 26%, up from 24% to 25% in 2025. We remain focused on high-quality, efficient growth, with a full-year 2026 outlook of positive adjusted EBITDA and positive free cash flow. Underpinning this plan is the assumption that macroeconomic conditions, particularly those impacting the housing market and consumer discretionary spending, remain stable. In closing, reaching this adjusted EBITDA inflection point is a landmark moment for 1stdibs.Com, Inc. This result marks the culmination of a four-year journey of rigorous expense management and strategic focus. We promised to reengineer our cost structure, remain disciplined on headcount, and prioritize technical velocity, and we have delivered. We enter 2026 with a leaner, more resilient, and more profitable foundation than at any time in our history. We appreciate your continued support and look forward to updating you on our progress in the coming quarters. Thank you. I will now turn the call over to the operator to take your questions. Operator: We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, press star 1 on your telephone keypad. To withdraw your question, press star 1 again. Please stand by now while we compile the Q&A roster. Your first question comes from the line of Ralph Schackart with William Blair. Your line is open. Please go ahead. Ralph Schackart: Good morning. Thanks for taking the question. First question, just maybe touching on your comments about accelerating growth through 2026. David, maybe you could just walk through the primary drivers as you see it to continue to turn the business around and to return back to growth, and will it continue to be a tough macro for you? And then I have a follow-up. David Rosenblatt: Sure. Hey, Ralph. So I think first, from September 2026 onward, we will be lapping what were pretty substantial reductions—almost 50%—in performance marketing spend. And then secondly, at the same time last September that we cut sales and marketing overall, we also increased our product and engineering investment, which obviously will result in a much bigger roadmap. So as you think about moving through 2026, what we expect is that the compounding nature of that product roadmap will provide a pretty clear path to year-over-year GMV growth by the fourth quarter. It is really the combination of those two things, lapping our performance marketing cuts and then also receiving the benefit of higher product and engineering investment. I think it is also important to note that for the full year, we are committed to delivering what will be our third consecutive year of revenue growth alongside positive adjusted EBITDA and free cash flow, as we did in the fourth quarter. And the last thing I would say, you made a reference to the market. We do not believe that this is dependent on a broader market recovery. We feel like we have all the tools needed to accomplish this even without that. Ralph Schackart: Great. And just touching on AI, it has been a big focus, obviously, this earnings season for investors, and you talked about you see it not as a competitor, but as a catalyst to unlock a catalog. If you could double click on that a little bit, in terms of why you potentially see disruption—it is just because you handle a lot of complex tasks in between the buyer and the seller and unique product categories, I guess, would be part of the reason there. But if you could touch on that a little bit more, I would appreciate it. David Rosenblatt: Yeah. I think in general, the way we see AI relative to our performance is that we view ourselves as a beneficiary of AI, really from the top of the income statement to the bottom. In terms of disintermediation specifically, though, I think that is likely more of a threat for commodity products. But we are the exact opposite of that. We have 2,000,000 one-of-a-kind pieces of inventory, and particularly when those items transact at the high price that we sell at, seller expertise and the integrity of the transaction itself are the primary components of value that we provide. So AI agents certainly can help with discovery. They can help buyers find products. But they cannot substitute for the buyer trust, the seller reputation, and all of the relatively complex logistical and payment infrastructure that is required to transact at our price points and with our kind of inventory. Ralph Schackart: Great. Thank you. Operator: Your next question comes from the line of Bobby Brooks with Northland. Your line is open. Please go ahead. Bobby Brooks: Hey. Good morning, team, and thank you for taking my question. As you think of returning to a consistent growth profile—I know this will be your third year of revenue growth—but across both GMV and revenue and maybe at a little bit higher clip, call it maybe high single digits, what are some of the most exciting initiatives that you are pursuing? David Rosenblatt: So, as I think you may be aware, we first of all have proven an ability to execute on our product roadmap and to drive conversion, which is the most important GMV lever as a result. We brought in a new head of product and marketing last August, and as part of that we recut our 2026 roadmap. So the 2026 plan is a combination of both evolutionary advancements relative to 2024 and 2025 and also new projects. I am super excited about each of them. Just to call out the four we expect to be highest impact, in no particular order: AI search is something that we are very optimistic about. Currently, searching on 1stdibs.Com, Inc. requires knowing the exact match of the products that one is interested in, which is a significant barrier for broader consumer demand, especially given the long-tail nature of the products that we sell. To address this in 2026, we are going to be introducing semantic search, which will make discovery much more intuitive and accessible to the average person. The second area that I am very excited about is shipping. Today, we have relatively unclear roles and distribution of responsibilities between sellers and 1stdibs.Com, Inc. That leads to higher costs, and also sometimes, just in terms of the operational workflow in getting an order converted, some confusion on the part of the buyer. We are reengineering our entire shipping framework to standardize those roles and responsibilities, which should have the impact of reducing complexity and also cost to the buyer. Pricing is number three. It is something we have talked about quite a bit in the past. We are not today always the lowest cost sales channel for a given item, and the second problem is that, again, given the long-tail nature of what we sell, it can be challenging for consumers to compare prices and evaluate and interpret them. To address this, as I think you are probably aware, we introduced a price parity enforcement mechanism last year. To expand this in 2026, we are going to be incorporating an LLM—it has not been AI-based to date—which will allow us to scale price parity across a much higher percentage of our inventory, which will eliminate the problem of individual items being listed at a higher price on 1stdibs.Com, Inc. than elsewhere. And then second, we are going to surface comps data much more broadly to both sellers and buyers to give them context. And then the fourth and last piece is, we are a little late to the party in developing a robust social strategy. Social has an especially important role to play for us, given our brand and the visual nature of the products we sell. To address this in 2026, we are in the process of implementing our first ever community-based approach, which really is just another way of saying we are launching an influencer network. It is something we have not done before, and we have high hopes for it. Bobby Brooks: Thank you very much. That is super helpful detail. For a follow-up on the pricing parity, definitely can see how helpful and beneficial that will be for the business. You mentioned incorporating the LLM to scale across a much higher percentage of inventory. I would be curious to hear how much of the inventory today listed has this price parity incorporated into it, and what are you looking to scale that to in 2026? David Rosenblatt: That is not data that we share primarily for competitive reasons. But it should roughly double the amount of product that is covered. It is actually, I think, from a behavioral point of view, more important to think about it in terms of number of sellers who are impacted rather than the percentage of items. Because once a seller understands that we have the ability and the intent to enforce this price parity feature of our contracts with them, they are less likely to be in transgression of that. And I think it is worth pointing out this is in the interest of both the buyer and the seller and 1stdibs.Com, Inc. Having a clean, well-lit, and regulated marketplace that is predictable and understandable to buyers ultimately has the effect of increasing confidence in us and our sellers on the part of the buyer, which benefits them. We do not think of this as a system of punishment, but more as a part of the process of creating, as I said, a clean, well-lit environment, which is to the benefit of all marketplace participants. Bobby Brooks: Got it. Appreciate it, David. And maybe one for Thomas. It has been really impressive, the margin expansion you have driven over the past few years, as you mentioned in the prepared remarks, despite some shrinking in the top line and GMV. As we think of 1stdibs.Com, Inc. returning to that steady growth rate on a GMV level, is it fair to think margin expansion would accelerate in that scenario? Thomas Etergino: Yeah, this is Thomas. I believe that what you have seen with our P&L, as you talked about, is that our gross margins have expanded from 73% to 74%. The contribution margin in particular has gone up from the 50% to 55% level to the 60% to 65% level. What I expect is that as you start to see GMV and revenue expansion, you will see a large portion of that additional revenue going to the bottom line because of the increase in contribution margin that we have put into the model at this point. Bobby Brooks: Very helpful. Exciting times. I will return to the queue. Operator: There are no further questions at this time. This concludes today’s call. Thank you for attending. You may now disconnect.
Operator: Good morning, and welcome to the Assured Guaranty Ltd. Fourth Quarter and Full Year 2025 Earnings Conference Call. My name is Becky, and I will be the operator for the call today. All participants will be in a listen-only mode. Should you need any assistance, signal a conference specialist by pressing star then 0 on your telephone keypad. During today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the conference over to our host, Robert S. Tucker, Senior Managing Director, Investor Relations and Corporate Communications. Please go ahead. Thank you, operator, and thank you all for joining Assured Guaranty Ltd. for our full year and fourth quarter 2025 financial results conference call. Robert S. Tucker: Today's presentation is made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The presentation may contain forward-looking statements about our new business and credit market conditions, credit spreads, financial ratings, loss reserves, financial results, and other items that may affect our future results. These statements are subject to change due to new information or future events. Therefore, you should not place undue reliance on them as we do not undertake any obligation to publicly update or revise them except as required by law. If you are listening to a replay of this call, or if you are reading the transcript of the call, please note that our statements made today may have been updated since this call. Please refer to the Investor Information section of our website for our most recent presentations and SEC filings, most current financial filings, and for the risk factors. The presentation also includes references to non-GAAP financial measures. We present the GAAP financial measures most directly comparable to the non-GAAP financial measures referenced in this presentation along with a reconciliation between such GAAP and non-GAAP financial measures in our current financial supplement and equity investor presentation, which are on our website at assuredguaranty.com. Turning to the presentation, our speakers today are Dominic John Frederico, President and Chief Executive Officer of Assured Guaranty Ltd., Robert Adam Bailenson, our Chief Operating Officer, and Benjamin G. Rosenblum, our Chief Financial Officer. After their remarks, we will open the call to your questions. As the webcast is not enabled for Q&A, please dial into the call if you would like to ask a question. I will now turn the call over to Dominic. Dominic John Frederico: Thank you, Robert, and welcome to everyone joining today's call. We significantly advanced Assured Guaranty Ltd.’s key business strategies in 2025, positioning us for sustainable long-term growth. Among this year's most important accomplishments, we again brought our key shareholder value metrics at year-end 2025 to new per-share highs of $186.43 for adjusted book value, $126.78 for adjusted operating shareholders' equity, and $125.32 for shareholders' equity. We earned adjusted operating income per share of $9.80 compared with $7.10 in 2024 and created significant future earnings from financial guarantee originations. Our present value of new business production, or PVP, totaled $286 million with meaningful contributions from each of our three financial guarantee underwriting groups. We continue to be the leader in the new issue market for U.S. municipal bond insurance. In our strategic efforts to expand our U.S. municipal secondary market business, we saw great success as we more than tripled our secondary market par insured over last year's performance. Rob will provide details on our financial guarantee production in a few minutes. In our capital management program, we repurchased 12% of the common shares that were outstanding on 12/31/2024 while meeting our 2025 target of repurchasing $500 million of our shares. We also distributed $69 million to shareholders through dividends, and last week, we announced that we have increased our current quarterly dividend per share by 12% compared to November 2025, representing fourteen years in a row of dividend growth. Our alternative investments continue to perform well, including funds managed by Sound Point Capital Management and Assured Healthcare Partners. Alternative investments have provided an annualized, inception-to-date internal rate of return of 13% through year-end 2025. As we mentioned on prior calls, we successfully defended our legal rights in litigation with Lehman Brothers International, resulting in a pretax gain of approximately $103 million in 2025. We also reached successful resolutions of several other loss mitigation situations that were accretive to our financial results. Ben will discuss these further in a few minutes. Lastly, during 2025, we completed substantially all the work required to leverage our decades of experience in life insurance securitizations and investment management into a life and annuity reinsurance business. In January 2026, we acquired Warwick Re Limited, which we have renamed Assured Life Reinsurance Limited, or Assured Life Re for short. This acquisition further diversifies our revenue sources and has the potential for significant synergies with our financial guarantee and investment activity. Assured Life Re’s primary business focus will be reinsuring fixed-term annuities, specifically multi-year guaranteed annuities known as MYGAs, and pension risk transfer annuities. The Assured Life Re platform combines Assured Guaranty Ltd.’s core strengths in credit and structured finance, management of our own multibillion-dollar investment portfolio, and our twenty-year track record of providing financial guarantee services to the life insurance sector with the operational infrastructure and experienced life reinsurance professionals of Warwick Re. We believe we are well positioned for growth in 2026 and beyond. Since we commenced operations in 1985, the value and reliability of our guarantee and the resilience of our business model have been repeatedly demonstrated, especially during financial crises, a global pandemic, and during other periods when it was difficult to predict the direction of economic conditions. I will now turn the call over to Rob to provide more details about our financial guaranty production results. Robert Adam Bailenson: Thank you, Dominic. In 2025, we generated $286 million of PVP from transactions that, in aggregate, were of higher credit quality than in recent years. Municipal bond insurance remained in strong demand during 2025, as the U.S. municipal market experienced the second consecutive year of record issuance. In U.S. public finance, we originated $206 million in PVP, finishing the second half of the year strongly with $132 million in PVP, a 19% increase over the second half of 2024. In looking at 2025, PVP was limited by the mix of business that came to market, which resulted in our insuring fewer large transactions in the BBB category than in 2024. As a result, municipal par we insured was weighted more heavily toward higher credit-quality transactions with lower capital charges, and these higher-rated deals produce less premium. Overall, we guaranteed over $27 billion of municipal par, 16% more than in 2024, across more than 1,500 primary and secondary market policies. For insured new-issue municipal par sold in 2025, Assured Guaranty Ltd. achieved a fifteen-year high, wrapping more than $25 billion and leading the bond insurance industry with 58% of new-issue insured par sold. Our new-issue deal count grew 15% year-over-year to more than 900 transactions. Perhaps most notably, we increased our U.S. public finance secondary insured par written more than 240% year-over-year to approximately $2 billion, which generated $44 million of PVP. With over $4 trillion of municipal bonds outstanding, we are excited about the opportunity available in bonds we can insure in the secondary market. We have made several technological and operational process improvements over a multiyear investment period to greatly enhance the secondary market team's ability to source, evaluate, and execute transactions. Modernization of our platforms, including deployment of new market analysis tools and applications and real-time data integration, as well as improved workflows, drove a substantial increase in our underwriting speed and capabilities, enabling faster credit assessments, quote turnaround times, and deal executions. A strong new-issue market demand on larger transactions showed continuing institutional appetite for a guarantee on such transactions. In 2025, Assured Guaranty Ltd. wrapped 51 primary market issues with approximately $100 million or more in insured par, a total of approximately $12.6 billion of insured par sold. This is our highest annual number of $100 million-plus municipal transactions in over a decade. Two of our transactions were honored at the 2025 Bond Buyer’s Deal of the Year ceremony. JFK International Airport's Terminal 6 redevelopment project, for which we insured $920 million of par in November 2024, was recognized as the Green Financing Deal of the Year, and Alaska Railroad Corporation's cruise port revenue bonds, where we insured $108 million in 2025, was named the Far West Region Deal of the Year. Other large deals in 2025 included $1 billion for the Authority of the State of New York, $844 million for the Downtown Revitalization Public Infrastructure District in Utah, $730 million for the Alabama Highway Authority, $650 million for the Massachusetts Development Finance Agency on behalf of Beth Israel Lahey Health, and $600 million for the New York Transportation Development Corporation’s new Terminal 1 at JFK Airport. Also in 2025, we saw an increase in the use of our insurance among underlying AA-rated credits, which are credits rated in the AA category before insurance by S&P or Moody’s. For AA-rated credits, in both the primary and secondary markets, we issued over 160 insurance policies totaling approximately $7 billion of insured par, which year-over-year represents an increase of approximately 60% for both of those metrics. While such step-away transactions produce less premium per dollar of insured par, they require us to hold less capital, generate attractive returns, enhance overall insured portfolio credit quality, and demonstrate market confidence in the strength, reliability, and durability of our guarantee as a backstop against potential issuer downgrades, headline risk, and market value declines. Turning to our other markets, non-U.S. public finance and global finance originations together contributed $80 million in PVP for 2025. We closed $37 million of non-U.S. public finance PVP in 2025, including $18 million in a strong fourth quarter. The year's production results were mainly driven by several primary infrastructure finance transactions in the U.K. and the European Union, as well as secondary market transactions for U.K. sub-sovereign credits. Among the insured credits are a portfolio of general obligation loans to universities in the United Kingdom, a project finance loan for a road construction project in Spain, and a note issue to refinance debt in the French fiber optic sector, our first primary market execution in France since the global financial crisis. In global structured finance, we guaranteed over 40 transactions in 2025, with a total PVP of $43 million, including strong fourth-quarter PVP production totaling $20 million primarily from fund finance facilities, insurance securitizations, the upsize of a transaction providing protection on a core lending portfolio for an Australian bank, and consumer receivable transactions. We have now built fund finance into a high-performance flow business that includes repeatable transactions whose renewals generate future PVP, and since these are shorter-duration transactions, we also benefit because we earn the premiums more rapidly and can recycle the capital more quickly. For example, the transactions we insured this year had a stated maturity within one to four years, and we will earn all the premiums during that period. This fund finance earnings time frame is two to three times faster than a typical structured finance business we insure. Looking toward par and PVP production in 2026, we have a robust transaction pipeline and are expecting strong results from each of our three financial guarantee product lines. Thus far, in 2026, we have already closed several large transactions. We believe we have significant short-term and long-term opportunities for growth across our financial guaranty markets. In the U.S. public finance market, we continue to be the premier insurer of new-issue municipal bonds and have developed more efficient and broader capabilities to serve the enormous secondary municipal market. In structured finance, our fund finance business provides us with a stream of shorter-duration transactions that are repeatable and complement the often larger and longer-duration transactions that have been typical in that sector. We have also seen expanding business opportunities in Europe and Australia across both public and structured finance. Most important of all, we have the financial strength, experienced staff, and improved business model to continue growing and leading the financial guaranty industry. I will now turn the call over to Ben to discuss our detailed financial results. Benjamin G. Rosenblum: I am pleased to report fourth quarter 2025 adjusted operating income of $109 million, or $2.32 per share, representing an increase of 83% on a per-share basis from adjusted operating income of $66 million, or $1.27 per share, in 2024. Our full-year 2025 adjusted operating income was $445 million, or $9.08 per share, representing an increase of 28% on a per-share basis from $389 million, or $7.10 per share, in 2024. The largest drivers of the quarter-over-quarter increase were a $23 million pretax gain associated with a loss mitigation strategy, higher earnings from alternative investments, and lower loss expense. Full-year results in 2025 also benefited from a $103 million gain related to the resolution of the Lehman litigation, $15 million in fees related to workout credits, and a $20 million increase in the pretax contribution from the asset management segment. As you can see, 2025 was a big year for resolving several previously troubled exposures. In addition to the gain on the Lehman resolution, loss mitigation efforts resulted in the paydown of our largest below-investment-grade security, reducing the amount of loss mitigation securities in our investment portfolio by over $400 million. In addition, a commercially leased building that was part of a loss mitigation exposure was sold, removing another troubled asset from our balance sheet. The company was able to fully recover its losses through the negotiated settlements that were finalized in 2025. This further demonstrates the strength of our underwriting, our persistence in defending our rights, and our multifaceted approach to working with issuers and developing innovative solutions. Enhancing our investment returns is another strategy that yielded results this past year. As of December 31, 2025, our alternative investments had a fair value of over $1 billion, up from $884 million as of 12/31/2024. In the fourth quarter of 2025, alternative investments generated $47 million in pretax adjusted operating income and $160 million of pretax adjusted operating income for the full year, representing a year-over-year increase of 33%. Since we commenced the alternative investment strategy, we have consistently reported inception-to-date IRR of approximately 13%. As a point of comparison, our fixed-maturity portfolio average yield over the past three years has been 4.16%. In terms of capital management, we again reached $500 million in share repurchases, buying back 5.8 million shares, or almost 12% of the shares outstanding at the end of 2024, at an average price of $85.92. We are committed to prudent capital management and have continued to repurchase shares in 2026. Our remaining share repurchase authorization as of today is $204 million. As always, we actively assess the various opportunities to deploy our capital effectively and aim to invest in those that we believe provide the most attractive returns. Our holding company liquidity as of today is approximately $130 million, of which $48 million is at AGL. Last week, our board of directors also approved a 12% increase in our quarterly dividend per share from $0.34 to $0.38. Finally, I want to highlight the acquisition of Warwick Re, which launched our annuity reinsurance platform and which we expect to add another source of earnings separate from our financial guaranty business. We are actively progressing several promising opportunities in our pipeline to assume new blocks of annuity business and expect to make investments in this business over the next few years. We are excited to grow this business, which we have renamed Assured Life Reinsurance, and we will have an update for you on the first quarter earnings call. In the meantime, we have an annuity reinsurance presentation on our website. I will now turn the call over to our operator to give you instructions for the Q&A period. Operator: We will now begin the question and answer session. If you are using a speakerphone, please pick up your handset before pressing the keys. At this time, we will pause momentarily to assemble our roster. Our first question comes from Marissa Lobo from UBS. Your line is now open. Please go ahead. Marissa Lobo: Good morning. Thanks for taking my question. Earlier in the quarter, you noted that issuance in BBB credits had come back from prior lower levels. How did this look in the fourth quarter, and what are your thoughts for the mix into 2026? Robert Adam Bailenson: We are seeing that come back, and we saw it in the fourth quarter. We are off to a very good start in the first quarter, so we believe that is going to continue. We have closed a number of transactions already in U.S. public finance as well as infrastructure finance in Europe, and so we continue to see that. We are very excited about 2026. Marissa Lobo: Okay. Thank you. And looking at the big exposures, could you give us an update on your outlook across the U.K. utilities and Brightline as well? Benjamin G. Rosenblum: Sure. I will start with that unless Dominic and Rob want to chime in. We are looking across, obviously, the U.K. utilities. When you look at what happened during the quarter, our U.K. water utility BIG exposure went down as we upgraded Southern Water. We feel pretty good about that upgrade at Southern Water. It was out in the market and had new equity introduced to it, so they raised debt and equity, making it really, in our opinion, an investment-grade credit. So for U.K. water, we are 100% focused now really on just Thames being the only problem exposure there. We are part of the creditors committee, as you know, on Thames, and we are actively looking to work with the U.K. government at a market-based solution, and we are hopeful to have an update on that relatively shortly. Do you want me to cover Brightline, or do you have any questions on that? Marissa Lobo: No. That is helpful. Thank you. Brightline, please. Except for Brightline, we remain confident. Benjamin G. Rosenblum: Our thesis when we went into Brightline was that there is a lot of subordination below us, over $4 billion below us, and that is a really good position to be in a capital stack of a troubled exposure. Their ridership is going up. I think they are on the way to recovery, and we are obviously happy to be part of any solution they have. But we remain committed to them as well as very confident in our position in that exposure. Marissa Lobo: Got it. Thanks for taking my questions. Thank you. Operator: Our next question comes from Thomas Patrick McJoynt-Griffith from KBW. Your line is now open. Please go ahead. Thomas Patrick McJoynt-Griffith: Hey, good morning. A question on your alternative investment portfolio. I tend to remember that it is largely CLOs that are in there, but can you just talk about the exposure there? Is there anything with private credit that we should keep on the radar? Benjamin G. Rosenblum: We do not really take direct, absolute direct exposure to private credit. Obviously, we are investing in the CLO market, and some of the names are in there as well. However, we do mark our portfolio to market, and we believe that any pain that probably has been experienced in the market today, for many of the names that have been in there, we have experienced. But we remain confident, and again, our exposure there is in good shape. We feel pretty good about it. Thomas Patrick McJoynt-Griffith: Okay. Thanks. In switching gears, to the extent that you allocate some capital into the annuity reinsurance market, would that preclude you from sticking with your $500 million annual buyback target, or should we think of those as two independent opportunities? Dominic John Frederico: You have to look at the entire capital stack as interdependent. We have a range of capital management opportunities this year in terms of stock buyback, but that range will be dictated by what other opportunities we see in the market, specifically the life and annuity reinsurance business. As we said when we made the acquisition, we have substantial excess capital there that allows us to write a substantial amount of new business. But as we have seen, we have gotten more inquiries than we were actually expecting, so we are pretty happy with the opportunities we see there. That might allocate some more capital that will dictate exactly where we will land in the range of our stock buyback. We are committed to capital management. We are committed to stock buybacks and repurchasing. We will just manage that throughout the year. Operator: Thank you. This concludes the question and answer session. I would now like to turn the conference back over to our host, Robert S. Tucker, for closing remarks. Robert S. Tucker: Thank you, operator. I would like to thank everyone for joining us on today's call. If you have additional questions, please feel free to give us a call. Thank you very much. Operator: This concludes today's conference call. Thank you all for attending. You may now disconnect your lines. Have a great day.
Operator: Welcome to Carter's, Inc.'s Fourth Quarter Fiscal 2025 Earnings Conference Call. On the call are Douglas C. Palladini, Chief Executive Officer and President; Richard F. Westenberger, Chief Financial Officer and Chief Operating Officer; and Sean McHugh, Treasurer. Please note that today's call is being recorded. I will now turn the call over to Mr. McHugh. Sean McHugh: Thank you, and good morning, everyone. We issued our fourth quarter 2025 earnings release earlier today. The release and presentation materials for today's call are available on our Investor Relations website at ir.carters.com. The statements on today's call about items such as the company's expectations and plans are forward-looking statements. For a discussion of factors that could cause actual results to vary from those contained in the forward-looking statements, please see our most recent SEC filings and the earnings release and presentation materials posted on our website. In these materials, you will also find reconciliations of various non-GAAP financial measurements referenced during this call. After today's prepared remarks, we will take questions as time allows. I will now turn the call over to Douglas C. Palladini. Douglas C. Palladini: Good morning and thank you for joining us as we share our fourth quarter and full year 2025 results. We are also going to offer some guidance for the year ahead. While we believe the recent news regarding tariffs will be net positive for Carter's, Inc., it will take some time for the proper level of detail to fully emerge. So our comments today will exclude that potential tariff impact. As I approach one year in role in April and reflect on 2025, it is becoming clear that several of the themes I have consistently highlighted are coming to life. As Carter's, Inc. returns to growth that is long-term sustainable and profitable, we continue to experience momentum in our business, doing what is right for our brands and consumers, which is yielding improved financial outcomes. As I characterize the kind of quality growth we want at Carter's, Inc., I am specifically talking about decreasing promotional activity over time, growing our ability to price up and to sell higher priced products overall, and balancing our transactional messaging with more emotion-driven product and brand storytelling that builds consumer connectivity and loyalty. We are creating new products that are truly resonating with consumers across all five brands led by the Carter's, Inc. namesake, embodying holistic value, including style and quality, not just price. In Q4, among our DTC channels, all apparel brands and all age segments grew versus last year. Our brands are increasingly attracting new consumers, particularly among Gen Z and millennial families, with new fans leaning into our better and best product offerings, with higher price points. We are validating what we believe are the equity and pricing power of our brands. Importantly, these newly acquired consumers are demonstrating the potential for higher lifetime value, an essential building block towards sustained positive results. Productivity has also been a consistent theme. We have taken necessary and decisive actions to rationalize our store fleet, rightsize our workforce, and reduce complexity throughout the organization. As we recognize the benefits of enhanced productivity, we return to investing where we can generate the greatest returns, including in product make, which provides the design and style consumers expect and appreciate, and in demand creation to drive store and ecommerce traffic. For the first time since 2021, Carter's, Inc. grew year-over-year revenue, even excluding the 53rd week of sales. We also executed our third consecutive quarter of retail comp growth, and we did so with higher AURs and less promotion. Consumer counts also continued to grow, as we attract new Gen Z fans who are selecting from our best product assortments at higher rates than existing consumers. These are all strong signals that our actions are generating results. We will continue to build upon our top line momentum, and profitability is expected to expand commensurately as productivity initiatives and demand creation investments generate returns. In 2026 and beyond, I believe both revenue and operating income will grow. We will get into the details around these things shortly, but first, let us hear about 2025 results from Richard. Richard F. Westenberger: Thank you, Doug. Good morning, everyone. I will cover our fourth quarter performance, and then we will share some perspective on 2026, including our outlook for the first quarter. Obviously, the developments over the last week have introduced new uncertainty regarding the topic of tariffs. There is a lot left to play out on this subject, including the potential to recover the significant additional tariffs we have already paid to date. Fourth quarter capped off a significant year at Carter's, Inc., one which included leadership transition, initiation of significant transformation and productivity initiatives, and response to the imposition of historic tariffs. As Doug said, while we have much work to do, there are many reasons to be encouraged about our path forward. Overall, we delivered good fourth quarter results. Sales, operating income, and earnings per share all exceeded our prior forecast. Industry data suggests it was a good holiday season for many companies; the consumer was clearly out shopping. We saw broad-based demand across our business in the fourth quarter, and achieved sales growth in each of our business segments. While we saw growth in sales, earnings were still down year over year, although at a lower rate than we saw through much of 2025. Improving our profitability remains one of our overriding priorities as a team. Now turning to the details of our fourth quarter and full year performance. Comments this morning will track along with the presentation materials posted to the Investor Relations portion of our website. On Pages two and three of the materials, we have included our GAAP basis P&Ls for the fourth quarter and fiscal year. On Page four, we have provided a summary of our non-GAAP adjustments for the fourth quarter and full year 2025. We had considerable non-GAAP charges last year, the most significant of which related to our operating model improvement work, organizational restructuring, leadership transition, and termination of two legacy benefit plans. In the fourth quarter, we also had charges related to our recent debt refinancing. At present, we do not expect any unusual charges in 2026. This morning, I will speak to our results on an adjusted basis, which excludes these adjustments. On Page five, we have our fourth quarter adjusted P&L. Fourth quarter was our largest quarter of the year with net sales of $925,000,000. We posted 8% growth in net sales over last year's fourth quarter. 2025's fourth quarter benefited from an additional week in the fiscal calendar, which contributed approximately $37,000,000 in net sales. On a comparable 13-week basis, which excludes the additional week, consolidated net sales for the fourth quarter increased 3% over last year. On our over $900,000,000 in net sales, gross margin was 43.2%, which was in line with our previous outlook. This represented a decrease of 460 basis points over last year's fourth quarter gross margin. As expected, our gross margin rate was pressured by tariffs, a gross impact of $40,000,000, which was roughly double the impact we experienced in the third quarter. Product costs were also higher due to investments in product make to improve the competitiveness and relevance of our product assortments. We continue to make progress on improving realized pricing, particularly in U.S. Retail and International. Fourth quarter AURs were up low single digits on a consolidated basis and up mid single digits in U.S. Retail. Fourth quarter adjusted SG&A increased 5% over last year to $315,000,000 driven by costs related to the 53rd week, as well as incremental investments in demand creation and improving consumer experiences in our stores. We also had higher costs related to inflationary pressures in wages and rent, in addition to higher provisions for performance-based compensation. As expected, growth in adjusted SG&A moderated in the fourth quarter from second and third quarters, and we achieved 90 basis points of spending leverage. Fourth quarter adjusted operating income was $89,000,000, with an adjusted operating margin of nearly 10%. Below the line, interest and other expenses were comparable to the prior year. Our effective tax rate in the fourth quarter was lower than we had forecasted at 15.4%, 340 basis points below last year. This lower year-over-year rate was broadly driven by a higher mix of our worldwide income outside the United States and, to a lesser extent, the delayed implementation of a new higher minimum tax in Hong Kong. The net of all this, on the bottom line, fourth quarter adjusted earnings per share was $1.90 compared to $2.39 last year. On Page six, we have a summary of our fourth quarter performance by business segment. As mentioned earlier, consolidated net sales increased over last year in all three of our segments. Adjusted operating income declined $26,000,000, resulting in an adjusted operating margin of 9.7% versus 13.4% last year. Our overall decline in profitability was driven by our Retail and Wholesale businesses, offset partially by lower corporate expenses and slightly higher profitability in International. In both the U.S. Retail and Wholesale segments, the lion's share of the decline in operating income was driven by the net negative impact of higher tariffs, as well as higher product costs related to investments in product make and spending deleverage. Also negatively affecting Wholesale's profitability were higher inventory provisions and a higher mix of excess inventory sales versus last year's fourth quarter. International maintained its operating margin reasonably well in the fourth quarter with higher product costs and spending deleverage that was offset by an improvement in product mix and higher pricing. Our lower corporate expenses compared to prior year were driven by lower charitable contributions and lower professional fees. Turning to some additional perspective on our business segment results beginning with U.S. Retail on Page seven. We are encouraged by the continued momentum in our business. Net sales increased 9% in the fourth quarter. Comparable sales increased 4.7%, our third consecutive quarter of comp sales gains. Comps were particularly strong in our ecommerce channel, driven in part by a double-digit increase in traffic in the quarter. We saw broad-based product strength in the quarter with sales growth across baby, toddler, and kid. All of our apparel brands also posted comp sales growth in the fourth quarter. Baby continues to be the strength in our product assortment. Q4 marked the sixth consecutive quarter of growth for Baby. As we have said, AURs improved in the mid single digits in the fourth quarter. Roughly half of this improvement was driven by reduced promotions, while the other half was driven by less clearance activity and increased penetration of the higher price portions of our product assortment. Our active consumer count continued to grow in the fourth quarter, building on the success we have had in this area earlier in 2025. Retail profitability was lower in the quarter for the reasons mentioned earlier: higher product costs reflecting incremental tariff pressure and product investments, which were partially offset by higher pricing. On Page eight, we have summarized the fourth quarter performance in our U.S. Wholesale and International businesses. In U.S. Wholesale, net sales increased 3% over last year. Wholesale benefited from the additional week in the calendar, which contributed $12,000,000 in net sales. Exclusive brand sales increased year over year based on continued strength of Child of Mine and Just One You. Sales of Simple Joys were down year over year in the fourth quarter, continuing the trend we have spoken of on previous calls. As I mentioned previously, profitability in the Wholesale segment was impacted by higher product costs, reflecting incremental tariff pressure and product investments, partially offset by higher pricing. We expect these pressures on Wholesale profitability will continue through 2026, especially the impact of incremental tariffs, which became effective around midyear in 2025. Operating margins are projected to be more comparable in Wholesale year over year in 2026. In International, reported net sales increased 10% over last year and by 8% on a constant currency basis. Our growth outside the United States was driven by our businesses in Canada and Mexico. Comps in Canada were roughly even. Last year's fourth quarter benefited from a government tax holiday, which did not repeat this year. Our team in Mexico continues to drive strong performance with net sales growth of nearly 30% driven by contributions from new stores, as well as another quarter of double-digit comp sales growth. As noted earlier, International operating profit increased slightly over the prior year. On Page nine, we have provided some balance sheet and cash flow highlights. Our year-end balance sheet was very strong. We ended the year with continued strong liquidity of more than $1,000,000,000, consisting of just under $500,000,000 of cash on hand, as well as the significant borrowing capacity available to us under our credit facility. In the fourth quarter, we extended the maturity of our debt through the issuance of $575,000,000 of new five-year senior notes with a 7.375% coupon. This new debt replaced our previously outstanding senior notes. We also replaced our previous cash flow revolving credit facility with a new $750,000,000 asset-based revolving credit facility, which also has a five-year tenor. Net inventories at year end were $545,000,000, up 8% over last year. Year-end inventory units were 4% lower than a year ago. Incremental tariffs continued to have a meaningful impact on inventory value, increasing year-end inventory by $50,000,000. Excluding the impact of higher tariffs, inventory dollars decreased 2% compared to last year. Exiting the year, our inventory quality was high with an improved seasonal mix compared to last year and lower overall excess inventory levels. We generated positive operating cash flow in the quarter and for the full year. Operating cash flow for 2025 was $122,000,000. The year-over-year decline in operating cash flow was due to lower earnings and higher inventories in part due to the impact of the higher incremental tariffs. We continued to distribute capital to our shareholders in 2025, paying $56,000,000 in dividends. On Pages ten and eleven, we have our full year 2025 adjusted P&L and business segment summary. This information is included for your reference. Now I will turn it back to Douglas C. Palladini for some thoughts on our business drivers for 2026. Douglas C. Palladini: I will spend a few minutes highlighting the direct actions we are taking to return Carter's, Inc. to growth in both sales and operating income in 2026, then hand the call back to Richard to wrap up our prepared remarks with guidance for Q1 and the fiscal year. Our primary goal in 2025 was returning to top line growth, which we accomplished, and this is growth we intend to sustain as we progress. In 2026, our objective is to grow both sales and operating income as we build on top line momentum from last year and realize the benefits of productivity and cost savings initiatives. I believe Carter's, Inc. possesses all the necessary building blocks to inspire consumers and reward shareholders. These elements include leading awareness and market share in children's apparel, iconic brands that are deeply trusted by families raising young children, a unique multichannel market model with best-in-class availability, and a talented and experienced team. We are organizing our efforts around three strategic pillars: consumer-led, brand-focused, and DTC-first. We believe renewed consumer connectivity, brand revitalization, and emphasis on a strengthened direct-to-consumer model will enable us to achieve our growth objectives in 2026 and beyond. We will continue to be focused on two key areas to drive our performance in 2026: demand creation and productivity. As it relates to delivering top line growth, we plan to continue to invest in demand creation. These investments are driving traffic to our stores and digital platforms, and we believe they are also helping us move the consumer past price-only messaging through product and brand engagement. Results continue to show this is a high-ROI investment. Our share of voice is expanding, and we are experiencing measurable demand and retention gains. We also saw evidence of demand creation impact in Q4 as traffic to our U.S. stores and websites grew year over year with both channels delivering notable improvements in the second half relative to the first. Traffic is a vital metric for us from a sales perspective and is also an important factor in improving productivity and margin in our direct-to-consumer business. Our demand creation efforts alongside product newness that is truly connecting with both new and existing consumers enabled us to grow our active consumer file in the U.S. in 2025, our first year of growth since 2021. Regarding productivity, we are addressing our cost structure across several fronts. On our last earnings call, we announced a portfolio optimization strategy to improve fleet productivity, including plans to close approximately 150 lower margin stores in North America through 2028. Last year, we closed approximately 35 stores, and in 2026, we intend to close roughly 60 stores. We believe these closings will reduce our fixed structure costs with the benefit of sales to other stores and our websites and be accretive to our profitability. In Q3 of last year, we took action to rightsize our office-based workforce, which we believe will yield approximately $35,000,000 in cost savings this year. Along with additional savings from discretionary spending reductions for 2026, we intend to maintain a disciplined focus on further cost containment, which frees up additional investment capacity. We are leveraging improvements to our operating model to drive productivity, including a three-month faster development cycle and a 20% to 30% reduction in product choices largely within Carter's, Inc. and OshKosh as we align to more global consistent brand lines. We are already seeing results with greater adoption of mainline product and reduced reliance on wholesale exclusives. We believe these actions will improve speed to market and assortment productivity, supporting both sales and margin. Our wholesale channel is expected to return to growth in 2026. Current sell-through rates across key accounts, as well as sell-in demand signals for future seasons, are strong. We plan to remain highly disciplined on capital investment spending overall, focus on what we have the most control over, discretionary spending, and hiring. We have largely halted deploying capital to adding new stores on our current format, but we are continuing to test new store concepts and experiences with the goal of attracting new consumer segments and driving loyalty. In that context, we are incredibly proud of the efforts demonstrated by our store associates as they continue to deliver engaging experiences and expertise that increase consumer satisfaction and differentiate Carter's, Inc. stores as true destinations. This is just one example of myriad initiatives that will further improve store-based productivity. We are also leveraging technology to drive the next phase of productivity and efficiency gains, including leveraging AI to pilot and test new consumer and product insight tools, and bringing a proprietary real estate market planning platform online this year to better guide fleet optimization. We are still very much in the middle of Carter's, Inc.'s transformation, and meaningful work remains. I remain confident that our talented and dedicated teams are focused on and aligned with the right things for Carter's, Inc. to generate durable growth and lasting success. Richard will now walk you through the details of our outlook for the first quarter and full year 2026. Richard F. Westenberger: Thanks, Doug. Turning now to our outlook for 2026 on Page 13 of our presentation materials. As Doug said, we intend to build on the progress we achieved in 2025. It continues to be a challenging time to forecast the business. Consumer spending appears to have held up well while other macro indicators such as consumer confidence and overall inflation are less positive. Tariffs continue to dominate the headlines. Our teams did a very good job in 2025 responding to and largely mitigating the new tariffs which were implemented. As we are still digesting the significant tariff news from last week, there continues to be a great deal of uncertainty about where all this will settle. In our outlook commentary today, we have not incorporated any developments related to last week's Supreme Court decision and subsequent action by the administration. In other words, our forecasts reflect the projected full-year impact of the significant additional tariff implemented last year. It is also worth noting that tariffs become part of inventory cost when inventory is added to our balance sheet. The inventory we are selling now reflects the higher tariffs we have paid on these products. So it will be some time before lower tariffs on new inventory receipts become a benefit to our P&L. Recall that the gross impact of higher tariffs on our P&L in 2025 was approximately $60,000,000. In our 2026 assumptions, this gross impact grows to over $200,000,000. We are assuming significant offsets to this increase in product costs from higher pricing, particularly in our U.S. Retail business, and the benefits of other supply chain mitigation actions and our productivity initiatives. Overall, we are planning good growth in the top line and in adjusted operating income in 2026. We are expecting net sales growth in the low to mid single digits over 2025. This growth reflects anniversarying the extra week in 2025. We are expecting growth in each of our business segments. In our U.S. Retail business, we are planning low single-digit sales growth with comp sales up in the mid single digits. In U.S. Wholesale, we are planning net sales up in the mid single digits driven by growth across most of our customer segments. Sales in our International segment are planned up in mid single digits, reflecting growth in each of the three principal components in our International business: Canada, Mexico, and international partners. On profitability, we are expecting adjusted operating income will also grow in the low to mid single digits over 2025. A few comments on our outlook for operating income in 2026. First, our plan is back-half weighted, with first-half profitability planned down and adjusted operating income and adjusted EPS planned to grow in the second half of the year. This planned pacing reflects, in part, the negative impacts of tariffs in the first half of the year. Tariffs overall are not comparable in the first half as the higher incremental tariffs were implemented midyear in 2025. Additionally, pricing is planned to be less of an offset in the first half, particularly in U.S. Wholesale, in part due to the timing of sell-in of first-half commitments in our Wholesale business. First-half profitability will also be weighed down by the timing of investment spending and higher interest costs due to our debt refinancing. In the second half, we planned for far less net impact from tariffs driven by additional planned progress in pricing, and product and customer mix improvements. Spending is also planned roughly comparable in the second half versus 2025. All of this nets to our full-year assumption that gross margin rate will decline somewhat versus 2025, and full-year spending will be roughly comparable to up slightly. We are expecting that our productivity initiatives, including store closures, will contribute strongly and will largely offset our investment in demand creation, select technology investments, and other cost inflation across the business. Below operating income, we expect net interest expense of just under $40,000,000. This increase reflects the higher interest and other costs associated with our debt refinancing late last year. The impact of higher interest costs on 2026 EPS is approximately $0.30. Our effective tax rate for 2026 is planned at approximately 22% compared to 19% in 2025. This increase reflects the implementation of a new global minimum tax rate in Hong Kong and our plan to generate a greater proportion of our worldwide income in the United States. The impact of these higher interest and tax effects results in adjusted earnings per share, which are expected to be down low double digits to down mid teens over 2025's adjusted earnings per share of $3.47. We are expecting good operating cash flow in 2026 in the range of $110,000,000 to $120,000,000. We are planning for CapEx in 2026 of approximately $55,000,000, with investments in new stores in Mexico, distribution center upgrades, and technology initiatives accounting for the majority of planned spend. Our expectations for the first quarter are summarized on Page 14. First quarter net sales are expected to increase in the mid single digits compared to last year. By segment, we are expecting in U.S. Retail growth in the high single-digit range with comparable sales planned up in the mid single digits. Easter falls earlier this year compared to 2025, which we expect will benefit the first quarter. First quarter-to-date sales in Retail have been strong, up in the mid single digits. The outcome of the quarter will be heavily influenced by business in March, which is historically one of the largest volume periods of the year, and represents about 50% of planned first-quarter U.S. Retail sales overall. In U.S. Wholesale, we are planning net sales down in the low single digits. We are expecting good growth with the exclusive brands offset by continued pressure in the Carter's, Inc. brand with department store customers. In International, we are planning double-digit net sales growth driven by growth in Mexico and Canada. We are planning first quarter gross margin will be down approximately 400 basis points over last year, principally due to the net unfavorable impact of tariffs, offset somewhat by a higher mix of U.S. Retail sales and lower sales of excess inventory than a year ago. Spending is planned up about 3% due to investments in demand creation, technology initiatives, and higher wage and rent costs. We are planning first quarter adjusted operating income in the range of $12,000,000 to $15,000,000. Below the line, we are expecting net interest expense of approximately $9,000,000 and an effective tax rate of approximately 37%. This effective tax rate is much higher than typical, driven by some negative tax effects related to stock-based compensation in the first quarter. As mentioned, we are planning a full-year effective tax rate of approximately 22%. First quarter EPS is projected in the range of $0.02 to $0.08. While we are projecting lower profitability in the first quarter, we are planning growth in adjusted operating income in each of the subsequent quarters of the year. Risks that we are tracking include overall macroeconomic conditions, as employment and consumer confidence metrics signal caution. And of course, there remains the potential for continued changes in tariff policies, which may significantly affect our business. That wraps up our prepared remarks. Before we open it up for questions, I want to take a moment and acknowledge Sean McHugh. Sean is retiring today after 15 years as our Treasurer and Head of Investor Relations. Sean has been a terrific leader here at Carter's, Inc. and a strong colleague to quite a number of you on the street. Sean, thank you for everything. We wish you and your family all the best in your retirement. And I would like to also welcome T.C. Robillard, who is joining us on the call today as our new Vice President of Investor Relations. T.C., welcome to Carter's, Inc. Glad to have you with us. And with all that said, we are ready to take your questions. Operator: Thank you, ladies and gentlemen. If you have a question or a comment at this time, please press. Our first question comes from Paul Lejuez with Citi. Your line is open. Paul Lejuez: Hey, thanks, guys. Can you talk more about your full price realization? If there is any color you can give around that within the retail business? And maybe could you quantify the drag from tariffs specifically that you build into gross margin assumptions? It would be really helpful if we could get a sense of that by quarter, even beyond Q1. And maybe just along those lines, any other big moving pieces within the gross margin line and how that might look different in the first half or second half? Thanks. Douglas C. Palladini: I will start, and then Richard can jump in. Thanks, Paul. I would say, first and foremost, on full price realization, we are selling more clean-ticket product than we have and have less product on promotion than we have traditionally. If you look at an emerging brand like Little Planet, if you look at our best-in-class sleepwear, which we call Purely Soft as part of the Carter's, Inc. line, those are great examples of where we are pricing up in AURs, and more of that is selling out on less of a promotional cadence. Also, as you look at our AUR increase in DTC, to more let the quality, the style, and the total value of the product speak for itself, and we are seeing that. We are also seeing that especially with attraction of new consumers. So as we bring new consumers into the fold, they are mixing into these better and best buckets at a higher rate and accepting the higher AURs, and I will turn it over to Richard for further quantification. Richard F. Westenberger: Yeah, Paul, a lot in your question as it relates to the impact of tariffs. And so just a few thoughts on that. Recall, and on our last call, we referenced that we thought the potential of the higher tariffs would put us in a range of a gross effect of $200,000,000 to $250,000,000. We are at the lower end of that range. So for the full year, we are expecting the gross impact to be somewhat over $200,000,000. Now, that compares to the $60,000,000 that we incurred on a gross basis before pricing benefit in 2025. So that is about $150,000,000 of an increase that will hit gross margin across the year. I do not know if I will go by quarter by quarter, but by half. It is reasonably comparable. The gross effect is a bit more weighted to second half, but they are more even than not. And then offsetting that are significant assumed pricing increases across the business, across all of our channels, as well as other supply chain mitigation actions. Our supply chain team has done an extraordinary job using whatever levers they have, moving production around, negotiating with our vendors. Pricing is the most significant offset to the planned tariffs. So I think from a full-year gross margin point of view, the overall gross margin is planned to be more comparable in the second half, as I mentioned, down in the first quarter, down to a lesser extent in second quarter, but we are showing more stability in the second half of the year. As I think about the full year, because of the presumed successful pricing and the proof points that we have had in recent quarters have given us some confidence, to Doug's points around our brands are worth more, the consumer is recognizing the value, and so far, we have not seen resistance to the price increases that we have advanced. On a full-year basis, we more or less offset the impact of tariffs, and what flows through are some other things such as the investment in product make, which we think is going to be important to continue to improve the competitiveness of our assortments, particularly in the Wholesale channel. And we have got some other benefits as well from our productivity initiatives; those cost centers are planned in gross margin. So we would have had to price up even more to hold the rate, but there is substantial pricing that is reflected in this plan. So hopefully those comments are helpful. Paul Lejuez: They are. And then just to follow up on the Little Planet and Purely Soft, what is the percent of sales that those represent right now? And how much of a driver is that, and how much do you bake into the fiscal 2026 growth rate? Richard F. Westenberger: Little Planet just had an important milestone across $100,000,000 in sales. So it is still relatively small, but it is growing off a small base rather rapidly. So we do have good growth plans. I do not know that I have that stat right in front of me, but we do have growth planned in Wholesale and in our Retail channel for Little Planet for the coming year. Paul Lejuez: Thanks a lot. Operator: Thank you, Paul. One moment for our next question. Next question comes from Jay Daniel Sole with UBS. Your line is open. Jay Daniel Sole: Great. Thank you so much. Richard, I have two questions for you. One is can you give us a little bit more detail on the U.S. Wholesale margins in Q4? Maybe talk about the inventory provisions and what component of that was the 810 basis point change in the operating margin? And then just the guidance for SG&A for fiscal 2026, can you give us a little bit of a bridge, like how much of a benefit is the store closures in addition to the $45,000,000 cost saving program you all announced last quarter versus maybe other things that you are investing in to get to what it looks like flat SG&A dollar growth for the year? Thank you. Richard F. Westenberger: Right. So Jay, on Wholesale margins, the most dramatic driver and most significant driver was the net impact of tariffs. So that was, on a gross basis, probably $20,000,000 of the $40,000,000 that I referenced. There was less of a pricing offset there. So in terms of just basis point decline, that was the majority of it. We did have an opportunity just opportunistically to move some excess inventory coming out of the mass channel. That was 40 or 50 basis points of the rate deterioration in Wholesale. So it was not the most significant, but it was above what we had initially thought we would do for excess inventory, but it was good to move that inventory. So I would say the headline really on Wholesale profitability is just the net impact of the tariffs. Recall that when the tariffs were implemented, we had already sold in fall, the goods had been ticketed. We certainly had good partnership on the part of our Wholesale customers, but it was not our intention to be able to cover all of that. So that price coverage of tariffs in the Wholesale channel improves over time. As I said, once we get past the first half, there is more significant benefit from pricing in the Wholesale channel, but it will weigh us down. It weighed us down in the fourth quarter. It will weigh us down in the first half as well. On your question on SG&A, we have planned SG&A more or less flat for the year, perhaps up slightly. There is a significant benefit from productivity that is coming through the P&L, about $40,000,000, I would say, on the SG&A line. There is some portion of our productivity initiatives, the $35,000,000 that Doug referenced from organizational savings. A portion of that comes through SG&A and a portion comes through gross margin. We have some cost centers that are reported as part of gross margin. But about $40,000,000 in total of productivity benefit coming through, an element of that is the SG&A savings from closing stores. So if I had to parse it out from memory, it would be about $25,000,000 of the organizational savings in SG&A and about another $13,000,000 to $14,000,000 from the store closures. We are using those strong benefits from productivity to offset the investment spending that is in the plan. So the items that we have talked about, marketing is a big headline. We felt like we have under-indexed in the investment in marketing relative to other good brands. So we have made a conscious decision to ramp that up. We do have some select technology investments. I think we have done a good job focusing the investment on the areas that we think are going to be the highest impact and help us drive the business. And then you have some other costs coming back into the business just with growth plans, so variable expenses are up, merit and wage costs are up. So those are kind of the puts and takes. Good benefit from productivity, but a good amount being invested back to drive the business for the long term. Jay Daniel Sole: Got it. Okay. Thank you so much. Operator: One moment for our next question. Our next question comes from James Andrew Chartier with Monness, Crespi, Hardt. Your line is open. James Andrew Chartier: Hi. Thanks for taking my question. Can you talk about when the pricing at Wholesale takes effect? Are you going to see the full benefit of price increase at Wholesale in first quarter? Or does that come later in the quarter? And then at Retail, how does the 53rd week last year impact kind of sales by quarter? It looks like it is a benefit to the first quarter. Richard F. Westenberger: Well, pricing is planned up, I would say, across the year in each of our segments. It is planned up in Wholesale, including in the first quarter. We just have much more of a benefit offsetting the tariffs in the second half of the year versus the first half. So again, our spring sell-ins took place at a time where we just did not cover as much of the pricing as might have been desired, but that is kind of where we are, and it improves over time. The 53rd week is only a benefit and really a comparison issue in the fourth quarter. It was about $8,000,000 of sales from memory. And to be clear, the new Wholesale pricing is in effect. James Andrew Chartier: Okay. Alright. It looks like you are guiding for Retail sales low single digits for the year despite a mid single-digit comp. But I think for first quarter, you said high single-digit Retail sales growth on a mid single-digit comp. So what is the delta there then if it is not the shift of the weeks in the quarter due to the calendar, maybe the extra week in fourth quarter? Richard F. Westenberger: We have a benefit from pricing coming through, and we have the store closures, which is driving a delta as well, Jim. James Andrew Chartier: So those just come later in the year. It is more impactful later in the year, the store closings? Richard F. Westenberger: Well, and we also have good ecommerce growth that is planned as well. That may be part of the difference. And just to correct my comment on the 53rd week, it was worth about $12,000,000 at Retail, Jim. James Andrew Chartier: Okay. And then just in the fourth quarter, Wholesale pricing was down low single digits despite higher realized pricing. Other than the excess sales, any other drivers that impacted the pricing at Wholesale in fourth quarter? Richard F. Westenberger: Yeah. It was down low single digits in the fourth quarter, Jim. I think that clearance activity did have some impact on the realized pricing in that segment. And also, while we had raised some prices in the fourth quarter in Wholesale, it just was not enough to cover the tariff impact. So the clearance activity definitely had an impact on driving the AUR down a bit. James Andrew Chartier: Great. Thank you. Operator: Sure. One moment for our next question. Our next question comes from Ken with Bank of America. Your line is open. Ken: Hi, good morning. Thanks for taking my question. Curious, so while guidance today obviously does not assume any tariff benefits, curious if the new 15% universal rate were to hold, how should we think about the benefit to your business compared to the rates you are seeing today? And also, what would you expect from the broader marketplace and your ability to take price? Douglas C. Palladini: Yeah. So we are not going to offer much conjecture on what could happen. We are going to wait and see, get the details, and then talk about them once we have the facts in front of us. Beyond what we have already said about, we believe the total impact could be positive based on what we know today. I think that is work to come. So please be patient while we sort through and get the details of what we need. Ken: Okay. That is fair. Question was just on sales. Curious, on the guidance for full year up low to mid single digits. What is the assumption on AUR growth as you lap pricing from the prior year? And especially against the extra week last year and planned reductions in the store footprint, what are kind of the key drivers underpinning your confidence in the guide? Richard F. Westenberger: Yeah. The assumption is for a mid single-digit increase in full-year pricing. So we started raising prices more meaningfully in the second half of 2025. So we have to comp up against that. But for the entire year on a consolidated basis, it is up mid single digits. Some puts and takes by business, but that is what it is overall. Ken: It is okay. Thanks. Operator: Welcome. One moment for our next question. Our next question comes from Mike Bertrand with Wells Fargo. Your line is open. Mike Bertrand: Hey, good morning, everyone. And Sean, it has been a pleasure working with you. Best of luck. Welcome, T.C. Two from me. I was going to start with Retail. Maybe, Doug, is there any chance you could give us, or Richard, some kind of read on just your comps have obviously been getting better for the last couple of quarters. Any commentary quarter to date? Curious how weather and storms have impacted you. And then along with that, could you quantify the benefit that the early Easter is going to give you and conversely how that should hurt you in the second quarter? Douglas C. Palladini: Yeah. I will take the first part, and Richard can take the second part. I would start by saying that we are not going to worry about the weather. You know, it affects everybody exactly the same. It is winter. There are going to be storms. Some days are better than others. So we are just in line with the rest of the retail community when it comes to our stores and the weather. But what I would say is that, look, we are seeing the impact of better product, focus on newness, on style, reinforcing the quality of what we make. We are seeing the benefit of demand creation driving traffic and really bringing new consumers to the table. So more people coming in the stores, a better in-store experience, more product that is resonating with consumers, and that is elevating our ability to get price, to discount less, and to get more repeat traffic, I would say, as well as very important. The one thing that we are seeing is that we are ratcheting up our ability both in demand and retention as we develop the equity for these brands. So that, I think, is what is most important to reflect in those Retail results. Richard F. Westenberger: And, like, quarter to date, we are running positive mid single-digit comp in U.S. Retail. I would say sometimes it is hard to draw a lot of conclusions on business in January and February; it tends to be a clearance period. As we said in our remarks, it is all going to be about March. March is a kahuna month, and that is where half the volume will be for the quarter. I think the earlier Easter historically has been worth a point or two of comp when it has come earlier. So that would be kind of my best guess on that. Do not want to minimize just the strength of our ecommerce at the moment as well. That was a real driver in the fourth quarter. I think some of the investments we have made in demand creation have kind of naturally driven traffic to the ecommerce business, which has continued to be strong. We have good positive comps planned for second quarter. An element of that would be the pricing. So that might affect perhaps some of that early April business, but we have good growth planned in second quarter comps in the U.S. Mike Bertrand: Got it. Super helpful. And then just a follow-up on Wholesale. So first quarter down low single, full year up mid. Is there something, is there a timing or some issue in the first quarter to call out? Also, can you quantify the Simple Joys headwind and how that should play out? And I guess my main question with all that is, why the channel's growth rate is planned to improve so much out of Q1, especially with the Amazon changes kind of taking place? Thanks. Richard F. Westenberger: Yeah. I would say there are multiple things at play here. There certainly was some timing. We did have some earlier demand for spring product that benefited fourth quarter that is pressuring a bit of the growth rate on first-quarter Wholesale volume. I think also, we have been conscious in our comments to talk about the investments in product make. We think that there has been room to improve the assortment, the appeal. We plan that business collaboratively with our Wholesale customers. They provide very good input. To Doug's point, the reception to what we have been showing them for fall already has been tremendous. And so we have got more growth planned, more volume planned in the second half. That helps kind of the Wholesale sales and profitability equation as we get into the second half as well. So I think multiple things at work there. Spring bookings were not as strong as we might have hoped. I think a number of our customers are understandably being cautious in this tariff environment when they are facing price increases as well across probably everything in their assortment. We saw those commitments come in a little lower than we had anticipated. The bookings profile and demand profile improves as you get later in the year. Douglas C. Palladini: And I will talk about Amazon for a minute and give everybody an update. You recall on the last call, we talked about moving out of Simple Joys over time as the business model there has shifted, and moving into featuring our own brands, led by Carter's, Inc., on the Amazon platform. That is happening already, and you are seeing the shift is underway. You will see Simple Joys as a percentage of our total sales there come down over time, not disappear, but come down. You would see, and you will see, sales of our existing brands come up. That will be reflected over time in growth in both revenue and profitability on that platform. Mike Bertrand: Got it. Thanks so much, guys. Operator: One moment for our next question. Our next question comes from Jai Ki with Goldman Sachs. Your line is open. Jai Ki: Hi, guys. Thanks for the question. I was just wondering if you could fill us in on the cadence of marketing and demand build investments. How is that being spent specifically, and where you might be seeing early green shoots in the returns? And then also, in terms of the new customers you are acquiring, I guess from maybe a demographic or an income cohort perspective, you could help kind of fill in the gaps about where that is—like, because you guys mentioned pre-ICR that that was coming from a higher income cohort. I am just wondering how much that has continued or accelerated since the last comments. Thanks. Douglas C. Palladini: Yeah. Thank you, John. Yeah. The first part on marketing cadence, I would say that as our renewed investments have kicked in, we have seen our ROI increase. And, again, as I mentioned, that is happening both in terms of demand and retention. Specifically, the outsized impact is coming from places like paid social, and you are seeing those gains in share of voice and our equity rising. We do, as you know, have a pretty significant incremental investment planned in 2026. Still, we are still fairly—vis-à-vis our competitors—humble at marketing as a percentage of total spend. So there is a lot of upside for us as we move forward in how much we invest. That said, we are going to measure along the way. So we are, as long as we are continuing to see the kind of ROI that we are seeing today, we will keep leaning in and investing. But we are going to be careful and make sure that we measure the results every step of the way. On new consumers, yeah, we are seeing—continue to see—acceleration in acquisition of new consumers. And what we know is that they tend to come from higher income than our existing consumer base. Okay? So they are above the—if you just look at U.S. household median income—they are above that median, which is interesting and new for Carter's, Inc. And also, I think, speaks to when you see the AUR increases, when you see better selling in our better and best buckets of product, you are seeing that relative spending power come into the brand. I also would just want to make it clear that our intention is not to replace our existing consumer. We want to serve all of our consumers. And if you come in the door of a Carter's, Inc. store and immediately ask where the clearance rack is, we are going to take great care of you. And so if you are a more price-sensitive consumer, we have great value for you. We have great style, quality, and at a great price. So we are going to take care of those people as well. But as we bring new consumers in, we know that they are coming from higher income brackets, and they also potentially show higher lifetime value as a result. Hope that helps, John. Jai Ki: Yeah. Absolutely. Thank you. Operator: One moment for our next question. Our next question comes from William Reuter with Bank of America. Your line is open. William Reuter: Good morning. On your price increases at Wholesale, has this resulted in any changes to your shelf space? And are your Wholesale customers asking for you to demonstrate how the product may be improved or offering greater value versus previous offerings? Douglas C. Palladini: So the answer to the first part is no. The answer to the second part is that there are no surprises there because we work very closely with them to deliver exactly what they expect from us. So we come in with a clear point of view about what we think is working for our brands, and we work very collaboratively with our Wholesale partners to ensure that we are delivering exactly what they expect. Now, we are in a very fortunate position that we are the number one national brand in most, if not all, of our key Wholesale accounts. And so they are reliant on our continued improvements in what we make, and we are leaning in there to make sure that we continue to show up as the primary brand on their floors. William Reuter: Got it. And then just as one follow-up, I know that a handful of years ago, you booked some price increases. You then were kind of forced to push down prices a little bit subsequently because the feedback was not great. What are you seeing in terms of private label competition? What is the spread in your current pricing versus where the private label options are? Richard F. Westenberger: I would say we are seeing prices go up in the marketplace. Historically, Bill, we have been kind of in that 15% to 20% range. That is kind of a good sweet spot for us to sit next to private label. I think the wild card is just sort of the state of the economy, and if things are a little shaky, does the consumer have more propensity to trade down to private label? Today, we have not seen it. Private label has picked up some share broadly in the market, I would say, over the last year. But we think prices are going up kind of across the marketplace. And a lot of the private label brands that you see in the market were in the same factory. So I do not think we are disadvantaged from a cost structure or a sourcing point of view. Douglas C. Palladini: Yeah. I think we are very comfortable being the premium national brand in our key accounts, but we do want our pricing to remain competitive. So when we talk about being competitive, we are talking about it remaining relative. So, yes, we can price up. We can come across as the leading national brand, but it still has to be in the context of what we are selling by product category, and we take that very seriously, and we try to make sure that we are competitive everywhere we are on sale. William Reuter: Got it. So I guess, Richard, it sounds like the pricing gap with your products and private label, they are pretty similar to what they have always been on a percentage basis. Is that fair? Richard F. Westenberger: Yeah. I think so, Bill. William Reuter: Cool. Alright. That is all for me. Thank you. Richard F. Westenberger: Thanks very much. Operator: I am not showing any further questions at this time. I will turn the call over to Mr. Palladini for any further remarks. Richard F. Westenberger: Thank you, everyone, for joining us this morning. Douglas C. Palladini: As we said earlier, we are pleased with the progress we are making against our core initiatives, but also recognize that there is much work to do to achieve our goal of sustainable and profitable growth over time. We look forward to updating you on our progress on Carter's, Inc.'s next quarterly call. Thank you, and goodbye. Operator: Thank you, ladies and gentlemen. This does conclude today's presentation. We thank you for your participation. You may now disconnect, and have a wonderful day.
Operator: Good day, and thank you for standing by. Welcome to the BrightSpring Health Services, Inc. Common Stock Fourth Quarter 2025 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. You will then hear an automated message advising you your hand is raised. To withdraw your question, please press 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, David Deuchler, Investor Relations. Please go ahead, sir. Good morning. David Deuchler: Thank you for participating in today's conference call. My name is David Deuchler with Investor Relations for BrightSpring Health Services, Inc. Common Stock. I am joined on today's call by Jon Rousseau, Chief Executive Officer, and Jennifer A. Phipps, Chief Financial Officer. Earlier today, BrightSpring Health Services, Inc. Common Stock released financial results for the quarter and full year ended 12/31/2025. A copy of the press release and presentation is available on the company's Investor Relations website. Please note that today's discussion will include certain forward-looking statements that reflect our current assumptions and expectations, including those related to our future financial performance and industry and market conditions. Forward-looking statements are not a guarantee of future performance. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations. We encourage you to review the information in today's press release and presentation, as well as in our Annual Report and Form 10-Ks that we file with the SEC, including the specific risk factors and uncertainties discussed in our Form 10-Ks. Such factors may be updated from time to time in our periodic filings with the SEC, and we do not undertake any duty to update any forward-looking statements except as required by law. During the call, we will use non-GAAP financial measures when talking about the company's financial performance and financial condition. You can find additional information on these non-GAAP measures and reconciliations of our non-GAAP financial measures to their most directly comparable GAAP financial measures, to the extent available without unreasonable effort, in today's earnings press release and presentation, which again are available on the Investor Relations website. This webcast is being recorded and will be available for replay on our Investor Relations website. With that, I will turn the call over to Jon Rousseau, Chief Executive Officer. Jon Rousseau: Good morning, everyone, and thank you for joining BrightSpring Health Services, Inc. Common Stock's fourth quarter and full year 2025 earnings call. I would like to begin by expressing my and the company's appreciation to all of our BrightSpring teammates who work hard to deliver attentive and quality patient care and services to people in communities across the country. They drive the realization of our mission forward every day. 2025 was another productive and impactful year at BrightSpring Health Services, Inc. Common Stock in many ways. Overall, we saw continued success delivering revenue and EBITDA growth while achieving many milestones, all underpinned by the delivery of high-quality and compassionate services and care to patients. In the beginning of 2025, we announced our plan to divest the Community Living business, which will streamline the company's operations and create more focus on core patient populations in prioritized markets. Earlier this year, the Community Living divestiture transaction was approved by the and at this time, we expect the transaction to close at the end of the first quarter. The transaction is expected to result in net after-tax cash proceeds of approximately $715 million, which we intend to primarily utilize for debt pay down to further improve our leverage and further strengthen the balance sheet. Additionally, the acquisition of Amedisys in 2025 in a two-part transaction on December 1 and December 31. BrightSpring Health Services, Inc. Common Stock acquired 107 branches at a purchase price of $239 million, which was fully funded from cash on hand. The assets generated full-year pro forma revenue of $345 million in 2025, which includes the months throughout the year prior to the transaction close. These assets are very complementary to our existing home health business from a geographic perspective, while also being in the same markets as our hospice locations in many cases, and we are thrilled to have the Amedisys and LHC assets and colleagues integrated into BrightSpring Health Services, Inc. Common Stock, as we are already taking steps to bring new and improved company capabilities to these acquired operations. This is another example of thoughtful, logical, strategic, and accretive M&A that has defined our acquisitions history. Home health, of course, has a tremendous value proposition given its impact on clinical outcomes and cost, as it is shown to reduce ER visits and hospitalizations by 15% and 25%, respectively, and reduce mortality rates by 30% relatively. With an estimated 35% of patients referred to home health but who do not end up receiving the service, home health should continue to be an important solution in the future of health care. Some other accomplishments of note in the pharmacy and provider last year include continued LDD wins, strength in quality metrics, technology and people investments that resulted in ongoing efficiency gains across the organization, de novo expansions, and small tuck-in acquisitions. BrightSpring Health Services, Inc. Common Stock's operational and financial performance exceeded the high end of our guidance range for the year, and we believe that the company's performance is a reflection of the value of our patient-centric lower cost, timely, and proximal care, enabled by our people and culture who maintain an ongoing commitment to providing excellent and leading services. Moreover, our goal is to continue to build out a unique and scaled home and community health care platform that demonstrates leading quality outcomes and operational best practices, a platform that is best positioned to be a critical partner in solution in U.S. health care. Before discussing BrightSpring Health Services, Inc. Common Stock's fourth quarter and full year performance, I would like to remind you that the company's financial results and 2026 guidance pertain to continuing operations, and do not include results from the Community Living business and the effects of any future closed acquisitions. For the fourth quarter, BrightSpring Health Services, Inc. Common Stock's revenue grew approximately 29% and adjusted EBITDA grew approximately 41% versus last year's comparable quarter, resulting in full year 2025 total revenue and adjusted EBITDA that were above expectations. For the year, total company revenue was $12.9 billion, representing 28% year-over-year growth, which included Pharmacy Solutions revenue of $11.4 billion and Provider Services revenue of $1.5 billion, representing 31% and 11% year-over-year growth, respectively. Full year 2025 adjusted EBITDA was $618 million, which grew 34% year over year, and adjusted EBITDA margin for the company was 4.8%, a 20 basis point increase versus 2024, primarily driven by cost efficiencies from procurement and operational initiatives along with generic revenue mix shift in pharmacy. On cash flow, the company realized $490 million of cash flow from operations in 2025, and leverage was 2.99x as of 12/31/2025, which declined from 4.16x as of 12/31/2024. Overall, BrightSpring Health Services, Inc. Common Stock performed well in both the fourth quarter and full year 2025 across all business lines, and we are very pleased with the position of the balance sheet and expanded cash flow profile of the company this year. Today, we are initiating total revenue and adjusted EBITDA guidance for 2026. We expect total revenue to grow approximately 14% year over year at the midpoint of the provided range, and total adjusted EBITDA to grow approximately 25% year over year at the midpoint of the provided range. Included in total adjusted EBITDA guidance is an expected contribution of approximately $30 million from the Amedisys and LHC acquisition. We are excited for the year ahead, and Jen will discuss 2026 outlook in more detail shortly. Before I discuss our business performance, I would like to highlight BrightSpring Health Services, Inc. Common Stock's commitment to our employees and the communities, individuals, populations, and therapeutic areas that we support. Whether our people, seniors, youth, or other specialty patient populations, at the company, we continue to lean into helping individuals and organizations with access to resources and opportunities. For example, in supporting employees through difficult unforeseen circumstances through our SHARE program and college scholarships, in nursing school partnerships, and in partnering with many, many organizations, such as the Special Olympics for one. We currently operate a foundation through our hospice service line, and we have now started an enterprise foundation that will more formally carry on all of our community and patient support activities. We are hopeful that this BrightSpring Health Foundation can positively impact lives for decades to come. I would also like to briefly highlight our strong patient satisfaction and high-quality scores in the fourth quarter, which are driven by our delivery of attentive and skilled care to complex populations in a timely and relatively lower cost manner. In home health, we continue to see over 91% of our branches at four stars or greater, with timely initiation of care at an industry leading level of 99.4%. In hospice, our metrics remain well above the national average, with a top 5% ranked hospice program in the U.S. and a CAHPS overall hospice rating of 87%. In rehab, our patient satisfaction scores remain very strong, with 100% outpatient satisfaction and 98.4% home and community rehab satisfaction. In personal care, we have a client satisfaction score of 4.6 out of 5, compared to 4.5 in the third quarter, along with strong internal client records and quality indicators audit scores. In home and community pharmacy, dispensing accuracy was 99.99%, order completeness was 99.3%, and on-time delivery was 96.8%. In infusion, our patient satisfaction score was 94%, and we were one of only two providers in the country to receive the ACHC IG Distinction award based on our clinical and operational commitment to the IG patient population, 92.4% in the quarter, along with time to first fill of 4.1 days, both much stronger than the national average. In 2025, Onco360 ranked first and CareMed ranked second in the MMIT physician and office staff satisfaction survey. BrightSpring Health Services, Inc. Common Stock continues to demonstrate very strong service and quality metrics across all businesses. Turning to BrightSpring Health Services, Inc. Common Stock's financial results by segment. Total Pharmacy Solutions revenue grew 32% in the fourth quarter and adjusted EBITDA grew 44% versus the prior year. Total pharmacy script volume was 10.8 million in the quarter, driven by total pharmacy census growth. Total pharmacy volumes declined 1% due to a slight decline in home and community pharmacy volumes from the previously mentioned unwinding of a large customer going through bankruptcy and our decision to exit specific uneconomic customers. Specialty and infusion script growth was 30% year over year in Q4. In the specialty and infusion business, performance throughout the year exceeded expectations, with fourth quarter revenue growth of 43% year over year driven by market adoption of existing LDDs, new LDD wins, fee-for-service growth, and strong commercial execution in the field. BrightSpring Health Services, Inc. Common Stock saw strength in the quarter from both brand LDDs and generic volumes, our total LDD portfolio now standing at 149 LDDs, including five launches in the quarter and 24 total launches in 2025. Moving forward, we expect 16 to 20-plus limited distribution drug launches over the next 12 to 18 months. We believe that our growth will continue to be driven by new LDD launches, generic utilization, commercial execution with referral sources, and expanding fee for service. We are excited to have been chosen as the preferred specialty partner for additional new innovative therapies this quarter, which include infusible LDD therapies to treat a range of oncology, rare, and complex diseases. In infusion, the business performed in line with expectations in the fourth quarter with solid script volume growth. Adjusted EBITDA in the quarter grew in double digits driven by the benefits of operational initiatives and process improvements. We expect to continue to see improved profitability in infusion from our operational and growth initiatives moving forward. In home and community pharmacy, we are pleased with the progress throughout the year. We have executed consistently across several end markets, including in behavioral, assisted living, hospice, and skilled nursing. As we have entered 2026, we continue to enhance our go-to-market strategy, invest in growth resources, and look forward to driving expansion in each of our end markets while we execute against the 2026 set of process, technology, and automation work to drive ongoing efficiency improvements. Turning to Provider Services. We are very pleased with the overall performance in the quarter and the year. In the fourth quarter, segment revenue grew 13% year over year, and segment adjusted EBITDA grew 16% year over year, with an adjusted EBITDA margin of 16.4% in the fourth quarter, a 50 basis point expansion year over year primarily driven by economies of scale and efficiency. Home health care, which represents approximately 55% of revenue in the provider segment, grew 19% year over year. Average daily census grew 15% to almost 35,000 in the quarter, driven by strong quality metrics, de novos, execution on partnerships and preferred MA contracts, and strategic tuck-in acquisitions in target markets. In home-based primary care, we are excited by the large opportunity that exists, especially with ACO payment strategies. We continue to invest in resources in this strategic area, and we believe we can further expand our home-based primary care business to benefit payers and their members and better connect patients to other integrated services that they need. In rehab care, which represented approximately 20% of provider revenue in the fourth quarter, revenue growth was 8% year over year. We are pleased by strong person-served growth of 13% and hours billed growth in the core neuro rehab services of 17%. Growth in the fourth quarter was driven by neuro rehab de novo additions and very high patient satisfaction scores, along with continued expansion of our Rehab in Motion program into ALF and home settings. We are excited by momentum in rehab Part B for seniors and look forward to driving additional de novo locations this year. Turning to personal care, which represented 25% of provider revenue in the fourth quarter, revenue remained steady to up and grew 4% year over year. Personal care persons served grew 2% to 16,175 in the fourth quarter. In the quarter, and throughout 2025, we saw steady operational performance as we continue to provide high-quality supportive care to seniors and assist with activities of daily living in the home. Overall, I am pleased with our operational performance throughout 2025, leading to excellent business performance across BrightSpring Health Services, Inc. Common Stock's enterprise. We now have a seven-year CAGR of 22% on revenue and 18% on adjusted EBITDA. 2026 is off to a consistent and good start, as we remain focused on leveraging our leading complementary and differentiated service capabilities and leveraging our scale, operational efficiencies, and best practices to deliver high-quality coordinated care to complex patients. We will be hosting an Investor Day on March 17 and look forward to discussing the BrightSpring Health Services, Inc. Common Stock platform and strategy that enables high-quality, lower cost, timely care delivery to approximately one-half million senior and complex patient individuals every day. We will provide information on the operations, end markets, and growth drivers of each of our business units, and we will discuss our long-term company vision and strategy, and the reasons why we have never been more excited about BrightSpring Health Services, Inc. Common Stock's future. With that, I will turn the call over to Jen. Jennifer A. Phipps: Before I discuss our financial results for the fourth quarter and full year of 2025, I would like to remind you that in 2025, we began to record the Community Living business in discontinued operations, as indicated in the press release and 10-K, to adhere to accounting standards required for annual reporting. As such, all BrightSpring Health Services, Inc. Common Stock financial results and forecasts that I will discuss are related to continuing operations and exclude Community Living and any acquisitions that have not yet closed. Management believes the presentation of the non-GAAP financials from continuing operations is a useful reflection of our current business performance. In 2025, total company revenue was $3.6 billion, representing 29% growth from the prior year period. Pharmacy Solutions segment revenue in the quarter was $3.2 billion, achieving 32% year-over-year growth. Within the pharmacy segment, infusion and specialty revenue was $2.6 billion, representing growth of 43% from prior year, and home and community pharmacy revenue was $593 million, representing a decline of 1% year over year. Home and community pharmacy revenue declined year over year due to the associated with the customer that declared bankruptcy and our decisions to exit specific uneconomic customers. This particular customer's bankruptcy process is still ongoing, and our forward-year guidance contemplates a variety of scenarios. However, we do not anticipate any changes to the year under any scenario. In the Provider Services segment, we reported revenue of $394 million in the fourth quarter, which represented 13% growth compared to the prior year. Within the Provider Services segment, home health care reported $217 million in revenue, growing 19% versus last year. Rehab revenue was $75 million, growing 8% versus last year, and personal care revenue was $102 million, representing growth of 4% year over year. For the full year 2025, total company revenue was $12.9 billion, representing 28% growth from 2024. Pharmacy Solutions segment revenue was $11.4 billion, representing 31% growth from the prior year, and Provider Services segment revenue was $1.5 billion, representing 11% growth from the prior year. Moving down the P&L, fourth quarter company gross profit was $413 million, representing growth of 22% compared with the fourth quarter of last year. For full year 2025, company gross profit was $1.5 billion, representing growth of 20% compared to 2024. Adjusted EBITDA for the total company was $184 million in the fourth quarter, an increase of 41% compared to 2024. For full year 2025, adjusted EBITDA for the company was $618 million, representing 34% growth compared to 2024. Adjusted EPS for the total company was $0.33 for the fourth quarter and $1.00 for the full year. Throughout 2025, we continued to implement procurement initiatives and have invested in and deployed new technologies to enhance operational efficiencies across the company. This has contributed to ongoing people and growth investments as well as net profitability growth and margin results for the fourth quarter and full year of 2025. In 2026, we anticipate our procurement and operational programs to result in additional gains through cost efficiencies, best practices, and streamlining across all business lines. Turning back to segment performance, in the fourth quarter, Pharmacy Solutions gross profit was $255 million, growing 25% compared with the fourth quarter of last year. Adjusted EBITDA for Pharmacy Solutions was $102 million for the fourth quarter, an increase of 44% compared to last year, representing an adjusted EBITDA margin of 5.1%, which was up approximately 40 basis points versus last year. Provider Services gross profit was $158 million, growing 17% versus the fourth quarter of last year. Adjusted EBITDA for Provider Services was $64 million for the fourth quarter, growing 16% versus last year, representing an adjusted EBITDA margin of 16.4%, up approximately 50 basis points versus last year. Community Living continued to show strong operational and financial performance throughout the year. We are pleased with the year-over-year revenue and EBITDA growth we achieved in this business in 2025. On a total company basis, cash flow from operations was $232 million in the fourth quarter and $490 million for 2025, exceeding our annual run-rate operating cash flow expectations for the year. Our adjusted EBITDA growth combined with our cash flow generation during the quarter has led to a leverage ratio of 2.99x at December 31, 2025, which we successfully decreased from 4.16x as of 12/31/2024. At the time we provided our fourth quarter 2024 results in March, our leverage ratio target was 3.0x to 3.5x pro forma for the Community Living transaction, and as of year end, we have now reached a leverage ratio of just under 3.0x and below that expected range. Our view of year-end 2025 leverage pro forma for the Community Living transaction is 2.6x. We are pleased to have exceeded our leverage target for the year, driven by both growth and very strong operating cash flows exiting the year. BrightSpring Health Services, Inc. Common Stock is well positioned with a strong balance sheet, enabling increased capital allocation flexibility in 2026 and beyond. Longer term, with continued execution, growth, and cash flow generation, we remain on track towards a leverage target of 2.5x or below, which at current trends could be realized by midyear, excluding acquisitions or other uses of cash. As of December 31, net debt outstanding was $2.5 billion. We continue to actively evaluate our capital structure to ensure that we are best positioned moving forward. As mentioned previously, in January, we expect to receive approximately $715 million of net cash proceeds from the $835 million of gross cash consideration in the pending Community Living sale, which at this time we expect to close by the end of the first quarter. Given various moving parts with regards to the use of Community Living proceeds, we are not providing interest expense guidance at this point in time. Turning to guidance for 2026, which excludes the Community Living business, as well as any acquisitions that have not yet closed. Total revenue is expected to be in the range of $14.45 billion to $15.0 billion, including Pharmacy Solutions revenue of $12.6 billion to $13.1 billion and Provider Services revenue of $1.85 billion to $1.9 billion. This revenue range reflects 11.9% to 16.2% growth over full year 2025, excluding Community Living in both years. Total adjusted EBITDA is expected to be in the range of $760 million to $790 million for full year 2026. This would reflect 23.1% to 27.9% growth over full year 2025, excluding Community Living in both years. Included in total adjusted EBITDA is expected contribution from the Amedisys and LHC acquisitions of $30 million. I will now turn it back to Jon. Thanks, Jen. Jon Rousseau: And thank you for your time today to go through BrightSpring Health Services, Inc. Common Stock's fourth quarter and full year 2025 results. We will now open up the call for questions. Operator? Operator: Thank you. Star 1-1 on your telephone and wait for your name to be announced. In fairness to all, we ask that you please limit yourself to one question and one follow-up. One moment for our first question. Our first question is going to come from the line of A.J. Rice with UBS. Your line is open. Please go ahead. A.J. Rice: Thanks. Hi, everybody. Obviously, a lot of things are going well for the company at this point. When you look at your '26 outlook, I wonder if you could— Jon Rousseau: —sit here right now. Yes. We see a lot of consistency that is playing out in Q1, as we look at 2025. So we do not see a whole lot of changes and are continuing to try to execute against the strategies that we have been driving for a while. I mean, as we look out for the year and try to ensure execution, continuing to drive volume growth in each of the businesses is going to be important. We are making sales investments, really as always, and in all of the businesses in particular, and a couple of them, like home health, hospice, and infusion and in home and community in select markets like IDD and ALS. So seeing those sales investments take hold, as always, we have a wholesome list of Lean Sigma tech and now increasingly AI projects that are slated to roll out through the company this year. We expect benefit from those as well. And then as we integrate the Amedisys and LHC acquisitions, those will be important to do well this year. So, look, I think it is just continued execution from a quality standpoint, and with that quality, investing more and more in sales to drive to our volume targets, and then on the cost side, continuing to drive lean initiatives through technology and through our procurement team. Obviously, there is some margin expansion in what we are expecting for this year, but all of those items are things we have been executing against for a long time, and I think we want to take the consistency we are seeing right now and just continue to execute from a volume and a margin perspective. A.J. Rice: Okay. And then maybe for the follow-up, I know you said that over the next twelve to eighteen months, you are looking at 16 to 20 new LDD introductions. I wondered if you could give us some comments about the landscape from a generic conversion, biosimilar conversion, and what that looks like for you at this point. Jon Rousseau: Yes. We 24 LDDs we won last year, and 16 to 20 is our guidepost. We have been beating that the last year or two. We feel like that is a really good number as we look out twelve to eighteen month payment, doing a great job. Again, from a quality and service level perspective, that is something we focus on immensely to try to be the best partner we can. I think importantly, we are winning rare and orphan and some LDDs outside of oncology as well. We will have probably three or four infusion LDDs, for example, that we are going to be winning here in Q1 or early Q2, and that is an area we are really focusing on. And then even a very meaningful cardiac drug here recently that we picked up too. So our LDD and specialty strategy is continuing to, would say, expand, leveraging on the core capabilities that we have. And that is deciding. From a biosimilar perspective, with Solara mostly in the rearview mirror, a little bit of residual impact for us this year, but we really do not have any exposure there just given the nature of the therapies and the drugs that we supply. A.J. Rice: Okay. Thanks a lot. Operator: Thank you. And one moment for our next question. Our next question will come from the line of Whit Mayo with Leerink Partners. Your line is open. Please go ahead. Whit Mayo: Hey, thanks. Good morning. Jon or Jen, can you talk about just EBITDA and margins for each of the segments expected for this year? Jon Rousseau: Yes, sure. I will go ahead and turn that over to Jen in a second. I would just say, as you are seeing EBITDA in our guide thus far for 2026 outpace revenue, obviously there is some margin expansion there. From a revenue perspective, some things that were expected, you have got IRA, you have got some branded generic conversions, you have got a little bit of residual impact from a customer or two in home and community pharmacy that we either fired or they went bankrupt, and so that is at play in some of our revenue numbers, notwithstanding that really strong growth rate numbers for the year that we are really confident in. I think some of the EBITDA drivers, as I said before, is going to be some product mix and then these operational efficiencies that we continue to drive. Provider has got a really good growth number for 2026. That is a 17% margin business as well. So, Jen, any other commentary at the segment level? Jennifer A. Phipps: Yes. I would say from a segment standpoint, we do expect broad-based margin expansion from the initiatives that we deployed in late 2025 and continuing into 2026. So we will see, we do expect some of that. We have favorable mix both in terms of product and services that is benefiting that. Jon mentioned some of the revenue impacts that also is causing expansion from a margin perspective, from an EBITDA standpoint. But just with all of that, we continue to invest for future growth. So in our plan for 2026, we will continue our investments in AI and technologies and other operational processes and sales investments, as Jon has mentioned. So we are going to be covering that in this revenue guide as well. Yes, I think that is an important point. I mean even sort of with the EBITDA guide for '26, which I think it is 27%, 28% at the high end, there is a lot of continual investment we are making in the company as we look out to one-, three-, and five-year growth, which we are really excited about. Whit Mayo: Okay. And then, I am curious just your views on the future of the temporary and permanent behavioral adjustment cuts for home health now that you have really doubled down on the industry. There is some debate whether or not CMS will in fact move forward to implement any further cuts. And then you may have kind of called bottom here on the rate environment in some ways. So I am just curious how you are looking at the rate environment. Jon Rousseau: Yes. We like home health a lot. I mean, that deal was such an incredible fit from a geographical perspective. Our baseline view of home health rates, just to be conservative, is flat. I think there has been a lot of constructive conversations even here recently around the future and the value of home health. So we do remain optimistic, and just given the landscape of what has happened with some of the providers, I mean, we see an unbelievable runway in home health over the next five to ten years. And our base case is flat, and I think if certain things occur in the future, there could be positivity there and back to normal and expected and justified rate increases. Remember, home health for us is sort of still sitting around 10% or so of the company. And then hospice has obviously had a ton of support and has been a phenomenal performer for us. Both of those teams in our company have best-in-class management. We continue to add sales. We continue to drive technology into those businesses, and I am super excited about their prospects. Operator: Thank you. And due to time, we ask that you please limit yourselves to one question. One moment for our next question. Our next question comes from the line of David Michael Larsen with BTIG. Your line is open. Please go ahead. David Michael Larsen: Hi. Congratulations on the great year. Can you talk a little bit about the earnings impact on specialty when drugs launch generic? It is my understanding that even though the price can decline, your margins would improve with generic launches. You are able to negotiate better margins across product classes when that happens. Numbers around that would be very helpful if that is the case. Thank you. Jon Rousseau: Hey, David. Yes. Look. In the specialty pharmacy business, that growth is multifactorial, and it has been working for a decade now. You have got brand LDDs. We continue to win about 20 of those a year. We are continuing to actually expand outside of oncology in a lot of rare and orphan conditions, which is exciting. The pipeline out there in pharma continues to never be more innovative and bigger. These therapeutics are amazing for what they can do for people. But you have got brand LDDs. You have got a healthy stream of brands converting generic over time. That is a great thing for everybody. We drive generic utilization as much as we can. Obviously, the cost on the buy side of procurement comes down, and that is helpful. And then we have a really growing fee-for-service business. We have a lot of data agreements and other service agreements with pharma. We are up to over 30 hubs now. We are the hub for pharma. And so just a terrific business in terms of the fee-for-service side, and that is obviously a higher gross profit margin as well. So we like the multifactor nature of growth in that business, and we continue to lean into all of them. Operator: Thank you. And one moment for our next question. Our next question comes from the line of Charles Rhyee with TD Cowen. Your line is open. Please go ahead. Charles Rhyee: Yes. Thanks for taking the questions, guys. Maybe just follow-up from Luke's question and just at least thinking through for the segments related to the overall EBITDA guidance, obviously, with the provider segment, we are going to add in sort of the $30 million contribution from the Amedisys transaction here. But beyond that, if we look at sort of either the 2025 full-year performance for the segments versus maybe fourth quarter, anything that would suggest that the trends that we are seeing that we should take account in our modeling as we think about the proportions of the overall EBITDA between the segments? Jennifer A. Phipps: We expect consistency with what we saw in 2025, so we will continue to see volume growth and EBITDA growth is our expectation, organically across both of our segments. Operator: And one moment for our next question. Our next question will come from the line of Jared Haas with William Blair. Your line is open. Please go ahead. Jared Haas: Yes. Hey, guys. Thanks for taking the questions, and good morning. Just wanted to drill in a little bit more. Just wanted to understand the margin profile of the Amedisys assets that you acquired. From your comments, it sounds like that is a high single-digit margin if I use the pro forma revenues and then the $30 million EBITDA contribution, which I guess seems to be a little bit on the lower side compared to peers in the space and the rest of your legacy provider segment. So just wanted to kind of understand, make sure we are thinking about margins for that asset correctly. And I am wondering if you are sort of absorbing any integration or transformation-related costs post that acquisition in the near term? Jon Rousseau: Hey, Jared. I will let Jen speak in a second. Good morning. No, look, I think you are largely doing that math correctly in terms of what we acquired. It is what it is. But, as we look out for the year, that would be something that we would hope to integrate very soundly, and as we step through the year, we will see how it is going. We have a margin that is higher than that, and our goals will be to drive to our margin over time, and I think we will look to see how quickly we can do that. Jennifer A. Phipps: I would agree. There is a lot of integration work, some technology investments that we are making, ensuring everyone is on consistent platforms and systems. A number of travel initiatives and other things. So we are really excited about that asset and what that will bring, and again, as Jon mentioned, we are very excited about moving that towards our overall profile. Jon Rousseau: I think the only question hopefully will be the timeline of that. And if it moves up, it moves up, and that is a good thing. Operator: Thank you. One moment for our next question. Our next question comes from the line of Brian Gil Tanquilut with Jefferies. Your line is open. Please go ahead. Brian Gil Tanquilut: Hey, good morning and congrats on the quarter, guys. Maybe, Jen, as I think through the year, any callouts especially with the AMED transaction coming in and kind of like a margin ramp expectation there? Any callout on how we should think about the cadence of the quarters for 2026? Jennifer A. Phipps: Yes. A really great question, Brian. Thank you. Just as a reminder, Q1 is the shortest quarter from a days perspective, so that tends to be, from an annualized perspective, our lowest quarter. We would expect sequential growth in each of our quarters throughout 2026, consistent with what we saw in 2025. And from a margin perspective, that will be driven really kind of throughout the year as well as we have different products coming online. We have a generic launch that will happen in Q2, so that will increase throughout the year from a margin perspective. Operator: Thank you. And one moment for our next question. Our next question will come from the line of Pito Chickering with Deutsche Bank. Your line is open. Please go ahead. Pito Chickering: Hey, good morning, guys. Great quarter here. Looking at the 2026 pharmacy revenue guidance, can you give us the moving parts between sort of core growth of existing drugs plus new LDD wins and then the offsets from generic conversions? And, obviously, generics is obviously revenue, obviously not EBITDA. But if you can just give how we think about core growing plus LDD wins, minus generics to help get to the pharmacy revenue guidance. Thank you. Jennifer A. Phipps: Yes. So maybe I will just start with a couple of unfavorable impacts. I think that will be helpful context. So as you think about IRA in specialty and infusion, we do have a revenue headwind of approximately $200 million, and then brand-to-generic conversions, as we have talked throughout 2025, we typically are trying to increase our sales in advance of a launch. And as we know, when there is a brand-to-generic conversion, revenue does come down, and then ultimately, that is good for everyone. It is beneficial from an EBITDA standpoint for us. The total impact in specialty and infusion is a little over $400 million between those two items. And then home and community IRA impact from a revenue standpoint is approximately $175 million. So we do have headwinds of approximately $100 million in 2026. Despite that, we obviously have strong growth. We do expect growth across all of our different business lines. We will absolutely have LDD growth. That is the, you know, that in specialty. We have strong script growth in home infusion and specialty plans. We mentioned in Q3 that home and community script growth will be challenged because of the year-over-year lapping of some of the customers that we offboarded or branches associated with that customer that went through bankruptcy and those locations. So in home and community, we will have script challenges until about Q3, but outside of that we are having really strong volume growth across each of our pharmacy businesses. Operator: Thank you. And one moment for our next question. Our next question comes from the line of Ann Hynes with Mizuho. Your line is open. Please go ahead. Ann Hynes: Great. Thank you. Can you provide an update on the infusion business? I know it has been a big focus of investment and growth. Maybe how much that grew within specialty, what the margin profile is, and maybe what it contributes now as a percent of total specialty. Thanks. Jon Rousseau: Yes. Hey, Ann. Good morning. We are pleased with where the infusion business is at. We have really high aspirations for it this year and going forward. The acute business, we are really a top-two provider there, and in a lot of markets, have a leading market share. That growth has been in the double digits, and we expect that will occur again this year. On the specialty side is, I think, where we have a big opportunity. We have been underweight on specialty. We are creating specialty hubs right now and really separating those two businesses out to create the focus that we want. We have invested in a lot of resources there. We are going to be further investing in resources. We have plans to significantly expand our AIS presence. We have got about 30 right now. We are going to be retrofitting those and upgrading them and moving locations all this year and trying to make them extremely consumer friendly in all the right kind of strip malls and places. So, super excited about it. As you look at our balance sheet, that gives us a lot more flexibility in the future as well. And then just kind of broadly, just touching back on Pito's question, when you think about the numbers Jen put out there, sort of those one-time impacts, that otherwise is calculating to a revenue outlook at this time for 2026 of at 20% or a little bit over 20% when you adjust for those items. So really robust, broadly outside of a couple of those external items. And then I just wanted to circle back on Brian's note on the cadence of the year. It is a great question. I mean, as Jen said, we do expect the quarters to increase throughout the year. As I sort of mentioned to AJ, the continual sales investments we are making, all in the back of quality, de novos that we are investing in, and then our operational projects, these things are all ongoing throughout the year. And as such, those are some of the growth drivers we see throughout the year as we sit here today. Operator: Thank you. And one moment for our next question. Our next question will come from the line of Matthew Dale Gillmor with KeyBanc. Your line is open. Please go ahead. Matthew Dale Gillmor: Thanks for the question. I wanted to ask about the Onco360 sales force. Seems like a pretty unique asset within the specialty pharmacy platform. Can you remind us the role they play, especially with LDD launches or with generic conversions? And what are the priorities for that part of the business as you are thinking about 2026? Jon Rousseau: Yes. No. That is an area that we have continued to invest in. A lot of longstanding relationships both with pharma and with prescribers, which we take extremely seriously and are very honored to have. But it is an area that we give a lot of attention. We have increased our investments in that field force every year. We will do it again this year. We are essentially, at this point, covering, I think, every geography in the United States from a referral standpoint. And, again, it is the service levels that are really pulled through behind the commitments by the field force that are so important, and those were all reflected in the net promoter scores that we have, which typically range between 95 to 100. So everything starts with service, and from there, it is just trying to offer the best education and support for all of the stakeholders out there in the market that we can. Operator: Thank you. And one moment for our next question. Our next question will come from the line of Joanna Sylvia Gajuk with Bank of America. Your line is open. Please go ahead. Joanna Sylvia Gajuk: Good morning. If I may ask the same question a little bit differently about the segment for that. So I appreciate the $600 million revenue headwind in the pharmacy segment. So if I look at, you know, 2025 pharmacy segment margins, right, they improved actually a little bit year over year, to 4.7%, call it, in '25. Is that the, you know, to think about 2026 margins for that segment, you know, how, I guess, will revenue headwinds translate into the margin for that segment? Thank you. Jennifer A. Phipps: Yes. Thank you, Joanna. Yes. It would be mix shift. It would be operational improvements and offset by the investments that we are going to be making, as mentioned, in each of the different segments and at corporate in those areas. So, again, we would absolutely expect an improvement in margin. You see that coming through in the in. You see that margin move up. We will expect a small improvement of that that is continuing through 2026. And, again, for those particular reasons. Jon Rousseau: Yes. In addition to the mix shift and the operational initiatives, you have got economies of scale just from really robust, just core growth. Operator: Thank you. And one moment for our next question. Our next question will come from the line of Raj Kumar with Stephens. Your line is open. Please go ahead. Raj Kumar: Maybe just kind of expanding upon the integration milestones with Amedisys, LHCG, and thinking about that beyond 2026 and maybe kind of flushing out the embedded value you see with the asset integration and then cross-integration of services and products between both segments, considering the deeper kind of geographical overlap post deal, kind of would be helpful to kind of see or frame the overall kind of story there. Jon Rousseau: Yes. So I think there was an earlier question about the margin structure that we acquired. Our provider margins, you can look at what they are. That is what our hope is for the business, and I think we just have to see how quickly we can get there. I would say we are very optimistic about the top-line growth and the volume and ADC growth as well, and the potential that we have in the business. The assimilation so far has gone incredibly well. From a cultural standpoint, fantastic, and so we are really excited about it. There is margin opportunity there, but we are as excited and even more excited about what we can do from a growth perspective in some of these really terrific markets. I would say that there is also overlap with our hospice branches, and so there is going to be a lot of integrated care opportunities there as well, and benefits for our hospice business too. I would note that we funded that deal entirely with cash on hand, and I think that is just a little bit of a callout to where our balance sheet and our cash profile is today. We ended up the year at almost $500 million of operating cash flow. We also did a repurchase later in the year. And as we look at our balance sheet under three times now, and pro forma for the Community Living close 2.6x, so the ability to execute against that transaction entirely funded with cash on hand was a helpful benefit of where we have come as a company from a balance sheet perspective and where we sit today. And as mentioned, I think that is going to give us some flexibility as we go forward, particularly later in the year and certainly into '27 and '28. Operator: Thank you. And one moment for our next question. Our next question comes from the line of Steven Beck with Wells Fargo. Your line is open. Please go ahead. Steven Beck: Yeah. Hi. Yes. So I am looking at the growth rates here, and I think that actually includes, potentially stepping over a fairly large headwind in the LTC business that is coming off the changes that are being made around the IRA. I was wondering if you could update us maybe on the magnitude of the headwind there that you are stepping over? And then any update on your efforts to maybe offset that headwind through reimbursement changes or additional fees or things like that? Thank you. Jennifer A. Phipps: Yes. So as we discussed last quarter, we continue to work and continued through Q4 to work productively with our payers regarding an enhanced dispensing fee that we have worked to achieve, which has helped us to mitigate some of the impact. We absolutely do have an impact. We continue to work through that from a payer perspective. But through all of the other growth initiatives, the volume growth, the efficiencies, we have growth planned, as we had discussed, healthy growth planned in the home and community business. So we continue to work again with our payers to ensure that we have an appropriate enhanced dispensing fee. Our government relations team is also active, making sure that everyone understands the impacts to the pharmacy business. But again, our scale platform and our operational improvements that are hallmark really to how we are approaching every single year, I think, have helped us in this year, for 2026. Jon Rousseau: Yes. I think hopefully we have been clear on the growth drivers for specialty across LDDs, brand generic, fee for service, infusion. You have got acute, you have got specialty. You have got a growing LDD business there, rollout of more AISs. In home and community pharmacy, outside of this IRA, which we will work through constructively, and you have got one or two customer situations, unfortunately, which will be in the rearview mirror probably by about Q3 or Q4. I mean, the name of the game in that business is driving as much volume as you can in these other attractive end markets and being the most efficient scale provider in the industry. So you look at assisted living, you look at hospice, you look at behavioral, you look at the PACE market we are entering, and then the skilled nursing market with a segment of that market, all extremely attractive. I mean, we are adding some 30 reps this year to grow and penetrate across all those markets further. And then this is where we are leaning into AI and technology the most, for starters. You look at the whole pharmacy intake and revenue cycle process, and there are some seven or eight projects this year. So super excited about continuing to build out the biggest scaled independent provider in that space in these attractive end markets, and providing a set of operations that produce the highest service levels possible and with a continued focus on cost per script there. Operator: Thank you. One moment for our next question. Our next question comes from the line of Sean Dodge with BMO Capital Markets. Your line is open. Please go ahead. Sean Dodge: Yes. Thanks. Good morning. Maybe just going back to the— Jon Rousseau: —margin comments on the pharmacy side. You mentioned some of the key drivers having been your efficiency efforts and then product mix. Could you just give us a sense of the margin expansion you drove over the last year? How much of that was from generics versus how much of that was from those cost initiatives? And then we think about the '26 guidance, the improving margins you are embedding there. Is that proportionality expected to change at all? How big of a role do you expect incremental efficiencies to play into that, again, versus lift from the generics? Thanks. Yes. I mean, well, look, the good news on operational efficiencies is a lot of them occurred in the back half of last year, so they are just sort of flowing through at this point and will be year-over-year tailwinds. And then in addition to that, we are always looking at the next thing and launching new projects. I would say on the pharmacy side, home and community and infusion is where we have the most projects from an operational excellence perspective going on and will be going on this year. But from a margin perspective, I mean, yes, economies of scale from pretty aggressive growth targets that we like to put out there and go try to achieve. But, look, across all the different businesses, you have got brands and generics in each. You have got a lot of different end markets, a lot of different payers. I mean, there is just a lot going on. But the net effect of it every year, if you focus on strong, strong double-digit growth, market share gains, targeting the most attractive therapeutic areas, and doing all of that with the best quality and the most operational efficiency, that has always been out to a really good place. The hallmarks of the company now for ten years has been volume and efficiency, and then accretive M&A. And so that story has really never been more intact, and you see all that play through in 2026, we think, as we sit here today. Operator: Thank you. I am showing no further questions. I would like to hand the conference back over to Jon Rousseau for closing remarks. Jon Rousseau: Thank you, everybody, for joining. We really appreciate it. Appreciate your questions, as always. Have a great day, and we look forward to talking with you soon. Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect. Everyone have a great day.
Operator: Welcome to TTEC Holdings, Inc. Fourth Quarter and Full Year 2025 Earnings Conference Call. I would like to remind all parties that you will be in a listen-only mode until the question-and-answer session. This call is being recorded at the request of TTEC Holdings, Inc. I would now like to turn the call over to Bob Belknapp, TTEC Holdings, Inc.'s Group Vice President, Corporate Finance. Thank you, sir, and you may begin. Bob Belknapp: Good morning, and thank you for joining us today. TTEC Holdings, Inc. is hosting this call to discuss its fourth quarter and full year 2025 results for the period ended 12/31/2025. Participating on today's call are Kenneth D. Tuchman, Chairman and Chief Executive of TTEC Holdings, Inc., and Kenneth R. Wagers, Chief Financial Officer of TTEC Holdings, Inc. Yesterday, TTEC Holdings, Inc. issued a press release announcing its financial results. While this call will reflect items discussed in that document, for complete information about our financial performance, we also encourage you to read our Annual Report on Form 10-K for the period ended 12/31/2025. Before we begin, I want to remind you that matters discussed on today's call may include forward-looking statements related to our operating performance, financial goals, and business outlook, which are based on management's current beliefs and assumptions. Please note that these forward-looking statements reflect our opinions as of the date of this call; we undertake no obligation to update this information as a result of new developments that may occur. Forward-looking statements are subject to various risks, uncertainties, and other factors that could cause our actual results to differ materially from those expected and described today. For a more detailed description of our risk factors, please review our 2025 Annual Report on Form 10-K. A replay of this conference call will be available on our website under the Investor Relations section. I will now turn the call over to Kenneth. Kenneth D. Tuchman: Good morning, and thank you for joining us today. 2025 was a pivotal year for TTEC Holdings, Inc., one in which we met our financial commitments, improved our balance sheet, and fortified our position as the leader in AI-enabled CX. For the full year 2025, revenue was $2,136,000,000, exceeding the high end of our guidance. Adjusted EBITDA was $214,000,000, reflecting year-over-year growth of 5.6%. We generated $83,000,000 in cash flow and reduced our credit facility borrowings by $70,000,000. This reflects our continued focus on strengthening our balance sheet. Before moving on to our business overview, I would like to point out that our operating improvements and disciplined budget management were offset by a one-time noncash goodwill impairment in the fourth quarter on a portion of our TTEC Digital segment. This was due to the decline in our market capitalization and the annual fair value assessment. While impactful from a GAAP perspective, the impairment was a noncash expense and has no impact on our broader ability to execute our strategy, or the value of our CX technology solutions. Now on to some highlights from the year. We deepened our relationships with our largest clients, capturing an increased share of wallet as they expanded their use of our end-to-end consulting, technology, and managed services portfolio. Sales of new lines of business launched in 2025 to our base were strong in both our Engage and Digital segments, increasing year over year. Across the business, we attracted a substantial number of new clients with our AI-forward and vertical solutions approach. Several of these clients are new to having a CX partner, a shift driven by a data and AI landscape that has become too complex for clients to navigate alone. We grew our strategic technology partnerships as we collaborated on new client sales opportunities and innovative solution development. Our professional services with these technology partners grew 16% outside of our legacy CCaaS practices. We continue to increase the penetration of our AI-enabled solutions with our embedded base and are integrating this innovation functionality in every new TTEC Engage and TTEC Digital opportunity. We expect we will achieve near 100% AI adoption with our current clients by the end of this year. And importantly, we continue to invest in our global team of CX engineers, consultants, data analysts, and associates, earning Great Place to Work certification in 15 countries, several more countries than last year. Before we move into the discussion of our segment performance, I would like to share some thoughts on the current macro environment. Clearly, there is an AI overhang casting a shadow over valuations for CX, IT, and SaaS-based business services companies. We are fully cognizant that over time, there will be an impact on lower-value interactions which are part of the current $400,000,000,000 TAM. However, the opportunity is sufficiently large to support the companies serving the market today, let alone the new solutions that are emerging. Based on our experience, AI is not eliminating the need for CX; it is making it more effective. By automating routine transactions, it is enabling humans in the loop to focus on the high-stakes interactions that define a brand. But even as we navigate the fastest tech adoption curve in history, we must remain mindful that the promise of AI is only as good as its execution. Success lies in balancing this rapid innovation with the operational realities required to deliver a seamless, human-centric experience. Our point of view is shaped by several market realities. One, transformation requires a long runway. It took almost 30 years from the Internet’s debut to achieve total global integration. It demanded decades to build the infrastructure, technology, tools, and adoption to achieve worldwide ubiquity. Two, systems sprawl is massive. Today, the average Fortune 1,000 company operates hundreds of software applications and technology systems, both in the cloud and on premise. Although not all of them are required for CX, less than a quarter of them are integrated. Three, internal cultural adoption creates a bottleneck. According to a recent Bain & Company study, 88% of business transformations fail to achieve their goals because of lack of organizational readiness and employee alignment. Success requires businesses to rethink how they organize, empower, train, and measure the effectiveness of their people and AI counterparts. And finally, technology is only as valuable as the end consumer’s willingness to use and trust it. Just as the EV market shifted towards hybrid cars when consumers demanded the security of traditional engines alongside new tech, CX is entering a hybrid era where consumers appreciate the potential convenience and personalization of AI, but demand the trust and authenticity of a human in the loop for high-value complex interactions. In this environment, enterprises are seeking guidance and expertise like never before. They are looking to architect modern data estates, integrate disparate systems, and redefine workflows. In some cases, rather than struggling to do it themselves in-house, they choose to work with an end-to-end partner like TTEC Holdings, Inc. This convergence of complexity and urgency is exactly where we excel. We do not just provide the technology or the people. We provide the strategic CX bridge that turns AI potential into operational reality. With 42% of general AI initiatives failing due to lack of depth, companies are shifting budgets to CX specialists like us who do not just know AI but have the precious final mile CX experience to move fast, remove risk, and deliver brand differentiation. To achieve the full potential of our unique platform, we continue to build on our strong leadership foundation with new talent. I am pleased to announce several key appointments that will further accelerate our strategic road map. Alfredo Rizzo, a long-standing leader with our TTEC Digital organization, has moved into the newly created role of Chief Technology Officer of TTEC Holdings, Inc., reporting directly to me. His deep institutional knowledge, client-centric experience, and AI-first approach will be vital as he fast-tracks our efforts to deliver Generation AI solutions at scale. Joining him is Ramki Desai Raju, our new Chief Operating Officer at TTEC Digital. His deep domain expertise gained at IBM, among others, will help us further bridge the gap between operational excellence and technology-enabled transformation, ensuring our digital initiatives continue to deliver measurable impact for our clients. Now I will turn to a discussion of our business segments. Let us start with the digital CX segment Engage. As planned, we delivered solid progress this quarter as we continue to advance our transformation agenda with a disciplined focus on profitable and sustainable growth. We are seeing encouraging traction across the business as clients increasingly turn to us for modern, digital-first, CX solutions and operational excellence. We are expanding our role by introducing new vertical-specific solutions, increasing cross-sell of digital capabilities, and consistently delivering on the priorities that matter most to our clients. At the same time, our new client pipeline reflects healthy momentum, attracting world-class brands that are seeking AI-forward CX solutions to deliver the highest quality interactions. We remain disciplined in our pursuit of operating leverage and margin expansion. Our digital-first strategy is yielding significant efficiencies, and our strengthened leadership team has energized our frontline performance as well as continued to optimize our global delivery mix. We are focused on winning new business that meets our profitability expectations. In parallel, we are working to optimize a few underperforming contracts. While this creates a temporary revenue headwind in 2026, it secures a healthier client portfolio, superior margins, and a more resilient growth profile. Ultimately, these deliberate actions ensure we are not just growing, but growing profitably and sustainably. Turning to TTEC Digital. We continue to evolve our professional and managed services to meet the changing needs and priorities of the market. Clients are looking to us as experts to help them navigate their digital evolution because we specialize in building value through the strategic application of data, AI, and automation. We are helping ensure that every innovation translates directly into disciplined, measurable business outcomes. While these engagements may begin smaller than traditional CCaaS migrations, they are highly strategic and sticky. They leverage our expertise in the application of AI, data analytics, consulting, journey orchestration, and systems integration. Because of our fluency with all the major CX technologies, these engagements often benefit from the network effect where they expand into multiphase professional and managed services relationships. The shift is broadening our addressable market, increasing both our share of wallet in existing clients and attracting new ones. Our technology-agnostic approach, combined with our ability to rapidly pilot use cases across all major hyperscalers, is positioning us as a trusted partner for complex, multiplatform CX transformations. As a result, we are seeing growing demand for adjacent services and strong momentum in professional services pipelines and bookings. Our partnership with a global travel and hospitality brand is one example of how our ability to combine consulting, technology, and analytic insight is driving sustainable growth. Our relationship began when this enterprise was facing a critical end-of-life cliff with their on-premise contact center technology. They brought us in initially to mitigate risk and assess their path forward. Fast forward four years, that tactical engagement has evolved into a complete digital transformation that will persist well into the future. We have modernized their foundation by successfully migrating them to an integrated CCaaS/CRM platform. We have architected a modern data estate with a clean, unified data environment required for advanced CX. And we activated AI by deploying generative AI functionality to personalize guest interactions at scale. We fundamentally moved this client from a high-risk, high-cost legacy environment to a high-reward, AI-ready CX engine. Their CX operations are no longer a cost center. Today, they are primarily a driver of revenue growth and long-term customer loyalty. This is the blueprint that we are now scaling across multiple clients. Digital-first automation handles low-complexity tasks, reserving human expertise empowered with AI for authentic, empathetic, white-glove moments. It demonstrates what can happen when we change the conversation from managing cost to mastering outcomes. As a global consulting, technology, and managed services company delivering solutions at the intersection of data, AI, and customer experience, we are evolving our business to capitalize on the massive opportunity before us. Which brings me to our financial resilience. We expect to continue delivering EBITDA growth while revenue in each business segment is anticipated to be slightly down this year. As we codify the next generation of the CX playbook, we are proactively remixing our solutions, delivery models, and commercial constructs. Regarding our stock price, it is our view that the current valuation does not reflect the differentiation and value in our business. Obviously, entire sectors have been put under similar pressure and are being treated as though they have no terminal value. Our strategy remains focused on the factors that we control and on building an enduring business for the long term. While we are collaborating with financial advisers and our banking partner on our credit facility, the business performance continues to improve with a stronger balance sheet and cash flow. These efforts will enhance our long-term flexibility, supporting both our operations and innovation agenda. As we pivot to the year ahead, we remain focused on returning the company to its historic growth and margin profile, prioritizing high-yield complex client engagements with ample opportunity for growth, expanding our role as a strategic end-to-end transformation partner, driving differentiation through vertical solutions and proprietary IP, deepening our technology partnerships, continuing to improve efficiency through AI and automation, and investing in specialized talent with deep vertical CX operational and technical expertise. These priorities are the critical path for continued success. By leveraging our unique end-to-end solutions and investing in our people, platform, and strategic partnerships, we will continue to capture the demand for AI-enabled CX solutions well into the future. I continue to appreciate and value the dedication and support of our board and talented teams across the globe. I will now hand it over to Kenneth. Kenneth R. Wagers: Thank you, Kenneth, and good morning. I will start with a review of our fourth quarter and full year 2025 financial results before providing context into our 2026 full year financial outlook. In my discussion of the fourth quarter and full year financial results, reference to revenue is on a GAAP basis, while EBITDA, operating income, and earnings per share are on a non-GAAP adjusted basis. A full reconciliation of our GAAP to non-GAAP results is included in the tables attached to our earnings press release. On a consolidated basis for fourth quarter 2025 compared to the prior-year period, revenue was $570,000,000, a slight increase over the prior-year period of $567,000,000. Adjusted EBITDA was $62,000,000, or 10.9% of revenue, compared to $51,000,000 or 9%. Operating income was $48,000,000, or 8.4% of revenue, compared to $35,000,000 or 6.2%. And earnings per share was $0.47 compared to $0.19. Foreign exchange had a $4,000,000 positive impact on revenue and a $1,000,000 negative impact on operating income in the quarter compared to the prior-year period, primarily in our Engage segment. Now turning to our consolidated full year 2025 financial results. Revenue was $2,140,000,000 compared to the prior year of $2,210,000,000, a decrease of 3.2%. Adjusted EBITDA was $214,000,000, or 10% of revenue, an increase of 5.6% or 80 basis points over the prior year of $202,000,000 or 9.2%. Operating income was $155,000,000, or 7.3% of revenue, compared to $136,000,000 or 6.2% in the prior year. Earnings per share was $1.10 compared to $0.71 in the prior-year period. Foreign exchange had a $3,000,000 positive impact on revenue, and a $4,000,000 positive impact on operating income over the prior year, primarily in our Engage segment. At the company and segment level, our full year financial performance was in line with the guidance expectations previously communicated, with revenue exceeding the high end of full year guidance range, while profitability came in near the low end of guidance. Turning to our fourth quarter and full year 2025 segment results. In our Engage segment, fourth quarter revenue decreased 1.8% over the prior-year period to $444,000,000. Operating income was $36,000,000, or 8.1% of revenue, an increase of 62% or 320 basis points compared to $22,000,000 or 4.9% of revenue in the prior year. Engage fourth quarter revenue and operating income were in line with our expectations as healthcare seasonal volumes delivered $22,000,000 of additional revenue compared to the prior year. As mentioned in our previous earnings, a significant portion of the investments related to the seasonal ramps and certain other growth clients were made in the third quarter, resulting in fourth quarter year-over-year profitability growth and margin expansion. The healthcare growth was offset by a decline in the public sector portfolio due to the loss of a large client we had previously communicated, which was at lower margins and thus had a nominal impact on operating income. We are pleased with our Engage segment's fourth quarter financial results, and the profitability improvement that not only drove significant growth in the quarter, but more than offset the third quarter decline and resulted in overall second-half margin improvement compared to the prior year. On a full year basis, the Engage 2025 revenue was $1,670,000,000, a decrease of 4.6% compared to $1,750,000,000 in the prior year. Operating income was $101,000,000 or 6.1% of revenue compared to $85,000,000 or 4.9% in the prior-year period, representing an increase of 18.8% and margin expansion of 120 basis points. The Engage revenue exceeded the high end of our full year guidance. Our focus on increased profitability was reflected in the year-over-year operating income growth and margin expansion delivered despite the decline in revenue. The profitability improvement was a result of our deliberate actions taken over the last 18 months where we realigned our cost structure, improved operating efficiencies and effectiveness, and continue to increase our offshore revenue mix. We also added new leadership, which helped drive these accomplishments. The Engage backlog for the next 12 months is $1,480,000,000, or 92% of our 2026 revenue guidance at the midpoint of the range, down from 96% in 2025. The Engage last 12-month revenue retention rate is 95%, compared to 82% in the prior year. Now moving to our Digital segment. Fourth quarter revenue was $125,000,000, a 9% increase over the prior year of $115,000,000. Operating income was $12,000,000, or 9.4% of revenue, compared to $13,000,000 or 11% in the prior year. The Digital fourth quarter revenue increase was driven by product resale, which drove $15,000,000 of additional revenue over the prior year. The overall revenue mix, however, drove a lower operating income and margin as recurring revenue declined 5.6% and professional services were slightly down 1.6% in the quarter, compared to the prior year. On a full year basis, Digital's 2025 revenue was $469,000,000, compared to $459,000,000 in the prior-year period, an increase of 2.2%. Operating income was $54,000,000 or 11.5% of revenue compared to $51,000,000 or 11.2% in the prior year. The full year Digital revenue growth was largely attributable to product resale, which nearly doubled compared to the prior year, increasing $24,000,000. This increase was due to multiple deals with clients that have yet to migrate to cloud-based CX delivery solutions. We believe over time, these product resale opportunities will diminish in the market. This revenue also included the sale of IP software closed in 2025 for $4,000,000. Excluding the product resale, Digital revenue declined $14,000,000, or 3.2%. This reflects the ongoing market shift, which is moving away from traditional CCaaS point solutions to partners that provide end-to-end transformative CX solutions optimizing clients' existing platforms. As a result of this shift, Digital full year 2025 recurring revenue declined 4% compared to the prior year. Professional services were slightly down year over year by 1.5%. However, professional services related to our expanded partnership network grew 15.8% outside of the traditional CCaaS offerings. Although the revenue mix came in less favorable than forecasted over the prior year, we are pleased with the full year Digital operating income growth and margin as cost and utilization management were high priorities. Our Digital backlog for the next 12 months is at $287,000,000, or 67% of our 2026 revenue guidance at the midpoint of the range, up slightly from 66% in the prior year. Before I discuss other financial metrics, I will address the noncash goodwill impairment charge and the related tax adjustment recorded in the fourth quarter. In ordinary course, we perform goodwill impairment analyses in accordance with GAAP on an annual basis during the fourth quarter, unless a triggering event requires a more frequent analysis. During the annual goodwill impairment analysis, the company elected to perform a quantitative evaluation of all of its reporting units. Based on this analysis, which reflects upon financial projections and market-based metrics, the fair value of our Digital recurring reporting unit decreased below its carrying value and resulted in a $193,000,000 noncash impairment charge. This was primarily due to industry dynamics that are shifting our legacy recurring managed service offerings from point solutions related to contact center technology, to optimizing existing environments through AI-led consulting, journey orchestration, and data and analytics services. This type of impairment is a reality in the technology services sector where previously acquired technology-related companies are impacted by changing market conditions. Our Engage and Digital professional services reporting units' fair value remains in excess of their respective book values, and are not impacted by the impairment. The tax impact of the Digital impairment created a net incremental noncash charge of $12,000,000, further reducing the carrying value of the reporting unit and bringing the total impairment charge to $205,000,000. Please refer to our Form 10-K for more details on the impairment and related tax impact. As Kenneth mentioned, while impactful from a GAAP reporting perspective, the impairment and the tax valuation allowance were a noncash expense and do not impact our broader strategies and capabilities nor the value of our CX technology solutions. These charges are normalized in our non-GAAP reconciliation calculations. I will now share other 2025 metrics before discussing our 2026 outlook. Free cash flow was a positive $83,000,000 in 2025 compared to a negative $104,000,000 in the prior year, which, as previously discussed, was impacted by the discontinuation of the accounts receivable factoring facility. Normalizing for the prior year, the year-over-year improvement was $86,000,000. This was due to a $79,000,000 increase in cash flow from operations, and reduced capital expenditures of $7,000,000. The significant increase in cash generation reflects our keen focus on improving profitability and working capital management. Capital expenditures were $38,000,000, or 1.8% of revenue, for the full year 2025, of which 60% was growth related. This compares to capital expenditures of $45,000,000, or 2% of revenue, in the prior year. The 2025 growth-oriented spend was primarily driven by product development and technology and real estate investments in support of client growth and expansion. As of 12/31/2025, cash was $83,000,000, with $908,000,000 of debt, primarily representing borrowings under our recently amended $1,050,000,000 revolving credit facility. The net debt position of $825,000,000 represents a year-over-year decrease of $68,000,000. As defined under the credit facility, we ended 2025 with a net leverage ratio of 3.58 times, compared to 3.99 times at the end of the prior year. As demonstrated by our improved cash flow generation and reduction in net borrowings, deleveraging and strengthening our balance sheet remain top priorities. We are confident that our 2026 outlook provides the cash flow needed to further reduce our debt and invest in the business to meet our strategic objectives. Our full year normalized tax rate was 37.1% in 2025, compared to 40.9% in the prior year. The decrease is primarily due to the jurisdictional mix of income and the impact of valuation allowances globally. Now transitioning to our 2026 outlook. I will now provide some context supporting our full year financial guidance. Related to our Engage segment, we expect a decline in revenue of approximately 4%, primarily due to the rationalization of certain clients and lines of business that are underperforming to our target profitability and the ongoing initiative of moving and growing our revenue to offshore locations. We expect the year-over-year revenue declines to be concentrated in the first half of the year while flattening out in 2026. Engage profitability is forecasted to continue its growth trajectory, benefiting from the profit initiatives implemented over the last 18 months. Margin expansion will be further driven by the rationalization of certain client programs where we have or will wind down unprofitable revenue. We also continue to prioritize our shift of existing and new business to offshore geographies. Although these actions negatively impact our top line growth in the near term, they are essential to further improve profitability and continue our drive towards historical margins. In our Digital segment, we are forecasting a revenue decline of 8.4%, primarily driven by the decrease in product resale as fewer opportunities remain given the number of clients that we are transitioning to cloud-based CX delivery solutions. Although the revenue decline is significant, these lower-margin deals have less of an impact on profitability. Recurring revenue is expected to decline due to the managed services related to our traditional CCaaS partners, however, the revenue growth is less pronounced as a higher volume of this work is being delivered offshore. Turning to the midpoint of our 2026 guidance, as outlined in greater detail in our fourth quarter and full year 2025 earnings press release: GAAP revenue of $2,030,000,000, a decrease over the prior year of 5%; adjusted EBITDA of $230,000,000, an increase of 7.6% over the prior year and 11.3% of revenue, compared to 10% in the prior year; non-GAAP operating income of $169,000,000, an increase of 9% over the prior year and 8.3% of revenue, compared to 7.3% in the prior year; non-GAAP earnings per share of $1.19, an increase of 9% over the prior year. Other relevant guidance metrics include capital expenditures between 1%–2% of revenue, of which approximately 60% is growth oriented. A full year effective tax rate between 38%–42%. We expect the phasing of our profitability to be more weighted in 2026, with approximately 52% of our revenue coming in the second half of the year, based on our historical seasonal trends. Please reference our commentary in the business outlook section of the fourth quarter and full year 2025 earnings press release to obtain our outlook for the full year 2026 performance at the consolidated and segment level. In closing, we are pleased with our full year 2025 financial performance, increasing our profitability and expanding our margins across both segments, despite an overall modest decline in revenue. We also significantly increased our free cash flow and reduced our borrowings. This was accomplished against the backdrop of an evolving market in both our Engage and Digital segments. We are committed to continuing this performance in 2026 by further increasing our EBITDA and operating income, expanding our margins, and reducing our debt. We remain focused on higher-value transformational engagements across both segments and have the discipline and confidence to deliver on our 2026 full year outlook. I will now turn the call back to Bob. Bob Belknapp: Thanks, Kenneth. As we open the call, we ask that you limit your questions to one at a time. Operator, you may open the line. Operator: You would like to ask a question, please press star and then the number one. Please unmute your phone and record your name clearly when prompted. Your name and company name are required to introduce your question. To cancel your request, please press star and then the number two. Our first question comes from the line of George Frederick Sutton of Craig-Hallum. Sir, your line is open. George Frederick Sutton: Thank you. Ken, you said something interesting that you thought nearly 100% AI adoption by the enterprises you are working with by year-end 2026. And I am just curious if we could look at sitting here at the beginning of 2026 versus the beginning of 2027 and what kind of ongoing work do we have with those customers relative to helping them deploy the AI. Kenneth D. Tuchman: Good morning, George. Well, first of all, understand that when we use the term AI, it is so ambiguous. When we make that statement, what we are referring to in general is the AI that we are utilizing to enable our associates to do their job, AI that we are utilizing in our talent acquisition and recruiting, AI that we are using in quality assurance, AI that we are using overall to empower all of our AI that we are utilizing internally, to make ourselves more efficient, etcetera. So, ultimately, our goal is that every single client of ours is taking advantage of everything from accent neutralization technology to our language translation technology where we can translate in real time from any language to any language, etcetera. Where I think you are probably going is AI as we utilize it, not just only to assist the associate to be better, faster, and more proficient, but also the ability to provide certain aspects of interactions that are self-service. And so we are very diligently working with clients that are open to and interested in helping them with their low-value transactions versus interactions that add no real value in cross-selling, upselling, building trust, building loyalty, maintaining retention, increasing wallet share, etcetera, and automating those with what we call an agent or human in the loop that can come in at any point in time to assist should there be a need to assist, or if it moves to something that is more complex or more higher value, etcetera. And so we are very focused in this area. We have been working with these technologies, as you know, for frankly, before AI was there was even a hype cycle on AI. And now it is really just a matter of which clients are actually ready and willing to start to adopt some of the capabilities where we can provide this on the front end from a self-service standpoint, which leads us more to futuristically our goal of outcome-based pricing. So we will achieve 100% by the year end, which means that at minimum, our clients are taking advantage of all of the internal tools that we utilize to make our people better and to drive higher quality, more accuracy, etcetera. George Frederick Sutton: Understand. Thank you for the perspective. Kenneth D. Tuchman: Thank you, George. Thank you. Operator: Thank you. Our next question will be coming from Margaret Nolan of William Blair. Your line is open. Margaret Nolan: Thank you. Maybe to ask that a little bit differently, how do you expect the mix of revenue to shift between project-based and recurring revenue over the next couple of years? Kenneth D. Tuchman: That is a really good question, Margaret. I am not sure that I actually can give you a number with any level of precision. I guess are you asking me, is that another way of saying, what percentage of the business will be that we currently classify as Digital versus Engage? Or are you asking me, as it relates to the Engage business, what percentage of that business will be more AI focused? So maybe if you could just give me a little bit more direction on your question. Margaret Nolan: Yeah. The original thought was sort of there is probably likely a mix shift between Digital and Engage, but the second question is extremely interesting as well. So any and all of the above. Kenneth D. Tuchman: Well, look. Our focus on Digital is for the business to drive, on average, a 50% recurring revenue, and we are currently achieving that, maybe even a bit more than that. And so if that partially answers your question, that is certainly the focus. As far as I am not I just want to make sure that I am still tracking your question. As it relates to Engage, and how we see the future of where that business goes, we absolutely see the future over time where more and more technology is infused in Engage and where we are pricing our services as much more of a turnkey offering that is tied to solutions and definitive outcomes. The reality, Margaret, and I know I am guilty of maybe over pontificating, so I apologize, but the reality is that what we find because of the size of the clients that we deal with, which tend to be in kind of that Fortune 500 category, is that when you get past all the AI hype that it is going to eventually brush your teeth and do everything else, what our clients are realizing is that with the amount of systems that they have, and the overall amount of silos that they have and the amount of systems that do not actually even talk to each other, that there are only certain things that they can take advantage of with AI in order for it to be impactful. And so what we are doing is we are focusing on what we can provide them with technology that takes advantage of AI right now with their current situation while we are also trying to demonstrate to them how we can help them build a modern data estate so that they can ultimately take advantage of far more AI. And, again, I am not here to give a lecture or whatever, but what the Street is absolutely positively missing is that the time that it is going to take for these large companies to synergize, so to speak, or create synchronicity of their data, it is not going to be measured in months. It is going to be measured in years. And that is not according to Kenneth Tuchman. That is according to the CIOs of virtually every major client that we have. So that is my way of saying that we are going to attack the parts of their systems that we can and that they will allow us to have access to. But the reality is that the hope that the HAL 9000 is going to take the human out of the loop is, I think, more distant than many people might be estimating. So I am sorry if I dragged that out too much, but hopefully, I am answering your question. Margaret Nolan: Thanks, Ken. Kenneth D. Tuchman: Thank you. Operator: Thank you. Our next question will be coming from Jonathan Lee of Guggenheim Partners. Your line is open. Jonathan Lee: Great. Thanks for taking my questions. First question for me, you highlighted revenue headwinds from offshore mix shift. Can you help us size how much more of your current onshore revenue might still be at risk from that mix shift dynamic? Kenneth D. Tuchman: Well, first of all, we do not view it necessarily as a negative. We view it as a positive, and it is actually a focus of ours and an imperative to work with our clients and work with our especially our new clients in shifting to offshore. So, currently, 80% of our entire net new sales pipeline is all targeted offshore. As it relates to the embedded base that we currently have that is onshore, I would say that it is actually a fairly limited number, and it is not because we would not like it to be a higher number. But remember, we do a fair amount of public sector and federal work, healthcare work, and financial service work, and a lot of that work requires highly skilled licensed employees and it is not legal for them to operate outside of the United States. So what I would say is that it is really giving us other lines of business that we can focus on to move offshore. And there are certainly some clients that we currently have that are considering certain aspects of the business to potentially go offshore. But it is somewhat limited, just due to the nature of the segments that are currently onshore and the regulatory aspect. Jonathan Lee: Ken, thanks for that color. But I think we were trying to size the current onshore revenue that might still be at risk, not necessarily the net new portion of the work that you had highlighted earlier. Kenneth D. Tuchman: Well, I am sorry, I thought I answered that. What I am saying is you mean at risk to go offshore? Or what? Jonathan Lee: At risk to go offshore. Not necessarily the net new portion of the work that you had highlighted earlier. Kenneth D. Tuchman: Yeah. And what I am saying is that the majority of the revenue that we have onshore, we legally, we do not have the ability or the client does not have the ability to move offshore under the current regulations, which have existed for many, many years. So I thought I answered that. So the answer is, I cannot give you an exact number, but what I can tell you is that the healthcare clients, which is a significant portion of our business, and the federal and public sector business, the part that we do that is regulated, cannot and will not be moved offshore unless the laws were to change. And my guess is that is not happening. Jonathan Lee: Got it. Thanks, Ken. Just as a follow-up, you know, understand that you are obviously investing in AI. Can you help us understand how you are defending against enterprise clients that may be pushing you to pass on the AI efficiency savings to them. Kenneth D. Tuchman: Well, you know, thus far, that is actually not even that is not so far, we are not actually encountering that. That is not to say that over time as AI more or less commoditizes that we will not feel that. But right now, clients are in such need of advisory work on how to take advantage of AI and just our unique ability to integrate to their systems. Because for over 25 years, we have done deep systems integration into all of our client CCaaS systems, etcetera, that that has just not been a focus. But I think more importantly, maybe another way of putting it is we absolutely plan, as we start to demonstrate to clients how we can take low-value transactions, transactions that typically we do not even handle today, it is not part of our focus of our business, and how we can help them automate them, and how we can get rid of their IVR and install agentic capabilities on the front end to determine the purpose of the call, to gather information, etcetera. Our goal is absolutely to share some of the upside, or the benefit, of the cost. And frankly, I would expect the whole industry to be doing that because it is a way for us to garner net new business by us showing the industry or the client base that we can have an impact on their cost to serve, and that is a huge focus of ours: how can we demonstrate to them that we can deliver the highest possible call quality at a lower cost to serve. And so if you are asking me, are they pressuring us for that? No. If you are asking me, are we volunteering that as it relates to when we are showing them aspects of areas that are currently not being handled in an AI way that we believe can and will not diminish the loyalty or relationship of the customer, 100%. And what I want to just stress, and I know I sound like a broken record on this, but it is really important for people to understand this. This industry is still $400,000,000,000. Every single analyst report that has come out, whether you know, I am technically not supposed to use the analyst names, but you know who they are, the Gartners and the Forresters and so on and so forth, every single one of them has said that net human contact center agents over the next 36 months will increase, not decrease. Now, do we think over time they will decrease? We absolutely do. And, frankly, we are okay with that. And the reason why we are okay with that is we are a little $2,000,000,000 company. And when there is a $400,000,000,000 TAM, AI could have a significant impact on the human aspect of it and we as a company could still be multiples the size that we are. At the end of the day, there are really only five to eight players in the marketplace that are consistently being considered for the large deals that are out there. And those five to eight players make up well under $50,000,000,000. When you do the overall math, that there is a $400,000,000,000 TAM, the reality is we have a long way to go. Because right now, where the new business is coming from, for the most part, is captives that are letting air out of the tires and they are starting to release business from their captives. And captives right now is a $300,000,000,000 total addressable market. And none of that includes the size of the AI and data analytics market that we are focused on, which we estimate is somewhere in the $500,000,000,000–$600,000,000,000 range. So there is so much greenfield opportunity out there that we are embracing AI as absolutely something that is very positive for our business on a go-forward basis. Jonathan Lee: Thanks, Ken. Kenneth D. Tuchman: Thank you. Operator: Thank you. Our last question is from Vincent Alexander Colicchio of Barrington Research. Your line is open. Vincent Alexander Colicchio: Yeah. Ken, to what extent are you benefiting from consolidation, or do you expect to benefit from consolidation, given your expanded footprint and the increasing complexity of technology? Kenneth D. Tuchman: So do you mean consolidation of clients consolidating the number of partners that they have? Because if that is the question, going on for the last eight or 24 months, and we think that that is going to that is currently taking place. We think that is going to over time accelerate as clients realize that the concept of having 10 vendors makes very little sense, especially when of the 10 providers out there, most of them do not have deep technological capabilities. And we believe that the majority of all new business out there is going to require somebody that has the ability to provide various different aspects of technology to help them become more modernized. So if that is the question, do I think there is going to be more consolidation? I do. And I think that the marketplace is already really bifurcated to what I would call third-tier type, second-tier type companies out there that can only compete on price and lack capability, and the scale players that have the right geographies that clients are looking for, but also have, more importantly, the right technology to apply. Vincent Alexander Colicchio: You did answer the correct question, and, you know, I am assuming that some of the companies that lack scale cannot keep pace in terms of their technology capabilities, and I think you answered that. Kenneth D. Tuchman: Is there anything else I can add to that? Or Vincent Alexander Colicchio: No. You answered the question. Kenneth D. Tuchman: Alright. Well, thank you. Operator: Thank you for your questions. That is all the time we have today. This concludes TTEC Holdings, Inc.'s fourth quarter and full year 2025 earnings conference call. You may disconnect at this time.
Operator: Thank you all for your patience. The conference call titled Amneal Pharmaceuticals, Inc. Fourth Quarter and Full Year 2025 Earnings Call will begin shortly. During the presentation, you will have the opportunity to ask a question by call. Good morning, and welcome to the Amneal Pharmaceuticals, Inc. fourth quarter and full year 2025 earnings call. I will now hand the call over to Amneal Pharmaceuticals, Inc.’s Head of Investor Relations, Anthony DiMeo. Go ahead, please, sir. Anthony DiMeo: Good morning, and thank you for joining Amneal Pharmaceuticals, Inc. Fourth Quarter 2025 Earnings Call. Today, we issued a press release reporting Q4 results. The earnings press release and presentation are available at www.amneal.com. Certain statements made on this call regarding matters that are not historical facts, including but not limited to management's outlook or predictions, are forward-looking statements that are based solely on information that is now available to us. Please see the section entitled “Cautionary Statements on Forward-Looking Statements” for factors that may impact future performance. We also discuss non-GAAP measures. Information on use of these measures and reconciliations to GAAP are in the earnings release and presentation. On the call today are Chirag K. Patel and Chintu Patel, Co-Founders and Co-CEOs; Anastasios G. Konidaris, CFO; our commercial leaders, Andy Boyer for Affordable Medicines, Joe Renda for Specialty; and Jason Daley, Chief Legal Officer. I will now hand the call over to Chirag K. Patel. Chirag K. Patel: Thank you, Anthony. And good morning, everyone. 2025 was a defining year of excellent execution and portfolio expansion at Amneal Pharmaceuticals, Inc. As a diversified biopharmaceutical company across specialty, complex products, injectables, and biosimilars, we are building category leadership positions in large and growing markets. In 2025, revenue grew 8%, adjusted EBITDA increased 10%, and adjusted EPS rose 43%. 2025 marks our sixth consecutive year of growth in our industry. That consistency of growth stands out. What is most exciting is not only what we have achieved so far, which we are truly proud of, but the even greater opportunity that lies ahead. We entered 2026 with a strong foundation and exciting strategic growth opportunities. Whether we are advancing the standard of care with innovative therapies like Trexon or expanding access to affordable complex medicines, our mission is clear: to become America’s number one affordable medicines company. Since our founding over 20 years ago, Amneal Pharmaceuticals, Inc. has always been driven by the deep passion and responsibility to serve the millions of patients who rely on our medicines every day. And we are just getting started. Let me begin with our largest segment, Affordable Medicines. The business continues to grow year after year, driven by an expanding portfolio of complex, differentiated, and durable products. 2025 was an exceptional year for approvals and launches, particularly in complex generics and injectables. These launches are not one-time events; they are multi-year value drivers. As a result, we expect meaningful acceleration in our Affordable Medicines segment revenue growth in 2026 and 2027. In injectables, we are executing with a clear ambition to become a top five player in the U.S. institutional market. Over the years, we have significantly expanded our R&D and manufacturing capabilities, adding the technical capabilities required for long-term leadership. Our strategy focuses on providing differentiated offerings for hospitals, including ready-to-use specialty injectables. With over 40 products and a pipeline of differentiated launches, we expect this business to scale substantially over time. In biosimilars, we are building a long-term growth engine. We began with in-licensing and creating a strong commercial platform. In December, we received approval for our adenosuba biosimilars, our fourth and fifth products. With biosimilars ZOLAR in review, we remain on track to have six biosimilars in the U.S. market by 2027. Strategically, our goal remains to be vertically integrated in biosimilars across development, manufacturing, and commercialization, which we believe is essential for long-term success. From a macro perspective, the opportunity is remarkable. Over the next decade, about 234 million of biologic sales will lose exclusivity, more than double the prior 10 years, and only about 10% of those products have biosimilars in development. This creates a significant long-term opportunity to dramatically expand patient access and drive very meaningful growth for our company. Next, in GLP-1s, our collaboration with Pfizer is progressing well, and both teams are working together. We are here to assist Pfizer in a meaningful way. This initiative builds on what we do best: develop, manufacture, and commercialize complex medicines at scale, and positions us to play a meaningful long-term role in one of the largest and fastest growing therapeutic categories in healthcare. Now let us turn to the specialty segment. We are very pleased with the take of Krexone. At the end of 2025, about 23,000 patients were on therapy, reflecting over 3% market share one year post launch. For context, Rytary reached 42,000 patients and 6% market share 10 years after launch. In December, interim Phase 4 data reinforced what physicians and patients are already seeing: Taxon delivers more good on time than other therapies. We remain confident in peak U.S. sales of $300 to $500 million for Trexon, which we believe is setting a new standard of care for Parkinson’s patients. In the fourth quarter, we launched Breqia, a first and only auto-injector for severe migraine and cluster headache patients. For many of these patients, the prior option was an emergency room visit. Plinkia gives them control, delivering the same hospital medication in a ready-to-use auto-injector. Recap is our next growth catalyst in specialty, with expected peak sales of $50 to $100 million. Lastly, healthcare continues to provide diversification and strategic advantage. Through government and distribution channels, healthcare strengthens our direct access to key end markets and provides an efficient path for new launches, including biosimilars, complex generics, and specialty products. Overall, we are building a diversified biopharmaceutical company that expands access and provides new therapies for patients and delivers consistent growth for investors. With that, I will turn it over to Chintu. Chintu Patel: Thank you, Chirag, and good morning. I will begin with gratitude and thank the global Amneal Pharmaceuticals, Inc. team for their dedication and hard work, which continue to drive our company's success. The formula for strong execution remains the same: operational excellence, robust innovation, and a differentiated portfolio. First, on operations, our global manufacturing network and leading technical capabilities remain a core strategic advantage. We continually enhance efficiency through digitization, automation, and AI, which will drive cost efficiencies. In GLP-1s, our collaboration with Pfizer is progressing very well. Our manufacturing buildout of two new GLP-1 facilities remains on target—one for large-scale peptide production and one for advanced sterile fill-finish manufacturing, designed to support all dosage forms. We are well positioned to participate meaningfully in the long-term GLP-1 market with a scalable and flexible manufacturing platform. In Affordable Medicines, we look to launch 20 to 30 new products each year. Importantly, it is not just the number of launches, but the value and complexity of these products that matter. In that regard, 2025 was an exceptionally strong year. For years, we have strategically prioritized development of complex generics, including injectables, ophthalmics, inhalation products, and other advanced drug-device combinations. As a result, we are now in the midst of one of the most concentrated and impactful waves of high-value Affordable Medicines launches in Amneal Pharmaceuticals, Inc.’s history. During the fourth quarter, we meaningfully expanded our portfolio with a series of important late 2025 approvals and launches across multiple areas. Highlights included risperidone extended release, our first long-acting injectable; sodium oxybate; bimatoprost; and cyclosporine in ophthalmates; the first generic for iohexol; and multiple other injectables for hospitals, including several epinephrine products. Notably, we also announced approval and are now launching our first two inhalation products: beclomethasone dipropionate and albuterol sulfate. This reflects a decade of hard work by the team and marks our new entry into inhalation, which is a new growth platform starting this year. With this level of activity, we are reaching an inflection point in complex innovation. We have 59 ANDAs pending, products with 64% classified as complex, and 52 more products in development with 94% complex. We look to file 10 to 15 key complex programs in 2026, including several more injectables and inhalation programs. This complex portfolio evolution positions us very well for sustainable growth. In biosimilars, we continue to build our business deliberately over time. Our next major milestone is biosimilar Xolair, which represents our sixth potential biosimilar and our largest opportunity to date. Xolair was one of the first blockbuster allergy biologics, and we expect to be among the first biosimilars in this over $4 billion U.S. market next year. We are very proud of the progress we have made in building a biosimilar business. As Chirag noted, we see a very significant opportunity ahead with the upcoming wave of biologics LOEs. Access in this space will require vertical integration, from cell line development and R&D to manufacturing and commercial capabilities. That is what will be needed to be a long-term leader in biosimilars. In specialty, Krexone continues to perform exceptionally well and we believe it has the potential to become the standard of care for all people living with Parkinson's disease. For decades, the foundation of treatment has been immediate-release carbidopa/levodopa, a therapy that dates back to the 1970s. IR CD/LD is limited by fluctuating symptom control, frequent dosing, and significant off time as the disease progresses. Kraxant represents a meaningful advancement in therapy designed to address these long-lasting limitations by delivering more consistent symptom control with fewer daily doses. In 2024, we initiated a Phase 4 real-world study of approximately 225 patients, converting them from Rytary, IR CD/LD, and IR CD/LD with COMT inhibitors to Kraxant. In December, we shared the first interim result from this open-label study, which demonstrated clear and clinically meaningful differentiation. Patients treated with taxon experienced substantially more good on time, less off time, and longer intervals of continuous good on time. Importantly, patients converted from IR to Krexone showed over three hours more good on time per day, a result that is highly meaningful for Parkinson's patients. taxon effectiveness. We look to generate further evidence to demonstrate and expect to share more data for 2026 and 2027. In addition, internationally, we have filed the products in a number of key countries, including India, Canada, and in Europe. Beyond Kraxon, we plan to expand our specialty over time with products in areas like CNS and others where differentiated delivery, real-world performance, and patient convenience matter. Brekia auto-injector is a clear example, combining a proven therapy with a differentiated drug delivery system that improves how patients receive care. Specialty represents a multiproduct growth engine for Amneal Pharmaceuticals, Inc., and we will share more on our pipeline as it evolves. In summary, we are executing well, driving operational excellence, advancing innovation, and expanding a differentiated portfolio across Affordable Medicines, specialty, and biosimilars. The progress we made in Q4 reinforces our confidence in the path ahead. With that, I will turn it over to Tasos. Anastasios G. Konidaris: Thank you, Chintu, and good morning, everyone. The fourth quarter completed another terrific year for Amneal Pharmaceuticals, Inc., with strong top and bottom line growth, as Q4 revenues grew 11%, adjusted EBITDA grew 13%, and adjusted EPS grew 75%. Our consistent performance reflects our strategic choices, relevancy of our broad portfolio, prudent capital allocation, and strong execution. In addition to strong top and bottom line growth, we also delivered strong full-year operating cash flow of $340 million, reduced net leverage to 3.5x, and our successful refinancing extended maturities to 2032 and substantially reduced interest costs. So all in all, an excellent finish to the year. Over the next few minutes, I will cover in more detail our fourth quarter and full year 2025 results and move on to our 2026 guidance. Starting with the fourth quarter, total company revenues grew 11% to a record $814 million. First, our Affordable Medicines segment was essentially flat at $437 million, reflecting the timing of key products and new launches. Second, specialty revenues were very strong again in Q4, up 38% year over year to $167 million due to strong demand across our key brands such as Krexone, Rytary, Unithroid, and some small initial sales of our newest branded product, PreKey auto-injector for cluster headaches. Third, AvKARE revenues grew 24% to $211 million, driven by strong growth in the government channel. Our Q4 revenues continued to benefit by approximately $50 million associated with one significant new product launch, which accounted for approximately $100 million in new revenue for the full year 2025. Fourth quarter adjusted EBITDA of $175 million grew 13%, driven by top line growth and limited operating expense growth. Q4 earnings per share of $0.21 grew 75% due to adjusted EBITDA growth and lower interest expense due to our favorable refinancing earlier in 2025. Let me now shift to our full year 2025 performance, where we exceeded all our financial guidance metrics. Total company revenue of $3 billion increased 8%, driven by growth across all of our business segments, as Affordable Medicines grew 4%, specialty grew 19%, and AvKARE grew 12%. We are also very pleased by the growth of our adjusted gross margin, which expanded by 50 basis points to approximately 43%. It is worth noting that last year’s 2025 adjusted gross margin increased in excess of 400 basis points due to our concerted efforts to prioritize profitability. On the bottom line, full year 2025 adjusted EBITDA grew 10% to $688 million, and adjusted EPS grew 43% to $0.83. In addition to our strong financial performance in 2025, we feel great about the actions we have taken to strengthen our balance sheet. First, we have reduced net leverage from 7.4x in 2019 to 3.9x at the end of 2024 and finally to 3.5x at the end of 2025. Second, we fully refinanced our debt last summer, and in January, we repriced our Term Loan B to further lower interest rate expense. As a result, our weighted average cost of debt is down from 10% in 2024 to about 6.8% in 2026, and maturities have been extended out to 2032. Accordingly, interest expense in 2025 was $217 million compared to $256 million in 2024, and as importantly, we expect a further reduction in 2026. I will now turn to our full year 2026 guidance which, in summary, reflects another year of growth across all financial metrics. In summary, we expect top line growth between 1% and 4%, adjusted EBITDA growth between 5% and 10%, and adjusted EPS growth between 12% and 20%. Let me provide a bit more detail on each of our guidance metrics. Starting with total company revenue of $3.05 billion to $3.15 billion, up 1% to 4%. As I mentioned, we expect the growth to be driven by our largest business segment, Affordable Medicines, where we expect growth between 7% and 8%. This is an acceleration from 4% growth in 2025, but in line with our prior three-year average. Our growth expectation is rooted in the robust cadence of new product launches we received from the FDA in the last couple of months. As a result, we enter 2026 with the highest number of product approvals, which de-risks our growth expectations. In our specialty segment, we expect 2026 revenues to be about flat to 2025. This temporary pause in growth simply reflects the continued growth of Krexham and our other brands, offset by the expected generic erosion of Rytary. As we look forward to 2027 and beyond, we expect our specialty business to resume its strong growth trajectory as the growth of Craigsson and our multiple other branded products overcomes the loss of exclusivity of Red Ari. In our AvKARE segment, we expect revenue between $625 million to $700 million in 2026 compared to $745 million in 2025 and $663 million in 2024. While the year-over-year revenues will be down in 2026, our expected profitability is flat year over year, as we continue our successful efforts to focus on the more profitable segments of the business. For some of the newer audience in our call, it is worth noting that it has been about six years since we acquired 65% of AvKARE, and over that time, top and bottom line have increased by over three times. We are very excited about AvKARE’s growth potential, given the strong fundamentals of an expanding population of more than 20 million pet veterans and federal government workers, as well as a growing portfolio of new launches such as biosimilars, complex generics, and specialty products. Overall, AvKARE remains a highly strategic direct platform for Amneal Pharmaceuticals, Inc., and we expect it to continue generating substantial profits and cash flow over time. Moving down the P&L, we expect 2026 adjusted gross margins of over 44%, which reflects approximately 100 basis points of gross margin expansion, driven by the continued mix shift in our business as the higher margin parts of our business are growing faster. As a result, we expect 2026 adjusted EBITDA between $720 and $760 million, up between 5% and 10%. From an EPS perspective, we expect 2026 adjusted EPS between $0.93 and $1.03, which reflects 12% to 20% earnings growth driven by strong adjusted EBITDA growth and lower interest expense. In terms of quarterly phasing for 2026, we expect a gradual build over the year for a couple reasons. First, the revenue associated with many new Affordable Medicines launches as well as correction will build throughout the year. And second, some launch-related investments are more front-end loaded to support key launches such as Brachia auto-injector. Moving on to cash, we expect robust 2026 operating cash flow between $325 million to $375 million compared to approximately $340 million in 2025, and CapEx of approximately $110 million or 3% of revenue. Lastly, we are pleased to be added to the S&P small caps 100 index a month ago. It reinforces the consistency of our operating and financial performance over time. We believe this inclusion enhances our visibility with the investment community and continued expansion of our institutional investor base. In summary, we enter 2026 in our strongest position yet, with a wind in our backs. We expect sustained top and bottom line growth, supported by our diversified portfolio and multiple growth drivers, including new branded launches such as correction and breakia, new biosimilar launches, and a very strong wave of new Affordable Medicines. Combined with our disciplined focus on profitable growth, operating efficiencies, and strong balance sheet, we see a clear path for substantial value creation. With that, I will turn the call back to Chirag. Chirag K. Patel: Thank you, Tasos. Our strong 2025 results and 2026 guidance reflect the momentum across our diverse business. We remain focused on the disciplined execution of our strategy as we progress towards becoming America’s leading affordable medicines company. Let us now open the call. Operator: Thank you. As a reminder for our audience, if you would like to ask a question, you may do so by pressing star followed by the number 1 on your telephone keypads. Again, that is star followed by the number 1 on your telephone keypads, please. And we now have our first question here from Chris Schott from JPMorgan. Your line is open. Chris Schott: Great. Thanks so much for the questions and congrats on all the progress. Maybe just to start out on Crexone, post the Phase 4 data for the product, can you just elaborate a little bit more on the response you are seeing in the market from these results? And maybe as part of that, as we think about 2026, how should we think about either revenue or market share targets for the product? Just had one follow-up after that. Chirag K. Patel: Excellent. Well, I will start and have my brother on to this as well. So the Phase 4 is interim result, showing 3.13 hours of good on time, which is what we have been hearing from physicians and the experience of patients. It is a huge uptake. 80% of the IR patients are converting to Crexone. And the Phase 4 continues, Chintu will give more details on it. And we also have another study which he will share as well. Market share, we would double it in 2026. More than double the revenue. Anastasios G. Konidaris: Percent of AvKARE. Since then, we have more than tripled the revenue, gross margins, and EBITDA. So it is great because we were able to leverage both the unique assets Amneal brought to the transaction as well as the inherent growth in that business. So as we talked about, when you look at 2025 versus 2024, in 2025, the total revenue of AvKARE was about $745 million, and in 2024, the revenue was $663 million. So that grew about a total of about 12%. About 50% of the revenue is between—about 40% goes into the government channel, 60% of the revenue goes in the distribution channel. So when you think about this 12% growth in 2025 versus 2024, the distribution part of the business declined, while the government business grew. The distribution declined—it was purposefully done, because that is what we talked about, because we decided to not chase businesses with 1% or 2% gross margin. So as a result of that pivot, leaning hard into the government channel, the gross margin of our AvKARE business grew over 400 basis points. So the gross margin in 2025 of AvKARE was $147 million compared to about $100 million in 2024, and the operating income in 2025 was $94 million compared to $57 million. So essentially, ’25 versus ’24, revenue up 12%, gross margin up 41%, operating income up 65%. So great performance. So now as we look into 2026, there are two things that are happening. We continue to expect the distribution business to be declining. But because it is such a low profitability part of the business, it does not hurt the bottom line. The government business is going to be down slightly, not because of anything fundamental that is happening, but in 2025 there was such extraordinary growth because we had this one generic product, essentially generic Entresto, where we were essentially the only ones in the market. That product had $100 million worth of revenues, as I mentioned before, in 2025. In 2026, as it always happens, it will have some additional competition. So that is why in 2026 revenue is declining—because of our pivot away from distribution, number one, and not having that exclusivity, if you want to call it that, of generic Entresto impacting the government business as well. That is what is going to drive the decline and what we like to call almost a reset level for 2026. But the bottom line is not going to be impacted, because for a couple reasons: A, there are other more profitable parts of the business to which we will be allocating resources; we will also be laying on some of the operating expenses. So these are the dynamics that are happening in AvKARE. Essentially it creates this reset revenue in 2026 before we resume top line and bottom line growth in 2027 and beyond. So I know I said a lot, Chris. Let me know if that was helpful. Chris Schott: That was perfect. Thank you so much. Appreciate it. Operator: Thank you for that question, Chris. Moving on, we now have Matthew Michael Dellatorre from Goldman Sachs. Go ahead, please. Your line is now open. Matthew Michael Dellatorre: Great. Good morning, guys, and thanks for the question. Maybe on the Pfizer GLP-1 obesity partnership, could you just share your latest update on the status of that partnership? And then how should we think about potential outcomes—you know, for example, if they do end up buying you out, would that be a complete, for instance, return of all rights and economics? Or are there other scenarios where maybe you do not manufacture for developed markets, but you keep emerging market rights? And then if it is a complete buyout, what would be the plan for the new facilities in India and the cash you would receive? And then maybe just on business development, could you share your latest thoughts on strategy, areas of interest and capacity, and then how you are thinking about the potential vertical integration of biosimilars? Thank you. Chirag K. Patel: Thank you. So good morning, Matt. With Pfizer collaborations, continue such as we had it with MedCerra. Both teams are working together. Facilities actually accelerated in manufacturing. And several levels of C-level meetings have been already conducted with Pfizer. So we expect nothing much to change. Right now, it is all waiting for starting the Phase 3 and getting the products and, you know, the demand is global. And we have built, building such a remarkable, highly automated fill-and-finish facility with latest and greatest equipment. So Pfizer is very excited about that. And also, we are making great progress on our peptide manufacturing, which you know is in shortages. With solid phase technology, we are also introducing hybrid in the future. So our teams are working with Pfizer on those aspects as well. And we continue to have the marketing rights for 18 countries, including India and Southeast Asia. So we are excited about the entire partnership, and there are no plans to think about right now. It is moving great. Yes. So as we have been saying it since the last couple of years, time is now to do the vertical integration. Biosimilar opportunities are awesome. Regulatory is streamlined. And we are very familiar with the market. So very excited—that is where the capital allocation will go first. And then, as I said previously, 2027 and onward, we will be more focused on specialty assets, and keep building our pipeline there. Remember, organically, we are very strong in our R&D pipeline, so we keep our pipeline full. More complex products, a great team in-house we have, so we will continue to invest in our own R&D, our own CapEx, which is—strategically, we have been investing and are very excited about the future. And next five years is going to be tremendous growth, more than what we have even witnessed in the last five years. Operator: Thank you for that question, Matt. Moving on, we now have David A. Amsellem from Piper Sandler. Go ahead, please. Your line is now open. David A. Amsellem: So just a few for me. Wanted to get your thoughts on the generic Omnipaque opportunity and what has been built into your ’26 expectations regarding that opportunity. Talk about barriers to competition, potential approval of additional strengths, and the extent to which you think that is going to be a limited competition product for the foreseeable future. So I know that is a bunch, but that is number one. And then secondly, I had a question on Xolair—similar set of questions—but wanted to get your thoughts on the extent to which that could be a limited competition market. I believe there are only two or three others. So talk about how big of an opportunity that could be in ’27 and beyond. Thank you. Chirag K. Patel: Great. Thank you, David. On iohexol, you know, the supply chain is complicated. They will be entering the market. GE has the huge market share, so we will be making inroads. The we have spoken to, they are very excited, but expect that as a ramp-up. Because of the difficulty in the supply chain. So over the years, as we introduce more strengths, it will pick up. So great achievement from our R&D team. And complexity of manufacturing, both we have achieved. So excited over time on iohexol. On Xolair, very excited right now with Celltrion and us in ’26. Large market, growing market. Very well set about—we expect 65% to 70% to go through the private label, which, you know, gives us immediate bump in the sales, rather than ramp-up over market share over one, two, three years. So exciting opportunity. And as you know, Amneal Pharmaceuticals, Inc. is well positioned to do business with these large buying groups as we have been doing business with them over 20 years—great relationship, number one pipeline in the country for them, and they appreciate our high integrity, the quality standards we have. So we expect tremendous partnership with these private label side of the business, which I expect about—going forward would be almost 70% would go through private label which would make the biosimilar penetration very effective. It would not have to wait for three, four years to get to 30% to 40% market share. It would jump to higher market share immediately in year one. And 20% to 30% will continue on a buy-and-bill, which we are well positioned for as well. So very excited on Xolair as well. Chintu, you wanted to add anything on ibexel? Chintu Patel: Yeah, David. So on iohexol, you had a question on additional strengths. So by end of the year, we will have approval for the missing strength. So by end of the year, we will have the entire Omnipaque, all the strengths. It is a very large opportunity for us. We have been working on strengthening our chain and increasing our capacity. ’26, we will start, but ’27 onward, it would be a meaningful revenue contribution. And from a competition perspective, it is a tough product. Supply chain perspective, manufacturing, it is a unique bottle. You know? So all those things put together, I think we do not foresee a lot of competition in multiple strengths. So we are very excited, and by end of the year, we will have all the strengths approved. Operator: Okay. Great. That is very helpful. Thank you, David. Moving on, we now have Leszek Sulewski from Tourist Securities. Go ahead please. Your line is now open. Leszek Sulewski: Good morning. Thank you for taking my questions. First one on Crexone. Can you quantify the persistence at perhaps month three or six versus your internal expectations and versus VITARI? Any sort of signal around discontinuation? And how should we think about the gross-to-net evolving as you broaden access, and what is kind of a steady state gross-to-net you are expecting at peak? And then second on the DHE order, what is the early patient profile? Is it migraine versus clusters and the switches from prior DHE exposure versus naive? Thank you. Chirag K. Patel: Thank you, Leslie. Good morning. Craig Sondors is right. Obviously, Crexone is performing much better, as Rydery took almost 10 years to get to 6% market share. First year, we have 3% market share, 23,000 patients on it. Testimonials are amazing, and we get letters in our office—literally written letters—from patients. Providers are—so physicians are so excited about the product as well. And now our aim is to make that a first-line therapy over time. So no patient has to take the old Sinemet, which is giving them a lot of fluctuations every hour and a half, two hours. So this is clearly a seven, eight hours of good on time every day. Amazing stories. No comparison with the. It is—we are doubling or more than doubling market share this year, so we will reach 6% plus this year, which would be above. And we learned the pricing side, we learned everything. We had about 35% of patients who could not fill their prescription due to the pricing on a dietary. We have really worked on it and have put the pricing out there; that number has been reduced now. And our gross-to-net runs is typical in this category, about 40% to 45%. We are very excited about TEXA. Break here, Joe, you want to—it is also the breakouts for cluster headache as well as severe migraine. So we are treating two segments, and all the excitement is amazing. Joe Renda is here. He just came back from our national sales meeting. Would you like to shed some light on— Joe Renda: Sure. Yes. So thanks so much for the question. And yes, the response from the field team so far has been fantastic on both Krepsmont and Berkey auto-injector because what we are seeing in the market from the key KOLs has been very favorable. I would say with regards to your question about Crexant with persistence and adherence, it continues to improve as we continue to see more and more patients on the product. And right now, it is surpassing that of Rytary, and we continue to anticipate that to go up because we are seeing patients return to therapy at a higher rate with Crexant than they did with Rytary. So that has been very favorable. With Berkey auto-injector, our strategy has been to focus on the key migraine treatment centers across the United States and key KOLs. And the response has been beyond our expectations so far. So we have been very pleased. We are about 90 days into the launch. And having come back now from our sales and marketing meeting—our national meeting—this week, I am maybe even more further convinced that we are going to continue to drive growth for both of those products. The team is trained and ready, and we are going be executing this year. So excited about that. Thank you. Operator: Thank you, Leszek. We are now clear on the Q&A queue. With that, I will hand the call back to Chirag K. Patel for closing remarks. Chirag K. Patel: Well, thank you, everyone, for joining the call today. Have a great Friday and weekend. Thank you. Chris Schott: Thanks, everyone. Operator: Thank you, everyone. This concludes today’s call. You may now disconnect your lines, and have a great weekend.
Operator: Good day, everyone, and welcome to the Calumet, Inc. Fourth Quarter and Fiscal Year 2025 Earnings Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. To withdraw your questions, you may press star and 2. Please also note today's event is being recorded. At this time, I would like to turn the conference call over to John Kompa, Investor Relations. Sir, please go ahead. John Kompa: Thanks, Jamie. Good morning, everyone. Thank you for joining our call today. With me on today's call are Todd Borgmann, CEO; David A. Lunin, EVP and Chief Financial Officer; Bruce Fleming, EVP, Montana Renewables and Corporate Development; and Scott Obermeier, President, Specialties. You may now download the slides that accompany the remarks made on today's conference call. The slides can be accessed in the Investor Relations section of our website at calumet.com. Also, a webcast replay of this call will be available on our site within a few hours. Turning to the presentation, on slide two, you can find our cautionary statements. I would like to remind everyone that during this call, we may provide various forward-looking statements. Please refer to our press release that was issued this morning as well as our latest filings with the SEC for a list of factors that may affect our actual results and cause them to differ from our expectations. As we turn to slide three, I will now pass the call to Todd. Todd Borgmann: Thanks, John. Good morning, and welcome to Calumet’s fourth quarter 2025 earnings call. 2025 is a defining, high-impact year here at Calumet. We began the year with a credible plan and large potential amidst deep market uncertainty. Throughout the year, risk was aggressively managed and execution of our strategy turned Calumet’s potential to actualized results. We opened the year with a mandate to demonstrate critical strategic objectives. First, we needed to demonstrate that our Specialties business would consistently generate durable free cash flow amidst large market uncertainty. Second, Montana Renewables needed to prove stand-alone financial resilience and a structural advantage. Third, we needed to receive the transformative DOE loan at Montana Renewables. And last, accomplish material deleveraging of the balance sheet. As we reflect on 2025 today, I believe Calumet achieved each of these strategic milestones. Over the course of the year, we reduced financial risk, expanded our structural earnings power, and repositioned Calumet for long-term value creation. Let me walk you through some of the highlights, and we will start with the balance sheet. We ended 2024 with restricted group leverage standing above 8x. We faced near-term maturities and elevated cash interest costs. Montana Renewables was awaiting DOE funding and the broad equity markets were hesitant to engage with fundamental value plays like ours. Today, that picture is very different. For full year 2025, we delivered $293 million of adjusted EBITDA with tax attributes, nearly a 30% increase year over year. We reduced restricted debt by more than $220 million. Net recourse leverage improved from 8.2x to 4.9x. We eliminated our 2026 and 2027 debt maturities, and Montana Renewables successfully closed its DOE loan, removing roughly $80 million of annual cash debt service while also improving its leadership position in this industry. The outcome was a fundamental shift in financial durability. This outcome was driven by structural improvements. Across the system, we dramatically reduced costs and drove increased reliability. Fixed costs were down over $40 million. Water treatment costs at Montana Renewables were down over $20 million, as were our crude transportation costs in the Specialty business, greatly enhancing feed flexibility and our ability to dial in specific specialty products for our customers. And as a result of improved reliability and fewer repairs, capital spending was also reduced by roughly $20 million. At the same time, our ops team increased production by roughly 1.3 million barrels on the year. Results like this come from an entire organization working towards a common goal. And I thank our employees for accepting the challenge to responsibly attack costs, including our 900-plus teammates in the field; our ops excellence team, which is relatively small but pound-for-pound exceptional; our finance team that made a step change in partnering with our sites and making information readily available; and more broadly, everyone who leaned in to owning and accomplishing this company-changing priority. Looking ahead, I believe there is more opportunity on both cost and reliability. Our company has been operating the current asset base for a little over three years, and during each of these, our team has delivered stronger production and lower operating costs. We expect that to continue in 2026, despite what is going to be a very heavy turnaround year. Let us turn to slide four. The operational improvements we just discussed are more than just volume and costs. Layering that capability on top of our leading commercial platform that has been built out over decades provides our sales team more volume and flexibility to support customers. We produced record levels of product in our Specialty Products and Solutions segment in 2025, and our commercial engine more than kept up, as we sustained material margins above historic norms despite softer macro conditions in the broader specialty chemicals industry. Our team places material successfully to new homes consistently. Specialty sales volumes exceeded 20,000 barrels per day during every quarter of the year. The continued results in this business reflect years of investment, commercial excellence, culture and talent, integration of Performance Brands, targeted reliability and mix improvement initiatives, and disciplined capital deployment. Our integrated asset network and ability to dynamically shift production into the highest value markets continues to be an advantage. And our extremely high customer experience scores are the result of a differentiated passion for customers, which is a core Calumet value. Turning to slide five, we see that Montana Renewables also enters 2026 in a much different position than a year ago. Throughout last year, we reached a new level of operational reliability and cost competitiveness, demonstrating a financial leadership position in one of the most compressed renewable diesel margin environments on record. Operating costs averaged $0.41 per gallon in the second half of the year, a 60% improvement over two years ago. Further, we monetized more than $90 million of production tax credits, which was essentially everything we made, and we are pleased to see the 45Z regulations progress in early 2026. On a strategic front, two quarters ago, we announced our streamlined MaxSAF 150 expansion would be bringing 120 to 150 million gallons of annual SAF capacity online at a fraction of the originally contemplated cost. In last quarter’s remarks, we mentioned roughly 100 million gallons of new SAF contracts at $1 to $2 per gallon premium over renewable diesel in final review with the DOE. These contracts are now complete, with more in process that will lay in to support our volume ramp. These contracts are all multiyear and they include increased take-or-pay volumes from existing customers, new physical SPK off-takers, book-and-claim, and blended SAF off-takes combined with contracts for scope 1 and scope 3 credits, which opens up premium renewable markets globally that complement the strong local markets we serve in Illinois, Minnesota, the Rockies, Canada, the Pacific Northwest, and California. Montana Renewables will begin its turnaround and MaxSAF 150 project next week and remain down through late April, at which point we will rebuild inventories and begin ramping up SAF production and serving these new customers. The regulatory environment for biofuels also continues to improve. I mentioned the 45Z rules are now clarified out for final comment. Further, and with plenty of press, the new Renewable Volume Obligation is expected imminently. We anticipate that a stronger RVO will improve industry utilization and margin improvement as idle facilities are expected to be required to restart to meet increased mandates. Restarting production to meet demand volume is a very different and much improved market dynamic than one where companies are hanging on at variable costs while waiting for the rules to shift. In fact, we have already seen improvement in the index margin on both the back of this expectation and the 2024 RIN carry-forward overhang drifting into history. An increased base level of industry RD margins would be a welcome change for all. At Montana Renewables, we are excited to stack on top of that the added margin from increased SAF as we complete our project in the second quarter. With that, I will turn the call over to David. Thanks, Todd. Turning to slide six. David A. Lunin: Overall, our quarter and full year results were strong both financially and strategically. We generated $69.3 million of adjusted EBITDA with tax attributes in the quarter and $293.3 million for the full year 2025. Each segment contributed meaningfully to our financial results. We saw continued momentum and record production both in our SPS segment and Montana Renewables, as well as continued outperformance and growth in our Performance Brands segment. Our strong earnings results during the quarter also allowed us to reduce restricted group indebtedness by nearly $80 million in addition to the $220 million that was reduced for the full year 2025. Before I get into more details, I wanted to highlight our planned capital expenditures for 2026. We are forecasting total CapEx of $115 million to $145 million for all of Calumet, of which $70 million to $90 million is in the restricted group. This is $30 million to $40 million higher than normal, primarily due to a heavy turnaround year, which is scheduled maintenance at Shreveport, Cotton Valley, Princeton, Karnes City, and Great Falls. Despite this, we expect total company production to increase year over year on the reliability improvements implemented over the past few years. Looking at our Specialty Products and Solutions segment on slide seven, both our quarterly and full year results reflected the continued benefits of our commercial excellence initiatives and totaled $88.5 million for the quarter and $291.8 million for the full year. The team continues to leverage the inherent optionality in our manufacturing network to place volumes where they can generate the most value while serving our diversified customer base. In fact, more than 50% of our customers buy more than one product line from Calumet, and many are long-term customers because of our unique ability to meet their product specifications. Both our quarter and full year reflect a favorable product mix. Even with certain specialty markets demonstrating some softness, our sales team has continued to place our products at over $60 per barrel margin. The benefits of our past reliability investments can also be seen in our strong operations, as we have had five consecutive quarters of specialty volume greater than 20,000 barrels per day. It was also the second consecutive quarter of record production. With our cost reduction initiatives and increased production, our fixed cost per barrel declined by over $1 per barrel versus the prior-year period. Finally, our steady production environment again enabled us to capture a stronger crack environment as fuel margins increased significantly year over year, which we view as upside to our integrated model. As I mentioned last quarter, we gained access to a new crude oil chain earlier this year, including the ability to target specific segregated or blended crudes in Cushing and further north in the DJ Basin, and at the same time, reduce our pipeline count. In 2025, this improvement drove about a $19 million decrease in transportation costs and provides even further ability to dial in our assets and feed to a specific use. In our Performance Brands segment on slide eight, we also saw the benefit of our commercial excellence initiatives, strong and growing brands, and integration capabilities. Adjusted EBITDA was $5.4 million for the quarter and $47.9 million for the full year 2025. Keep in mind that fiscal year 2024 includes a full year of Royal Purple Industrial results and that the Royal Purple Industrial business was sold in 2025. Adjusting for the divestiture and insurance proceeds received, 2025 was the third consecutive year of growth in the segment as we offset the lost contribution from RPI through growth and cost reduction. One of our standout product lines is once again our TruFuel business, which posted another record year. This ready-to-use fuel engineered for outdoor power equipment is available for four-cycle and two-cycle engines, and the product continues to resonate with consumers and first responders considering its proven ability to protect small engines from the corrosive nature of ethanol while ensuring peak performance of the equipment. Moving to slide nine, our Montana Renewables fourth quarter 2025 adjusted EBITDA with tax attributes was negative $5.4 million and positive $31.3 million for the full year 2025. On the MRL side, the company worked through trough renewable fuel industry conditions for most of the year and also the quarter was burdened with disproportionate transaction costs related to the $65 million of PTCs that we sold during the quarter. We expect to monetize our production tax credits more ratably as the market is now normalized. On a full year 2025 basis, adjusted EBITDA with tax attributes for MRL was nearly breakeven even as margins remained compressed by the low 2025 RVO, offset by our significant cost reduction efforts. Notably, the full year results do not reflect an additional $8.4 million of 2025-generated PTCs, which occurred after final regulations were posted after quarter end. Our MaxSAF 150 plans remain unchanged, and we are set to begin the project as we head into March and combine the required changes to our kit with a turnaround. We expect to complete the expansion in the second quarter and then steadily ramp volumes moving into the third quarter to meet new customer contracts, including the notable agreement we announced recently with World Energy, the previously announced contract with EPIC, and an increase in offtake with Shell, amongst others. Finally, on the Montana Asphalt side, both the fourth quarter and fiscal year results improved on the strength of improved asphalt margins and cost reduction initiatives following years of site reconfiguration. Further, we are seeing a widening of the WCS differential into 2026. With the site back at a reasonable cost level and more normalized WCS, we expect the site to continue producing in the $30 million to $50 million of EBITDA range we have discussed routinely. Let me now turn the call back to Todd for his concluding remarks. Todd Borgmann: Thanks, David. We are entering 2026 with the same high level of energy and excitement as a year ago, but with a much improved underlying fundamental. In Specialties, we expect the cost discipline embedded over the past two years to be durable, along with our continued commercial leadership position. While 2025 was another step change in operational excellence, we believe further opportunity remains to expand earnings through incremental reliability gains and customer-focused growth. In addition to that, David mentioned a heavy turnaround year, and I will highlight that turnaround excellence is the next step in our evolution. Our operations team has been planning these for some time, and during these events, we are making critical improvements that will underpin the next step change in operational performance. At Montana Renewables, our objectives are clear. First, execute MaxSAF 150 safely, on time, and on budget in the second quarter. Second, continue improving our already strong cost levels. And third, continue to leverage our early-mover advantage in SAF as we grow. We expect that accomplishing these will drive a step-change financial improvement even in past trough market conditions, and will be increasingly exciting if the market’s growing assumptions surrounding an improved RVO play out as expected. Last, on the back of these key items, we will continue to evaluate strategic pathways and unlock long-term value as the platform demonstrates sustained performance. Across Calumet, our capital allocation priorities remain disciplined and consistent. We expect to continue to drive durable free cash flow that underpins enhanced deleveraging. We plan to grow both our Specialties, widening our competitive moat, and execute our MaxSAF 150 strategy at Montana Renewables. And we plan to execute this strategy and continually develop it with an eye towards mid-term shareholder value creation. With that, thank you for your time today. I will turn the call back to the operator and see if we have any questions. Operator? Operator: Ladies and gentlemen, we will begin the question-and-answer session. If you are using a speakerphone, we do ask that you please pick up your handset before pressing the keys to ensure the best sound quality. At any time your question has been addressed, to withdraw your questions, you may press 2. Our first question today comes from Alexa Petrick from Goldman Sachs. Please go ahead with your question. Alexa Petrick: Hey. Good morning, team, and thank you for taking our question. We wanted to ask two parts, maybe. First, can you talk about the macro setup from here? There is still, you know, some uncertainties, but we got a bit of an update yesterday. And then from there, talk about what you are doing at an operational level. What are the gating items at MaxSAF? And what should we expect from here? Bruce Fleming: Oh, hey, Alexa. It is Bruce. Look, the regulatory uncertainty, as a lot of us call it, is just a feature of the landscape. You know, the global energy transition is a regulated market. But it is collective governments, many, many governments acting directionally. And, you know, we feel like that is a very robust framework. We also feel like it adds the equivalent of a lot of margin volatility on top of kind of the base energy. So with that said, you know, if you want to survive in that environment, be a low-cost provider, be well positioned, be able to shift gears quickly, and we think we are all three. Todd Borgmann: And, Alexa, it is Todd. Maybe I will pile on a little bit. One of the things that we think is so important and exciting about our MaxSAF project at Montana Renewables is that it adds an element of, you know, just durability on top of the RD margin volatility that Bruce mentioned. So you can kind of think about it a lot like our Specialties business relative to fuels in the other half of Calumet. So, you know, we have contracted volumes with meaningful margin in them that, even if we kind of rewind the clock to last year, were generating pretty meaningful free cash flow at Montana Renewables with the addition of the SAF volume and the contracts that we have. So, you know, like Bruce said, then you get to layer on the improvements that we are expecting from the RVO, and it creates a really nice dynamic. But there is kind of the risk-reward; I would say both sides of that coin are really improved with the SAF project. So thanks for the question. Alexa Petrick: Thank you. That is very helpful. Sounds like a good setup. I will turn it back. Operator: The next question comes from Conor James Fitzpatrick from Bank of America. Please go ahead with your question. Conor James Fitzpatrick: Good morning, everybody. It looks like we are in the phase of the RINs market and demand step-up progressing where we should sometime soon begin to see producers ramp utilization. And I think one way to glean that is from moves in feed prices. And they have gone up, but a lot of that is raw soybean cost pass-through through the crush spread. So I was just wondering, there has not been a lot of press releases of idled plants coming back online. There is not a ton of evidence of utilization coming back within the overall market. I was wondering if your views are similar or different as it relates to—and it is particularly important to our views of the cost of producing RINs at 2026 demand levels. Bruce Fleming: Hey, Connor, it is Bruce. Thank you for the question. Let me answer with a concept of time scale. So we think the industry is running at variable margin now. People are not covering fixed costs. And the half of the group that is in the high-cost structure have been closing. We have been running full. So you have got to be tactical on where you stand in the supply stack exactly. So that ghost capacity, which exists in biodiesel plants that can come back quickly, and renewable diesel plants that are online and can speed up, that is available, but it is not going to be called into the market until we see the RVO come out. We are all waiting for that. We feel good about what we are hearing, and, you know, let us see what the facts are shortly, we hope. Todd Borgmann: Yeah, and I would add, Connor, it is Todd. The likelihood that people turn back on, you know, when they are covering fixed costs by a penny after some of the decisions made more broadly in the industry over the past couple of years, we think is very favorable to the market. And I have talked about this kind of the couple quarters in the prepared comments, but like Bruce said, as we float on variable margin, you know, you do not incur—our normal kind of supply stack does not govern today, because people are not making long-term rational economic decisions. They are hanging on based on expectations that they are going to recover the investments in the fixed-cost losses in the near term. As we see people have to restart and make that decision to restart to cover increased demand, we do not think that they are going to do that for a penny. We think that people are going to be very thoughtful and cautious and, you know, it creates quite a constructive outlook if you believe that. So, you know, we will see what the final RVO is. I know there is a lot of rumors going around out there. When we do, we do not think that the industry just kind of ramps up overnight. We think it is going to be kind of a very thoughtful volume ramp-up over time that will be beneficial to those who are in and operating every day. Conor James Fitzpatrick: Thanks. That is good color. And for what it is worth, you know, if you look historically at the changing marginal producer back in time, that producer tends to earn, like, $0.20 to $0.30 per gallon, just if you do some rough math on it. And then I guess my follow-up question was just moving parts for fourth quarter Montana Renewables margin. There were some—and market margins were pretty fluctuant; they were up for some weeks and down for other weeks. I was wondering just how that translated into margin capture for the business and operations? Bruce Fleming: So we are—Connor, it is Bruce again. We are pretty good at shifting gears there. Our inbound and outbound supply chains are pretty short in terms of days of shipping. And, you know, we do track capture. We do not publish it, but I will tell you that we capture more than 100% of the renewable diesel index margin, and that is because of our ability to shift gears quickly. Now, it is worth noting the fourth quarter managed to hit the lowest renewable diesel index margin ever recorded in the history of the world. And we are very much looking forward to the current administration restoring, you know, reasonable industry structure through their proposed RVO. We are bullish on that, and I think that is going to break things back to historical. Remember that these margins were $2 to $3 a gallon on an index basis as recently as three years ago. You know? So we just need to resume that kind of environment and we are going to have an entirely different view of, you know, our success here. Conor James Fitzpatrick: Thanks. That is all I have. Operator: Our next question comes from Samir Yoshi from C. Wainwright. Please go ahead with your question. Samir Yoshi: Hey, good morning. Thanks for taking my questions. So this capacity expansion that I think Todd said will start next week and is likely to complete by late April. When should we see capacity ramp up at full scale? And does this bring along with it, of course, capacity expansion, but also operational savings? Like, would you be lower than 41 gallons—sorry, $0.41 per gallon? Todd Borgmann: Hey, Sudhir. It is Todd. Good questions. I think we are on—on—I will start at the end. On the cost curve, we are obviously heading in the right direction and just continue to, almost every quarter, see improvement over the previous. So we expect to just continue the incremental improvement there. We are going to keep getting more efficient over time and, yes, as we increase our volume, then, you know, we will see more unit efficiencies drop to the bottom line as we progress. So I do not think there is anything in this specific MaxSAF project that would say, hey, there is a major, major cost out. But we are certainly going to be making more margins. We continue to look to improve our costs regardless of the project, just in a steady state. And to the extent that we are ramping up volume, like I said, it helps kind of at the unit level on the bottom line. So that is, you know, probably one side of your question. I guess the other on the ramp-up: We have previously guided to 120 to 150 million gallons annually, and that is where we expect to stay. So we are not naive enough to say that everything goes perfect and we come out of this thing in May and the very first day we are producing at a 150 million gallons, but we also do not have too technically challenging of a turnaround. This is pretty well controlled, it is pretty well designed, and it is implementing and expanding equipment that we know a lot about and is not a major kind of risk, I would say, like the last major project that we have going on. So I think what you will see is coming online, we will have a really nice strong volume. We will ramp up accordingly. Exactly how long it takes us to get to the, you know, 120–150 million gallons run rate, we do not think it is going to be too long. So we will come up in May and keep everybody up to speed on where we are, and I am thinking the second half of the year that we are going to be at that level. Samir Yoshi: Got it. Thanks for that color. And then I think you mentioned 100 million gallons of contracts with multiyear contracts, and they are indexed at $1 to $2 premium over RD premium. Will you help us or remind us how does the feedstock pricing play into this, and how is that likely to impact pricing—I mean, profitability? Bruce Fleming: Here is the merits first. So it is worth noting that we are performing now under the SAF contracts, but until we deconstrain the unit during this upcoming turnaround, we cannot get our rate up to where we want it. So we are going to have the acceleration Todd mentioned. As we lean into that, the book of business that our marketing guys have created is very interesting. We have intentionally executed contracts one by one which are different than the other contracts. In other words, we are trying to have a portfolio that is robust to some of the dynamics we talked about with Alexa a minute ago. And, you know, with that in mind, I think the expectation should be that all of that feathers in. If we can hit the high end of the engineering ranges, you know, then we will get towards the 150. And if we hit the lower end, it will be towards the 120. But the contract volume, the differential that you asked about, that is in, and we have had those folks lifting already. Todd Borgmann: And I would add a little bit more, Samir, on the feedstock you asked about. We have been pretty successful linking those to the contracts. So, again, we are in a location in Great Falls where we have access to a broad range of feedstocks, including all of the low CI ones that the SAF market typically wants. So we have been pretty successful landing those on long-term contracts as well. And we feel quite confident in our ability to both continually add offtake and volume as we ramp up, but to match that with contracts on the feed side just given kind of robustness around the number of options that we have in the region. Samir Yoshi: Sounds good. Thanks for that color. Congrats on the progress operationally and as well as deleveraging. Thank you. Todd Borgmann: Thank you. Operator: To withdraw your questions, you may press 2. Our next question comes from Jason Daniel Gabelman from TD Cowen. Please go ahead with your question. Jason Daniel Gabelman: Yes. Hey, good morning. Thanks for taking my questions. Shifting over to the base business, the specialty margin was strong once again, above $60 a barrel. What is going on in the business that is enabling you to sustain those higher levels, and do you see that to continue to move higher over time? And then, conversely, if you could just comment on the Performance Brands weakness in the quarter. Scott Obermeier: Hey, Jason. Scott here. So a few answers. You know, in terms of the strength of the specialty piece within SPS, you know, this has not just been, like, a one-quarter or one-year high performance. I think if you—you have covered us for a while, you have seen the progression over the past, you know, five years and, frankly, the transformation of the business. Todd talked about it in the prepared remarks. You know, really, at the end of the day, our commercial excellence focus and the initiatives that we have done over the years, and couple that with our integration and the optionality, has proven to be highly successful, highly durable for really almost any type of market. And then the improving production reliability as well as adding the volumes to it. So we remain, you know, really positive and constructive overall within that piece of the business. As we look heading into the early part of this year, you know, we expect our high performance to continue. Certainly, we have got some headwind early on in 2026 with the crude oil run-up, some short-term headwind. But overall, we feel really good about the business and the work that has been done in that business that is going to continue to outperform the market. I think on the Performance Brands, we are really pleased with the year. You know, we think we are essentially at a place now, Jason, where we have essentially offset—even as we said that we would do—offset the Royal Purple Industrial sale and the margin that went away with that. So feel really good about the year overall. We did see in the fourth quarter, though, as you pointed out, a lot of the customer base, retail in particular, that really destocked late in the year. So some challenges there, but we are feeling good about the start of this year and the orders that we are seeing. So we are optimistic about the ’26 results. Jason Daniel Gabelman: Got it. And just on the ’26 outlook, you mentioned the turnarounds, but you should have higher volumes despite that. Is there any impact to the margin outlook given those turnarounds and perhaps having to produce a different slate of products than you typically do? Scott Obermeier: Yeah. I would say the simple answer is no. There should not be much of an impact despite turnarounds and some of the volatility going on. Jason Daniel Gabelman: Got it. And my follow-up is just going back to the SAF contracts because I think one of the items we struggle with is just the confidence around that $1 to $2 per gallon premium that you have cited. And so I was hoping you could just clarify kind of how the contracts are structured. Is it—when you talk about a premium over renewable diesel, are you indexing the contract to the renewable diesel margin including, you know, the RIN, the LCFS credit, the PTC, or is it more nuanced than that? Bruce Fleming: Hey, Jason. Bruce. I will give you a framework for that. Great question. Looking backwards, it was fully indexed. I mentioned earlier we were intentionally diversifying the contract structures. Collectively, we want them to be different. So, for example, FEG is a scope 1 and 3 emissions certificate that we pull off. So that means we take that SAF, we sell it, we get all of the credits, you know, RIN, LCFS, etc., producer’s tax credit. And on top of that, we get the certificate. So that stacks up a little differently. And, you know, I could go around the table, and as I said, each one is intentionally designed to act differently in different market conditions. We think the portfolio will be more robust and more stable to, you know, prospective regulatory changes and evolution. So with that said, you know, the guidance—we really do not want to start identifying specifics here. But the guidance has held for a long time, and one of the reasons for that is real simple. SAF is an excellent renewable diesel blend component—super high-quality properties—and it cannot go into the market below RD. It cannot. Every once in a while, I pick up some publication where somebody calculated—you know, we used to call this dry lab back in the chemistry class—somebody calculated that SAF is lower than diesel, and that is crazy. Because the operator is going to take the SAF tank, pump it into the diesel tank, and capture that arb this afternoon on the day shift. Right? So it is always more, and we are just arguing how much. Todd Borgmann: And I think if I could add just a little bit, to your question around, can we just depict that, are the underlying components similar? Like Bruce said, we are intentionally diversifying. At the same time, we are quite confident in the $1 to $2 per gallon range just because of how these contracts come together. So a little more color on that: our largest customers—now, your question around underlying the premium—if you looked at their contracts underlying the premium, it looks a lot like RD contracts plus the fixed premium on top of that. So in that group, we are quite excited to have the exposure to the upside on the RD plus a fixed premium, which you were kind of alluding to earlier. That fixed premium plays out even in scenarios—if we were going back to last year and looked at kind of trough index margin environments. And then the other thing I would say is, like Bruce highlighted on the scope 1 and scope 3 credit sales, there is a naturally quite a correlation. We want diversification. We want exposure to those markets, and I think I have said in the past, we see it a lot like our Specialties business where we can do some things that others probably do not want to when we are transacting in truckload volumes, controlling quality, and, you know, transloading and doing those types of things that require a little bit more hands-on service. So it fits us really well. That being said, there is obviously a high correlation between the value of those credits and the fixed premium that other customers are willing to pay. So it is no coincidence that as we look at both of those, they lie comfortably in the $1 to $2 per gallon range we have talked about. And I will highlight these are fixed contracts. Right? And I think that was probably part of your question. But, you know, this is not a spot gasoline rack. These are contracts. They are multiyear contracts. They have commitments to perform on both sides, and,you know, we are quite confident in the ability to capture that margin. Jason Daniel Gabelman: Great. Thanks. I appreciate all the color. Todd Borgmann: Thank you. Operator: With that, we will be concluding today’s question-and-answer session. I would like to turn the floor back over to John Kompa for closing remarks. John Kompa: Thank you, Jamie. On behalf of Todd and the entire management team, I would like to thank everyone for their interest today in Calumet. Have a great rest of the day. Thanks. Operator: The conference has now concluded. We do thank you for attending today’s presentation. You may now disconnect your lines.
Operator: Greetings, and welcome to the Main Street Capital Corporation Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance, please press 0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Zach Vaughan. Thank you. You may begin. Zach Vaughan: Thank you, operator, and good morning, everyone. Thank you for joining us for Main Street Capital Corporation's fourth quarter 2025 earnings conference call. Joining me today with prepared comments are Dwayne Hyzak, Chief Executive Officer, David Magdol, President and Chief Investment Officer, and Ryan Nelson, Chief Financial Officer. Also participating in the Q&A portion of the call is Nicholas T. Meserve, Managing Director and Head of Main Street's Private Credit Investment Group. Main Street issued a press release yesterday afternoon that details the company's fourth quarter and full-year financial and operating results. The document is available on the Investor Relations section of the company's website at mainstcapital.com. A replay of today's call will be available beginning an hour after the completion of the call and will remain available until March 6. Information on how to access the replay was included in yesterday's release. We also advise you that this conference call is being broadcast live through the Internet and can be accessed on the company's homepage. Please note that information reported on this call speaks only as of today, 02/27/2026, and therefore, you are advised that time-sensitive information may no longer be accurate at the time of any replay listening or transcript reading. Today's call will contain forward-looking statements. Any of these forward-looking statements can be identified by the use of words such as “anticipates,” “believes,” “expects,” “intends,” “will,” “should,” “may,” or similar expressions. Statements are based on management's estimates, assumptions, and projections as of the date of this call, and there are no guarantees of future performance. Actual results may differ materially from the results expressed or implied in these statements as a result of risks, uncertainties, and other factors, including but not limited to the factors set forth in the company's filings with the Securities and Exchange Commission that can be found on the company's website or at sec.gov. Main Street Capital Corporation assumes no obligation to update any of these statements unless required by law. During today's call, management will discuss non-GAAP financial measures including distributable net investment income, or DNII. DNII is net investment income, or NII, as determined in accordance with U.S. generally accepted accounting principles, or GAAP, excluding the impact of non-cash compensation expenses. Management believes that presenting DNII and the related per-share amount are useful and appropriate supplemental disclosures for analyzing Main Street Capital Corporation's financial performance, since non-cash compensation expenses do not result in a net cash impact to Main Street upon settlement. Refer to yesterday's press release for a reconciliation of these non-GAAP measures to the most directly comparable GAAP financial measures. Two additional key performance indicators that management will be discussing on this call are net asset value, or NAV, and return on equity, or ROE. NAV is defined as total assets minus total liabilities and is also reported on a per-share basis. Main Street defines ROE as the net increase in net assets resulting from operations, divided by the average quarterly NAV. Please note that certain information discussed on this call, including information related to portfolio companies, was derived from third-party sources and has not been independently verified. I will now turn the call over to Main Street's CEO, Dwayne Hyzak. Dwayne Hyzak: Thanks, Zach. Good morning, everyone, and thank you for joining us. We appreciate your participation on this morning's call. We hope that everyone is doing well. On today's call, we will provide you with our key quarterly updates. We will also be providing a few updates on our performance for the full year. Following our comments, we will be happy to take your questions. We are extremely pleased with our continued strong performance in the fourth quarter, which closed another great year for Main Street Capital Corporation. Our strong performance resulted in a return on equity of 17.7% for the fourth quarter and 17.1% for the full year, strong levels of DNII per share, a new record NAV per share for the fourteenth consecutive quarter, and extremely strong investment activity in our unique lower middle market investment strategy, resulting in an annual record for gross lower middle market investments. We believe that these continued strong results demonstrate the sustainable strength of our overall platform, the benefits of our differentiated and diversified investment strategies, the unique contributions of our asset management business, and the continued strength and quality of our portfolio companies, particularly our existing lower middle market portfolio companies. We remain confident that our unique investment income and value creation drivers, together with our cost-efficient operations and conservative capital structure, allow us to continue to deliver superior results for our shareholders in the future. Our favorable results in the fourth quarter combined with our positive outlook for the first quarter resulted in our most recent dividend announcements, which I will discuss in more detail later. Our NAV per share increased in the quarter primarily due to the impact of significant net fair value increases in both our lower middle market and private loan investment portfolios, including the benefits of material net realized gains, which Ryan will discuss in more detail. The continued favorable performance of the majority of our lower middle market portfolio companies resulted in another quarter of strong dividend income contributions and significant net fair value appreciation in our lower middle market equity investments. Based upon our current views of these investments, and feedback from our portfolio company management teams, we expect the strong contributions to continue. Consistent with my comments over the last few quarters, and as David will discuss in more detail, we are pleased to have exited our investments in one high-performing lower middle market portfolio company, Mystic Logistics, in the fourth quarter, and our investments in another high-performing company, KBK Industries, in 2026, in both cases resulting in material realized gains in addition to significant dividends received over the life of our equity investments. We believe that these investments serve as yet another great example of our highly unique lower middle market investment strategy, which delivered significant benefits for both Main Street Capital Corporation and our management team partners, including significant dividend income, fair value appreciation, and realized gains, resulting in best-in-class returns on our equity investments, in addition to the highly attractive interest income on our debt investments. Even after these recent realizations, we continue to see significant interest from potential buyers in several of our lower middle market portfolio companies, which we expect will lead to favorable realizations over the next few quarters and which we believe further highlights the strength and quality of our portfolio companies and their exceptional leadership teams. We are also excited about the new and follow-on investments we made in our lower middle market strategy during the quarter, which included the addition of five new portfolio companies and a net increase in lower middle market investments of $253,000,000, representing our highest level of quarterly lower middle market net investment activity since 2021. Consistent with our prior guidance, private loan investment activity in the fourth quarter returned to our expected normal level of quarterly activity and generated a net increase of $109,000,000 in our private loan portfolio. In addition to the favorable investment realizations in our lower middle market portfolio, we also completed successful exits of two private loan portfolio company equity investments in the fourth quarter, both at meaningful premiums to our third quarter fair values. David will discuss our investment activity in more detail. Given our conservative capital structure and strong liquidity position, we remain very well positioned to continue the growth of our investment portfolio for the foreseeable future, and we are excited about the current opportunities we are seeing. We also continue to produce positive results in our asset management business. The funds we advise through our external investment manager continued to experience favorable performance in the fourth quarter, resulting in significant incentive fee income for our asset management business and, together with our recurring base management fees, a significant contribution to our net investment income. We remain excited about our plans for the external funds that we manage as we execute our investment strategies, and we are optimistic about the future performance of the funds and the attractive returns we are providing to the investors of each fund and about our strategy for growing our asset management business within our internally managed structure. As part of these efforts, we remain focused on growing the investment portfolio of MSC Income Fund, a publicly traded BDC advised by our external investment manager which is solely focused on the private loan investment strategy with respect to new portfolio company investments. The result of the increase to its regulatory debt capacity became effective in January 2026, and the fund maintained significant capacity to add additional debt to fund the future growth of its investment portfolio. MSC Income's fourth quarter and full-year 2025 financial results conference call will be held later this morning for those who would like additional details. Based upon our results for the fourth quarter, combined with our favorable outlook in each of our primary investment strategies and for our asset management business, earlier this week our board declared a supplemental dividend of $0.30 per share payable in March, representing our eighteenth consecutive quarterly supplemental dividend, and regular monthly dividends for 2026 of $0.26 per share. These second quarter regular monthly dividends represent a 4% increase over the regular monthly dividends paid in 2025. The supplemental dividend for March is a result of our strong performance in the fourth quarter and will result in total supplemental dividends paid during the trailing twelve-month period of $1.20 per share, representing an additional 39% paid to our shareholders in excess of our regular monthly dividends. We currently expect to recommend that our board continue to declare future supplemental dividends to the extent DNII before taxes significantly exceeds our regular monthly dividends paid or we generate net realized gains, and we maintain a stable to positive NAV in future quarters. Based upon our expectations for continued favorable performance in the first quarter, we currently anticipate proposing an additional significant supplemental dividend payable in June 2026. Now turning to our current investment pipeline. As of today, I would characterize our lower middle market investment pipeline as above average. Consistent with our experience in prior periods of broad economic uncertainty, we believe that our ability to provide unique and flexible financing solutions to lower middle market companies and their owners and management teams and our differentiated long-term to permanent holding periods represent an even more attractive solution to the needs of many lower middle market companies given the current economic environment, and we are confident in our expectations for strong lower middle market investment activity in the first quarter. In addition, we continue to have an increased number of existing portfolio companies that are actively executing acquisition growth strategies that we anticipate will provide attractive follow-on investment opportunities for us in the near-term future and significant value creation opportunities for these portfolio companies in the longer-term future, consistent with the successes we have demonstrated and experienced with other portfolio companies. To date in the first quarter of 2026, we have made follow-on investments in four high-performing lower middle market portfolio companies to support strategic acquisitions, for a total of over $45,000,000 in incremental investments in those portfolio companies. We also continue to be pleased with the performance of our private credit team and the significant growth they have provided for our private loan portfolio and our asset management business over the last few years, and as of today, I would characterize our private loan investment pipeline as above average. With that, I will turn the call over to David. David Magdol: Thanks, Dwayne, and good morning, everyone. Each year-end provides a good opportunity to look back at our history and highlight the results of our unique and diversified investment strategies and discuss how these strategies have enabled us to deliver highly attractive returns to our shareholders over the last nineteen years. Since our IPO in 2007, we have increased our monthly dividends per share by 136%, and we have declared cumulative total dividends to our shareholders of more than $49 per share, or approximately 3.3 times our IPO share price of $15. Our total return to shareholders since our IPO, calculated using our stock price as of yesterday's close and assuming reinvestment of all dividends received since our IPO, was 17 times money invested. This compares very favorably to the 5.3 times money invested for the S&P 500 over the same period of time and is significantly higher when compared to most public companies. As we have previously discussed, we believe the primary drivers of our long-term success have been and will continue to be our focus on making both debt and equity investments in the underserved, highly attractive lower middle market; our private credit investment activities for the benefit of our stakeholders and for the clients of our asset management business; our internally managed structure, which allows us to maintain a highly efficient and industry-leading operating structure; and the strong alignment of interest between our employees and our shareholders as a result of our team's meaningful stock ownership. Most notably and uniquely, our lower middle market strategy provides attractive leverage points and income yields on our first lien debt investments while also creating a true partnership with the management teams and other equity owners of our portfolio companies through our flexible and highly aligned equity ownership structures. This approach provides us significant downside protection through our first lien debt investments and preferred equity positions while still providing the benefits of significant upside potential through these equity investments. Main Street Capital Corporation's long-term historical track record of investing in the lower middle market, coupled with the fact that this continues to be a large addressable and underserved market, gives us confidence that we will be able to continue to find attractive new investment opportunities in our primary investment strategy. Our ability to provide highly customized capital solutions for the predominantly family-owned businesses that exist in the lower middle market has been and continues to be our primary differentiator. In 2025, Main Street Capital Corporation invested over $700,000,000 in our lower middle market strategy, which represents the largest year of lower middle market originations in our firm's history. $482,000,000 of this capital was deployed in 13 new lower middle market platform companies, with the remaining $219,000,000 predominantly representing follow-on investments in existing seasoned and well-performing lower middle market companies. Our follow-on investments are typically used to support multiple objectives, including growth capital and organic expansion opportunities, acquisitions, and recapitalizations. Most importantly, these follow-on investments are made in support of proven management teams that we believe represent significantly lower investment risk when compared to investments in new portfolio companies. Since we are significant equity owners in our lower middle market companies, we also benefit from participating alongside these proven operators as they strive to achieve meaningful equity value creation. As we have stated in the past, as our lower middle market companies perform over time, they naturally deleverage with free cash flow generated from operations. This allows us, along with our lower middle market portfolio management team partners, to benefit from a larger portion of the company's free cash flow after debt service, which can be available for distributions to the equity owners. Given the strength and quality of our lower middle market portfolio and the long-term to permanent holding period for many of our companies, we expect dividend income to continue to be a significant contributor to our results in 2026 and in the future. Additionally, this deleveraging, coupled with the strong underlying operating results of our lower middle market portfolio companies, allowed us to achieve $150,000,000 in net fair value appreciation in 2025 from our lower middle market portfolio. In 2025, we also achieved $77,000,000 in net realized gains in our lower middle market portfolio, including the largest realized gain in our firm's history. The benefit from realized gains in our lower middle market equity investments is unique to our strategy and provides the opportunity to offset losses, which will occur when investing in non-investment-grade asset classes. As our lower middle market equity investments perform, they also provide the opportunity for unrealized appreciation, which allows us to continue to grow our NAV per share. A great example of a lower middle market equity investment that highlights the benefits of our unique investment strategy was our investment in Mystic Logistics, which we exited in the fourth quarter. This exit resulted in a realized gain of $24,000,000. In addition to this realized gain, Mystic Logistics also distributed total dividends to us of $22,000,000 over the life of our investment. The last important area I would like to cover regarding our 2025 accomplishments are the contributions we received from our private loan investment strategy. We believe that our private loan investment strategy provides a very attractive risk-adjusted return profile for us and for the clients of our asset management business as we execute on our strategic objective to continue to grow our asset management business. Despite a challenging investment environment for most of the year due to slower-than-expected private equity industry activity, we completed gross investments of approximately $672,000,000 in our private loan strategy, and at year-end, our private loan portfolio represented 43% of our total investments at cost. As a reminder, in our private loan strategy, we are primarily a lender to private equity-backed businesses. We also occasionally make small equity investments in our private loan portfolio companies. In the fourth quarter, we recognized a significant realized gain of $34,000,000 in our investment in Purge Right. This exit provides evidence of the potential benefits of our private loan equity co-investment strategy. As of December 31, we had investments in 189 portfolio companies spanning across numerous industries and end markets. Our largest portfolio company, excluding the external investment manager, represented only 5.2% of our total investment income for the year and only 3.3% of our total investment portfolio fair value at year-end. The majority of our portfolio investments represented less than 1% of our income and our assets. Now turning to our investment activity in the fourth quarter, we made total investments in our lower middle market portfolio of $300,000,000, including investments of $241,000,000 in five new lower middle market portfolio companies, which after aggregate investment activity resulted in a net increase in our lower middle market portfolio of $253,000,000. During the quarter, we also completed $231,000,000 of total private loan investments, which after aggregate investment activity resulted in a net increase in our private loan portfolio of $109,000,000. At year-end, we had investments in 92 companies in our lower middle market portfolio, representing $3,100,000,000 of fair value, which is 26% above our cost basis, and investments in 86 companies in our private loan portfolio, representing $2,000,000,000 of fair value. The total investment portfolio at fair value at year-end was 17% above our cost basis. Additional details on our investment portfolio at year-end are included in the press release that we issued yesterday. With that, I will turn the call over to Ryan to cover our financial results, capital structure, and liquidity position. Ryan Nelson: Thank you, David. To echo Dwayne's and David's comments, we are very pleased with our strong operating results for the fourth quarter, which included several quarterly records and capped a year in which Main Street Capital Corporation achieved a record in NAV per share. Our total investment income for the fourth quarter was $145,500,000, increasing by $5,100,000, or 3.6%, over the fourth quarter of 2024 and increasing by $5,700,000, or 4.1%, from the third quarter of 2025. Our positive performance for the first three quarters continued in the fourth quarter and culminated in a year with favorable total investment income highlighted by strong levels of dividend and fee income, which again demonstrate the continued strength of our differentiated and asset management strategies. Interest income decreased by $7,200,000 from a year ago and by $500,000 from the third quarter of 2025. The decrease from the prior year was principally attributable to a larger negative impact from investments on non-accrual status and a decrease in interest rates, primarily resulting from decreases in benchmark index rates on our floating rate debt investments and other decreases in interest rates on existing debt investments, partially offset by the impact of the growth of the investment portfolio. The decrease from the prior quarter was principally attributable to a decrease in interest rates, primarily resulting from decreases in benchmark index rates on floating rate debt investments and other decreases in interest rates on existing debt investments and a larger negative impact from investments on non-accrual status, partially offset by the impact of the growth of the investment portfolio. Dividend income increased by $11,400,000 when compared to a year ago, including a $4,500,000 increase in unusual or nonrecurring dividends, and increased by $4,600,000 from the third quarter, including a $200,000 increase in unusual or nonrecurring dividends. The increases in dividend income for both comparable periods are primarily a result of the continued underlying positive performance of our lower middle market portfolio companies and their capital allocation decisions. Fee income increased by $900,000 from a year ago and by $1,600,000 from the third quarter. The increases in fee income are primarily due to higher closing fees on new and follow-on investments, partially offset by a decrease in fee income from the refinancing and prepayment of debt investments and other investment activity. Fee income considered nonrecurring decreased by $700,000 from a year ago and by $100,000 from the third quarter of 2025. The fourth quarter included increased levels of income considered less consistent or nonrecurring in nature in comparison to the comparable periods, primarily related to dividends from our equity investments. In the aggregate, these items totaled $7,600,000 and were $3,900,000, or $0.04 per share, higher than the fourth quarter of 2024 and $3,400,000, or $0.04 per share, higher than the third quarter of 2025. Our operating expenses increased by $1,400,000 over the fourth quarter of 2024 and by $1,100,000 from the third quarter. The increase in operating expenses from the prior year was largely driven by increases in cash compensation-related expenses, share-based compensation expense, and general and administrative expenses, partially offset by a decrease in interest expense and an increase in expenses allocated to the external investment manager. The decrease in interest expense from a year ago was primarily driven by a decrease in the weighted average interest rate on our unsecured debt obligations, resulting from the issuance of the August 2028 notes, the early repayment of the December 2025 notes, and a decrease in the weighted average interest rate on our credit facilities resulting from decreases in benchmark index interest rates and decreases in the applicable margin rates resulting from the amendments of our credit facilities in April 2025. The ratio of our total operating expenses, excluding interest expense, as a percentage of our average total assets, was 1.4% for the quarter on an annualized basis and 1.3% for the year, and continues to be among the lowest in our industry. Our external investment manager contributed $9,300,000 to our net investment income during the fourth quarter and $34,600,000 for the year, representing a slight increase over the prior year and the third quarter. Our investment manager earned $4,200,000 in incentive fees during the fourth quarter and $14,500,000 for the year. The investment manager ended the quarter with total assets under management of $1,700,000,000. During the quarter, we recorded net fair value appreciation, including net realized gains and net unrealized depreciation on the investment portfolio, of $42,500,000. This increase was primarily driven by net fair value appreciation in our lower middle market, private loan, and other portfolio investments, partially offset by net fair value depreciation in our middle market investments and our external investment manager. The net fair value appreciation in our lower middle market portfolio was largely driven by the continued positive performance of certain portfolio companies. The net fair value appreciation in our private loan portfolio was primarily driven by several specific portfolio companies and decreases in market spreads. The net fair value depreciation of our external investment manager was primarily driven by decreases in the valuation multiples of publicly traded peers, which we use as one of the benchmarks for valuation purposes, partially offset by increased incentive fee income and increased base management fee income. We recognized net realized gains of $50,800,000 in the quarter. Additional details on our net realized gain activity are included in the press release we issued yesterday. We ended the fourth quarter with investments on non-accrual status comprising approximately 1% of the total investment portfolio at fair value and approximately 3.3% at cost. Net asset value, or NAV, increased by $0.55 per share over the third quarter and by $1.068 per share, or 5.3%, when compared to a year ago, to a record NAV per share of $33.33 at year-end. Our regulatory debt-to-equity leverage, calculated as total debt excluding our SBIC debentures divided by NAV, was 0.71 times, and our regulatory asset coverage was 2.41 times, and these ratios continue to be more conservative than our long-term target ranges of 0.8 to 0.9 times and 2.25 to 2.1 times, respectively. Given our current liquidity position, we continued to be less active during the fourth quarter in our ATM program, raising net proceeds of $8,700,000 from equity issuances. In February, we expanded the total commitments under our corporate facility by $30,000,000 to $1,175,000,000. This increase was a result of a new lender relationship, which further expanded our lender group under the corporate facility. After giving effect to the capital activities in 2025 and this February, we enter 2026 with strong liquidity, including cash and unused capacity under our credit facilities totaling over $1,200,000,000, with a near-term debt maturity of $500,000,000 in July 2026. We continue to believe that our conservative leverage, strong liquidity, and continued access to capital are significant strengths that have proven to benefit us historically and have us well positioned for the future, allowing us to continue to execute our attractive investment strategies despite the current market uncertainty. Because of the market uncertainty, we expect to continue to operate over the next few quarters at leverage levels more conservative than our long-term targets. Coming back to our operating results, as a result of our strong performance for the quarter and year, DNII before taxes per share for the quarter of $1.11 was $0.03 higher per share than the fourth quarter of last year and $0.04 per share higher than the third quarter. Looking forward, we expect first quarter 2026 DNII before taxes of at least $1.04 per share, with the potential for upside driven by portfolio investment activities during the quarter. With that, I will now turn the call over to the operator so we can take any questions. Operator: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star key. One moment while we poll for a question. Our first question comes from the line of Robert Dodd with Raymond James. Please proceed with your question. Robert Dodd: Hi, guys, and congratulations on the quarter. I want to ask about the activity level, obviously a really high level of activity in the fourth quarter. Then the pipeline is still above average. I think you said you are seeing a very strong Q1 as well. Is this just a timing event, that things just happen to be coinciding for the back end of last year and the beginning of this year, or do you think this is a step change in activity and that could persist in terms of more of the type of retirement plan, etcetera? Do you feel this is a shift up or a bump in activity, if that makes sense? Dwayne Hyzak: Sure. Good morning, Robert, and thank you for the question. I will probably give two answers here, and I will let David and Nick then add on if they have any additional comments they want to add. If you look at the lower middle market side first, I would say we have been intentional for the last couple of years about trying to grow our activities in the lower middle market. That includes growing our team. We have been trying to grow our people. We have a number of individuals that have been at Main Street for a long period of time executing our consistent lower middle market investment strategy, and we have had a couple of individuals now be promoted to Managing Director. That has happened really over the last eight to eighteen months. I think you are seeing the benefit of having additional people focused on that consistent strategy. That is part of it. I think we have also done some things internally just to try and do a better job at executing, and I think that has also had a benefit. It is really hard to pinpoint how much benefit, but I am confident it has had a benefit from an execution standpoint. We have also always said we think our lower middle market investment strategy should be attractive at all times to individual owner-operators or families that own a business. When you look at the last couple of years, and it continues to be the case today with the uncertainty in the economy, I would think that our offering would be even more attractive, and I think we are seeing that as well. If you are an individual owner-operator that is looking to get liquidity, it is probably still not the perfect time to sell your business given the uncertainty that is out there. It is a great time to bring on an institutional partner like Main Street Capital Corporation with the best-in-class track record that has extreme flexibility from an investment standpoint to help you get some liquidity and then help you grow your business and execute your plan going forward. Those are the three things I would point to on the lower middle market side. On the private loan side, or private credit side, I would say our team continues to do a really good job there, but I do think some of that is more just the market, the overall investment activity for private equity firms. We saw it building halfway through the third quarter. Obviously, that momentum did not come to fruition until the fourth quarter, but I think we saw it in the fourth quarter, and we have continued to see good activity in the first quarter. I would say there, it is our team doing a good job, but also just the market becoming more active. I will let David add anything on lower middle market or Nick on the private credit side if they have additional comments. David Magdol: I think you covered most all of it, Dwayne. The only thing I would add is that we are really pleased with the growth of our number of teams that we have seen in the lower middle market. I will say Q4 was a particularly strong originations quarter, and in the future, we hope to be able to continue momentum at above-average rates. I would not say that Q4 is necessarily indicative of our view towards our expectations going forward on the lower middle market originations side. It was particularly strong. Nicholas T. Meserve: On the private credit side, I would echo Dwayne's comment that it is really the market volume that has driven the changes from early 2025 to the third and fourth quarters and the first quarter so far this year. Dwayne Hyzak: Robert, as I thought about comments earlier, the one other thing I would add is just the follow-ons. We talk about it all the time, both lower middle market and private credit/private loan. We have seen consistent activity there. We find those investments, those opportunities, very attractive because we already know the team. We know the company. It is likely, in both cases, lower middle market and private loan or private credit, delevered from our original entry point. If we can have opportunities to fund follow-on investments for acquisitions or other growth activities in both our existing lower middle market and private credit/private loan portfolio companies, we find those really attractive, and we have seen that occur both in Q4 and Q1, and we are hopeful it will continue to occur in 2026. Robert Dodd: Got it. Got it. In an attempt to back you into a corner a little bit more on this topic, at what point does this new level become the new average? David said you expect it to remain above average for a while. If it is above average for a while, it is the new average. It is like Lake Wobegon where everybody is around average. At what point do you think you recalibrate that this is the new normal rather than it is just that those teams and everything have reset the normal? You have set the average rather than it being above average, so to speak. Dwayne Hyzak: I would again focus this comment more on the lower middle market side, Robert, than the private loan side. If we are adding people, and we are promoting MDs, we should have a different expectation. I do think, when you look at it, I think David was just referencing that Q4 was a really, really active quarter. As we add MDs and teams, if we are not having more investments and a bigger portfolio, we should not be adding MDs and teams. When you see us completing those activities, one is the individual's ability to do it, but there is an expectation that we have growth and performance as well. I do think that from that standpoint, not a massive step change, but over time we are adding those individuals and those teams for a reason. Robert Dodd: Got it. Got it. Thank you. One more if I can. On software, since it is a topic, you do not have a lot of exposure, mid-single digits. What is the view on that? Obviously, there might be a different view of what you are willing to do on the software side in the lower middle market versus on the private loan side because those can be quite different types of businesses where there is software. What is your view of your exposure and your outlook regarding software in the different segments? Dwayne Hyzak: I will give my comments, and then maybe Nick can add on the private credit side if he has other comments. I would reiterate what you said. We do not have significant software exposure at all. As you have always heard us say, both on the lower middle market side and private credit, we are value-based investors. We love basic industries. A lot of people do not find that attractive. I think in today's environment, it is probably pretty attractive. We have always found it to be very attractive. We do not chase stuff that has high valuations. As a result, if you look at areas that we are underweight, software and healthcare would be two areas that we would be underweight. I would say we go into this situation with limited exposure. When you look at the individual names there, as you would expect us to, as any other investment manager would be, you are paying a lot of attention to what is going on there. As we sit here today, we feel good about the exposure. Obviously, you have to take AI into consideration, not just at Main Street Capital Corporation, but much more so at the portfolio company. We are confident in those management teams and their business models, and as we sit here today, we feel pretty good about the exposure. Nick, if you have anything you want to add on the private credit side? Nicholas T. Meserve: Historically, we have not done a lot. On a go-forward basis too, it is finding the right deals that we like. High-growth or high ARR deals, that is really not where we are going to focus. We have focused on cash flow software deals on the few that we do. I think going forward, we will see even more of that. It will be more focused on the infrastructure side versus, say, a growth SaaS or software model. Robert Dodd: Got it. Thank you. Operator: Thank you. Our next question comes from the line of Brian McKenna with Citizens. Please proceed with your question. Brian McKenna: Great. Thanks. Good morning, guys. What continues to stand out to me is the resiliency of your ROE. I think there are a number of things driving this, but when you look at the underlying drivers and trends across your business today that ultimately impact the trajectory of returns from here, how do all these look today relative to a year ago? I am trying to think through some of the puts and takes in the current operating environment and what this means for the intermediate-term outlook for ROEs. Dwayne Hyzak: Morning, Brian, and thanks for the question. We feel good about where we are today. If you look at 2025 versus 2024, your ROE came down some year-over-year. When you look at the current environment, two things will impact our ROE going forward on the private credit/private loan side. Both your floating index rates and spreads have some impact. That is marginal, but that does have a negative impact or a headwind. On the lower middle market side, the overall economy will be a big driver of where our ROE shakes out both in terms of dividend income and fair value appreciation. Our companies, as you have heard us say in the past, we think they are really good companies. Even more importantly, we think our management teams that we get to partner with at the lower middle market are exceptional. We are confident that no matter what happens in the overall environment, they are going to outperform what is happening in the overall economy. If the overall economy takes a step back, we are going to have some impact from that as well. Overall, we still feel really good about where we sit. The other thing I would say, and this is maybe less significant, but if you have significant growth, particularly in the lower middle market, those investments are not going to be creating the same ROE day one. It is a new investment. It has not delevered. It has not grown. As you have more growth, just naturally, the new investment is going to be contributing a lower ROE than an investment that has been in the portfolio for five or ten years. That would be another thing. Overall, though, I think we feel really good about the expectations for ROE across the platform, and then specifically in lower middle market and private credit. The other benefit we have, which you know, is that we have a very efficient operating structure, which allows us to have additional benefits as we grow our portfolio from an OpEx standpoint and what that does to ROE. Those are the comments I will give you, Brian. Brian McKenna: That is great. Thanks, Dwayne. Clearly you are operating from a position of strength here at a time when most others across the industry are playing quite a bit of defense. Your balance sheet is rock solid. You have a ton of excess capital and liquidity to keep growing and investing across the business despite what happens in the broader macro and capital markets. Periods of volatility are always driven by different things, but history often rhymes. Given your two-decade track record managing the business, what are some of the past experiences you are leaning on today to make sure you prudently manage the business through the current environment? It sounds like pipelines are strong across the board. From a deployment perspective, where are you really looking to lean in from a sector or mix perspective? Dwayne Hyzak: A couple of comments. From a sector mix, I think we feel really good about both the lower middle market and private loan/private credit businesses and opportunities. I would not say that we are leaning in to one of those more than the other. It is going to be consistent with what we have done in the past. At the individual industry level, you have probably heard us say this before, but we are less focused on an individual industry, and we are more focused on who is the individual that we have the opportunity to partner with on the lower middle market side. We take a very broad-based, industry-agnostic approach. Once an opportunity comes in, then we are going to figure out if that is an industry and a company product or service that we find attractive. First and foremost, it is about who is the individual, is he or she best in class, and is he or she trying to achieve a transaction goal that fits or aligns with our interest? If we can find that, then we are going to be interested in most industries. I think what you will see us continue to do is just lean on our history. We are value-based investors. We are going to partner with best-in-class managers. On the capital structure side, we are going to maintain a conservative capital structure and significant liquidity position. Our ability to issue equity under the ATM is huge, as you know, and that is something that we do not use just to maximize issuing equity at a high stock price. We issue equity as we grow the portfolio, particularly on the lower middle market side. We have the tools and the ability to continue to grow the platform, both lower middle market and private loan, and finance it in a way that is very conservative but also very constructive for us and our shareholders. I do not know if that answers your question, but those are the views I would give. David, if you have anything you want to add, feel free. David Magdol: I would just add one quick comment, which is that our philosophy over two decades has been to be very thoughtful about the underlying credit that we are investing in on the lower middle market side. We know that we are going to see cycles. We assume that we are going to see cycles. We underwrite to that. On the front end, we are assuming that we are going to be through good and tougher times. We talk about that a lot at our investment committee meetings so that we can get through stressful times without too much disruption. Brian McKenna: Alright. I will leave it there. Thanks so much. Dwayne Hyzak: Thanks, Brian. Operator: Thank you. Our next question comes from the line of Arren Cyganovich with Tuohy Securities. Please proceed with your question. Arren Cyganovich: Thank you. Good morning. Your comments about expanding MDs and that helping to increase the level of activity that you are seeing. I know that from meeting with you in the past, you have talked about the larger proportion of your MDs, or almost all of them, coming from internally as you grow them. You do not really get them from outside, generally. What is the pipeline of your talent pool, and how are you managing that in this environment? Is it continuing to be pretty steady? Dwayne Hyzak: Thanks for the question, Arren. We feel good about it. Our group of Managing Directors, as you said, we have had a few that have gotten promoted here in the last eighteen months or so, so we feel good about those individuals. We also feel really good about the group of Directors and VPs that we have beneath that. The comments I have given were on the lower middle market side. We have had the same thing on the private credit side. We have had two individuals that have been here for a very long time who were promoted recently to Managing Director. We are seeing the same thing from a talent and capability and experience standpoint on both the lower middle market and private credit. In the case of all those people, they are not people we hire from outside. These are people that have been at Main Street for a long period of time executing to our strategies, which we think are very unique, and executing in the way that we have executed for the last twenty years. We feel really good about the talent pipeline and pool that we have in both lower middle market and private credit. Arren Cyganovich: Thanks. In terms of the investment pipelines, are there any common threads in terms of industries or areas that seem to be a little bit more active than others? Dwayne Hyzak: Just like our portfolio and our history, I would say it is pretty diverse and broad. We are not seeing any concentration in one industry or one sector. Arren Cyganovich: Great. Thank you. Operator: As a reminder, if anyone has any questions, you may press star 1 on your telephone keypad in order to join the queue. Our next question comes from the line of Doug Harter with UBS. Please proceed with your question. Doug Harter: Thanks, and good morning. Just following up on your comment that you underwrite to cycles, can you talk about what you are seeing in the underlying performance of your companies and any areas of increased focus as you look at that performance? Dwayne Hyzak: Thanks for the question, Doug. We feel good about the portfolio as a whole. I would not say we are seeing any sector, industry, or specific area that is seeing more pressure or more underperformance. As we talked about earlier, given AI and the noise around that, anything that has software exposure, we are spending more time there. We have very limited exposure in that area, but we have been spending more time there. Low-end consumer, you have heard us talk about this probably now for three years. That is an area that has been and continues to have some challenges. Over the years, we have taken most of the pain from a fair value standpoint. We feel pretty good about where we sit today, and those companies overall are doing fine. It is just another area, given our experience for the last couple of years, that continues to get more attention. David or Nick, anything to add on that? Nicholas T. Meserve: Nothing to add. Doug Harter: Great. Appreciate that. Thank you, Dwayne. Dwayne Hyzak: Thanks, Doug. Operator: Next question comes from the line of Ryan McKenna with Citizens. Please proceed with your question. Ryan McKenna: All right. Thanks for the follow-up here. Just a couple of quick questions on the RIA. Based on the math that I have done, it looks like the RIA generated about $35,000,000 of NII in 2025, and that is roughly flat compared to 2024. I know there are a couple of near-term drivers for AUM growth. Should this earnings stream start to inflect higher in 2026? Looking at this business more broadly, are there any opportunities to create some additional strategies here? I ask this because your performance across Main Street Capital Corporation is quite differentiated, and I am wondering if you can further leverage this performance at the RIA for some newer strategies. Dwayne Hyzak: Thanks for the question, Ryan. I do think when you look at our external investment manager, we expect to have growth in the future. We have to have execution, and the market has to be cooperative, but we expect to have an increase in the base management fees there, primarily as MSC Income Fund executes its growth opportunity and strategy. We are expecting some benefit there in 2026. Outside of that, it is going to come down to our ability to grow outside of MSC Income Fund, having another private loan fund or some other strategy that we add to our asset management business. We are looking at opportunities and ways to grow there. We look forward to hopefully having some news over the next month or so about some of our efforts there. Those efforts and that news probably do not have an immediate impact, but they position us for growth over the longer term. We are working on that. We think it is a phenomenal generator of value to Main Street Capital Corporation. We also think there is a tremendous opportunity for us, given Main Street’s long-term track record and performance and what we think are very happy investors, both on the public company and the private fund side. We, like you, think it is a great business. We look forward to growing it. We just have to find the best avenue or the right avenue to grow it. Ryan McKenna: Alright. Thanks, Dwayne. Operator: Thank you. We have reached the end of the question-and-answer session. Therefore, I will turn the call back over to management for any closing remarks. Dwayne Hyzak: Thank you again to everyone for joining us this morning. We appreciate the continued support of our shareholders. We look forward to our next call in early May after the release of our results for the first quarter. Thank you. Operator: Thank you. This concludes today's conference, and you may disconnect your lines at this time. We thank you for your participation.
Operator: Good day, and thank you for standing by. Welcome to the DiamondRock Hospitality Company Fourth Quarter 2025 Earnings Conference Call. At this time, participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press *11 on your telephone. 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, Briony R. Quinn, Executive Vice President and Chief Financial Officer. Please go ahead. Briony R. Quinn: Good morning, everyone, and welcome to DiamondRock Hospitality Company's fourth quarter 2025 earnings call and webcast. Joining me today is Jeffrey John Donnelly, our Chief Executive, and Justin L. Leonard, our President and Chief Operating Officer. Before we begin, let me remind everyone that many of our comments today are not historical facts and are considered to be forward-looking statements under federal securities law. As described in our filings with the SEC, these statements are subject to numerous risks and uncertainties that could cause future results to differ materially from what we discussed today. In addition, on today's call, we will discuss certain non-GAAP financial information. A reconciliation of this information to the most directly comparable GAAP financial measure can be found in our earnings press release. We are pleased to report that we finished 2025 ahead of our most recent guidance estimates. For the full year 2025, we delivered corporate adjusted EBITDA of $297,600,000 and adjusted FFO per share of $1.08. Our free cash flow per share, defined as adjusted FFO less CapEx, was $0.69, a 6% increase over 2024 and a 22% increase since 2023. Full-year comparable total RevPAR grew 1.2% and comparable hotel adjusted EBITDA grew 1.1%. Turning to the fourth quarter, corporate adjusted EBITDA was $71,900,000 and adjusted FFO per share was $0.27. Comparable RevPAR declined 30 basis points in the quarter, slightly exceeding our expectations. The fourth quarter represented our most difficult comparison of the year, with RevPAR growth of 5.4% in 2024. Against that backdrop and the impact of the federal government shutdown in the quarter, we are certainly pleased with the portfolio's performance. Occupancy declined 130 basis points year-over-year while ADR increased 1.6%. By segment, business transient revenue led the quarter with 2.5% growth while group revenue declined 1% and leisure transient revenue declined 2.5%. We are particularly proud of the results achieved by our recently renovated assets, including The Cliffs at L'Auberge, now fully integrated into L’Auberge de Sedona, and the Kimpton Palomar Phoenix. In addition, our hotels in Destin, the Greater San Francisco market, New York, and Denver delivered standout results. Out-of-room spend proved more resilient than we anticipated. Total RevPAR increased 0.6%, representing a 90 basis point outperformance relative to RevPAR. This strength was concentrated in our resort portfolio, where out-of-room revenue per occupied room increased nearly 7%, the strongest quarterly growth of the year. Notably, out-of-room revenue per occupied room at our resorts accelerated sequentially throughout 2025, from 4% growth in the first quarter to nearly 7% growth in the fourth quarter. Food and beverage was a bright spot again for the third consecutive quarter. Food and beverage revenues increased 1.4%, with banquets and catering up over 2% and outlets up 0.5%. Food and beverage margins expanded by 120 basis points, aided by just a 50 basis point increase in labor costs. In practical terms, food and beverage profits increased by over 5% on just 1.4% revenue growth. Additional contributors to out-of-room revenue growth included spa, parking, and destination fees, each of which increased in the mid- to high-single digits, partially offset by slightly lower attrition and cancellation fees. Turning to portfolio segmentation, our urban portfolio, which accounts for 62% of annual EBITDA, delivered 0.3% RevPAR and total RevPAR growth in the fourth quarter. November was the softest month of the quarter when the impact of the federal government shutdown was most pronounced. The strongest RevPAR growth among our urban hotels was achieved by the Hotel Emblem San Francisco, the Denver Courtyard, Kimpton Palomar Phoenix, and Courtyard Fifth Avenue, all of which posted double-digit gains. At our resorts, RevPAR declined 1.8% while total RevPAR increased 1.1%. We remain optimistic about the trajectory of our resorts in aggregate, as the fourth quarter experienced the lowest year-over-year RevPAR decline among all the quarters. In fact, resort RevPAR would have been flat but for the renovation displacement at Havana Cabana, and below average snowfall in Vail, which impacted the Hyatt. During our third quarter call, we noted the material spread in RevPAR growth achieved between properties with rates over $300 versus those under $300. In the fourth quarter, that spread widened, with a 580 basis point spread in RevPAR growth between the two rate groups and a 1,230 basis point spread in EBITDA growth. On the expense side, total hotel operating expenses declined 0.5% in the quarter, resulting in an 82 basis point expansion in hotel EBITDA margin. This margin improvement was the largest quarterly gain this year, yet it was on our lowest total RevPAR improvement of the year. Wages and benefits, which represent nearly half of total expenses, increased just 0.6% in the quarter, reflecting continued productivity gains. This is a testament to our asset management team working closely with our operators to ensure we rightsize expenses for this operating environment. Before turning to the balance sheet, I will make a few comments on our group segment. Group room revenues declined 1.1% in the quarter, with rates up 2.6% but room nights down 3.6%. The federal government shutdown disrupted our typical cadence of short-term group pickups in November, contributing to the fourth quarter demand headwind. Looking to 2026, we enter this year with $149,000,000 of group room revenue on the books. This is the same as 2025, which was a peak for DiamondRock, but we expect more in-the-year-for-the-year pickup from a greater volume of tentatives and leads. Although cancellations from East Coast winter storms in January and February, limited snowfall in our ski markets, and a slower start to the year in Chicago have put downward pressure on our first quarter pace, we are confident we will see improving prospect conversion to firm group business. Turning to the balance sheet, on December 31, we redeemed our Series A redeemable preferred shares utilizing cash on hand. Net of lower interest income, that capital allocation decision will generate a $0.03 tailwind to our FFO per share in 2026. Following the amendment of our senior unsecured credit facility in July, repayment of our last piece of outstanding property-level debt in September, and the redemption of our preferred shares, DiamondRock Hospitality Company's capital structure is exceptionally simple. We have three fully prepayable term loans, are not encumbered by secured debt, have no joint ventures or off-balance sheet encumbrances, and with extension options, we have no debt maturities until 2029. Inclusive of interest rate swaps, 70% of our debt is floating rate, which we believe is appropriate in order to take advantage of the declining interest rate environment. We paid a common dividend of $0.80 per share in each quarter of 2025 and a stub dividend of $0.04 per share in the fourth quarter, equating to an annual FFO per share payout of 33%. Our payout percentage is below our historic levels as we continue to utilize our net operating losses to offset our tax income, in line with our capital allocation strategy. For 2026, we expect to declare quarterly dividends of $0.90 per share, with the potential for a fourth quarter stub dividend depending on full-year results. In 2025, we utilized our free cash flow to repurchase 4,800,000 common shares at an average price of $7.72 per share, and an implied cap rate of 10% on consensus estimates. We continue to review share repurchases as a highly attractive use of capital in this environment. I will wrap up my comments with our 2026 guidance. We expect 2026 RevPAR growth of 1% to 3% and total RevPAR growth 25 basis points higher. We expect adjusted EBITDA to be in the range of $287,000,000 to $302,000,000 and FFO per share to be in the range of $1.90 to $1.06. In addition, we expect to spend $80,000,000 to $90,000,000 on capital expenditures this year, which Jeffrey will detail in his remarks. Based upon the midpoint of our guidance, this would imply a 4% increase in our free cash flow per share in 2026. The first quarter will be our toughest comparison of the year, and we expect first quarter RevPAR to be essentially flat to 2025. Taking this into account and the weighting of special events in the second and third quarters, you should expect our first quarter 2026 EBITDA and FFO as a percentage of the full year to be below the percentage we realized in 2025. With that, I will turn the call over to Jeffrey. Jeffrey John Donnelly: Thanks, Briony, and thank you all for joining us this morning. On Wednesday, the company announced that our chairman, Bill McCarten, will not be standing for reelection and will retire from the board in late April at the conclusion of his term. Bill founded DiamondRock Hospitality Company almost 22 years ago, served as our first Chief Executive Officer, and has provided the steady, thoughtful leadership this company needed throughout its evolution. His judgment, perspective, and commitment to doing what is right for shareholders have left an enduring mark on DiamondRock Hospitality Company, and he will be deeply missed by all of us. With Bill's retirement, the board has selected Bruce Wardinski to serve as DiamondRock Hospitality Company's next chairman. Bruce has been a member of our board since 2013, and for most of his tenure, he has served as our lead independent director. He has a deep understanding of the lodging industry and brings a history of creating value for shareholders across the numerous companies he has led and later sold. I worked closely with Bruce for many years and look forward to partnering with him as we continue to execute our strategy and create long-term value for our shareholders. 2025 is an exciting year for DiamondRock Hospitality Company. We celebrated our twentieth year as a publicly traded REIT, we achieved a company record FFO per share of $1.08, and our shares outperformed the peer average by over 1,300 basis points. Those results reflect the hard work and discipline of the DiamondRock Hospitality Company team and our partners, and I am proud of what we have all accomplished together. Less than two years ago, we introduced DiamondRock 2.0 with a simple but deliberate strategy: drive outsized free cash flow per share growth, and total shareholder returns will follow. That playbook works across other sectors, and we believe lodging should be no different. The lodging REIT sector is inherently more complex than other real estate classes. Between owner, operator, often franchisor, and sometimes ground lessor, there can be many cooks in the kitchen. We believe it is important to remember who owns the kitchen. We are the stewards of your capital, and we take that role very seriously. Disciplined capital allocation is our most important responsibility, for it is the foundation of total shareholder returns. We invest capital into our assets when underwriting supports appropriate risk-adjusted returns, acquire assets when they enhance free cash flow per share, and we sell assets when their ability to be additive to our free cash flow per share growth is at risk or when a buyer's view materially exceeds that of our own. Discipline matters on all three fronts. Accordingly, today, I will present to you our five-year capital expenditure program and update you on intentions to recycle capital within the portfolio in 2026. First, let us talk about the CapEx program. We believe our capital expenditure program is a key distinction and a critical reason we are a free cash flow per share growth story and not a short-term RevPAR headline story. What distinguishes our intentional approach is the stability of our well-planned spending and an appropriate level of total investment. These two key differentiators increase certainty for shareholders, generate solid risk-adjusted returns, and support our hotels' outsized RevPAR index scores and strong EBITDA margins. Over the next five years, our CapEx program will annually equate to 7% to 9% of total revenues, not 10% to 11%, which is the peer average, and certainly not the mid-teens several have been spending, but 7% to 9%, or about $80,000,000 to $100,000,000 per year for the next five years. In absolute dollars, the difference in the capital we are spending versus what we would be spending at the peer average rate is cumulatively over $100,000,000, or $0.50 per share. That is not an amount we are underinvesting, rather, that is the increment we do not believe provides an appropriate risk-adjusted return and, therefore, will be redirected to where we see superior returns. As fiduciaries of your capital and shareholders ourselves, that is paramount to us. We expect to undertake four to five meaningful renovation projects annually, and the remainder of the portfolio will benefit from more focused improvements. To be clear, our portfolio has improved steadily and thoughtfully every year to support or enhance competitive positioning. Consistent with the past, improvements are managed to maintain earnings disruptions to about $2,000,000 to $4,000,000 per year. You will hear us say repeatedly, as owner, we are best positioned to determine the optimal balance between operating performance, capital expenditure magnitude, timing, and value creation. We believe DiamondRock Hospitality Company has found that right balance. Through the experience and integrated work of our in-house design and construction team and asset managers, we have determined that our hotels, on average, do not require full renovations on the rigid seven-year cycle. Each asset's value, age, relative performance, profitability, prior renovation quality, and the care provided by our operating partners all matter. When renovations are determined to be the best course forward, cost discipline is paramount. Every improvement is evaluated through its impact on productivity and profitability, and every fixture and finish is scrutinized for cost, durability, and necessity. Our Kimpton Palomar Phoenix is a clear example of an appropriately timed and right-sized renovation. The hotel was nine years old when we undertook its first renovation in 2025. It was well built, well maintained. By our determination, its competitive positioning within the downtown market would be enhanced through investing just over $20,000 per key. We completed the renovation in the third quarter, and by the fourth quarter, EBITDA had increased nearly 20%, with a 15-point gain in RevPAR index by December. That is the balance of an appropriate capital investment and resulting operating performance gain at work. This does not mean we shy away from ROI projects. To the contrary, we believe ROI projects can be among the very best risk-adjusted uses of capital to drive long-term earnings growth, provided returns are conservatively underwritten and time to stabilization is defendable. ROI projects are included in our five-year CapEx plan, and we are excited about what is ahead. Our next project will likely commence in 2027. We will share more in the coming quarters. Our projects are appropriately scaled. We prefer to hit singles and doubles because, as in baseball, getting on base is far more important to winning than striking out chasing the occasional home run on a riskier, large, complicated, multiyear project. That philosophy is reflected in our most recently completed ROI project at L’Auberge. We hosted the majority of our covering analysts in early December and were thrilled to show off the integration of the two properties into one unified luxury resort, a new elevated pool and F&B experience, and expanded event space overlooking Sedona's iconic Red Rocks. In its first quarter subsequent to the completion of the renovation, L’Auberge delivered 15% RevPAR growth and over 25% EBITDA growth, reflecting its top-line tailwinds and efficiency gains of operating as a single integrated resort. It is still early, but results are ahead of our expectations, and based on booking pace, we remain comfortable the product will achieve at least a 10% yield on cost at stabilization. On to capital recycling, the transaction market is showing signs of improvement. Higher quality single assets and portfolios are coming to market, buyer and seller expectations are moving towards a more rational equilibrium, and debt capital is available at attractive pricing. The acquisition strategy of DiamondRock 2.0 is straightforward. We are looking for situations where we believe we have the fundamental and asset-level flexibility to create value. Basis is critical. In an AI-enabled economy, we expect demand will increasingly favor assets that deliver authenticity, emotional connection, and differentiated experiences with irreplaceable travel. We prefer supply-constrained markets. We prefer to avoid ground leases, because asset value transfers to the ground lessor like a leak in a boat. And we prefer to partner with independent operators and lean into situations where our best-in-class asset managers can meaningfully drive free cash flow growth. We have nothing to report at this time, but we remain active underwriters as our team is always cultivating opportunities through our extensive network of independent owners. That said, it is increasingly likely that DiamondRock Hospitality Company will be a net seller of hotels in 2026. Early last year, we were engaged in active discussions around the potential disposition of several DiamondRock Hospitality Company properties, largely driven by inbound interest. The uncertainty introduced by Liberation Day understandably paused many of those conversations. Over the past six months, however, most of those discussions have resumed. To be clear, we do not expect every asset under review will be sold, nor do we feel any pressure to sell. The breadth of interest has been wide, spanning both smaller and larger assets across urban and resort markets. We will only transact when doing so advances our strategy to drive value through increasing free cash flow per share over the medium to long term. Our shares currently trade over a 9% implied cap rate. At this time, we believe our shares are the best use for recycled capital. Turning to our view on 2026, multiple forces are aligning in our favor. We should benefit from easier year-over-year comps following Liberation Day and the 43-day federal government shutdown in 2025, as well as a holiday calendar that is more favorable for incremental business and leisure travel. Our portfolio is well positioned in markets expected to participate meaningfully in the country’s 250th anniversary celebrations and aligns closely with FIFA's World Cup games, incrementally so as the tournament progresses. In addition, we expect to benefit from outsized renovation tailwinds from L’Auberge de Sedona, Havana Cabana, and Kimpton Palomar Phoenix, while not experiencing material renovation disruption in 2026. Finally, our higher-end portfolio continues to benefit from the resilient spending patterns of affluent customers who have experienced disproportionate wealth gains in recent years and remain avid travelers. Spring break demand is developing favorably, supported by solid rate growth across a broad range of our urban and resort hotels. With respect to FIFA World Cup and July 4 bookings, we have some early observations. For World Cup, we are seeing impressive rate growth in our host markets, but it is still very early. We will have more clarity on pace by our next earnings call, as most transient bookings are likely to occur 30 to 60 days out. Turning to the 250th anniversary of the United States on July 4, rates for the holiday weekend are 20% higher than last year. While major urban markets such as Boston and New York are typically top of mind for these celebrations, the strength we are seeing today is actually coming from our resort portfolio. We view 2026 as an exciting time for our hotels, but we have provided a RevPAR and total RevPAR outlook that we deem to be appropriate and measured given the inherent uncertainty of the macroeconomic environment. As we think about our guidance, greater confidence lies in what we can control: converting top-line performance into FFO per share and free cash flow per share growth. We do that through disciplined expense management aligned with the demand environment, a balance sheet positioned to benefit from declining interest rates through floating rate debt exposure, and a highly disciplined capital expenditure program. In 2025, with just 0.4% RevPAR growth, our FFO per share increased 4%, and our free cash flow per share increased 6%. Said differently, our FFO per share margin was over 350 basis points better than our full-service peers in 2025. Based upon the midpoint of the guidance Briony provided earlier, in 2026, we expect our RevPAR to increase 2% and our FFO and free cash flow per share to increase approximately 4%. We were among the very few full-service lodging REITs in 2025 to deliver free cash flow per share in excess of 2018. We view the relative TSR performance of our shares in 2025 as a validation of our strategy. With continued discipline and execution, we believe the momentum we built in 2025 is repeatable in 2026. Momentum matters, because at DiamondRock Hospitality Company, we believe excellence compounds. Thank you for your time this morning, and we are happy to answer your questions. As a reminder, to ask a question, please press *11 on your telephone and wait for your name to be announced. To withdraw your question, please press *11 again. You may then rejoin the queue. In the interest of time, we ask that you please limit yourself to one question and one follow-up. Please standby while we compile the Q&A roster. Operator: Our first question comes from Smedes Rose with Citi. Your line is open. Good morning, Smedes. Smedes Rose: Hi, thanks. Good morning. Morning. Thanks for those opening remarks. That is helpful. I wanted to ask you maybe a little bit more about your thoughts around pace of labor and benefits, just overall wages in 2026 at the property level. And then I do not know if you can share anything about how you are thinking specifically about your New York exposure given the upcoming contracts in midyear? Briony R. Quinn: Yep. Good morning, Smedes. The midpoint of our guidance implies that labor costs will be up around 3% next year, and that is inclusive of, as you noted, the contract renewal in New York. We have three limited-service hotels in New York, and that represents about 7% of our overall labor cost. So that will provide a little bit of pressure in the back half of the year. As a reminder, this year, our labor costs were up a little over 1%, essentially flat in our resorts and up about 2.5% in our urban portfolio. Jeffrey John Donnelly: And a lot of the success in labor for us is really around productivity. So I think while we are continuing to try to find incremental ways where we can get less hours worked throughout the portfolio, I think we found a lot, probably some of the lowest hanging fruit, so that is why we think our guide in terms of total labor cost is probably going to increase this year. Smedes Rose: Okay. Thank you. And then I just wanted to ask you, Briony, I guess, your remarks about first quarter RevPAR, sounds like that might be the weakest for the year, kind of in line with what we are hearing from a lot of other companies. But anything you can provide on sort of the cadence of earnings through second through fourth quarters? Briony R. Quinn: Yeah. You are right. First quarter will be our toughest for the reasons I mentioned in my remarks. I think when we think through the remainder of the quarters, our group pace is sort of weighted between the growth in second and fourth quarter. We have a little bit of a headwind in the third quarter with respect to our group pace, but we think, obviously, transient should more than offset that in the third quarter given the special events that are happening. Smedes Rose: Alright. Thank you, guys. I appreciate it. Briony R. Quinn: Thanks, Smedes. Operator: Our next question comes from Cooper R. Clark with Wells Fargo. Your line is open. Cooper R. Clark: Great. Thanks for taking the question. And I appreciate that Western Seaport earnings impact may be more of a 2027 event, but just curious how we should be thinking about that franchise expiration this year within the context of some of your prepared remarks and what possible outcomes are on the table that we should be considering? Justin L. Leonard: Sure, Cooper. I think, you know, we still have not come to a finalized contractual deal on that, but we have been pleased with the level of interest that we have gotten from multiple brands and, frankly, the flexibility around both contract term, stabilized fees, and termination clauses. So I think as we continue to work through that, we will keep everybody apprised. But we think we have a pretty interesting option on the table that we are sort of working on finalizing. Cooper R. Clark: Okay, great. And I appreciate the color on the World Cup and recognize it remains early with respect to the 30 to 60 day window you spoke to in the prepared remarks. Just curious if you could provide some additional color on the RevPAR lift currently embedded in guide from World Cup demand and what you are seeing kind of quarter-to-date on the World Cup as it relates to some of the rate strength you spoke to, group booking trends, or maybe markets or specific assets where you are already seeing an outsized impact? Briony R. Quinn: Yeah. I would say the amount that has been embedded in our guide is about 20 basis points when we look at how we structured our 2026 guidance. I would say that what we are seeing at the market level is there is decent strength in the rates; you are just not seeing the volume of room nights come into play yet. It is still early, and that is why we think that you begin to see some acceleration when you are about 30 to 60 days out from the event. So I would love to give you more color, but at this point in time, that is what we are seeing through our hotels. Cooper R. Clark: Great. Thank you. Appreciate it. Operator: Our next question comes from Michael Bellisario with Baird. Your line is open. Michael Bellisario: Hi. Thanks. Good morning, everyone. Could you dig into the out-of-room spend outperformance a little bit more? I guess sort of two parts: just, one, why should you not be able to do more than 25 basis points on total RevPAR above RevPAR? And then, sort of related to that, any update on whether you are still in a group-up strategy, and if you are seeing any change in booking windows for either group and transient? Thank you. Jeffrey John Donnelly: I mean, I think, Mike, we are cautiously optimistic we can move the needle, but I think it is also just partly run rate. Right? I mean, we look at sort of what the run rate of out-of-room spend has been. And so, you know, it is not that we are saying that is necessarily going to decelerate, but if the underlying RevPAR accelerates relative to what we saw last year, if that stays stable, then the margin contracts. Michael Bellisario: Anything on group-up and booking window? Briony R. Quinn: Oh, in terms of the booking window for groups? I mean, I think last year, frankly, was a bit of a struggle. Given Liberation Day, you did not see as much conversion of leads into firm contracts. I am optimistic that as we move through this year, we will see a little bit of a recovery there, because when you look at our leads and tentatives for this year versus last year, we are up about 10%. So I am encouraged that we will continue to see good growth on the group side. Jeffrey John Donnelly: I think that is right, because we really saw, as you might imagine, a pretty significant drop off in leads when we got to April. So as we progress through the year, we think those stats will continue to get better just in terms of the margin of lead volume over same time last year. Operator: Our next question comes from Chris Jon Woronka with Deutsche Bank. Your line is open. Chris Jon Woronka: Hey, good morning, guys. Thanks for taking the questions. First of all, Jeff, you have talked about some, I guess, DiamondRock-specific wins on kind of CapEx, and part of that is working with your brand partners. I am curious as to whether you have kind of any—what you might have on the agenda for '26 in that sense and whether it continues to skew a little bit more towards some smarter CapEx, or whether maybe there could be some operational things that you are hoping to accomplish with them as well? Thanks. Jeffrey John Donnelly: I mean, it is a couple of fronts, Chris. I would say that, as Justin mentioned, as it relates to the Western Seaport, for example, I think there is a situation that you will not see the results of that in 2026, but I think in '27, we are optimistic that if we are able to bring that deal to conclusion, I think it will be beneficial to that hotel, and I think it could be felt by DiamondRock Hospitality Company overall next year. So I think those wins certainly are out there, but they do not happen necessarily as frequently. We have a lot of control over our hotels at the operating level, just because they are largely third-party managed. So I think that is throughout the year. I would say on the CapEx side is probably where we have that sort of larger success because the brands, whether they are franchised or managed, do have standards for what they want their hotels to be like. And I think that is where we really distinguish ourselves versus the marketplace in just really value engineering those and making sure that the expenditures that we make are appropriate for each hotel and not necessarily the same for all hotels, if that makes sense. Does that help? Chris Jon Woronka: Yeah, that is super helpful. Thanks, Jeff. As a follow-up, is there any—can you maybe share with us what might be embedded in your guidance for kind of ramp up of recently completed renovations? So I guess Sedona, I think Phoenix, maybe even Havana Cabana. Is there any lift, you know, much less expected this year? And then as we think to '27, do you think the potential lift from the things you are finishing in '26 is more or less than the lift you get in this year in '26? Briony R. Quinn: Yeah. I mean, really the one that we have called out is Sedona. It is about 25 to 50 basis points in the year for RevPAR growth. There will be some benefit—I do not have a specific number for you—but for Havana Cabana, fourth quarter, because we ended up accelerating some work at that property that we had in future years and just taking advantage of the opportunity of the softness that we were seeing in Florida during the summer to do some of that work in third quarter and fourth quarter. You can see it in the disruption of the property's EBITDA. We had probably 60% of the rooms out of service in that period of time, so there will be some recovery of that EBITDA as we get into the back half of this year. I apologize. I do not have a specific percentage for you, but I think it will be $1,000,000 or $2,000,000, I guess. Jeffrey John Donnelly: I think that is right. And we set our '26 renovation projects to kind of align up with the timing of the projects we did in 2025. So if you think about sort of the year-over-year, some of that disruption that we will have in '26 might sort of offset some of the gains that we have from headwinds from '25. Chris Jon Woronka: Okay. Very good. Makes sense. Thanks. Thanks, Jeff. Thanks, Briony. Operator: Our next question comes from Duane Thomas Pfennigwerth with Evercore ISI. Your line is open. Duane Thomas Pfennigwerth: Hey, good morning. Thank you. Your commentary on the transaction markets is encouraging. It sounds like you are maybe more optimistic on the sell side, but maybe neutral on the buy side. Correct me if that premise is wrong. And I just wondered, in terms of acquisitions, is that a function of the quality of what is on the market or pricing? Jeffrey John Donnelly: It is a good question. I think that is a fair characterization. I think we are more inclined to be sellers at this time. And I just think the reason for the neutrality on acquisitions is that right now our shares look to be a better investment than the options that we see out there. I think a lot of the deals that are coming to the market—and this is very early on in the last, say, two to three weeks—they tend to skew towards very large luxury assets. So from a ticket price and size and pricing, it just does not necessarily align with what we chase, but I think it is the type of asset that is going to end up setting some favorable comparisons in the marketplace and I think begin to provide the market with some visibility in where asset prices are. Duane Thomas Pfennigwerth: That is helpful. And then just maybe you could play back just the payoff of the preferreds. What are the net impacts to the P&L and cash flow? And as you look at your capital structure, it feels pretty clean at this point. Is there anything left to kind of, you know, higher cost to pay down that would compete favorably with buyback? Thank you. Jeffrey John Donnelly: No big pieces of capital out there that are competing with buyback. I would say one of the reasons that we looked at it—and Briony can give you some of the pieces that drive the earnings impact that we see from this—but one of the reasons that we looked at that is that was an opportunity to invest almost $120,000,000 at effectively an 8.25% yield. You know, share repurchases were certainly competitive with that, but the ability to get that much stock in such a short period of time would be difficult. So this was one where we thought it cleaned up our balance sheet a little bit more, and it was an efficient use of just removing a costly piece of capital. Briony R. Quinn: Yeah. When you offset the—You know, we obviously had some significant cash balances that we held for a portion of the year last year. So when you offset through the lower interest income in '26 with the benefit of paying off our preferred, it provides about a $0.03 tailwind to FFO per share this year. Duane Thomas Pfennigwerth: Thank you. Jeffrey John Donnelly: Thanks, Duane. Operator: Our next question comes from Austin Todd Wurschmidt with KeyBanc Capital Markets. Your line is open. Austin Todd Wurschmidt: Thanks. Good morning, everybody. Jeff, just going back to your comments specifically about the improving kind of debt capital availability and cost, I thought that was particularly interesting given sort of the varying size of hotels you have discussed selling on prior calls. I guess, does that comment really open the door for potential larger sales this year? And just given the maturity profile—I think you said nothing coming due until 2029 or so—what is sort of the intended use of proceeds, and how much do you really think you can do from a share repurchase perspective? Jeffrey John Donnelly: Yeah. That is a thoughtful question. I would say that I think it is beneficial that you are getting some declines in rates, but I also think lenders are—early days—but beginning to get a little more aggressive on proceeds. And that is what I think is going to be beneficial, because if you look in the year or two when interest rates were more volatile and, frankly, a little bit higher, it was hard to get some spread between your borrowing cost and the ultimate price someone was purchasing at. So now that you are getting some of that spread, I think it is providing some positive leverage to investors out there. And that is what I think is going to be helpful, provided there are not any other unforeseen macroeconomic events, to maybe facilitating some dispositions. As I mentioned, I think our shares are appealing right now. It depends on the size of the disposition. I think if something was very large—again, it depends on pricing and what have you—but I think our inclination is to lean into share repurchases, but it is something that you have to make a determination on at that time. Austin Todd Wurschmidt: I appreciate the thoughts there. And then just going back to The Cliffs at L’Auberge, you have talked about this 25 to 50 basis points tailwind this year. Can you just remind us, is that just getting back the disruption that you saw at that hotel last year and then, in the spirit of flow-through being more impactful, what does that imply from a hotel EBITDA perspective in terms of what was lost last year but what you anticipate to get back in 2026? Thanks. Briony R. Quinn: Yeah. I was going to say we look at that as an investment that will ultimately provide north of a 10% unlevered yield on our investment. So the idea is that when it stabilizes, call it two to three years from completion, we will earn more EBITDA than we were earning before. It was not just an investment to disrupt and then recoup what we had just lost. Jeffrey John Donnelly: I do not have off the top of my head the precise number. I think, round numbers, we went about $1,000,000 in EBITDA backwards last year, and I think from an independent resort perspective, it usually is a multiyear stabilization process. So my guess is we get $2,000,000 to $3,000,000 of that back this year. So we will see $1,000,000 to $2,000,000 of incremental and then kind of continued progression along that trend line for a few years. Austin Todd Wurschmidt: And then just following back, if I can squeeze in one more related, that hotel had a pretty material outperformance, I think it was in 2022, certainly a unique period of time. But is it possible from a stretch goal perspective that you could get back to that level with some of the efficiency gains as well as ADR upside that you have highlighted? Briony R. Quinn: Yeah. I think that is certainly possible. It is hard to appreciate unless you are standing there, but I think because those two hotels were adjacent but fairly different in their quality level that I think now unifying them really opens up the opportunity for that hotel down the road to bring in more group events and different types of guests than it had before, because of its increased scale. Austin Todd Wurschmidt: Thanks for the time. Jeffrey John Donnelly: Thanks. Operator: As a reminder, to ask a question, please press *11. Our next question comes from Rich Hightower with Barclays. Your line is open. Rich Hightower: Hey, Jeff. I got a little nervous thinking ahead and star one. So, Jeff, I want to go back to your thoughtful ruminations on CapEx and where it sort of fits into the longer-term plans for DiamondRock Hospitality Company. And I think, even going back prior to COVID, when you think about why hotel REIT stocks generally never went up over long periods of time, I think CapEx is a big part of that. So now that you have sort of re-sought what that strategy should be for the company, what do you think a sustainable—absent major macro disruption—sort of return on equity profile should be for a hotel REIT? And how do you expect to get there? Jeffrey John Donnelly: You mean like a levered return on equity? Rich Hightower: A levered return on equity, yeah. Cash flow return to equity owners in the company. Jeffrey John Donnelly: The way we framed it to our board—and maybe I am not precisely answering your question—but I think the responsibility that we have in order to outperform is that we need to be effectively surpassing what I was calling sort of the growth and the yield, like FFO growth and dividend yield combined, as sort of a loose proxy of total return. We have to be beating the broader equity REIT average probably by about 200 basis points as a sector, in order for people to feel that there is a reason to be looking at lodging vis-à-vis other sectors. And I think if you look over periods of time, probably at any of the comp sheets out there, a lot of the equity REITs historically are providing sort of a 6% to 9% combination of FFO growth and dividend yield. And I think we have to be above that range as an industry, and for us within it, leading that in order to be attracting capital. Rich Hightower: I think that is helpful. I guess maybe just to follow up on one element there. Briony, you mentioned you still have some NOLs to burn off before increasing the dividend payout. So what does that schedule look like? And when do you sort of revert to, I guess, a more normalized payout ratio? Briony R. Quinn: Yeah. I mean, the goal is for us to sort of spread those NOLs out as long as we possibly can. So that is sort of the trajectory of being able to steadily increase our dividend over time, maximizing our NOLs over the next year or two and then not having to have this big spike in a dividend payout. So I would anticipate, given our strategy, that it will probably take another three to four years before we fully burn off those NOLs. Rich Hightower: Alright. Great. Thank you. Jeffrey John Donnelly: Thanks, Rich. Operator: Our next question comes from Christopher Darling with Green Street. Your line is open. Christopher Darling: Thanks. Good morning. Jeff, you spoke about the bifurcation in consumer trends, how that has been benefiting DiamondRock Hospitality Company as well as other high-end owners. What is your forward-looking view as it relates to this dynamic? Do you think that relative strength at the high end will persist for the foreseeable future, or do you envision more of a broad-based recovery unfolding throughout the industry? Jeffrey John Donnelly: Yeah. I would say it is—you know, I think when you look at it, it is hard to base upon just our portfolio because, in the grand scheme of things, we have 35 assets. We are not representing a huge swath of the economy. But I do feel like that affluent consumer is going to continue to be a spender. My sense is that, despite the volatility in the stock market, there has been a lot of wealth created, and I do not see that disappearing very quickly. I think there have been some other headwinds on the economy in terms of international inbound travel that necessarily will not change on a dime. But I think if you think over the next two to three years, I am hard pressed to see how it continues to erode. So I would like to think that that more well-heeled traveler will continue to improve. The lower level we do not have as great visibility on, candidly. I think there is certainly a lot of pressure on consumers. But I think that is where politicians certainly seem to be more intently focused. It is a little outside my pay grade to predict easily, but I would like to believe that there are some tailwinds there down the road. Christopher Darling: Okay. That is helpful thoughts. And then maybe just more broadly, can you speak on the state of business transient travel, how that segment has sort of progressed, and your expectations for the coming year? And maybe within that answer, you could touch on government travel specifically, whether you see that segment as a tailwind or a headwind this year. Jeffrey John Donnelly: Yeah. BT, I think late last year we were seeing sort of mid-single-digit growth. I think our expectation for BT is somewhere around that level. So it feels like it is holding in fairly well and delivering sort of consistent growth. On the government side, we do not do a tremendous amount of government business. It is a very, very low single-digit contribution. I do not know, Justin, if you have anything else to add on those two. Justin L. Leonard: Yeah. I mean, I think the two, in some cases depending on the market, are somewhat intertwined. And so we actually see, if you go to like a San Diego, you will see a drop off in BT during the government shutdown period because a lot of that business is government contract related. So we are hopeful with a little bit more normal kind of, you know, a little bit more stability in our government and kind of government budget process that some of the BT falloff we saw last year that sort of averaged us down to that mid-single digits will abate, and we will be able to continue that trend line or better. Christopher Darling: Alright. I appreciate the time. That is it for me. Jeffrey John Donnelly: Thanks, Chris. Operator: Our next question comes from Patrick Scholes with Truist. Your line is open. Patrick Scholes: Great. Good morning, everyone. Justin L. Leonard: Hey. How are you doing? Patrick Scholes: I am doing well. Thank you. Jeff, regarding your five-year plan for lower CapEx, I am curious—I assume you have probably run it by your property managers or franchisors—and if so, any difference in the type of feedback that you are getting or pushback, say, versus the major brands versus the independents in your portfolio for that lower level of CapEx? Thank you. Jeffrey John Donnelly: Yeah. I guess I would say that when you think about the hotels that are independent, we do not really have to run it by anybody. That is what we want. And it does not matter. Now, that said, we do have folks managing those hotels, and we always want their feedback on whether or not we are spending appropriately. And as it relates to franchised or managed—Justin, if you want to chime in—but we do look at brand standards, but you see those are guidelines effectively, and you are trying to manage the timing of the expenditure and the magnitude. And as I talked about in my remarks, emulating the design standard, but you do not have to do it precisely with the exact nightstand or the exact lamp that they want. There are ways that you can value engineer that and deliver the refined experience that they were looking for, but do it more cost effectively rather than just strictly following their literal blueprint, if you will. Patrick Scholes: Okay. I am just curious if any of the major brands gave you a—you do not have to list them by name—but a particularly difficult time, you know, sometimes in this industry, we know there are different interests of different parties. So I am just curious about that. Thank you. Jeffrey John Donnelly: No. I would just say they are always happy when you are offering to spend more. I think we are just focused on being treated equitably amongst the entire spectrum of owners. I think in today’s world, especially as transaction volume has fallen off and there are a lot fewer change-of-control bids being executed, historically, given the public companies are not single-asset levered typically and have a lot of capital, there often is more focus or reliance upon them to maybe renovate in a greater amount or in quicker succession than what the private owners do. And I think we are just focused on being a franchisee like everyone else in the universe, doing things on a similar cadence to the overall hotel investment market. Patrick Scholes: Okay. And then maybe a little more granular, just a follow-up question. Maybe just a specific, real hotel example of if you were investing 6% versus 10% or 11% previously, what might be a real example of, “Hey, this is something that if we were at that prior level of CapEx, we would have done today. We do not think we need to do it.” Something specific. Thank you. Jeffrey John Donnelly: Trying to think if Palomar in Phoenix would be an example. Justin L. Leonard: Yeah. I think it really goes down into the minutiae of, as opposed to coming in and saying we are doing a rooms renovation, we are essentially going to start over and replace everything. I think Phoenix is a good example where we kind of looked at corridor carpet as an example and said, we do not really feel like this needs to come out. Existing wall vinyl in the rooms, aesthetically, works with what we are doing. I think maybe one piece of furniture we kept. It is not really carte blanche throughout the portfolio, but I think it is really just assessing the utility of the existing stock and making sure that we are only touching the things that need to be touched, as opposed to just holistically changing everything every time we go in and do a renovation. Patrick Scholes: Great. I think what you are doing here is great as far as being really on top of cost and everything. Thank you. Jeffrey John Donnelly: Thank you. Operator: I am showing no further questions at this time. I would now like to turn it back to Jeffrey John Donnelly for closing remarks. Jeffrey John Donnelly: Thanks, folks, and we look forward to seeing you all on the road, and we will be certainly meeting with many of you at the Citigroup real estate conference next week. Operator: Safe travels. This concludes today's conference call. Thank you for participating. You may now disconnect.
Robert Blum: From the company are Fei Chen, Chief Executive Officer, and David Kowalczyk, the company's Chief Financial and Chief Operating Officer. Before I turn the call over to management, let me remind listeners that there will be a Q&A session at the end of the call. To ask a question through the webcast portal, simply type your question through the Ask a Question feature in the webcast player. Before we begin with prepared remarks, we submit for the record the following statement. This conference call may contain forward-looking statements. Although the forward-looking statements reflect the good faith and judgment of management, forward-looking statements are inherently subject to known and unknown risks and uncertainties that may cause actual results to be materially different from those discussed during the conference call. The company, therefore, urges all listeners to carefully review and consider the various disclosures made in the reports filed with the Securities and Exchange Commission, including risk factors that attempt to advise interested parties of the risks that may affect the company's business, financial condition, operations, and cash flows. If one or more of these risks or uncertainties materialize, or if the underlying assumptions prove incorrect, the company's actual results may vary materially from those expected or projected. The company, therefore, encourages all listeners not to place undue reliance on these forward-looking statements, which pertain only as of this date and the date of the release and conference call. The company assumes no obligation to update any forward-looking statements to reflect any events or circumstances that may arise after the date of this release and conference call. With that, I would like to turn the call over to Fei Chen, CEO of LiqTech International, Inc. Fei, please proceed. Fei Chen: Thank you, Robert, and good day to everyone on the call. 2025 represented a meaningful step forward for LiqTech International, Inc. For the whole year, revenue increased 13%, driven by a 49% increase in total systems and aftermarket revenue, and we made improvements to drive efficiencies across much of our business. That shift toward higher value system sales is central to our long-term strategy and reflects growing adoption of our silicon carbide membrane technology across multiple end markets. We were a few shy of our original revenue guidance. This was primarily due to continued delays with a large OEM in the gas order that remains active in our pipeline. The project is still under discussion, but as we have consistently communicated, the timing of large oil and gas projects is difficult to predict. That said, we understand that we cannot be unpredictable. Our focus needs to be, and is, on building a diversified systems portfolio with stronger visibility and an improved margin profile going forward. In many ways, this has been consistent with our approach since I took over as CEO: to focus on more predictable parts of our business, such as swimming pools, which will be a key driver going forward. We are certainly amplifying this approach in terms of how we allocate our resources. Our commercial pool business was a standout performer in 2025 and delivered the strongest year in the company's history. We shipped 34 pool systems during the year, a new record for LiqTech. Of those, 24 systems were delivered in 2025, with the remaining 10 scheduled for delivery in early 2026. Pool system revenue totaled $2.6 million for the year and was the percentage driver of growth within our systems segment. All systems shipped during the year were based on our proprietary ClariFlow commercial pool filtration platform. ClariFlow is designed to meet the increasingly complex operational, regulatory, and space requirements facing modern aquatic facilities. Compared to conventional media filtration, our system delivers stable and reliable water quality while enabling greater automation and operational efficiency. Its compact and modular design makes it particularly well-suited for retrofit installations where equipment room space is limited—an increasingly important consideration for operators upgrading aging infrastructure. The required number of system sales reflects growing customer acceptance and increasing confidence among both operators and distribution partners. We see clear momentum as facilities prioritize water quality, automation, and space efficiency, and ClariFlow is emerging as a compelling alternative to traditional filtration methods. We have also made structural improvements to the pool system itself. Our newer modular design is standardized and cost efficient, which improves gross margins and simplifies installation. Unlike oil and gas systems, which often are highly customized to specific customer needs, pool systems are increasingly becoming repeatable, off-the-shelf solutions. This makes the market segment both more scalable and profitable. From a distribution standpoint, we recently expanded our relationship with Bandwidth in the UK into an exclusive distribution agreement, subject to minimal annual system volumes. In addition, we are seeing interest from US-based swimming pool companies. In these days, we are working on the final details for the first US swimming pool project. We see the potential opening of a very attractive growth market. All told, we have shipped pool systems in six different countries in 2025 and look to extend that this year. Based on the guidance we have provided, we expect pool revenue of approximately $5 million to $6 million in 2026, which compares to $2.6 million in 2025, reflecting continued mass adoption and delivery of systems already in backlog. Turning to water for energy. Oil and gas remains an opportunity, but it continues to present timing challenges. We are engaged with multiple providers, both large and small, and the delayed order that impacted 2025 guidance remains under discussion. As mentioned, these systems are typically highly customized, which not only makes timing unpredictable, but also impacts our margin profile. While we continue to pursue this segment and see potential opportunities with partner companies such as NASA in the Middle East, and ongoing trials through Razorback Direct in North America, we are going to be disciplined in how we allocate resources, and we are no longer basing our operating plan on difficult-to-predict customer timing, no matter how promising they may be. Where we are seeing encouraging and increasing tangible traction is within broader water-for-industry applications. The successful delivery and commissioning of our advanced membrane-based filtration system for oily wastewater at North Star BlueScope Steel has been a key proof point. The system was designed to resolve recurring filtration disruptions of polymer membranes caused by high oil content and variability in wastewater, which has given our customer costly and difficult experiences. Our system has demonstrated strong performance. This project has reinforced our belief that industrial wastewater treatment can become a larger and more stable contributor to our business. Industrial systems tend to be more standardized than oil and gas projects, which supports better margins and shorter sales cycles. We are seeing increased interest across multiple industry verticals, and to support this growth, we added dedicated sales resources to expand our industry presence in the US. In further support of our US growth strategy, we also opened a dedicated service center in Texas in partnership with Halo Systems this past November. This facility enhances our ability to support customers in the water-for-energy and water-for-industry segments by providing certified technicians, spare parts availability, remote and on-site technician support, and system maintenance and repairs. To scale in the US market, localized service is critical. The service center not only strengthens customer support but has already begun to contribute to new business development by increasing customer confidence in our long-term commitments to the region. Going ahead, we believe we will see strong contributions from the industrial side of the broader energy segment, with upside opportunities from the more specific oil and gas markets. In total, we are expecting water-for-energy and water-for-industry-related revenue of $5 million to $8 million. This compared to $4.1 million for this market segment in 2025. We are happy to see that our marine segment is building momentum, particularly through our joint venture in China. During 2025, we broke ground on a new marine-focused R&D center in Mentong and completed a regional spare parts warehouse to strengthen service capabilities for our growing marine customer base. These investments are designed to support the development and localization of marine silicon carbide membrane water treatment units for dual-fuel engine vessels, on-board water purification, and reuse. By increasing local assembly and sourcing within China, we are improving supply chain resilience and cost competitiveness in the market. We strongly believe that silicon carbide membrane technology will continue gaining adoption in new marine vessels equipped with dual-fuel engines, driven by its durability, chemical resistance, and energy efficiency. We ended the year with three marine orders for eight commercial vessels in backlog, scheduled for delivery throughout 2026. Marine revenue, including service sales, was approximately $1.5 million in 2025, and we are targeting approximately $4 million in 2026, reflecting good market adaptation of our membrane filtration technology. Looking at the broader systems business, including pool, water for energy, water for industry, and the marine side, our expectation is that we will generate revenue of $14 million to $18 million. This would be up from $8.2 million in systems revenue in 2025, showing growth of about 70% to 120%. This is a key reason why we are so excited about the future. Beyond our systems business, we also have our legacy DPF and membrane business and the plastics business, which remain stable contributors to our operations. Combined, this segment represented approximately $8 million in revenue in 2025. We expect this part of our business to remain reasonably stable in 2026, and in a cautious outlook, anticipating total revenue from the two groups combined to be slightly increased to $9 million in revenue. Looking at 2026, we expect revenue in the range of $23 million to $27 million and positive full-year 2026 adjusted EBITDA in the middle to high range of the revenue guidance, assuming constant currency. Growth is expected to be driven primarily by continued expansion in pool systems, industry applications, and marine. The range in our revenue guidance largely reflects the continued unpredictability of oil and gas project timing. Our strategic focus remains clear: scale standardized, higher-margin system platforms. We are maintaining disciplined cost control and operational efficiency with the goal of near-term profitability. Let me now turn the call over to David to review the financials in more detail. I will then make a few closing comments and look to open the call for your questions. Robert Blum: David? David Kowalczyk: Thank you, Fei, and good day, everyone. Let me take some time diving into the financial results in a bit more detail and add some color to what was in the press release. Please note that I will keep my remarks focused primarily on the year-over-year changes. Let us start with revenue. Revenue for the year came in slightly above $16.5 million, up from $14.6 million a year ago. Broken down by verticals, sales for the year were as follows: systems and aftermarket sales of $8.2 million compared to CHF 5.5 million in the prior year; DPF and ceramic membrane sales were $4.0 million, down from $5.6 million in the prior year; and finally, plastic components revenue came in at $4.1 million compared to $3.4 million last year. The increase was mainly due to increased deliveries of systems to pool, energy, industry, and marine water treatment, and components plastics, partly offset by decreased sales of filters. The increase in deliveries of system was mainly driven by increased deliveries within pool filtration industry systems. The increase in components mainly within machine building for the food industry. The decrease in sales of filters was primarily driven by a refocusing of our strategy to capitalize on subsegments where we see increased future demand for DPF outside automotives. As Fei mentioned, the delta between our recent expectations for 2025 and actual results was primarily due to the delay in a larger oil and gas system, which remains in our pipeline that we have not yet received the purchase order for. Turning to gross margins, margins for the year were 7.6%, compared to 1.7% in 2024. As we continue to be below our optimal revenue level, we continue to have fixed production costs that are not being fully absorbed, and thus lower-than-normalized gross margins. A couple of key notes are that part of the increase in gross margins was due to the higher level of overall revenue, as our contribution margins are typically on average in the 40% area. We do have some fluctuations between market segments, as you know, however, this was offset by the investment of resources into deliveries of containerized oil and gas systems to the US, which contributed to lower-than-usual margins, reflecting a strategic decision aimed at demonstrating the validation of our value proposition associated with our technology and seeding the market for future growth. As we move forward, a key focus will be on leveraging our standardized systems, which inherently are higher margin. This means more focus on pools, industrial applications, marine applications, and membrane sales. Turning to OpEx. Total operating expenditures for the year were $9.6 million compared to €9.7 million last year. Breaking it down, selling expenses for the year were CHF 2.7 million compared to CHF 2.7 million last year. This development was partly driven by full-year effects of savings made in 2024, lower accounts receivable write-offs and provision needs. These effects were partly offset by costs associated with our newly formed joint venture in China, costs for outbound distribution including tariffs to the US, and expenditures related to external sales consultancy services, which also increased in 2025. General and administrative expenses for the year ended December 2025 were $5.7 million compared to $5.7 million in 2024. Underlying development in local currencies, Danish kroner, was a 4% improvement compared to 2024. This development was due to savings made in 2024, partly balanced by filling the CFO position and other open positions. Research and development expenses for the year were $1.2 million compared to $1.4 million in 2024. The decrease was primarily due to a more focused R&D strategy, with fewer ongoing projects and reduced average number of employees engaged in external research and development activities. For the year, adjusted EBITDA was negative $5.0 million compared to negative CHF 6.1 million last year. Turning to our guidance for 2026, we are expecting revenue to be in the range of $23 million to $27 million. As we break this down, we are anticipating that our broader water-for-energy and water-for-industry business will be between $5 million and $8 million. We believe our pool business will be in the range of $5 million to $6 million. Our marine business would be about $4 million, of which 60% will be from new systems and 40% from our recurring service business. And finally, our legacy DPF and plastics business will be about $9 million. We target a positive full-year 2026 EBITDA in the mid to high range of the revenue guidance, assuming constant currencies. And finally, from a cash perspective, we ended the quarter with £5.1 million in cash. Everything else was pretty much in line with our normal operating procedures from a balance sheet perspective. And with that, let me turn it back to Fei. Fei Chen: Thank you, David. To close things out before I turn over to questions, our silicon carbide filtration platform is central to how we address increasingly complex global water challenges. Built on advanced ceramic membrane technology, our solutions are designed to operate reliably in some of the harshest and most demanding treatment environments, from produced water in energy applications to commercial pool systems and heavy industry wastewater streams. As European customers meet strict environmental regulation while lowering water usage and energy intensity, we provide practical, high-performance solutions that support long-term sustainability goals. The momentum we generated in 2025, including record pool system sales, progress in produced water, marine system deployment, and industry installations such as our project with a major steel producer, demonstrates the expanding global recognition of our technology's value. As we look ahead, our direction is well defined. We are prioritizing growth in our most attractive verticals, particularly food industry applications and marine. We are remaining disciplined in execution across the organization. At the same time, we remain firmly focused on scaling the business to achieve profitability and positioning LiqTech International, Inc. for durable, profitable growth over the long term. Again, thank you everyone for your support. This week, as Robert said, we would be happy to take any questions. Robert Blum: All right. Thank you very much, Fei and David, for those prepared remarks. I want to remind everybody that is listening to the webcast player: to ask a question, simply type in your question through the Ask a Question feature in the player there. We will do our best to get to as many questions here as possible. There are a few already in the queue here, Fei and David. So the first one here is: when can we expect revenue from the large oil and gas order pushout to be booked? David Kowalczyk: That is a good question. And, of course, as we mentioned, it is a bit, you can say, in the hands of the customer. But we definitely would expect, you can say, the oil and gas project to materialize in this year, essentially, 2026. We do not know the precise timing, but ideally Q2 finalization. Robert Blum: Okay. Very good. The next question here is: do tariffs affect your US oil and gas business? Are your products competitively priced? Fei Chen: This is a very good question, and because the tariffs are a moving target, we really have our focus on that. Up to now, we have been able to have very good discussions with our customers, so we do not need to take all the tariffs on ourselves alone. Going forward, we are definitely looking at what is the best way for us to handle the tariffs and how we are able to keep our competitiveness. As we mentioned before, we are working very focused on the cost reduction of our product and also on standardization and efficiency, and that will somehow balance the tariff impact on our technology. Robert Blum: Okay. Very good. Again, a quick reminder to everyone: simply type your question into that Ask a Question feature in the webcast player if you do have any questions here. A couple of questions here pertaining to your need for capital here in 2026. Fei Chen: As you have heard today, we actually have laid out a very clear growth plan with a revenue guidance of $23 million to $27 million in 2026. So we are definitely evaluating how we are able to support this strong growth plan, and that means we are working at different financial options. Robert Blum: Okay. Very good. And it looks like this may be the final question, barring any last minute ones that may come in. And I think you have touched on this a few times, but to reiterate, what are the drivers of your 2026 revenue outlook of $23 million to $27 million? Fei Chen: This is a very good question also, as we used some time in our earnings call about this. What we really have to say to ourselves is we have to be really focused on a broader and diversified perspective and also work more on the verticals which have more risk visibility and higher predictability. So we are actually looking at growth in basically all our system segments. The pool system will have $5 million to $6 million coming this year, and the marine will grow from $1.5 million to $4 million. We said water for energy and water for industry will be $5 million to $8 million. There is a bigger range there because the oil and gas projects are more difficult to predict the timing. And the DPF and plastics plus the membrane area, we expect a slight increase from $8 million to $9 million. So, as you can hear now, the drivers are from the different verticals, and this gives us much more reliable, predictable revenue growth compared with before. Robert Blum: Okay. Very good. I am showing no further questions in the queue. So with that, I would like to turn the call back over to Fei Chen for closing remarks. Fei Chen: I would like to say thank you to all of you for being with us today. We look forward to communicating with you soon again. Thank you. Robert Blum: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.