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Operator: Thank you for standing by, and welcome to the Horizon Oil Limited Half Year Results. [Operator Instructions] I would now like to hand the conference over to Mr. Richard Beament, Chief Executive Officer. Please go ahead. Richard Beament: Well, look, a very good morning, and welcome to Horizon Oil's FY '26 Half Year Results Presentation for the period ended 31 December, 2025. I'm Richard Beament, Horizon's CEO, and I'm joined today by Kyle Keen, our CFO. This half year represents a very important period for the company. Despite a materially lower realized oil price environment, we delivered strong operating and financial performance, underpinned by disciplined cost control and the successful integration of our recently acquired Thailand assets. The completion of the Thailand acquisition on the 1st of August, together with the 10-year extension of the Maari permit to December 2037, has delivered a genuine step change for Horizon, increasing production, strengthening cash flow resilience, extending portfolio life and further diversifying the business. This morning, I'll provide a brief overview of the half-year performance, then hand over to Kyle to take you through the financials before I return to cover asset performance, outlook and upcoming activity. And we'll then open up to questions. Before we begin, I'll draw your attention to the customary compliance statement on Slide 2, which I encourage everyone to read in full. During today's presentation, we may make forward-looking statements, and actual results may differ materially due to known and unknown risks and uncertainties. It's also important to note that in our results, our recent Thailand investment is equity accounted in the half year financial statements since we hold the interest through our 75% shareholding in MH Energy Thailand LLC, the company which we acquired together with Matahio from Exxon. To aid our investors, where possible, we've reported metrics for the half year inclusive of the contribution from Thailand, such as underlying revenue to aid with comparability. As always, I should also note that all dollar amounts referred to in this presentation are in U.S. dollars unless otherwise stated. Now, this slide highlights Horizon's diversified non-operated portfolio across Southeast Asia and Australasia. We now have 5 producing assets across 4 countries with China, New Zealand, Australia and Thailand with a strong weighting toward long-life, low-cost oil and gas assets operated by experienced partners. The addition of the Sinphuhorm and Nam Phong gas fields in Thailand further strengthens the portfolio, increasing gas exposure and providing additional scale and resilience. Turning now to the investment highlights for the half year. Production and sales volumes increased by 26% and 25%, respectively, compared to the prior corresponding half year, reflecting 5 full months of contribution from the Thailand assets, together with continued solid performance from our existing portfolio. Underlying revenue for the half year was $54.2 million, including $9.6 million from Thailand, while EBITDAX of $28.6 million was broadly in line with the prior half year despite a 15% lower realized oil price. Cash flow from operating activities increased by 37% to $25.1 million, demonstrating the resilience of our assets and cost base. We finished the period with $35.6 million of cash and a modest net debt position of $9.8 million following payment of the FY '25 final dividend in October. Importantly, the Board has declared an FY '26 interim dividend of AUD 0.015 per share payable in April this year, maintaining our long-standing commitment to prioritizing shareholder returns. Now the next slide brings together how the business is performing against strategy. First, on shareholder returns. With the declaration of the FY '26 interim dividend, Horizon enters its sixth consecutive year of distributions, with more than AUD 0.17 per share paid or declared since 2021, totaling over AUD 274 million. Operationally, we continue to execute across the portfolio. Thailand is already contributing meaningfully following completion of the acquisition in August. Block 22/12 is in the midst of a liquid-handling upgrade. Maari delivered its strongest production rates in more than 5 years following workovers, and Mereenie continued to perform strongly with gas sales now supported by long-term arrangements with the Northern Territory government. Strategically, the Thailand acquisition and the Maari permit extension materially strengthened portfolio longevity at low-risk growth options and with Thailand's increasing gas exposure, including the sanctioned Nam Phong Booster Compressor, which is expected to deliver a significant percentage uplift in production from that field around mid-2026. Finally, from an ESG perspective, safety performance remains strong across the portfolio. Our gas assets continue to support regional energy security and the completion of a double materiality assessment during the half year helped sharpen our ESG focus as the business evolves. Overall, this half year reinforces that Horizon is delivering disciplined growth, resilient cash flows and long-term value creation. And now I'll pass over to Kyle to run through the financial results for the half year in a little more detail. Kyle Keen: Thank you, Richard. As always, all references to dollars are to United States dollars unless otherwise stated. Throughout the financial slides, you'll see a constant theme, the strong and positive contribution from the Thailand acquisition. Whilst the acquisition had an effective date of the 1st of January 2025, completion occurred on the 1st of August 2025. Therefore, only 5 months of contribution is reflected in the half year results. Importantly, cash flows generated between the effective date and the completion dates were deducted from the initial purchase consideration. Turning to the group's financial performance for the half year. This slide summarizes our results compared with the prior half year period. We've also included 2026 calendar year results, which we reference later. Most key metrics were strong despite a 15% lower realized oil price, which notably impacted profits. That impact was largely offset by the 5 months contribution from Thailand, allowing us to maintain underlying revenue and EBITDAX while increasing operating cash flow. Production and sales for the half year increased by over 20%, exceeding 1 million barrels of oil equivalent and generating underlying revenue of $54.2 million. On the cost side, the group continued to maintain a low cash operating cost base of around $20 a barrel of oil equivalent, supporting continued strong free cash flow generation with an EBITDAX result of $28.6 million and cash flow from operating activities of $25.1 million for the half year. At the 31st of December, the group held cash reserves of $35.6 million, resulting in a modest net debt position of $9.8 million. This reflects the payment of the FY '25 final dividend and completion of the predominantly debt-funded Thailand acquisition. This chart clearly illustrates how the business has performed over the past 6 months, breaking down operating cash flow and how those funds were deployed. The $25.1 million of operating cash flow, including Thailand's contribution, has completely funded the 2025 final dividend of $15.9 million, $3 million of debt repayments and $4.6 million of investments in our low-cost producing assets. The chart also highlights the minimal equity contribution to the Thailand acquisition, with the majority of the purchase price debt funded. The primary reason for the decline in cash over the period was the loan to our joint venture partner to aid with completion of the transaction. That loan generates interest income of at SOFR plus 9% per annum and fully amortizes by the 31st of December 2027, with over $1 million already repaid. The group closed the half year with $35.6 million of cash, and this provides sufficient liquidity to pay the interim distribution of AUD 0.015 per share. That's to be paid in April 2026, fund ongoing development activity across the asset base, progress organic and inorganic growth opportunities and to allow us to maintain appropriate working capital balance, which includes the provision for Maari's long-term decommissioning obligations. Moving to the calendar year context. 2025 sales volumes were the highest in 5 years, reflecting the contribution from Thailand following completion in August 2025. Mereenie continues to play an important role in offsetting natural reservoir decline at Block 22/12, reinforcing the strategic value of that acquisition. While revenue remains closely linked to production volumes, it is also influenced by realized oil and gas prices. And despite the lower realized oil prices, calendar year underlying revenue of $103.6 million was achieved, noting it was supported by Thailand's contribution. Building on production performance and continued cost discipline, the group remained profitable. Half year EBITDAX remained strong at $28.6 million, while calendar year EBITDAX of $54 million demonstrates the consistency of earnings following the Thailand acquisition. Calendar year profit of $8 million primarily reflects a higher non-cash amortization expense, together with the impact of lower realized oil prices, with underlying cash operating margins remaining resilient. The strong profitability delivered over recent years has been underpinned by disciplined capital allocation and the contribution from high-quality acquisitions and development projects, including the Weizhou 12-8 East development and more recently, the Mereenie and Thailand acquisitions. Now turning to our final financial slide. The charts highlight the group's ongoing ability to generate free cash flow and return capital to our shareholders. At the 31st of December 2025, net debt was $9.8 million, following the Thailand acquisition and shareholder distributions during the half year. Cumulative distributions now exceed USD 165 million or approximately AUD 250 million over the past 5 calendar years and excludes the FY '26 interim distribution of AUD 0.015 per share, which will be paid in April later this year. These outcomes reflect a clear strategy focused on value, disciplined investment and consistent shareholder returns while maintaining balance sheet strength and flexibility. With that, I'd now like to hand you back to Richard to provide an update on the asset portfolio and an outlook for the company. Richard Beament: Well, thanks, Kyle. I'll now provide an update on the assets. As Kyle mentioned, starting with Block 22/12 in the Beibu Gulf. Block 22/12 delivered a solid operational performance during the half year, with production broadly in line with expectations. As anticipated, natural reservoir decline was partly offset through a combination of workovers, slickline activities and ongoing optimization initiatives. A key focus for the joint venture remains the liquid-handling capacity upgrade, which is scheduled to come online progressively over the coming months. This upgrade is expected to aid with sustaining and potentially increasing oil production rates later this year. In parallel, feasibility studies have progressed on a potential multi-well development at 12-8 East, which continues to be evaluated by the joint venture. Turning to Maari in New Zealand. Maari delivered an outstanding half year performance, achieving the highest daily production rates in more than 5 years during August following successful workover activities. Average production for the half year was approximately 12% higher than the prior corresponding period, underpinned by stable reservoir performance and effective water injection. A major milestone during the period was the award of a 10-year permit extension through to December 2037, providing long-term certainty for continued production, further optimization and decommissioning planning. This extension reflects the increasing focus on energy security in New Zealand and reinforces Maari's value as a long-life cash-generating asset. Moving now to Mereenie in the Northern Territory. Mereenie continued to perform strongly during the half year, with production supported by the 2 infill wells drilled in early 2025, which still contribute almost 25% of total field gas production. Realized gas pricing improved materially following the expiry of legacy contracts and the execution of a binding letter of intent with Power and Water Corporation provides a pathway to firm supply of uncontracted gas through to 2034. This agreement underpins the planned drilling of additional infill wells later in calendar year 2026 and reinforces Mereenie's role as a critical supplier of domestic gas to the Northern Territory. Turning now to Thailand, our most recent addition to the portfolio. The acquisition of interest in the Sinphuhorm and Nam Phong gas fields completed on the 1st of August 2025 and delivered an immediate positive impact during the half year. Over the 5-month period, Thailand contributed approximately 28% of group production with revenue of $9.6 million and very low average operating costs of around $7 per barrel of oil equivalent. Operational performance has been strong, with both fields exceeding nominations and early optimization at Nam Phong delivering an estimated 7% uplift in production with no additional capital. A final investment decision was reached in early January on the Nam Phong Booster Compressor, which is expected to increase field production by at least 40% from mid-2026. At Sinphuhorm, regulatory approvals are now in place and works commenced for the tie-in of the PH-14 well, which along with the perforation of the shallow section of the original discovery well, the PH1 sidetrack on the same pad. This is targeted for completion later in 2026. Overall, integration of the Thailand assets has been seamless, and they are already making a meaningful contribution to group cash flow and portfolio resilience. Finally, turning to our activity plan for the next 12 months. At Block 22/12, the liquids-handling upgrade is expected to ramp up over the coming months, with further drilling and workover activity under review. At Maari, focus remains on ongoing optimization and infrastructure integrity following the permit extension. At Mereenie, the joint venture is progressing planning for additional gas infill wells, supported by long-term gas sales arrangements. And in Thailand, we are advancing the Nam Phong Booster Compressor Project and the Sinphuhorm infill well tie-ins, both of which are expected to support higher production and cash flow from the second half of calendar year 2026. So once again, we have a busy calendar of activity, firmly focused on extracting more value out of our assets. In summary, this has been another strong half year for the company. We've delivered resilient financial results in a lower oil price environment, successfully integrated the Thailand acquisition, extended the life of Maari and maintained our commitment to shareholder returns, all while preserving balance sheet strength. And with that, Kyle and I would now be very happy to take any questions you might have. Operator: [Operator Instructions] Unknown Executive: Okay. So the first question we have right now is, how have you found Thailand as a jurisdiction and working with PTTEP? Richard Beament: I might take that one. Look, it's been a really rewarding and good experience going into Thailand. Our relationship with PTTEP has been very, very strong. I think the testament to that is that within 5 or 6 months of taking over and completing the transaction, we've reached FID on that Booster Compressor Project at Nam Phong and that [Technical Difficulty] milestone so quickly after taking the rains there in Nam Phong to how strong that relationship has been. And moreover, the energy security requirements in Thailand. These fields provide fundamental gas supply to a power station. And all we've seen is positivity around how we can continue to help them to extract more gas and deliver into the power station. Unknown Executive: Thanks, Richard. The second question we had again on Thailand is Sinphuhorm was lower in August and September and February and March. Can you explain why? Richard Beament: Yes. Look, I mean, that was purely -- as sort of depicted on the slide, that was purely due to a planned maintenance outage in the EGAT power station. They essentially did a 5-year turnaround on one of their gas turbines earlier in the year and the second one in that August, September period. Production is back up over 100 million standard cubic feet per day, and we expect it to be maintained at that level for the foreseeable future. Unknown Executive: Thank you. Another question we have here is, what consideration is being given to testing Mereenie Stairway untapped gas? Richard Beament: So, I think you're referring there to the Mereenie Stairway formation. Look, the immediate priority of the joint venture is to drill infill wells in order to fulfill and essentially support the Northern Territory gas demand. So, those infill wells planned to be drilled into the existing Pacoota reservoir. The Stairway formation continues to be a priority for us. It is something we are keen to drill. The joint venture continues to consider its options in respect of that, whether it can be drilled as part of the campaign later this year or in a subsequent campaign, that's still to be determined. Unknown Executive: Thanks for that. We might just give another 30-odd seconds or so if any final questions come through, please put your questions in the Ask Question box and send them through. I don't think we've received any more questions. So, please feel free to e-mail us any questions you might have at info@horizonoil.com.au. And this concludes our webcast for today. I'll hand you back to the operator. Operator: Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.
Richard Cathcart: Hello, everyone, and welcome to the MercadoLibre Earnings Conference Call for the quarter ended December 31, 2025. Thank you for joining us. I'm Richard Cathcart, MercadoLibre's Investor Relations Officer. Today, we will share our quarterly highlights on video, after which we will begin our live Q&A session with our management team. Before we go on to discuss our results for the fourth quarter of 2025, I remind you that management may make or refer to and this presentation may contain forward-looking statements and non-GAAP measures. So please refer to the disclaimer on the screen, which will also be available in our earnings materials on our Investor Relations website. Please note that this call is being recorded, and a replay will be made available on our IR website also. With that, let's begin with a short message from our CFO. Martin de Los Santos: Good evening, everyone, and thank you for joining us. I'm pleased to report that we ended 2025 with robust operating trends that reinforce the strength of the MercadoLibre ecosystem. Our relentless focus on customer experience translated directly into strong financial performance with fourth quarter net revenues growth of 45% year-over-year. Our performance is supported by 2 primary growth drivers: the acceleration of our commerce business, and the rapid adoption and structural expansion of our fintech services. Crucially, both of these are increasingly supported by the tangible impact of our investments in artificial intelligence. Turning to commerce. In Brazil, our largest market, GMV grew an impressive 35% year-over-year alongside a 45% increase in sold items. This acceleration is the result of our strategic investments to enhance the value proposition, most notably the decision to lower the free shipping threshold. More free shipping is driving higher purchase frequency and bringing new buyers into the ecosystem. This volume is translating directly into efficiency. Our logistics network absorbed the increase in volumes while driving productivity gains, proving our ability to scale effectively. Our value proposition is generating traction in Mexico, too, where GMV also grew 35%. Across our ecosystem, we are seeing clear evidence that our investments in artificial intelligence are accelerating revenue. In advertising, AI is powering our bidding algorithms and automated campaign tools are generating better returns for sellers. This improved performance is driving higher adoption and capturing a larger share of advertisers' wallet, propelling the business to grow 67%. AI is also transforming the effectiveness of our acquiring sales force. In Brazil, these tools helped identify high-value merchants faster, resulting in higher TPV per merchant and shortened payback periods. This contributed to acquiring TPV growing 25% in Brazil and 50% in Mexico. Our Mercado Pago AI assistant is solving 87% of interactions without the need of human support. Millions of users already adopt this conversational tool to manage their credit card, make transfers and understand their credit offerings. In fintech services, we reached a historic milestone. Mercado Pago now holds the leading Net Promoter Score in Brazil, Mexico, Argentina and Chile. Monthly active users are growing close to 30% for 10 consecutive quarters. Our credit portfolio nearly doubled year-over-year to $12.5 billion, including almost 3 million new credit cards issued in Q4 alone. Assets under management are close to $19 billion growing at 78% year-over-year. This is helping us to increase principality amongst our users. Regarding our financial performance, our revenues full year growth was an impressive 39%. Income from operations grew 22% for the full year. The margin compression reflects our decision to invest in the areas of the business with the greatest long-term growth opportunity, especially shipping and credit card expansion. We remain confident these investments strengthen our ecosystem, deepen our competitive advantages and expand the long-term growth runway in a region where both e-commerce and financial services remain meaningfully underpenetrated. We enter 2026 in a position of strength. All our business units are growing at a fast pace, demonstrating that these investments are already generating results and unlocking long-term value. We are as excited as always with the opportunities ahead. And now we open up to your questions. Operator: [Operator Instructions] Our first question today is from Andrew Ruben with Morgan Stanley. Andrew Ruben: Congratulations on the growth this quarter. It was helpful you mentioned in the release of the 5 to 6 percentage point margin impact from -- you mentioned free shipping, 1P, cross-border, credit card investments. Maybe it involves taking these one by one when considering cross-border could be a newer call out than, say, credit card. But I'd like to understand where you are in this investment cycle? We understand the disciplined approach, but my question is, where could these investments already be at peak intensity versus where we could expect a more elongated cycle? Martin de Los Santos: Andrew, it's Martin here. Thank you for your question. First, let me clarify. We try to -- we've been talking about the investments that we are doing. We talked a lot about the results of those investments, but we wanted to give a sense of what those investments were in terms of margin compression. So what we did here is we -- basically, we look at the main areas of investment, like you said, a lowering of the shipping threshold that we did last year in Brazil. The credit card, we are investing in Brazil, Mexico and now Argentina, and the 1P, which is continuous its path to profitability, but still not profitable on its own. The same thing with CBT, which we are expanding now to the China and the U.S. corridor and then we also added the smaller countries where we continue to invest as we reach scale in those countries. So when we put all that together, we wanted to give you a sense of the pressure that, that generated on our margins and that gives you a range of between 5 and 6 points. So that's the intention of putting it on the letter. In terms of the trajectory, I think it's in line with what we have been talking about this in the past. CBT is a business that when it's locally fulfilled, is profitable, international fulfillment needs to continue scaling and moving in the right direction, but it will continue to scale and it will put some pressure on margins because of that. When you look at our 1P, I think we talked a lot about 1P. It continues to be profitable on a variable basis level before allocating central cost, direct indirect cost is profitable. So the scale will play in our favor in terms of continuing to improve profitability. I think the credit card, Osvaldo will talk about this, I'm sure, in some of the questions, but the credit card continues to improve its profitability, in particular in Brazil, where we're seeing already a significant part of the portfolio, the other cohorts being profitable. So I think a lot of moving parts, right? The individual businesses are growing and moving in the right direction. Then you have a shift issue because some of these are growing at a faster pace. But the bottom line is that we're very confident that the investments that we're making in our platform and addressing the long-term opportunities that we see ahead of us, and we're also improving user experience in our platform. This particular quarter, we mentioned that we have the highest NPS level in commerce and fintech in Argentina, Brazil and Mexico. So that's a consequence of investments that we have been doing, and we're very comfortable with these levels of investments in our ecosystem. Operator: The next question is from Irma Sgarz with Goldman Sachs. Irma Sgarz: So quick question on the direct contribution margin in Argentina, which was down a little bit quarter-over-quarter. And I know there were some specific pressures last quarter that perhaps you managed to address this quarter in terms of repricing of the credit spreads, whereas others may have still lasted, especially on the logistics and shipping side. And I know fourth quarter is also more promotional in general. But I was just hoping if you could break it down for us a little bit more and how we should think about this margin going into 2026 just in terms of some of those pressure points rather than specific guidance. And the other question I had was just as you had some very interesting comments around how you deploy AI across the demand and search side as well as the supply side for merchants. How one of the debates around the Agentic commerce obviously relates to the long-term opportunity for ad monetization. So I was hoping you could perhaps share some of your thoughts about or early initial thoughts about how you think about the risks and preparing for some of those risks of ad monetization moving further up the funnel. Martin de Los Santos: Martin here. I'll take the first part. We see, as you mentioned, some compression in Argentina. Keep in mind, Argentina continues to be the highest profitability market in terms of margins. But we did see some compression mostly coming from fulfillment. As you know, we opened couple of new fulfillment centers recently, so that generated some year-on-year compression on COGS. Also, provisions for bad debt because of the credit card. We launched the credit card in the middle of last year. So we're still -- we're seeing some compression because of that. As you know, the credit card requires investments upfront. And there is some year-on-year increase on funding costs. It's true what you said. Sequentially, quarter-on-quarter, the funding cost of our credit portfolio was lower in Q4 relative to Q3, but it still was higher relative to a year ago. So those are the main reasons for the compression that we saw in this quarter. Ariel Szarfsztejn: Irma, Ariel here. So let me try to take a step back in answering your question on AI and the impact of our revenues. But let me start with the idea of Agentic commerce and how that will play out for us and potentially disintermediating, which is something that I've been asked over and over. So I think it's still a bit early in the game, but we don't think that solving one part of the value chain will actually change the rules of the game, meaning that we still think that the key is to provide the best end-to-end experience for our customer. So we know that searching for an item is one important task but reading reviews, making sure the package arrives on time, offering the widest selection, having the best prices, the best financing, preventing fraud, having the best customer support and so on are also key parts of the end-to-end job on -- that we need to solve and that drive the decisions on where buyers will end up buying, right? So -- and by the way, to complement this comment, I would say that the part where we're putting most of our efforts is in developing our own agentic experience inside MercadoLibre. We think and we are convinced that we have the first-party data to create the best search, best recommendation, best discovery engine on which we can personalize and lay over the agentic experience that the new technology drives. So -- and by the way, if you believe that there is a world of agentic commerce, that could mean that retail will move even faster from the offline to the online world. So all this to say that I do think that we are well-positioned to actually capturing ad revenues in the future because we still think that MercadoLibre will be go-to place for demand to do shopping online. On top of that, then there's an issue on what happens with all the agentic commerce that will occur outside of MercadoLibre because for sure, we will not have 100% market share. And we think that, that also represents an incremental opportunity for many, right? So today, we are providing with our tech stack advertising services to third parties, we do that with Google Ad Manager, with Disney. We do that with Roku with HBO Max. And the reason behind that is that we have a unique set of data, customer knowledge, attribution capabilities that we think are very hard to match. So we eventually what I'm trying to convey is that on the one hand, we are confident on MercadoLibre's own ability to capture traffic through its own agentic experience. And on top of that, we do think that advertising represents an additional revenue opportunity in a world in which there is agentic commerce. And by the way, the agentic world can also imply a faster shift of advertising dollars moving from traditional offline channels into digital advertising, which generates the opportunity to be even bigger. So we remain positive, we remain focused. The only thing that we know for sure is that we need to put our developers to work to have the best tech stack for advertising and the best agentic experience inside MercadoLibre. Operator: The next question is from Bob Ford with Bank of America. Robert Ford: Just to expand on the discussion on agentic solutions. The press release comments on the agentic solution for Pago in terms of handling queries without human intervention. But the functionality appears to be far more sophisticated than that. And I was curious, how is that Pago agent increasing engagement impacting borrowing or savings behavior or promoting the adoption of new financial products? And Daniel, maybe you could comment about how you're thinking about a personal agentic solution or solutions for the marketplace and the functionality and how to deploy that you're anticipating? Osvaldo Giménez: Bob. We are very excited by Mercado Pago's AI assistant it is already helping mostly with solving questions and concerns from our users. We have built a lot of functionality into our agent. Basically you can do pretty much everything you do with Mercado Pago with the agent. For example, you can tell them -- you can tell him, please tell me all of the invoices I have that are due in the next week, and then we will bring them on and you can say, pay all of them. And so the functionality is really impressive already. So far, we have been mostly dealing with these interactions that are initiated by users and the vast majority of them are responded by the agent without any kind of human intervention. But I would say, so far, we have not yet started using the agent for cross-sell, but it's something that we will start doing. Given that you are in a conversation, you can, for example, tell the consumer that she has a credit offer or a credit card offer and the benefits of the credit card. We are not doing that yet, but we believe the opportunity there is significant and the system will become more proactive. And beyond cross-sell, it will also become more proactive in terms of acting like a personal banker. So helping you, I don't know, allocate your portfolio or make the recommendations of what kind of credit is better for you. So we believe here that the opportunity is significant. And also, we also see an opportunity in terms of -- on the other side of Mercado Pago on the acquiring side of Mercado Pago in helping merchants deal with presales and post-sales and also integrating with typical platforms that then will be able eventually to use Mercado Pago credentials to complete payments. So we are very excited about opportunities with AI at Mercado Pago. Ariel Szarfsztejn: Just to complement Osvaldo here on the marketplace side, while we have many, many features that are powered by AI, starting with our search algorithm, our recommendation and so on, I think it's worth highlighting the fact that we have a seller assistant today running in our platform, basically 20% of our GMV is somehow advised by our assistant. It's actually proving to be pretty successful in helping sellers improve their live listing, reduce their lead times to get better reputation in our platform, capture some of their questions and requirements in terms of customer support. So very positive on the progress in that regard as well. Operator: The next question is from Marcelo Santos with JPMorgan. Marcelo Santos: I wanted to discuss about advertising. You had some good growth, accelerating penetration. Could you discuss what are the main products that are driving these or regions or if there is any particular driver behind the acceleration? Ariel Szarfsztejn: Marcelo, Ariel here. So yes, to your point, we are very pleased with the performance we had in ads this quarter. Revenue accelerated to 67% on an FX neutral with higher adoption and spend basically driven by improvements in our tech stack. It's broad-based. So there's no one silver bullet driving that growth. But basically, we are attaching our product in the different parts of the value chain, right, auction bidding, placement optimization, demand generating initiatives and all that powered by an improved an easy-to-use platform in terms of front end for our customers. So extremely, extremely satisfied with that. Just to give you some color on a few of the initiatives. Our budget orchestrator allowed sellers to reallocate and use budgets across campaigns that were capping the use of dollars previously and that happened, of course, within the same advertiser, and that was positive. We also scaled a budget boost for seasonal campaigns with recommendations powered by predictive signals in order to make sure that advertisers have the right budget in place in order to deal with all the demand that was coming during peak season. We have performance-driven recommendations based on insights that our technology is capturing. We have AI agents supporting our advisers and engaging directly with sellers in order to accelerate the penetration of ads for mid- and long-tail sellers. So many, many tools being deployed and scaled, many of which are using AI. But I would say, in all, great progress from the team, but still lots of things to do. So penetration of ads with revenues as a percentage of GMV is still small compared to its potential. So very happy with the results so far, but even more encouraged with the potential looking ahead. Operator: Next question is from Rodrigo Gastim with Itau BBA. Rodrigo Gastim: I just would like to double-click here on these margin investments in Brazil. So just wondering how do you see the balance -- this balance of keeping up with this strong GMV growth above 30% in Brazil and eventually dealing with this margin pressure in 2026. In other words, with the market share you've been able to clearly capture over the last couple of quarters, do you already believe we should start to see further operating leverage in Brazil going forward just to see how you are thinking this balance? Martin de Los Santos: Rodrigo, it's Martin here. I think you -- first, it's important to put in context when we talk about margins, the growth that we're delivering. Most of the margin pressure comes from deliberate decisions that we're making in terms of pursuing investments that are generating tremendous growth and improving user experience. As you mentioned, in Brazil, in particular, we have been growing our GMV and gaining market share, mainly because of these investments. Our top line grew by 45% year-on-year. As I mentioned earlier, our NPS is at record levels, and that's because of the investments that we have been doing. You mentioned CBT, 1P, the lower shipping presold, expanding more free shipping, increasing booking capacity. So we feel very comfortable with these investments and the current margin levels because we are seeing the results in terms of growth, market share gains and improvements in user experience and engagement. As I said in the past, our main focus is on capturing the large opportunities in front of us in commerce, fintech and advertising. And we will not hesitate to invest and to order to capture those opportunities as we have done in the past, even if that puts some short-term margin pressure, we're not trying to optimize short-term margin. We manage the business for long term -- from a long-term perspective, we believe these investments are creating a foundation for future growth, and we remain confident in our long-term margin trajectory. So again, we are confident in the investments that we're doing in credit card and commerce, and we are seeing already the results. So that's our strategy, and that's the way for us to create long-term value for our shareholders. Operator: The next question is from Josh Beck with Raymond James. Josh Beck: I'm kind of curious where maybe the business plan shook out versus your expectation with respect to the lower shipping threshold. Certainly, it seems like there's been a very nice frequency lift. Is that pretty much what you had anticipated or modeled? And then related to the improvement in unit cost, I believe it was 11% decline in unit costs in Brazil. Is that something that is sustainable as you build out this parallel slow delivery network? Or how should we think about the prospects there? Ariel Szarfsztejn: Josh, Ariel here. So indeed, we are very pleased with the results of our lower free shipping threshold in Brazil. This is the third time that we have lowered the threshold and the results we are seeing now are no different from the results we've seen in the past. So growth has accelerated, frequency has accelerated. We had a record conversion rates, record retention rates for new and existing buyers. We are having more new buyers, our NPS in Brazil is at its peak. We have more sellers, more live listings per seller. We are expanding market share and reaching our record levels. So yes, indeed, we are pleased, and this is very much aligned to what we were planning for. Items sold growth accelerated from 26% year-over-year in Q2, to 42% in Q3, to 45% In Q4, I think that is huge, considering the size of MercadoLibre. The same happened with GMV from 29% to 34%, now to 35%. So -- and of course, this on top, all the growth and the size that we've achieved after 25, 26 years of existence and after a pandemic in which we accelerated growth a lot. I think that as we mentioned in our shareholder letter, new buyers that have come to MercadoLibre since June when we launched the new value prop are buying more items across a larger number of categories with higher retention rates compared to cohorts of new buyers prior to that change. So we are very encouraged by the impact that we've seen, and this gives us great optimism about the foundations we are building as we look to be the driving force for e-commerce -- for commerce shifting from the offline into the online, which is at the end of the day, the goal that we are pursuing, right, serving our customers better, providing the best value proposition out there. In terms of shipping costs, I would say we are pleased with the performance that we are having the cost improvements come from several parts of the equation. On the one hand, of course, more volume is diluting more cost. Also, we are taking advantage of idle capacity through our slow shipping network, meaning that we are able to ship items whenever we see space in the value chain. And of course, we continue working on technology and productivity in order to make our operation even more efficient and more sustainable. So we don't see a reason for this not to change or not to continue, right? So we are positive. I think the team has done a tremendous job but we still think we have more things to do. Operator: The next question is from Geoffrey Elliott with Autonomous. Geoffrey Elliott: Can you discuss the changes that you announced to the shipping model in Brazil, I believe, on January 20 and getting a little bit more variable around different shipping rates for different types of shipments? And then high level, how do you see that impacting financials impacting margins? Ariel Szarfsztejn: So basically, we are trying to deleverage a bit the way we charge merchants and we think shipping costs do correlate a lot with measurements and weight. And for that reason, we decided to move to a different type of table in which we are able to charge merchants in a much more correlated way to the cost structure that we have based on actual dimensions and weight of the items. I think it's early to make comments on impacts on financials. As you know, we don't guide. So probably at the end of Q1 with our results at the time, we will be able to share more details and color on impact. But again, as always, we continue to evolve and sophisticate the way we manage the business and what we've done with the shipping tables is no different from that. Operator: The next question is from Kaio Prato with UBS. Kaio Penso Da Prato: I have two quick questions on my side, please, on Mercado Pago. First, specifically in Brazil, we are seeing a really solid growth on your deposit franchise, basically the double year-on-year looking to the Central Bank data. So can you please clarify if these deposits are now being used for funding to your credit business or not? If so, how much of that? I would like to understand how do you see this usage going forward and what type of impact it may bring to your NIMAL as well. And quickly, the second is in terms of your NPL ratio, the early NPL ratio between 50 and 90 days, it increased a little bit. Can you walk us through the impact of that as actually the seasonality is usually positive in the 4Q and expectation going forward? Osvaldo Giménez: Kaio, let me start with the first question regarding deposits. Today, mostly, we are not using deposits for funding. We are not doing fractional banking the way -- but nonetheless, we are very happy with the growth in those deposits. And since -- we last year, a year ago, basically, when we introduced ports and a higher interest rate on ports, we saw a significant increase in the deposit rate. And what we saw is that those users that use ports and in general, have more money with us, we see a significantly higher level of engagement. And we see that across the board on Mercado Pago and also MercadoLibre. So we see these users doing more transactions, using our credit products more often, being more likely to use in our debit cards or getting a credit card. So we see it as a significant driver of engagement and a driver of NPS of Net Promoter Score that is. And as you know, this is a metric we follow closely, and we are very happy to have finished the year leading the Net Promoter Score tables for financial institutions in Brazil. The second part of the question, if I got it right, was regarding NPLs and the impact of a little bit -- a slight deterioration in NPLs from the third quarter to the fourth quarter. And that is -- so that is -- I would say that in general, NPLs of the credit card book fell to an all-time low of 4.4% in the fourth quarter. Nonetheless, the increase in NPL was mostly related to the consumer and merchant books. But having said that, I think that more important than NPLs are NIMALs and those improve, meaning we are more profitable than we were a quarter before. Therefore, what we did was we increased the number of people and the riskier number of people we give credit to, but we price that risk accordingly. And therefore, we ended up having a significant -- a larger spread than we did on the prior quarter. So I think this was a calculated risk and it worked out well. Operator: The next question is from Neha Argawala with HSBC. Neha Agarwala: I'd like to follow up on the last question. We have certainly seen a pickup in loan yields quarter-on-quarter in the fourth quarter. And as you mentioned, you're taking more risk, which is resulting in the early delinquencies going up in fourth quarter despite positive seasonality. Does this mean that maybe in the next quarter or 2, we will start seeing an impact on 90-day NPLs and they will start going up again since you're taking more risk? Although I understand that your pricing for it, but is this a trend that we should continue to see going forward? And just to confirm, the increase in loan yields was just from taking higher risk in the New Mexico and not coming from an increase in the share of the portfolio in Argentina? Osvaldo Giménez: Neha, as you know, we don't guide, but we are very comfortable with the amount of risk we are taking. We have seen our model is improving. And what we have been doing is pricing risk accordingly and having good spreads. When we expect the loss, we booked that in advance. So we don't believe there will be any surprises there. And then I would say that we don't see an increase in yields coming. I'd say we are growing in all 3 countries in a very similar fashion. We were more cautious in the fourth quarter in Argentina because of the election. Because of we saw some macro instability because of the election. So we were a little more cautious. Also, there was a spike in interest rates prior to the elections and then they came down and therefore, being interest rates higher, there was less demand for credit. But beyond that, we did not see any significant change in the other markets in terms of demand for credit or change in loan yields. Martin de Los Santos: Maybe to complement, it's Martin here. I think the philosophy on credit has always been that we will grow our credit books as long as we have a healthy book. And as Osvaldo mentioned, you're seeing only part of it -- part of the equation on the NPLs. But obviously, we are pricing those ahead of time. And the margins in Argentina and Mexico are extremely high. I mean much better than last quarter. In fact, when you look at NIMAL, that looks at the whole equation because not only looks at bad debt and provisions, but also the revenues that are generated on that portfolio, you can see that NIMAL improved quarter-on-quarter. So we feel very, very comfortable about the quality and the health of our portfolio. And that's the reason why you see our credit book growing at 90% because we are confident in our models and our collection. Operator: Your next question is from Donnie Tiger with XP. Unknown Analyst: I would like to explore a little bit the sales and marketing and provision of doubtful account dynamics. Firstly, regarding sales and marketing, we see an increase Q-on-Q in terms of investments as a percentage of sales. But you also mentioned in the release some tactical investments being done because of seasonality. So it would be interesting for you to share with us some color around how we should think about this investment going forward, especially as we see a lower intensity coming from competition especially in Brazil in the beginning of the year. And also regarding the acceleration of consumer books that you mentioned in Brazil and Mexico and that being the key lever for this doubtful accounts not improving Q-on-Q. You also mentioned that you are benefiting from a higher cross-selling with your marketplace while as you mentioned, overall metrics remain healthy. Should we think that maybe this pressure is a consequence of you guys capturing this opportunity of kind of increasing the overlap between the two platforms? And since you have a strong momentum in commerce that is fueling the consumer book growth? Martin de Los Santos: Martin, here. I think in the first part of the question is related to sales and marketing, I think it's consistent what we have been saying over the past couple of quarters. Specifically this quarter, if you see sequentially, we increased our spending by 60 basis points and year-on-year by 1.4 basis points on marketing. For the most part, is the result of expansion of our social channels. As we mentioned in the past, we are scaling our affiliate program with very positive results. In Brazil, for instance, the number of affiliates almost doubled in Q4 relative to Q3. And year-on-year, we have 6x the number of affiliates that are selling or promoting products to MercadoLibre. So we see as a very positive and very -- it's a channel that should help us drive growth in the future. So we are investing in that particular channel. So that explains most of the increase in investments and marketing. The rest of the lines remaining the same. There might be some seasonality in Q4. But for the most part, this is the affiliate program. And just to put in perspective, if you look at the past several years, the range of investment in sales and marketing is between 11% and 12%. We are on the upper range of that level, but it's within those lines that we have been investing over the past several years. Second part of the question? Osvaldo Giménez: I think the second part of the question was if there was an acceleration of credit driven by the momentum of e-commerce? I'd say, to some degree, that could be the case. But I would say it's mostly that we're -- we have been mostly on the -- let's split this answer in the two main areas. On the one hand, I would say that the yielding account, we have been advertising it strongly last year, and that has been the main driver. We pay a larger return in the super yielding account. And that has been the main driver for the acceleration. I would not say that it's necessarily related to the extra activity in the marketplace. And then on the credit card front, I would say it's a combination of two things. One, definitely, we have been improving the integration of the offer of the credit card in the checkout and also offering more installments in the checkout. So definitely, the marketplace is a big driver for the growth of the use of the credit card. But on top of that, we have continued being continuously been improving the quality of our models as we improve our credit models, we feel more comfortable issuing more cards. And therefore, I'd say the main driver for issuing more cards, I would say, has been the increase in the accuracy of these credit models, but also definitely the integration with the checkout of the marketplace is also a big driver. Operator: Next question is from Craig Maurer with FT Partners. Craig Maurer: I'd like to ask the flip side of the prior question, which is if you look over time at the -- considering the investments you've made in provisions as well as growing out the credit book through credit cards and other types of loans, I was wondering if you could dimensionalize the lift that you get on a basket size or a GMV spend basis for those that have the credit card or a borrowing versus those that are not and perhaps also the degree of retention that you see in those customers versus those that don't. Osvaldo Giménez: Craig, look, we have not disclosed a specific number in terms of a lift. We see neither spend or retention, but definitely is, I'd say, significant. We measure several things. One of them is how much interaction they have with the marketplace, also Net Promoter Scores, there's a significant lift when someone start using our credit products, so they get a credit card and Net Promoter Score. And I would say, on top of those two things, we do see a higher engagement and higher net spend. Also, when we look at each of the main countries, I'm talking about Brazil, Mexico and Argentina; and we look at what percentage of mix of all of the NMV is paid with Mercado Pago products and those lines have been growing steadily in all 3 markets. So if you combine buy now, pay later, credit card, store balance and so on, that is growing and is becoming a more significant part of NMV in each of the markets. And those transactions are great because typically, they have a significantly higher approval rate and a lower cost and many times, we are double-dipping because we have some income also on the Mercado Pago side, or at least a lower cost. So I think there is really a big synergy going on between the marketplace and Mercado Pago there. Operator: The next question is from Marvin Fong with BTIG. Marvin Fong: Two quick ones also on credit card. You -- I believe you mentioned in prepared remarks you issued 3 million plus in the fourth quarter. I believe that's up substantially, I think the last time you mentioned in the second quarter, you issued 1.5 million. So it didn't sound like Argentina was the main driver of that. But could you just kind of break out -- are you -- is the growth in Brazil and Mexico dramatically higher compared to the second quarter? And then the second part of the question, as the NPL performance in credit card continues to get better, are you, or is there an opportunity in the future to kind of take a lower provision in the upfront and make it more margin attractive at an earlier stage? Osvaldo Giménez: Marvin, let me take the first question with regards to the number of credit cards we issued in the fourth quarter, we issued nearly 3 million cards versus, as you said, 1.5 million in the second quarter and 2 million in the third quarter. I would say, from the second quarter to the third quarter, the main increase came from Brazil where improvements in our models meant that we were able to find more users that fit into our payback targets. And that was from the second quarter into the third one. But then from the third quarter to the fourth quarter, there were two drivers. One of them was Argentina, as you mentioned, we started issuing cards in, let's say, halfway through the third quarter but significantly sped up through the fourth quarter, and we issued several -- a few, I'd say, 100,000 cards as we begin to ramp up our surge in that country. Early results are promising and cards are being issued to lower-risk users than the typical ones that could use our consumer loans. So we are excited with how Argentina is growing, and we are just getting started. And then in Mexico, I would say that better-than-expected payback periods enabled us to pick up the pace of issuance and we are comfortable with the pace we're taking. So I'd say the first, we have an acceleration in the third quarter in Brazil and then in the fourth quarter in Mexico and Argentina, and now we're working with the 3 countries at full speed, I would say. Martin de Los Santos: And in terms of the profitability of a product, if you look at Brazil, which is the oldest cohort we have been issued credit cards in Brazil since 2021, cohorts that are older than 2 years are already profitable at a NIMAL level. So that gives us a lot of encouragement to continue expanding the user base. But obviously, as we incorporate a large number of new users, the average is still not profitable, but we are seeing light at the end of the tunnel, right? So it should be a profitable business, it should add to profitability when it comes to maturity. But still, we are at a stage where we are growing the user base. So on average is not profitable yet. So just to put in perspective, we have 3 books of credit. We have consumer credit, which is a relatively high-margin business in terms of NIMAL. If you look at NIMAL, it's in the 30s, in the high 40s merchant credits. The credit card at this point, it's not NIMAL positive on average, but the half of the portfolio is already NIMAL average in Brazil. We are seeing positive trends also in Mexico and would be actually too early to tell. Operator: The next question is from Jamie Friedman with Susquehanna International Group. James Friedman: So I had a question about the acquiring TPV. In terms of the mix of on and off platform acquiring TPV, how does that mix impact, say, that the consolidated take rate of acquiring? And if it does, is the interchange component of that now facing the regulatory caps that I think are underway in Mexico? Osvaldo Giménez: Jamie, let me clarify on acquiring. So we have, if you want 3 segments. You mentioned on platform and off platform. But basically, all of what is on platform we are measuring straightaway on the marketplace economics. So you don't see that on the acquiring side. However, we do see on the acquiring side, both online and offline. So that is typically POSs and we provide merchant services for other merchants. And there, typically, since there is higher risk and it's more complex to do online transactions. We have a higher take rate in online transactions and a lower take rate in POS transactions because, in many cases, there is really no risk in those kind of transactions. So I would say most -- the higher margin is on the online transactions. Nonetheless, offline is growing a lot, and we see a lot of potential because we have a lower market share in that part of the business. And then with regards to the interchange cap in Mexico that did not go through. The regulator decided to postpone that or to put that on hold. So there will be no change in interchanges in Mexico for the time being. Operator: The next question is from Joao Soares with Citigroup. Joao Pedro Soares: I appreciate the broader strategic upside you've outlined on agentic commerce. And I fully agree with the merits of driving online retail penetration in digital advertising. What I want to hear is your thoughts on the risk component. So essentially, how these independent agentic systems could introduce new forms of disintermediation and engage clients directly, right, leading to potential changes in monetization. The most obvious one we can think of and discuss a lot is the dollar flow of advertising. So I really want to hear how you view these risks and how you're approaching them strategically. Ariel Szarfsztejn: Yes. Thank you, Joao. Let me try to rephrase what I meant earlier as I try to address your point. I think there are things that we know and there are things that we don't know. So we don't know which hardware people will use in 10 years to buy. We don't know whether the winning model will be X, Y or Z and so on. We do know that consumers do value or do look for the best end-to-end experience. We do know -- and that means not only searching for products, but also getting products fast, having the widest selection, pricing, the best financing alternatives, post-purchase support and so on. We also know there's a technology today that can dramatically improve the product discovery process. And for that reason, we are putting all of our efforts and deploying lots of engineers in building our own agents and our own shopping assistant within MercadoLibre. It's early to know what will happen with other shopping assistant. I take your point that it might present a risk. I understand where you're coming from. But we are confident that we are playing this one from a position of strength that we have the relationship with consumers. We have a brand that Latin America loves. We have information and data about past purchases that allow us to offer them a great shopping assistant. And we are betting and putting our efforts on what we can control, which is building the best assistant possible. And then we'll see, right? And time will tell, it's a bit early in the process. But once again, I think that MercadoLibre is well-positioned to capture this technology transformation, which, as I said before, I think will accelerate the migration from offline retail into online retail, which will be particularly relevant in a geography like Latin America, where we are somehow like 10 years before where the U.S., the U.K. or Asia is today. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Martin de los Santos for any closing remarks. Martin de Los Santos: Thank you all for joining the call and for your questions. We are very excited with the results that we're seeing across our ecosystem. In 2025, we achieved record market share gains in commerce in Brazil and Mexico. In fintech, we also saw important market share gains in our acquiring business, and we continue to scale our credit portfolio, which is very profitable, as we discussed earlier. This resulted in Q4 revenues growing at 45% year-on-year, marking the 28th consecutive quarter of growth above 30%, which is another sign of effectiveness of the long-term investment and customer focus that we have within our ecosystem and the way we manage our ecosystem. In 2025, we reached a record NPS in commerce and fintech in Brazil, Mexico and Argentina, which is a great achievement that should enable us to sustain future growth as we look into 2026. I look forward to coming to you again in May when we disclose Q1 results. In the meantime, the Investor Relations team is available for any further questions. Thank you again, and good evening. Operator: The conference has now concluded thank you for attending today's presentation. You may now disconnect.
Operator: Good afternoon. My name is Chloe, and I will be your conference operator for the Vaxcyte Fourth Quarter and Full Year 2025 Financial Results Conference Call. [Operator Instructions] Today's call is being recorded. I will now turn the call over to Andrew Guggenhime, President and Chief Financial Officer of Vaxcyte. Please go ahead, sir. Andrew Guggenhime: Thank you, operator. Good afternoon, everyone, and thanks for joining us today as we review our 2025 results and provide a business update. I am joined by our Chief Executive Officer, Grant Pickering; and our Executive Vice President and Chief Operating Officer, Jim Wassil. Earlier today, we issued a news release announcing our results. Copies of this and our other news releases, latest corporate presentation and SEC filings can be found in the Investors and Media section of our website. Before we begin, I'd like to remind you that during this call, we'll be making certain forward-looking statements about Vaxcyte, which are subject to various risks, uncertainties and other factors that could cause actual results to differ materially from those referred to in any forward-looking statements. For a discussion of the risks and uncertainties associated with these statements, please see our press release issued today as well as our most recent filings with the SEC, including the risk factors set forth in our Form 10-K for the year ended December 31, 2025, and any subsequent reports filed with the SEC. With that, I'll turn the call over to Grant Pickering. Grant? Grant Pickering: Thanks, Andrew. As we close out 2025 and look forward to multiple clinical readouts beginning later this year, I'm proud of the progress we made across the company, particularly within our pneumococcal conjugate vaccine or PCV franchise. Despite decades of vaccination efforts, pneumococcal disease continues to drive substantial morbidity and mortality worldwide, particularly among young children and older adults. While current vaccines have made a meaningful impact, gaps in serotype coverage persist and the public health need for broader spectrum protection remains clear. Consistent with that need, we are seeing accelerating growth in the adult PCV market, driven by expanded age group recommendations in the United States and increasing international adoption of adult PCV vaccination. Continued momentum in the PCV class has reinforced the size of the opportunity and demand for a PCV that increases disease coverage by protecting against both historically and currently circulating serotypes while maintaining robust immune responses. Taken together, this underscores our opportunity to improve public health as we prepare to enter an increasingly attractive commercial market. The unprecedented results from our Phase II study in adults demonstrated that VAX-31 may offer substantial improvement over existing products and achieve our objective to significantly expand disease coverage while maintaining high immunogenicity responses. And with the OPUS Phase III program underway, we believe that we are uniquely positioned to set a new standard by which future adult pneumococcal vaccines will be measured. In December, we initiated OPUS-1, our pivotal noninferiority study and expect to announce top line safety, tolerability and immunogenicity data in the fourth quarter of this year. In January, we initiated OPUS-2, a Phase III trial evaluating VAX-31 when administered concomitantly with a licensed seasonal influenza vaccine, reflecting real-world vaccination practice. And earlier this month, we announced the initiation of our OPUS-3 trial to evaluate the safety, tolerability and immunogenicity of VAX-31 in adults who previously received lower valency pneumococcal vaccines. For this population, VAX-31 could represent a substantial incremental benefit and could be well positioned to obtain a catch-up recommendation. We look forward to the readouts for both OPUS-2 and 3 in the first half of 2027. In infants, we reported the final data from the VAX-24 Phase II dose-finding study in November. These data were consistent with the previously reported positive interim results and provided important encouraging insights into immune responses, concomitant administration with other vaccines and dose responsiveness. Based on these learnings, we modified the ongoing VAX-31 infant Phase II study to include an optimized dose arm in order to evaluate multiple higher doses than those explored in the VAX-24 infant study. Enrollment for this study is now complete, and we expect to announce top line safety, tolerability and immunogenicity data for both the primary 3-dose immunization series and booster dose either sequentially or together by the end of the first half of 2027. In parallel, we continue to make strides to fortify our manufacturing capabilities, commercial readiness and financial foundation. On the manufacturing front, I'm pleased to report that we have now completed the construction of the dedicated large-scale manufacturing facility on time and on budget that has been designed to support global commercial demand for our PCV candidates throughout the developed world. In addition, the build-out of a high-volume, custom fill-finish production line in North Carolina is underway as part of a long-term investment of up to $1 billion in U.S. manufacturing and services. To advance commercial readiness, we began to scale the organization, including the appointment of our first Chief Commercial Officer, Mike Mullette, and the initiation of launch planning activities in earnest. These actions reflect our conviction in the long-term potential of our PCV franchise and our focus on a highly successful commercial launch. Turning to our balance sheet. We strengthened our already robust financial position with the successful completion of a public equity offering in February. We believe we are well positioned to advance our programs through multiple upcoming data readouts while continuing to invest in the capabilities needed to prepare for commercialization. Overall, 2025 was about focused execution on our clinical programs and establishing the infrastructure clinically, operationally, and organizationally to support what we believe will be a defining period ahead. None of this progress would have been possible without the expertise and dedication of our teams across the organization, and I want to thank them for their commitment. With that, I'll turn the call over to Jim to walk through our clinical programs in more detail, including the OPUS Phase III program, the infant program and an important update on VAX-A1, our Group A Strep candidate. Jim? James Wassil: Thanks, Grant. I'll start with an update on our VAX-31 adult Phase III program and then turn to our VAX-31 infant Phase II program and broader pipeline. Beginning with adults, the Phase III OPUS program represents VAX-31's transition into late-stage development and is designed to support a planned BLA submission. The Phase III clinical trials were finalized in consultation and alignment with the FDA and are intended to generate a broad and robust safety, tolerability and immunogenicity data sets across relevant adult populations and real-world vaccination scenarios. OPUS-1 is our pivotal noninferiority trial evaluating VAX-31 for the prevention of invasive pneumococcal disease and pneumonia. This trial is evaluating the safety, tolerability and immune responses of VAX-31 in adults aged 50 and older through direct head-to-head comparisons with both Prevnar 20 or PCV20 and Capvaxive or PCV21, which are the current standard of care PCVs for adults. We remain on track to announce top line data in the fourth quarter of this year. OPUS-1 was designed to establish a best-in-class profile for VAX-31. Based on the unprecedented clinical results we have generated to date, we believe this trial can deliver that profile and thus set a new standard in the adult pneumococcal vaccination. We believe the current standard of care vaccines, PCV20 and PCV21 have hit the ceiling of what conventional approaches can achieve. Each of these vaccines represented a meaningful advancement over prior generations, yet in both cases, trade-offs were required to obtain licensure. In the case of PCV20, they focused on making incremental serotype additions to PCV13, but fall short of coverage of the 31 serotypes in VAX-31. For PCV21, while it covers a greater percentage of circulating disease than PCV20, the trade-off was sacrificing historically circulating strains, some of which are still circulating meaningfully and others that are likely to return if we fail to protect against them. VAX-31 is designed to overcome each of their limitations. By using our validated carrier-sparing platform, we have shown VAX-31 can provide protection against both currently circulating and historically prevalent serotypes while maintaining robust immune responses. With the OPUS-1 study where PCV20 and PCV21 are the comparators, totality of data framework supports our objective to deliver a best-in-class PCV. In this context, regulators assess both the public health impact and the overall strength of the data package, for which perfection on an individual serotype basis has never been required, nor is it our expectation. With this in mind, we are confident we can deliver an outcome to support a robust BLA submission and with 10 or 11 incremental serotypes over our study comparators, we believe VAX-31 has the headroom to miss on a handful of individual serotypes without risking the ultimate goal of licensure with what we believe is a best-in-class profile. Now I'll briefly review the other OPUS trials, which are also currently enrolling subjects. OPUS-2 is designed to evaluate the safety, tolerability and immunogenicity of VAX-31 when administered either concomitantly with or 1 month following a licensed high-dose seasonal influenza vaccine in adults. This descriptive study reflects clinically relevant real-world use scenarios, particularly for older adults who routinely receive multiple vaccines at one time. OPUS-3 is evaluating VAX-31 in adults who have previously received lower valency pneumococcal vaccine. This descriptive study is intended to evaluate the safety, tolerability and immunogenicity of VAX-31, including whether VAX-31 can boost serotype-specific immune responses while providing the broadest coverage in a single vaccine in this adult population. OPUS-1, -2 and -3, complemented by a planned manufacturing consistency study are designed to generate a broad and robust safety, tolerability and immunogenicity data set. The 3 ongoing trials will enroll approximately 6,000 adults in total, of whom approximately 3,400 will receive VAX-31. Turning to our infant PCV programs. We completed the VAX-24 Phase II dose-finding study with final data confirming dose-dependent immune responses and the safety and tolerability profile consistent with the standard of care comparative. As Grant noted, we used those learnings to modify the ongoing VAX-31 infant Phase II study to include an optimized dose arm. The higher doses being evaluated are designed to enhance and optimize immune responses to provide short-term and long-term protection while maintaining tolerability and safety. Enrollment in this optimized study is now complete with 900 infants dosed. In U.S. children, VAX-31 is designed to cover over 90% of IPD and acute otitis media due to strep pneumoniae, which represents a significant increase over today's standard of care. By the middle of this year, we expect to provide an update on our unblinding and disclosure plans for this study. Beyond our PCV franchise, you will recall that we made a decision to pause non-PCV pipeline programs last year. I'm now pleased to share that we plan to resume development of our most advanced preclinical program, VAX-A1 our Group A Strep vaccine candidate, which is designed to provide protection in both the adult and pediatric settings. We expect to initiate a Phase I study in adults this year with the primary objective of assessing safety and tolerability. We plan to conduct a study in Australia where Group A Strep has been especially problematic and with our experienced investigator networks with expertise in Group A Strep. This approach is designed to generate high-quality initial safety data and provide a foundation for evaluating next steps in this program's development. Group A Strep remains a major global cause of morbidity and mortality due to its wide-ranging clinical manifestations and potential for severe complications. Group A Strep causes common illnesses such as strep throat and skin infections, but it can also lead to serious conditions like sepsis, meningitis and rheumatic fever and is a leading driver of antibiotic use, most notably in children. Each year, it's estimated that Group A Strep is responsible for over 600,000 deaths and 800 million cases of illness worldwide. In the United States, the medical and economic impact of Group A Strep is substantial with the estimated annual healthcare and productivity costs exceeding $6 billion. This underscores the importance of advancing a preventative vaccine approach. With that, I'll turn the call over to Andrew. Andrew Guggenhime: Thanks, Jim. I'll begin with a brief overview of our financial position and then touch on our public affairs and policy engagement. As of December 31, 2025, we reported $2.4 billion in cash, cash equivalents and investments. Subsequent to year-end, we further strengthened our balance sheet through a public equity offering, raising approximately $600.2 million in net proceeds. The offering further enhances our financial flexibility as we advance our adult and pediatric VAX-31 programs, continue to invest in manufacturing readiness and prepare for potential future commercialization activities. Based on our current operating plan and including the net proceeds from our recent financing, we believe our cash on hand provides runway to at least the end of 2028. This supports execution across multiple planned clinical, regulatory and manufacturing milestones over this period. From a total spending perspective, we saw an increase in 2025 compared to the prior year, driven primarily by continued investments in commercial manufacturing readiness and advancement of our clinical programs. R&D expense growth reflected manufacturing scale-up and validation activities and late-stage clinical execution. Separately, we saw an increase in capitalized costs primarily related to the build-out of our dedicated manufacturing facility. Our full year audited financials are available in our Form 10-K filed today. Looking ahead to 2026, we expect total expenses, particularly within R&D to increase meaningfully relative to both full year 2025 and fourth quarter 2025 annualized levels. This expected increase is primarily driven by a few key factors: first, an increase in manufacturing spend to support commercial readiness, including the buildup of VAX-31 commercial supply in advance of potential launch; and second, higher clinical spend to support a greater number and size of clinical trials with multiple VAX-31 adult Phase III studies and the Phase II infant study. Within manufacturing, there are several initiatives running in parallel, preparing for the potential VAX-31 adult launch at the current Lonza shared facility, running batches at the dedicated large-scale manufacturing suite, the construction of which has now been completed, and to a lesser extent, bringing the dedicated fill-finish facility online. With respect to capitalized costs, we expect these to trend down in 2026 compared to 2025. As I mentioned, we have now completed the build-out of a dedicated large-scale manufacturing facility with Lonza. And as a result, the majority of the costs related to this facility going forward will be expensed rather than capitalized. Turning to public affairs and policy engagement. During the year, we formalized and expanded our efforts to engage with policymakers and public health stakeholders. This included targeted outreach to federal government stakeholders and discussions focused on the importance of science-based vaccine policy, domestic manufacturing readiness and the role of broader spectrum vaccines in reducing disease burden and healthcare costs. We continue to engage constructively with the FDA as our programs advance, and we believe the regulatory framework for PCVs remains well supported. These engagements are focused on process and clarity, and we view them as an important part of responsible development as we move into late-stage programs. And with that, I'll turn the call back to Grant. Grant Pickering: Thanks, Andrew. As we close our prepared remarks, 2025 was a year of executional excellence, laying the foundation for advancement into late-stage development and continuing our transition toward becoming a commercial enterprise. The progress we've made across clinical, manufacturing, and commercial readiness reflects an organization that will be prepared to seize the opportunity our PCV franchise affords. We believe the breadth of this franchise, the underlying strength of our platform and our ability to deliver disciplined execution position the company well for what we expect will be a catalyst-rich 12 to 18 months ahead. With that, we're happy to take your questions. Operator? Operator: [Operator Instructions] We'll take our first question from Roger Song with Jefferies. Jiale Song: Two from us. One is for OPUS-1, how is the study powered to show the statistical noninferiority against each the comparator independently? Just curious if FDA look at the subpopulation they want to show the noninferiority against either Prevnar 20 and then vaxive (sic) [ Capvaxive ] independently, would you be able to show that? And then the other thing is since you have -- you're about to reach alignment on the manufacturing consistent study as the last phase of -- last Phase III study. Just curious what's remaining to be discussed? Would that involve the U.S. and ex U.S. regulatory? That's it. Grant Pickering: Yes. Thanks for the question, Roger. The first question was about OPUS-1 and the powering. I think the first key thing to point out is that we locked down that pivotal Phase III study in consultation with the FDA. The noninferiority, you asked whether or not it was independently assessed. The way the study is set up, first of all, as it relates to the power is, we've already performed a head-to-head study against Prevnar 20. And so we have really good data to perform the powering to set expectations as to our ability to hit the noninferiority. We think we have exceptionally high power across the board to deliver relative to Prevnar 20. We have not performed a head-to-head study against Capvaxive. So we need to look across their own comparisons to Prevnar 20. So we do have high confidence there as well. But as it relates to the serotype-by-serotype comparisons, the way the study is set up is such that for the 10 serotypes that are in all 3 vaccines, the analytical plan has it such that we only need to show noninferiority to one or the other to declare success. And then as it relates to the incremental serotypes, there are 10 more that are exclusively in VAX-31 and in Prevnar 20. Those will be head-to-head comparisons. We've already seen the results in our Phase II. We're quite confident there. And then as it relates to the exclusive serotypes in VAX-31 and Capvaxive, there are 8 of those, and we've been able to look across their GMRs compared to Prevnar 20 -- our GMRs compared to Prevnar 20, the magnitude of the OPA responses, the magnitude of the IgG responses, the mean fold rise over baseline. And taken together, it gives us confidence that we're going to see a successful result. A successful result, as we pointed out in the call today, is not perfection, right? No pneumococcal conjugate vaccine has ever had a perfect slate of comparisons to the standard of care vaccines. These vaccines are approved based on the totality of what they offer over and above the standard of care vaccines. And when we bring 10 or 11 more serotypes to the equation, totality is tilted in our favor by design. And so we believe and the FDA has told us we don't need to be perfect. We can miss on a few. We know that we have really robust immune responses, and it gives us confidence. But we know we don't need to be perfect. We believe even if we were to miss on a handful of comparative serotypes that would still put us in a terrific position with an approvable BLA that would have a best-in-class profile. You also asked about manufacturing consistency. Indeed, that is the last incremental study that we need to lock down on top of the 3 OPUS studies that are already underway and enrolling. And I would say, those conversations with the FDA are moving a pace. They're constructive. And the real key agreement that we reached last summer was the ability to advance into Phase III for which there was an exhaustive review of all of the manufacturing to date for this complex biologic. And we feel good about where we're tracking, and we anticipate that, that study will get underway and conclude in conjunction with our expected BLA timing. Operator: We'll take our next question from Jonathan Miller with Evercore. Jonathan Miller: Looking forward to the, as you say, catalyst-rich time coming in the next 1.5 years. I would love to ask, first, you mentioned the catch-up rec being possible in the adult market. And obviously, it's in the context of PCV21, which does deliver strong results across many serotypes that are relevant to the adult market. So what do you need to show specifically versus PCV21 for that catch-up rec to seem possible to get or it seem likely to get from the ACIP? And then secondly, dose response, which you've shown a couple of times, looks good for many serotypes, but it's not the same across all serotypes in those infant studies that we've seen. So when we think about the new dosing regimen in the updated VAX-31 infant study, what drives your confidence that the serotypes that need the additional immunogenicity boost are going to get what you're hoping for out of the increased dose? Grant Pickering: Yes. Jon, thank you for the question. And indeed, we're really excited about the catalyst-rich year ahead for us starting in the fourth quarter and then into 2027 with the 3 readouts we expect then. So as it relates to the OPUS-3 study, which is the one that we'd set up for a catch-up recommendation where we're giving VAX-31 to adults who have previously received a lower valent pneumococcal vaccine, the convention has been to run these types of studies and to demonstrate the ability to improve the responses to those serotypes for which they received vaccination in the past, so effectively see a boost to what they came into the study with after having previously been vaccinated. And then to demonstrate that the incremental serotypes on top of what they saw previously are also delivered with robust immunogenicity. So I mean, what we're looking to do is to demonstrate across the span of historical vaccines, inclusive of Prevnar 13, the 15-valent, the 20-valent, the 21-valent Capvaxive and then also against Pneumovax that we can expand coverage over and above what they have benefited from with a previous vaccination and potentially boost the responses to the strains they saw previously. That's what the competitive programs have showed. That is what we would expect to show. And the broadest spectrum vaccine has enjoyed this sort of catch-up recommendation in the past, and that's what we'll be shooting for. One of the challenges for us is that Capvaxive is only recently on the market. So there will be fewer individuals who've received that vaccine, but we'll do what we can to produce evidence to suggest that there's a benefit there, too. Then your question about the infant expectations, I appreciate that comment about the demonstration of dose responsiveness. That is definitely what we see in the data. There are some serotypes that are more responsive to increased doses than others. And what we're looking to showcase in the VAX-31 data that we'll see next year is a continued ability to demonstrate the incremental serotypes that we bring over and above the standard of care can produce that sort of expanded coverage footprint. And that has been reasonably straightforward to show based on our VAX-24 infant data and for others historically. So we have high confidence that the incremental 11 will come through over and above the 20-valent. And then as you'll recall, the 20 for which we have compared already in the context of the VAX-24 study, most of the serotypes looked great for our product. There were a handful that showed room for improvement. Fortunately, for us, they were key circulating strains. But what we're looking to show is continued strong, robust responses on the serotypes for which there is the most strategic importance. Those are the strains that are circulating. And then for those serotypes where we did show room for improvement that aren't circulating, we'll look to recover as many of those as possible. And what we've done is introduced multiple doses in the context of the VAX-31 Phase II study that are using higher doses for any of these serotypes that showed room for improvement. So again, as is the case in adults, most certainly in the infant setting, we've seen as many as 6 missed noninferiority comparisons already in this segment. And we're looking to recover as many of those as possible, but we know perfection is not the requirement. So even if there were still a handful of misses at the end of the day, in the context of a 31-vallet vaccine that increases coverage from in the 60th-ish percentile of circulating disease to the 90th-plus percentile of circulating disease, that would be a huge step forward for the class. Operator: We'll take our next question from Salim Syed with Mizuho. Erik Lavington: This is Erik on for Salim. Yes, just curious about the Group A Strep. I understand that it's early yet, but just trying to think about what we might expect to see the plans for development, what other things are out there. Is there an accepted standardized standard for immunogenicity? Do you think that longer-term, all things going well with Phase I, Phase II that you might expect to run an efficacy trial for Phase III for submission? Grant Pickering: Erik, thank you for the question. I'm going to hand it off to Jim in just one second, but I really appreciate the acknowledgment around VAX-A1. This is a program we've been really excited about for quite some time. It was a really tough decision to pause that program last year, but we're thrilled to be able to guide to the initiation of clinical development this year. This is a really important vaccine. This has a blockbuster kind of profile. It's an important unmet need in both adults and infants. So yes, I think it's going to get substantial attention as we move into the clinic. But I want to hand it to Jim, who's been the chief architect of this program to answer those questions as it relates to setting expectations around clinical data coming out of Phase I. Jim? James Wassil: Thanks, Grant. Erik, our plan is to start in adults with the safety assessment. We will also be looking at immunogenicity, both IgA and IgG, we're going to be looking at both serum and saliva to see what the responses are to our antigens. There is no correlative protection, so we will not be able to predict whether or not there is efficacy. However, what's unique about Group A Strep is that strep throat is so ubiquitous in school entry kids that we can do a very small study, and you're talking hundreds, maybe just barely in the thousands, and you can really get an early read on proof-of-concept even before going into a Phase III. So our intent here is to get some safety from adults as well as immunogenicity and dose-ranging analyses, move into the toddlers and then do a proof-of-concept. Andrew Guggenhime: And Erik, this is Andrew. Consistent with prior practice, we've obviously guided to initiating the Phase I study this year. We're excited about that. As we've noted and consistent with our prior practice, we would intend to outline the specifics of the trial design upon the commencement of enrollment in the trial. Operator: We'll take our next question from Seamus Fernandez with Guggenheim Securities. Boran Wang: This is Evan Wang on for Seamus. Just 2 for me. Just one follow-up on Group A Strep. Great to see that back by the way. Just curious if you mentioned that does this reflect more of the updated financial position or any incremental confidence around either the vaccine or development path? And then on VAX-31, can you just describe some of the work with respect to the pre-commercialization planning underway now and some of the regulatory discussions around post-marketing efficacy studies? And then maybe on the post-marketing studies, just how we should be thinking about how you're tackling these versus to some of what we've seen in the past from Merck or Pfizer. Grant Pickering: Yes. Maybe I can take the second one first and then pump the first to Andrew. As it relates to the post-marketing efficacy studies for VAX-31, what we have worked out with the FDA is entirely consistent with the same agreements that were made with the currently marketed standard of care pneumococcal conjugate vaccines. So in the case of Merck and Capvaxive, they agreed to a test negative design surveillance approach where you monitor pneumonia cases in the environment to confirm that you see the amelioration of disease from your product in relation to the other products that are out there. So that's a standard study that has already been blessed, and we will be following an extremely similar approach. So I hope that answers your question. And then, Andrew, can you address the Group A Strep related question, either you and/or Jim? Andrew Guggenhime: Yes. Yes, sure. Thanks for the question, Evan. You may recall last year, when we announced our decision, as Grant said, difficult, but we think the right one to pause advancement of our pipeline programs in the clinic. The most implicated program of that decision was the VAX-A1 Group A Strep program. And that decision was made principally for financial reasons to extend our runway to ensure we could deliver on the key milestones for our PCV franchise, which, of course, remains the biggest value driver. And we, obviously, executed financing that closed in February of this year and in our discussions with investors and others, one of the benefits of the financing was to enable us to, again, resume advancement of the pipeline programs, and we specifically highlighted VAX-A1 in those discussions. And so we can now move into the clinic with confidence and at the same time, preserving all the significant milestones across our PCV franchise that we can continue to deliver on with cash now through at least the end of 2028. Operator: We'll move next to Carter Gould with Cantor. Carter Gould: Congrats on all the progress. Looking forward to exciting 2026. Back to OPUS-1. Jim and Grant, I appreciate your comments around the regulatory flexibility on individual serotypes. But I guess I wanted to pressure test how much that commentary should be read to extend even to scenarios around serotype 3 comparisons against PCV21 given its importance in IPD prevalence. And maybe just speak as well to the commercial importance of demonstrating noninferiority there to avoid counter detailing. Grant Pickering: Yes. Thank you, Carter. Appreciate the question and the recognition of the moment for us. Yes, so I think the key for us is that the test for vaccines in this class is the totality of the vaccine's contribution on a relative basis. And so in our conversation and exchanges with the FDA, we've acknowledged that they said in writing, we could miss on a few serotypes, and that was without designation. So there isn't a serotype that would be a disqualifier. Now that said, I can completely appreciate why you're raising serotype 3. It is the outlier in the entire pneumococcal space. It is an infuriating serotype that despite its inclusion in the marketed pneumococcal conjugate vaccines for now over 15 years, it continues to be the top circulating serotype. And the reason for that is, unfortunately, none of the vaccines have produced a magnitude of antibody responses that can keep that particular serotype in check. This is a complete outlier relative to the remainder of the serotypes that have been included now up to as many as 21. And our objective is to include that up to 31 soon. So yes, serotype 3 is just the total outlier. And even though there have been some of the vaccines that have been able to show higher serotype immune responses relative to others, unfortunately, they're all still well below that protected threshold. So we've seen this play out already. When the 15-valent from Merck came out, they had higher immune responses to serotype 3, but the reaction from all the key decision-makers was, well, better to have more, but not enough for it to be meaningful. And so that is the reality of where we find ourselves is in a situation where no one has been able to produce meaningfully different antibody responses that anyone thinks would produce a better outcome, unfortunately. So serotype 3 has not proven to be a differentiating feature for anyone. And we already have our serotype 3 responses. Ours looked better than Prevnar 20, both in the adult setting for VAX-31 as well as for VAX-24 and in the infant setting for VAX-24. So we know we're on the right track, and we'll have to see what ultimately our immune responses look like in a direct comparison to Capvaxive. But ultimately, it has not proven to be a benefit to the products that have had slightly higher immune responses. So we do not expect that to be a competitive differentiator coming out of these studies. Operator: We'll take our next question from Jason Gerberry with Bank of America. Dina Ramadane: Congrats on all the progress this quarter. This is Dina on for Jason, by the way. I guess, maybe just a follow-up on the prior discussion of the various OPUS-1 data scenarios. You've kind of outlined a clear base case in order to kind of clear the regulatory bar for approval. Curious, in your view, just maybe thinking about the future competitive landscape, what is the bull case on data? Is it hitting statistical superiority on a certain number of strains or statistical superiority on some high-priority strains? And then just a quick one on VAX-XL. Can you talk about where this program just kind of generally sits in terms of development? If you felt compelled to advance it, how quickly could you move it into the clinic? Grant Pickering: Well, thank you for those questions, Dina. Thank you for being a pinch hitter for Jason. So the first question as it relates to OPUS-1, I'm glad the base case is clear, and thank you for asking about the upside case. I mean, the first thing to emphasize is that coverage is king in this class. We've seen it over and over and over again, and we're seeing it playing out once again. Even in the context of Capvaxive relative to Prevnar 20, which are the 2 currently recommended vaccines for adults, Capvaxive is obtaining market share at a really rapid clip based on its coverage advantage, and yet it has this Achilles' heel of not covering 10 of the historically circulating serotypes, a couple of which are still circulating significantly. So we think we have an opportunity to once again prove that coverage is the key adoption feature, and we'll have an improved coverage advantage that exceeds what has turned out to be a substantially winning strategy for others in the past. So coverage, coverage, coverage. But then as it relates to superiority on a relative basis for immunogenicity, that is something that we haven't really seen much of in this class. The only example of that ironically was with serotype 3, and it was a really difficult uphill climb to use that to their benefit because even though they were statistically higher, and this is kind of consistent with what I was saying in the last response, that serotype statistically higher immune response that was in the case of one product, it didn't turn into a competitive advantage because everyone acknowledged that while statistically higher, it was not clinically meaningful for a serotype that continues to circulate in earnest. So that's the only example we have to look at, and that was a single serotype for a broad-spectrum vaccine. We have an opportunity to potentially have a different set of arguments. Obviously, we have the Phase II data relative to Prevnar 20, where we showed consistently higher immune responses across an array of the common serotypes along with an incremental 11 serotypes on top of their 20. So I think it's a very different set of arguments when you're combining coverage and improved immune responses. So as you may recall, in our Phase II study, 18 of the 20 common serotypes we were directionally higher and 7 of those 20 had statistically significantly higher immune responses. So I think it is a different set of arguments when you're combining coverage and a broad array of improved immune responses. And of course, this is in the context of the historical trade-off where you're training coverage for lower immune responses. So we've really flipped the script on being able to have the opportunity to demonstrate both. So yes, I think we're incredibly confident that coverage will carry the day, and then we'll see how much improved immune response may or may not further the advantage as the data comes into focus. Now you also asked about VAX-XL. That's our third-generation broader spectrum vaccine over and above the 31 serotypes in VAX-31. This is a life cycle management strategy. As we've said, when you have a vaccine like VAX-31 that covers 95% to 98% of the circulating disease in the U.S. and in Europe, respectively. There really isn't enough headroom to warrant bringing out a third-generation vaccine just yet. But the reality is that serotype replacement is a key phenomena in this class. And we believe that with the utilization of VAX-31 broadly, we will begin to see serotype replacement from those very modestly circulating serotypes today to something more significant. And in that regard, we want to have the readiness to expand coverage over and above the 31 in order to produce the most beneficial vaccine societally. We also want to make sure that we continue to flex a coverage advantage relative to any potential competitors. And yet in this moment, it's really more about preparedness and identifying those serotypes for which may circulate and having readiness to add them on top of VAX-31 to have this third-generation program move forward into the clinic in earnest at the appropriate time. Operator: We'll take our next question from Tara Bancroft with TD Cowen. Tara Bancroft: So I feel like we have a pretty good grasp of data expectations, your regulatory commercial readiness. So I kind of want to ask something more qualitative, perhaps your thoughts on OPUS-2 and -3. Between those, I'm curious to hear from you guys, which of these do you find more or really the most meaningful in the commercial setting and why? And how could these specifically impact an ACIP recommendation beyond the OPUS-1 data? Grant Pickering: Thank you for that question, Tara. I always appreciate you being a student of the vaccine space. So yes, I think for OPUS-2 and OPUS-3, each of these studies will contribute meaningfully to the overall BLA package. First of all, they're going to help us round out the safety database to ensure we get enough adults exposed to VAX-31. But then each of them provide their own additional elements to the set of arguments that we want to make, both in the context of the BLA, but then also in the context of the recommending bodies as they determine how to slot VAX-31 into the schedule. And so OPUS-2 and its examination of concomitant vaccination with flu vaccines and with VAX-31, it's important. Pneumococcal conjugate vaccines are given only so often versus flu vaccines that are given annually. So I think it will be helpful, but I wouldn't call it instrumental. I do think the OPUS-3 study is perhaps a more strategically important outcome. And when you think about the context of a potential catch-up recommendation, where we've had adults now vaccinated in earnest in the United States for 12 years, you have an entirely massive potential catch-up population of individuals who have received lower valency vaccines. And that could create a really large bolus market that we would work through over many years to give as many people the benefit of the breadth of coverage that VAX-31 could provide. So yes, if I had to pick 1 of the 2, I think it's OPUS-3 that could unlock the most commercial potential for the company. Tara Bancroft: Okay. Great. And I also -- I have to say, specifically to Jim, I'm very happy for you guys that you have strapped back. James Wassil: I appreciate that. I'm really pleased that we can start this program again. Operator: We'll take our next question from Asad Haider with Goldman Sachs. Asad Haider: Congrats on all the progress. A lot of mine have been answered already. Just 2 quick ones. First, just on the infant program, what factors are you considering in whether to announce the infant data either sequentially or together? And maybe just talk about the pros and cons of each approach. And then on the competitive front, as you look out over the PCV competitive landscape, what are the key developments that you're monitoring? And how can you ensure your lead longer-term? Grant Pickering: Maybe I'll take the competitive landscape question and then hand the question about the trade-offs to Andrew in just a moment. So yes, I think as it relates to the competitive landscape, Asad, we're in front, right? We've got 2 vaccines that are the standard of care today. One is a 20-valent, the other is a 21-valent. Our 31-valent is in the midst of its Phase III program, as we've discussed. The only other 30-something that's out there is the program that we're aware of from GSK. They're in Phase I. They just announced today the initiation of a second Phase I study on top of the Phase I that they started last year. Apparently, it's a new formulation. We don't really know much more than that. But I think their expectation is to hope to have Phase I safety data by the end of this year. And of course, we're anticipating having the outcome of our pivotal Phase III foundation of our BLA filing by the end of this year. So I think we're comfortably in front with a technology that is much more based in certainty. And then, of course, Pfizer and Merck have their own programs. We're not aware of any further development in the adult side from Merck. We are aware of the program that Pfizer has in Phase II, which is a 25-valent vaccine. And as we understand it, there are as many as 15 different formulations currently in Phase II for that program. So it sounds like they're still working it out. So of course, we're watching everybody, but those are the folks that are at the top of our list. And then Sanofi has a 21-valent infant program. It did not work in adults, but they did proceed with the 21-valent in infants. So yes, I mean, we're obviously trying to keep our finger on the pulse of everyone who's working in the space, but that's the landscape as we see it. Andrew, do you want to comment on the first question? Andrew Guggenhime: Yes, sure. And thanks for the question, Asad. And just to set the context, as we've said, right, the current disclosure is that we would announce the PD3 and PD4 data either sequentially or together by the end of the first half of next year. And the real question that we are interrogating is whether there are any operating benefits to unblinding the PD3 data in advance. And of course, if we can blind it, we would announce when it's a reality. And those potential operating benefits we're interrogating would be, would it enable us to engage with the FDA earlier in an end of Phase II meeting? Would it allow us to initiate a Phase III program sooner. So that discussion is still underway internally. That's the primary driver of our decision here. And as we've noted, we expect to provide an update on this and kind of declare what our plan is by mid this year. Operator: We'll move next to Tom Shrader with BTIG. Thomas Shrader: It's certainly going to be an exciting 18 months. I have a kind of a question on OPUS-3. Is that the same format as Merck's equivalent STRIDE-6? And I guess what motivates the question is if you're looking at the relative boost of 2 different vaccines with people who have had a prior PCV maybe a year before, maybe 10 years before. I'm just wondering if the final immunogenicity is so broad that it's going to be hard to say anything. So I guess the question is, did Merck run the same trial? And is the trial tricky because of that big window of how long they had a prior PCV? Grant Pickering: Yes. Yes, Tom, thank you for the question. I'll tag team this one with Jim. But indeed, both Pfizer and Merck have run similarly designed studies as ours. Ours is of similar size in terms of enrollment and similar design, but not precisely the same. I would say your question is an interesting one as it relates to the duration between vaccinations. It was interesting, the Pfizer study, they did present the baseline presentation immune responses, which was helpful. The Merck study did not include that, at least in the published findings. So we didn't get the benefit of that particular effort to look across the magnitude of immune responses based on which vaccine and how long ago they received it, but we did see some of the data from Pfizer. So I just wanted to acknowledge that first part. Jim, any other comments? I don't recall if STRIDE-6 was the name of their study or not, but what would you have to say? James Wassil: Yes. No, what I would comment is, I think you're absolutely right, Tom, that there's a lot of heterogeneity here. What we want to show is that if you give up VAX-31 that you don't have what's called hyporesponsiveness, which is a reduction in the immune response with subsequent exposures to your vaccine. Now that has been seen with people who receive Pneumovax, which is the polysaccharide-only vaccine. It has not been seen in this category with PCVs, the conjugates. So our goal is to show that we can expand coverage for these other vaccines, give them the extra coverage that whichever vaccine -- 13, 15, 20, 21 that they would be getting and not have any hyporesponsiveness. And I think if we achieve that, then we can go forward and work with recommending bodies to see if we can get a recommendation for a catch-up or an expansion for those who have been previously vaccinated. Thomas Shrader: So if you get more breadth, the bar for common serotypes is just be no harm. Is that? James Wassil: That has been the case historically. And like I said, when you had Pneumovax and then you got a PCV, you did see some reduction in diminution in the immune response, but you haven't with PCVs. So I think that's the bar we're hoping to achieve. Operator: [Operator Instructions] We'll move next to Joseph Stringer with Needham & Company. Joseph Stringer: You commented that FDA has historically required greater than 3,000 patient exposures from a safety database perspective. It sounds like you'll have more than that in total from your Phase III trials. Could you just characterize how your conversations with FDA have gone on the safety database requirement and your level of confidence that having at least 3,000 would be sufficient? Any additional color on this would be helpful. Grant Pickering: Yes. So we have been aware of the 3,000 minimum standard for quite some time. We have not seen a shift in that thinking. We have initiated these 3 OPUS studies on the merits and in order to not only meet the minimum exposure for VAX-31, but to also set us up to have the ammunition to make that best-in-class set of claims. So I think our view is that it's been a consistent request and really not sure I have anything to add on top of that. Jim, would you add anything? James Wassil: No. I think historically, there's been 3,000 subjects exposed. And yet, like Grant said, we're going a little bit above to make sure we get a really robust label. And I'll leave it at that. Andrew Guggenhime: Yes. I would just say this is one of the -- this is Andrew, one of the many components of the protocol that was developed in alignment and consultation with the FDA. Operator: [Operator Instructions] And we'll take our next question from David Risinger with Leerink. Unknown Analyst: I'm [ Edward ] calling in for David Risinger. So just a quick question on PCV uptake for those who are like 50 years old and above. What is the current trend right now? Grant Pickering: Yes. Thank you for that question, Andrew (sic) [ Edward ]. I think I will turn that one over to our Chief Commercial Officer, Mike Mullette, who is with us. Mike, do you want to comment as to what we're seeing with regard to uptake of pneumococcal conjugate vaccines now that the age has been reduced down to 50 and up from 65 and up? Mike Mullette: Yes, sure. So first of all, thanks for the question. It's I think, a really exciting time and opportunity for commercialization of VAX-31. So we're getting ramped up and ready to go. Some positive signals we're seeing in the marketplace already. Obviously, the drop to 50 to 64 is progressing. We start to see both Pfizer and Merck sales in the segment account for immunizations in that age group, 50 to 64. I would say that in some ways, those immunizations were probably lower this year because of the lower influenza vaccination rates over the course of Q4 of this year. So we'll continue to monitor those and see how they progress. Also, I would say, encouraged to see the market share that Capvaxive has been able to achieve, again, solidifying this market dynamic of shifting from lower serotype vaccines to higher serotype vaccines. We continue to see Merck report strong earnings in the United States and strong market share figures, targeting in the high 30s, low 40s, depending on the segment of the market that we saw last year. So we'll continue to follow that trend as well, which we see as a supportive signal for the market likely moving to VAX-31 in the future. We also, I would just say quickly are encouraged by the uptake internationally of some of the adult vaccination programs in European countries, Japan, Canada, where Merck and Pfizer continue to make inroads in driving adult immunization in the pneumococcal space, which, again, we hope to follow on with the licensure of VAX-31. So I would say really positive and encouraging signals so far from the market, and we'll continue to keep everyone updated as we progress with preparations. Grant Pickering: Excellent. Thank you, Mike. Yes, I think I would just want to caveat that the U.S. is a bit of an outlier making the universal recommendation for adults 50 and up. While the international adoption is increasing at a terrific rate, most of the major developed countries have now made recommendations. They're sticking with a slightly older age group, more like 60 and up and sometimes 65 and up. But these are countries for which there was no universal recommendation. So it's really leading to a substantial increase in the overall opportunity for pneumococcal conjugate vaccines in adults. And Mike, thank you for bringing that up. And Edward, thank you for the question. Operator: That concludes today's question-and-answer session and also concludes today's Vaxcyte fourth quarter and full year 2025 financial results conference call. Please disconnect your line at this time, and have a wonderful day.
Operator: Good day, and thank you for standing by. My name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Tempus AI Fourth Quarter 2025 Fiscal Results Conference Call. [Operator Instructions] It is now my pleasure to turn today's call over to Liz Krutoholow, Vice President of Investor Relations. Please go ahead. Elizabeth Krutoholow: Thank you, Tina. Good afternoon, and welcome to Tempus' Fourth Quarter 2025 and Full Year 2025 Conference Call. This afternoon, Tempus released results for the quarter and year ended December 31, 2025. The press release and overview of the quarter and our latest presentation are available on our IR website. Joining me today from Tempus are Eric Lefkofsky, Founder and CEO of Tempus; and Jim Rogers, CFO. Before we begin, I would like to remind you that during this call, management may make forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially. For a discussion of these risks, please refer to our 10-K and other subsequent filings with the SEC. During the call, we will discuss non-GAAP financial measures, which are not prepared in accordance with generally accepted accounting principles. Definitions of these non-GAAP financial measures, along with reconciliations to the most directly comparable GAAP financial measures are included in our earnings release, which is available on our IR page. I would now like to turn the call over to Eric. Eric Lefkofsky: Thanks, Liz. 2025 was an exceptional year for Tempus with both of our businesses growing rapidly and performing well above expectation. Total revenue of our core business was up over 33% when you factor in the acquisition of Ambry, obviously much higher. If you look at our 2 main businesses, I'll start with Diagnostics. In Oncology, we had unit growth of 29%, which was and has been accelerating throughout the year. We called out that our MRD growth rate was actually 56% quarter-over-quarter, which is extraordinary. Hereditary held up well with 23% unit growth. So all in, our Diagnostic business is accelerating and performing above expectation. In terms of Data, that business is growing even faster. It's made up of really 2 product lines, our licensing business and our applications. Our licensing business, or Insights, was up 69% in the quarter when you factor in the onetime impact of the AstraZeneca warrant, and we're projecting roughly 40% growth this quarter. Total contract value was greater than $1.1 billion and most importantly, has been rising faster than revenue over the past several quarters. And net revenue retention was 126%, which is super strong, all things considered. We guided to $1.59 billion, which is in line with our 25% long-term growth expectations and approximately $65 million of positive adjusted EBITDA. Our balance sheet is in great shape. Our products are resonating. Our AI advantages are continuing to take hold. So all in, we're poised for a phenomenal 2026. With that, happy to take questions. Operator: [Operator Instructions] And our first question comes from Kallum Titchmarsh with Morgan Stanley. Kallum Titchmarsh: Eric, I wanted to zoom out from the financials. I'm sure that will be covered and go a bit broader. The markets are a bit anxious around AI and how value is getting distributed within that ecosystem. And we're now obviously seeing kind of traditional AI players push into the healthcare sphere. So I'm curious how you feel your position is protected on the data side? And I guess, to that point, why you expect the large pharma companies you work with, particularly within Insights to keep coming back for more? The Q1 guide is obviously strong, but I'm kind of looking on that. And then finally, just on that point, I'm interested whether the feedback you're receiving from these customers suggests that they're getting better at what they do because of what you're providing them. Just any sense of success stories and what you're hearing on the ground would be appreciated. Eric Lefkofsky: Yes. So I mean, I think the most interesting business models, I believe, surrounding AI, in particular, large language or large multimodal models, really center around access to proprietary data to train models and proprietary distribution once you have a model that generates insight. So as we've talked about historically, Tempus is uniquely positioned in that. We have both of those at scale. We have over 450 petabytes of connected multimodal data, which flows from our Diagnostic business, which has real-time insights, real-time connection to outcome and response, is able to track patients longitudinally, rich molecular data, rich imaging data. So we have this really unique proprietary data set that you can use to train AI, to train models. And then once we generate insights or some kind of contextualization that we want to put in the hands of a doctor, because we're connected to more than 5,500 hospitals, because we have more than 8,500 regularly ordering oncologists and thousands of other physicians and other areas, we can deliver these insights in real time as part of routine clinical care. So that's what makes us unique that if somebody wanted to replicate our data business, they'd have to go reproduce all that real-time data, which is quite hard to do. You have to enter into contracts with providers. You have to get the data, you have to work through IT issues. You have to structure the data, you have to build technology to make the data useful. It's an enormous lift that we've been on over the last 10 years. And I think because of that, because of the work we've done to build the data pipes, to harmonize and structure the data, to build technology that wraps around the data, we just have a unique offering and other people have been unable to replicate it. And so if you look at our -- the scale of our data business, I mean, a few years ago, people thought we couldn't hit $100 million of data revenue. And we're now 4x that and projecting to grow 40% even at this scale. We have 126% net revenue retention, which means, on average, our clients are ordering significantly more year after year than they ordered the year before. And all kinds of proof points. Our largest clients continue to re-up. Those contracts get extended. We've announced a bunch of them over the last several years. And it's because we're demonstrating real -- our data is demonstrating real value where these clients are able to use our data and our technology to be more intelligent about what assets to go forward with, refine their early-stage discovery projects, design more intelligent Phase IIs and Phase IIIs, recruit the right populations at the right time and get their drugs approved and in market faster. And that is why the data business is just kind of having a moment and the growth is actually accelerating. Operator: Your next question comes from the line of Subbu Nambi with Guggenheim. Subhalaxmi Nambi: Earlier in 1Q, you launched Paige Predict. Given you previously discussed that you don't expect this to contribute meaningfully to revenue this year, can you discuss the strategic value of the added capability when samples are QNS? How often is this case with xT and xR? And a quick one for Jim. Jim, ASPs are expected to reach over 2,200 in the coming years, but what are you expecting in '26 guidance? Eric Lefkofsky: Yes. So I'll start with Paige Predict. So we have -- and I think I'd encourage you to read the letter. We try to spell some of this out in the letter we published. But we've long talked about how there's enormous benefits to the contextualization of these diagnostics and the technology we wrap around them. And it's not just about having the next version of an assay or running a study that produces some kind of wet lab improvement, like that only means so much. If you look at our growth and the fact that our growth is this strong at this scale, it's in large part driven by the fact that we just have a technology advantage that makes physicians want to order our products because they get greater insights from those products. And those insights, like if you look at just a few that we called out, one is Paige Predict and other is what we call our Immune Profile Score, and there are dozens of others. But if you look at Paige Predict, here's an example of we've built technology that at scale, allows us to digitize pathology slides and generate insights from those pathology slides by which we can predict mutations that exist that will show up when we do the next-generation sequencing. The benefit of having a system where you're sequencing tons of patients and following mutations and you're digitizing pathology slides and tracking those is you can begin to correlate these things. All next-generation sequencing has some amount of error. It's just inherent to the process of using Illumina and other sequencing companies where you don't get 100% output when you sequence a patient. So some percentage of the time -- it's a small percent, but some percentage of the time, you have results that can't be returned to a physician. Being able to digitize the pathology slide and render insights even when sequencing fails just makes our tests a little better than somebody else. The fact that we can also render those results in hours, makes us a little faster to deliver those insights. So the same thing if you look at our Immune Profile Score, we're able to look at lots of different multimodal data we generate, could be digitized pathology slides, could be transcriptomic data from RNA, could be DNA data and refine what have historically been traditional biomarkers like tumor mutational burden or others. And each of these insights that we can generate, again, it's not that one of them alone is the reason that a physician would use us, but they just keep stacking up. And if you look at the foundation model efforts that we're engaged in, that's going to do nothing, we think, but accelerate that dramatically. And so to the extent today that we're X percent better than somebody else because we can generate Y percent more insights, you should expect that to grow quite a bit over the next several years. James Rogers: And then in response to the ASP question, so ASPs in Q4 were around $1,640. That was up about $40 quarter-over-quarter. As you noted in our investor deck and kind of what was discussed at JPM is we think that there's about $500 or greater than $500 of upside to ASP based on the current mix driven by a couple of factors. One is the continued migration of xT CDx from the LDT version to the FDA-approved version. As we previously stated that we plan by the end of 2026 to be exiting with the vast majority of volume on that FDA-approved version. So that's kind of the biggest impact from an ASP perspective in 2026. We also announced that we've submitted our xF, which is our liquid biopsy to the FDA. That will unlikely to have much of a '26 impact from ASP, but as we get into '27, we'll start to contribute. And then lastly, there's still some upside from commercial payers as we kind of chip away at those. So that's kind of the build -- those 3 initiatives kind of get you that upside of $500 with xT CDx being the biggest driver, and that will play out over the course of 2026. Operator: Your next question is from the line of Ryan MacDonald with Needham & Company. Ryan MacDonald: So my question for Eric, you just sort of talked about the foundation model and how that can exponentially help the stacking initiative and development of additional algorithms, different additional modules over time. Can you just give us an update on where things stand on the development of that foundation model? I think you mentioned last quarter, you're hoping to have the first version of the model ready in the first quarter of '26 here. And so just curious if that's launched yet, how it's performing relative to expectations? And then for Jim, just curious in terms of -- you talked about ASPs just now, but just curious how you're thinking about sort of underlying assumptions for volume growth across Oncology in particular, but Hereditary as well in the '26 guide? Eric Lefkofsky: Yes. So I'll start. So the foundation model had a deliverable in Q1 where we had to hit certain benchmarks that AstraZeneca had established. We think we've hit all those benchmarks. We've submitted all that to AZ. They're testing the model now, but we feel great about the model's performance. And so those efforts will go on. We've also -- that was a particular cluster we set up of, about a little over 1,000 H200s dedicated to that Oncology foundation model. We've also procured a second cluster of more than 500 GB200. So in terms of actual compute power, it's greater than the first cluster. And we're running additional models internal, not just in oncology, but across all of our data because we have enormous amounts of radiology data and pathology data and cardiology data, neuropsych and so on and so forth. So we're incredibly long on the value that these models are going to deliver, and we're doubling down on those efforts. We think they'll be catalytic both to our diagnostic business as we keep dropping insights into our tests that make our test smarter and better than others. And so that should be an accelerant to growth. And then we also intend to propagate these insights through our data business so that our clients get more value. James Rogers: Yes. And then in terms of the kind of underlying volume assumptions in the Diagnostics business, Oncology, as Eric mentioned, had 29% growth in Q4. The first quarter is off to a good start, and so we're not seeing kind of that pace slowdown. On the Hereditary side, volume growth was 23% in Q4. As we've talked about previously and what we highlighted in the letter is we do anticipate that continuing to moderate as we lap some of the share gains that they had. There likely will also be some lumpiness in the Hereditary growth rates in 2026. And so in the letter, we've called out kind of this high teens longer-term growth rate. It might be a little bit lower in Q1 and then kind of pick up throughout the year. There will probably be some lumpiness, but we think that, that high teens is still achievable. So Oncology, again, we feel really strong about where the Oncology business is. And on the Hereditary side, again, it was -- we were anticipating some of the slowdown given the lapping of some of the share gains. Operator: The next question comes from the line of Mark Massaro with BTIG. Mark Massaro: Congrats on a strong year. So I think in your letter, you talked about MRD volumes came in around 4,700 tests in the quarter. And I think you made a reference that, that level could have been 20x higher if the entire sales force had been selling it. So am I understanding it correctly that approximately 5% of your sales force was selling MRD in Q4? And is the right way to interpret this that if everyone sold it, it could be 20x higher in the Q4? Or is the 20x higher more of an aspirational longer-term outlook? Eric Lefkofsky: Yes. I mean -- so the -- obviously, it's just -- it's a hypothetical, so it's impossible to say what could have happened in Q1. We were simply highlighting the really unbelievable strength of our MRD offering on -- the main vector being we ran 4,700 tests. It's 56% quarter-over-quarter, not year-over-year, but quarter-over-quarter growth, and we are highly constraining this effort. And so yes, we have a very small percentage of our cumulative sales force that is currently selling MRD. And if we were to let everyone sell it and completely unblock it, it could be 20x higher. So now whether it would be, obviously, you only know that when you unblock it. But our point is, the growth is just really amazingly strong with a highly constrained sales effort. Now we will eventually unblock that sales effort. It's a function of reimbursement. It's a function of the appropriate timing, but we intend to, over time, ungate this and be in market fully. It took other companies that have really strong reimbursement like, for example, Natera, it took them quite some time to establish coverage in a broad enough way that this made financial sense. We're fortunate that we can kind of ungate this in an intelligent, appropriate manner and not kind of reap financial havoc. But what we are calling out is when you look at our diagnostic platform, which is obviously broadly connected for hereditary profiling, broadly connected for therapy selection, both in solid tumor profiling and liquid biopsy. When you look at the number of EHR connections we have and the number of integrations we have and the number of feet we have on the street, deeply embedded in the workflows of such a large percentage of the U.S. oncology market, I would suspect when we ungate this, we will become a very large MRD supplier. Operator: Your next question comes from the line of Kyle Mikson with Canaccord Genuity. Unknown Analyst: It's [ Darren Kirstein ] on for Kyle Mikson. So just taking a step back, in Oncology, I was wondering if you could provide a bit of more clarity on your tests. You briefly touched on ASP and volume dynamics, but could you just kind of walk through what each of the main growth drivers will be for xT, xR, xF, xH and xE in 2026 and beyond? Eric Lefkofsky: I don't even know how to answer that question. It's a fairly broad question. But I would say, in the letter, we call out, I think, our main platform advantage that provide -- that has been kind of fueling our growth. That platform advantage, the fact that we contextualize diagnostics, the fact that we're marrying clinical data with molecular data, the fact that we have such a comprehensive profile, the insights we can generate by virtue of that, that advantage exists in xT, which is our DNA profiling. It exists in xR, which is our RNA profiling. It exists in xF, which are liquid biopsies. It exists in xH, which is our heme offering, which, by the way, we have a whole genome heme offering that goes live this year. And it exists in xE, which our whole exome offering. So it's across our entire platform. So it's not as if we've got like one driver driving DNA and another driver driving RNA. Our core technology advantage drives the growth of all 5 of those assays. James Rogers: The other thing I would add is obviously, the market itself is also growing. And so amongst our peers, everyone is experiencing kind of healthy growth rate. So clearly, sequencing is becoming more prevalent amongst our ordering physicians and ultimately patients. And as Eric noted, kind of that data advantage is what allows us to kind of capture additional market share. Eric Lefkofsky: Yes. With us, obviously, in solid tumor growing, it looks like at this point faster than others. Operator: Our next question comes from the line of Casey Woodring with JPMorgan. Casey Woodring: Can you walk us through what the guide embeds for data and services revenue in 2026? I know that you pointed to $350 million of current TCV being tied to '26. So can you just talk about the visibility into in-year bookings to get to that guide and the timing around that? And then maybe as just a follow-up, can you split out the guide of the 40% growth you're assuming in data in 1Q? Maybe just talk through how that will shake out across insights and trials and any contribution embedded from the current foundation model with Pathos and AstraZeneca? Eric Lefkofsky: So the -- as we called out, I think, during the JPM conference, the bookings have been so strong that we start the year with greater visibility into the 2026 revenue build than we've ever had by a long shot. So we called out, again, at JPM that it is normal for us to generate about $100 million of revenue within a given year from bookings in the year, meaning we -- somebody wanted data and we delivered it within the year. So the fact that we have such a high percentage of our revenue already committed for 2026 means that we expect to be doing our best to manage the growth of the data business because it has just such systemic growth drivers going into 2026. And that's directly a correlation between bookings and revenue. We just have greater than $1.1 billion in the tank. A bunch of that applies to 2026. And so we just are starting the year super strong, and we just have got crazy amounts of demand for our data products. Feels like we are in a unique spot in that we're just pulling further and further away from the competition. So that business just is having a moment. And as it relates to like how the rest of it stacks up, the vast majority of our data and apps is data licensing. It represents the biggest chunk of it. And so everything else is kind of relatively small, but it all adds up to the other piece, and that's our clinical trial matching business, TIME, our care gap product called Next and a few of the ancillary products that are connected to that. Operator: Our next question comes from the line of Douglas Schenkel with Wolfe Research. Colleen Babington: This is Colleen on for Doug. So you delivered high 20s clinical oncology volume growth exiting 2025. How should we think about the durability of that volume growth into this year and next? And how should we be thinking about liquid versus tissue CGP growth throughout this year? Any color you can share on repeat testing with xF? And if we should continue to think about xF being about 25% of total clinical oncology volume going forward? James Rogers: Yes. So I'll start and then Eric, you can chime in. So in terms of the 29% growth and how that stacks up, again, as I mentioned before, kind of we're off to a good start in the first quarter here. And so we don't see a massive slowdown in the Oncology growth rates. Obviously, you're getting to larger and larger scale. So there -- it's tough to continue growing at the same rate, but we're off to a good start. In terms of the breakdown, outside of MRD growing dramatically faster than the rest of the portfolio, we see strong growth across both xT and xF. XF may be growing slightly faster than solid, but not -- there's not a dramatic variation there. And we don't see kind of that trend -- that's a trend that we've seen for quite some time. So we don't see a lot of variation in kind of the product mix as we look at '26. Eric Lefkofsky: Yes. And I'll just add to that. Like so we -- our guide implies 25% growth year-over-year. So we've called out that our Hereditary business is growing slower. It's kind of like for the year, we think kind of high teens, mid- to high teens in that range. And we have a few other businesses that we historically have called out are also not growing. Like, for example, we deemphasized -- we have a little relatively small, but maybe $20 million CRO business that we don't spend time on. Things of that nature. So you have a little bit of revenue with Ambry -- a lot of decent amount of revenue that's growing kind of significantly less than 25%, which means that our data business and our core Oncology Diagnostic business are growing 30-plus percent, right? And just as we told the world, we expect it to grow at 30% or so last year in our core business and ended up growing at 33%, I suspect something similar this year, right? You can -- if you do the math, we're going to be growing in the roughly 30% range plus in those businesses. So they're super healthy. Liquid is growing a little faster than solid. So that's been a long-term trend for us. We don't disclose breakdowns of each and so on and so forth, but liquid is growing a little faster. Both are super healthy. And there's just no one driver of the growth. It's not as if like -- it's not as if repetitive testing or concurrent testing or this kind of testing or that kind of testing or having an outsized impact. We're just seeing really good solid growth. We're seeing really good liquid growth, slightly better, but that's been a long-term trend. And more and more people want the benefits of tumor normal profiling, more and more people want the benefits of DNA and RNA, more and more people want our connected platform that's intelligent. So our unit growth in Oncology is really strong and showing no signs of slowing down. Operator: Next question comes from the line of Andrew Brackmann with William Blair. Andrew Brackmann: Eric, it's sort of been just over a year since you closed on Ambry. And if we sort of go back to when that acquisition was announced, sort of a big part of that thesis was really around the data that you would be able to sort of generate across the entire drug oncology testing spectrum. So can you maybe just sort of talk about the acquisition in that lens now that it's sort of been a part of the company for some time, just sort of what you're seeing in that regard and how that's led to growth in the data business as well? Eric Lefkofsky: Yes. So I think we called out multiple reasons to acquire Ambry. The first by far was to broaden the comprehensive nature of our testing compendium. So when if someone said to me, why did you buy Ambry? I wouldn't say data. I would say the #1 reason we bought Ambry was they had a very strong hereditary profile. More and more of our clients want a comprehensive solution. I think we've said this historically, I very much believe that over the long term, when it comes to treating cancer patients, it's going to be like e-commerce shoppers going online. I don't go to one e-commerce site for books and another for clothes and another for consumer electronics and so on and so forth. I go to Amazon because they have kind of everything I need in one place. And I believe that's going to be the case as it relates to sequencing. So more and more providers want somebody who can help them manage risk, help them treat patients once they've been diagnosed and help them monitor those patients post treatment. And so we want to have a broad menu. That said, we're also seeing a trend of more and more of our provider partners and certainly, obviously, to the benefit of patients, wanting to contribute de-identified data to platforms like ours to be used to accelerate research and to accelerate drug discovery and development. This is a very big trend that I don't see stopping. We still have 600,000 people a year that die of cancer. We're not making nearly enough progress as it relates to eradicating that. And so I think you're seeing a movement among institutions that are saying, we need to help stop the waste to make sure these patients get better drugs and get them in market faster. And so we see that as a constant movement and a benefit of the kind of data we collect and then on a de-identified basis, take to market. Operator: Our next question comes from the line of Dan Brennan with TD Cohen. Eric Lefkofsky: Can't hear you. Daniel Brennan: Sorry about that, Eric. Just maybe one on MRD and on Insights. Just on MRD, any update on the first-gen CRC assay? I know it's sitting at MolDX. Just any color there? And on the next-gen tumor-naive assay, have you guys discussed kind of what type of performance advantage you would expect to get out of that? Obviously, you're filing for 2 tumor types this year and then you have another 2 that you mentioned in the letter. Just wondering what kind of performance enhancements do you think that could offer versus the existing tumor-naive landscape? Eric Lefkofsky: Yes. So we're back and forth with MolDx now. We didn't call out when that gets resolved, I mean, because I don't control MolDx. I mean, so it's possible that we have reimbursement in a month, and it's possible that it takes longer. I don't have any idea. We also didn't call it out because it's just not that relevant to our current MRD offering, which is, I don't know, like 95% tumor-informed. So because we're largely in market with a tumor-informed product in partnership with Personalis, it just represents the vast majority of our current market penetration. And this particular product, which I do expect will be reimbursed by MolDX, is just not going to be a needle mover because the goalposts keep moving. And so what's happening is tumor-naive products have to keep getting better and better to really compete. In CRC, I think it's going to be quite some time before you have a significant amount of the volume moving away from tumor-informed to tumor-naive. So I think the naive market is either episodic or it's for those patients where, for whatever reason, they can't get tissue. But tissue is pretty pervasive in colorectal cancer. And so I think tumor-informed wins the day in that subtype for a while. There are other subtypes like, for example, lung, where tissue is more sparse, where I think tumor-naive products can do quite well. We realized that we just weren't getting the performance off the first version of our assay. So instead of like -- we're running a ton of studies to collect samples, I mean, a ton. And so we decided to kind of pivot and begin working on the second generation of assay instead of like burning those very precious study samples on an old version, we wanted to move to the new version. So we kind of pivoted and we were fortunate -- everything we do takes into consideration this notion of like a comprehensive portfolio. So we were fortunate that we had a tumor-naive product that was just kind of doing super well in the market, more than -- giving us more volume than we candidly want or need. And so we didn't have to kind of overly push on the accelerator for tumor naive. But the second version is coming along well, and I suspect at some point, we'll have a really nice assay market. Operator: Next question comes from the line of Mark Schappel with Loop Capital Markets. Mark Schappel: Eric, the start of the year is typically when companies adjust their sales organizations and their go-to-market strategies. First, if you could just give us an idea whether you've implemented any meaningful changes to the sales org this year? And then as a follow-up, maybe you could just sketch out what you believe are the firm's kind of key investment priorities for the coming year. Eric Lefkofsky: In terms of the sales force, we've made no big moves to reorg the sales force. We did that, obviously, early '25, and we announced the impact of that. And so the good news is we're long lapping that. And in terms of our priorities, they remain the same, to bring the benefits of technology and AI broadly to diagnostics and make sure that every decision, whether that's a decision in clinic or a decision for research, is data-driven. And I would expect us -- given that we're growing so rapidly in our business accelerating, I would expect us to stay the course. Operator: Our final question comes from the line of Bradley Bowers with Mizuho. Bradley Bowers: Just wanted to get into some of the ASP outlook and maybe the gross margin implication. Obviously, a lot of upside here with the 2,200 test outlook. I just wanted to kind of hear about what the expectation should be for gross margin. It assumes a big lift. I mean, if you assume that the costs hold and do some math, it kind of gets towards gross margin in the genomics side of 70% plus. What could you say about that progression? And is that 1:1 with ASP? Or are there some offsets we should be considering? James Rogers: Yes. I think when -- obviously, any time ASP increases, that would lead to an increase in gross margin. I think our -- we've long kind of taken the approach that as ASPs kind of increase or as cost of sequencing come down to reassess kind of how much you kind of increase the size of panels to generate more data. Obviously, that's great for patients and great for doctors and all that. And so that's something that we do on kind of an annual basis. We're not -- given the fact that we have kind of these 2 businesses, Diagnostics and Data, we're less reliant on maximizing gross profit within the Diagnostics kind of product line as some of our peers may be. That said, as ASPs increase, we would anticipate seeing some increases in gross profit, but always balancing to make sure that we're bringing to the market the broadest panels possible because it obviously has a bunch of downstream implications. Operator: There no further questions in queue. I will now hand the call back over to Liz Krutoholow for closing remarks. Elizabeth Krutoholow: Thank you all for joining us today. We look forward to updating you again next quarter. Have a great day. Operator: Thank you again for joining us today. This does conclude today's conference call. You may now disconnect.
Operator: Welcome to the Amplitude Energy Limited FY '26 First Half Results Webcast. [Operator Instructions] I will now pass over to Jane Norman, Managing Director and Chief Executive Officer of Amplitude Energy. Please go ahead, Jane. Jane Norman: Good morning, and thank you for joining us. This is Jane Norman, and I'm joined today by our Chief Operating Officer, Chad Wilson; and our new Chief Financial Officer, Ian Bucknell. For those who haven't yet met Ian, he started with Amplitude as our CFO in January this year. Ian has held several prior CFO roles at ASX-listed energy and mining companies over the last 15 years, and we are very pleased to have someone of his caliber add to the strength of the executive team. Ian will cover our first half financial results in detail a little later on. After today's presentation, we will host a Q&A session, and we welcome your questions. Today's presentation as well as our first half financial report and summary announcement were released to the ASX this morning and are available on the Amplitude Energy website. Today's webcast is being recorded, and a playback will be available on our website later today. Please note the disclaimer information on Slide 2 of the presentation before moving on to Slide 3. I'll come to our record first half metrics in a moment, but reflecting on these results at a higher level, I see a business that has built strong foundations for near, medium and long-term growth. In the near-term, continued improvement at Orbost is underpinning our base business and with a good second half expected across all 3 of our basins, we have increased FY '26 production guidance today. As we increase Orbost's production rates, it is important that the Sole reservoir continues to perform well. We significantly increased our 2P reserves booking in Sole last year based on reservoir performance, and we will be undertaking reviews to assess further upside. The market fundamentals and the outlook for gas demand clearly support our business and the investments we are making. Our customer relationships have delivered new higher-value contracts that will materially increase our average contracted gas price from this year onwards. These relationships also position us well for future contracting of the Sole volumes and long-term supply agreements for the ECSP into the next decade. In the last month, we have embarked on our major medium-term growth project with the ECSP. The ECSP campaign is focused on drilling our attractive exploration targets in the Otway Basin in addition to developing the Annie discovery. Whilst the Elanora exploration result was disappointing and not as expected, we completed the well efficiently, and we are now sidetracking into Isabella, where results are expected in the near-term. It is important to remember that upon success, it is Isabella, not Elanora, that has been earmarked as the producing field for ECSP. A drilling campaign like ECSP with multiple exploration targets remains the most capital-efficient pathway to success and growth. Pleasingly, the ECSP remains on schedule and budget. Longer term growth from the Gippsland Basin also remains on the agenda with the Patricia Baleen restart progressing through a concept SELECT phase and potential backfill to existing infrastructure from our booked 2C and Manta and Gummy and the attractive Wobbegong prospect. We are in a great position to grow organically in both the Otway and Gippsland basins, backfilling existing infrastructure funded from strong organic cash generation. Our assets provide material volumes of gas to the Southeastern market, offering energy security and supply diversification to our customers and the community as a whole. I'll turn to Slide 5 now to dive into the headline results. This morning, we announced an outstanding set of numbers for the first half of FY '26. These results highlight further improvement in production at Orbost, higher realized gas prices and good cost control. This resulted in records in all of our key operational and financial metrics in the first half of FY '26. The confidence we have in the performance of our base business and expectations of further upside has allowed us to increase FY '26 group production guidance this morning, which I will cover in detail a little later. Underlying EBITDAX of $100.3 million and adjusted cash flow from operations of $85.6 million demonstrates the company's leverage to higher production and gas prices and its ability to generate strong cash flow. Followers of Amplitude Energy may have noted we have continually posted record production, revenue and underlying EBITDAX results over the last few years, and we look forward to continuing this track record of performance. During the half, we made important progress on the East Coast Supply Project, setting the company up for its next phase of growth. We are imminently expecting the results of the Isabella well, and we will speak about the ECSP in more detail later in the presentation. I'll turn to Slide 6 now and provide an overview of our HSE performance during the first half. Our total recordable injury frequency rate for the 12 months to the 31st of December 2025 was 3.18 injuries per million hours worked, below the 3.34 recorded in the corresponding period in 2025 and well below the industry benchmark of 4.94. We continued our excellent safety performance during the first half of FY '26 with no recordable injuries or Tier 1 or Tier 2 process safety events. The company has now achieved over 2 years without a lost time injury. We maintained our exemplary environmental performance throughout the period with no reportable or notifiable environmental incidents over the half. These results illustrate the discipline embedded in our operations and activities. Hours worked across the organization will increase in FY '26 and FY '27 due to the ECSP, in particular, with drilling operations and our safety culture will be important to ensure these operations run smoothly and people come home from work safely. Turning to Slide 7 and an overview of the Gippsland Basin production. Orbost produced a record average processing rate of 66.3 terajoules per day for the half. As we've said in the past, these improvements have been driven by a range of engineering solutions in the sulphur phase of the plant with sulphur processing and removal no longer a constraint to the plant's production rate. I'm pleased to report for the first time since the sulphur came online in 2020, there were 0 cleans of the sulphur absorber units in the 6 months to the 31st of December. As of that date, one of the absorber units had run 9 months without a clean. A lack of absorber cleans means higher production and lower costs, improving our margin and cash generation from the plant. In January, we undertook our first absorber clean for FY '26 in both absorbers, utilizing the new clean-in-place method. This allows some of our fastest cleaning times on record with Orbost producing around 60 terajoules on the day of one of the cleans. This would have been unheard of as an achievement for the plant only 1 year ago. In December, we finally received regulatory approval to lift Sole pipeline's production capacity, meaning Orbost can operate above its previous nameplate level of 68 terajoules per day. We have successfully trialed production at rates over 70 terajoules per day since then. The plant reset its 14-day average production record at 70.9 terajoules per day earlier this month, hitting a new daily production record rate of 71 terajoules. Sole field and reservoir performance continue to demonstrate strong and reliable production capability with the existing wells comfortably supporting the increased throughput rates at Orbost. Importantly, the field's proven deliverability is expected to underpin anticipated near-term debottlenecking initiatives at the plant, providing confidence in its ability to meet the higher target processing rates. As announced at the year-end 2025, Sole 1P and 2P reserves increased by 19% and 9%, respectively, reflecting the strength of the field performance and ongoing subsurface evaluation. Building on this momentum, further technical studies are underway to assess additional resource potential within the Sole field area. These studies are focused on evaluating opportunities for potential future bookings of contingent resource subject to technical maturity and commercial assessment. Beyond 2026, continued integration of subsurface studies and production performance data may support future reserves reassessment. Any additional resource classification or reserves revision will, of course, be subject to the completion of technical and commercial evaluations and applicable reporting standards. Moving on to our Otway and Cooper Basin producing assets on Slide 8. The average processing rate of Athena during the first half of FY '26 was 8.2 terajoules per day net to Amplitude Energy's 50% share. With the Casino 4 well unavailable during the half, production was cycled through the remaining Casino, Henry and Netherby wells. We have a plan underway to bring the Casino 4 well back into production during the current half and reduce the rate of decline from those fields. A successful Casino 4 restart will, on average, add just over 1 terajoule per day of additional gross production through the Athena plant over the coming year. Front-end engineering design for Athena gas plant upgrades as part of the ECSP were also completed. In the Cooper Basin, production is recovering after the easing of last year's floods. Production increased 21% quarter-on-quarter at the end of last year. A successful 3-well development campaign was undertaken in the Callawonga field with production expected to commence from this area in the second half of FY '26. We are also assessing other Cooper Basin prospects ahead of the next phase of development. The next 2 slides talk to our initiatives to increase gas prices, starting with Slide 9. Here, we set out our stack of existing gas contracts alongside uncontracted or spot gas exposure for our equity share of total production on a calendar year basis. Our GSAs are all fixed price take-or-pay contracts with the price indexed annually to inflation. The dark navy portion of the stack reflects our legacy gas contracts, including foundation contracts for Sole gas that were entered into several years ago at the development stage of the project. You can see that this component of the contract stack declines over time with capped price reviews for these volumes to be undertaken from around 2028 onwards. In the dark green color, you can see the gas we recontracted in 2023, aligned with prevailing mid-teen type pricing, with this tranche stepping up materially from the 1st of January, 2026. Together with CPI indexation, the result is an approximate 20% increase in our weighted average contract gas price this calendar year compared with the levels in 2025, where it averaged a little over $9 a gigajoule. The blue area at the top of the stack represents uncontracted or spot volumes, which illustrate the portfolio's attractive and growing exposure to higher gas prices. This is one of the key drivers of further margin expansion and earnings growth that we expect over the coming years. I should reiterate that this does not constitute production guidance. The profile we are showing here is based on actual group production for 2025 and illustrative group production of 75 terajoules equivalent per day from 2026 onwards. As noted in the callout box on the top right-hand side, the chart does not include any increased volume from our ECSP project. Beyond the picture we -- that we see here today, we will continue to seek to optimize the customer portfolio. You can expect to see us continue to reshape existing contracts with our customers where it makes good economic sense for us to do so, while seeking to offer investors exposure to East Coast spot gas prices. Slide 10 provides more detail on our gas marketing activities. On average, realized gas prices have consistently increased over the past 3.5 years. This is due to a combination of higher gas contract prices, as I just mentioned, and greater exposure to spot gas prices driven by Orbost's production outperformance. Greater availability and consistency of spot gas sales has allowed our commercial operations team to pursue trading opportunities available in various gas markets. This has included trading spot gas into various Victorian and Sydney spot markets, modifying the profile of spot gas sales to maximize sales during high demand periods as well as prioritizing sales into markets with the highest price. The chart on the right illustrates the new contractual arrangement that we recently entered into with OG for gas supply to its Pelican Point Power Station. The agreement provides Amplitude with exposure to South Australian spot electricity prices between a strike price and a cap, effectively mimicking the spot spread value of the power station during peak demand periods. We've talked at length about looking at different ways to access the spark spread for electricity generation, and this is an initial step in that direction for this calendar year. Moving on to Slide 11 now. As discussed in our FY '25 results, our continuous improvement program seeks to identify efficiencies and opportunities to extract further value from our operations. We have over 80 initiatives currently underway or identified across the business, which in aggregate are on track to deliver around $10 million in cash flow improvements by the end of this financial year. Around 2/3 of this relates to production improvements. I have already discussed these, and they are expected to drive near-term value through increased sales volume. There remains further opportunity to reduce our costs in areas such as waste disposal, maintenance and insurance. We also continue to pursue marketing and trading initiatives to maximize our gas price, some of which I touched on, on the previous slide. I'm also very pleased with the success of the continuous improvement program in keeping the business lean and constantly focused on doing things better. Net corporate G&A costs were $8.6 million in the first half of FY '23, before I started at Amplitude. In the half just gone, those costs were down to $5.2 million despite 3 years where the business has grown production and delivered major projects. This tells me that we are delivering value for our shareholders. I'll hand over to Ian now to talk to our first half financial performance from Slide 12. Ian Bucknell: Thank you, Jane, and good morning, everyone. Before I start my prepared comments, I'd just like to say that while I've only been at the company a short time, I've been struck by the professionalism and depth of the management team and the sophistication of the company's processes. This has made the CFO handover and preparation of the financials very smooth. I'll start my prepared remarks on Slide 13 with a few comments on Amplitude's recent track record of performance. I'm happy to say that in the first half of FY '26, the company continued its consistent track record of increasing production and reducing unit costs, which has helped generate record underlying EBITDAX and strong levels of cash from operations. Jane has talked through the production performance for the first half shown here in the top left-hand side of the slide. On the top right-hand side, you see our declining unit production costs, which demonstrate the operating leverage potential within the business as production rises with what is a relatively fixed cost base. We are pleased that the underlying EBITDAX and underlying operational cash flow from the business is showing the company's clear potential for margin expansion and organic cash generation. This provides comfort around our ability to both invest in growth and comfortably manage our senior bank debt at the same time. Turning now to some of the detail in our first half financial results on Slide 14. Our first half FY '26 results are the kinds of numbers you see when a business is really humming. Our record group production rates were tracking above our previous production guidance even prior to the recent capacity increase at Orbost. We have, therefore, upgraded production guidance today, which Jane will cover shortly. Sales revenue of $141.5 million was also a record for a half and 6% above the prior comparable period due to a combination of higher sales volumes and higher average realized gas prices. Production expenses were just under $25 million for the half, a significant decrease of 14% on the prior comparable period and well down in unit cost terms at $1.79 per gigajoule. We do, however, want to note that we expect higher production costs from maintenance at the CHN fields in the Otway Basin in the second half of the financial year as well as the scheduled maintenance shutdown at Athena in April. Underlying EBITDAX was up 9% to $100.3 million compared to first half FY '25, another record for the company. This highlights the cash generation potential of the business and indeed, adjusted cash from operations for first half FY '26 was up 5% to a record $85.6 million. Underlying net profit after tax was $25.7 million for the first half of FY '26 compared with $7.8 million for the comparative period. CapEx incurred for the half was $11.1 million, which was less than half the expenditure of first half FY '25. This was largely associated with ECSP long lead items with OG Energy's cost carry of approximately $28 million on ECSP expenditure active for the month of September 2025 onwards. Restoration payments were also significantly lower, reflecting the now complete Minerva Wells decommissioning program. Our net debt position as at 31 December reduced to $34 million, reflecting a strong balance sheet ahead of the ECSP investment phase. Slide 15 provides further detail on underlying EBITDAX in the half. This waterfall bridges first half FY '26 underlying EBITDAX of $100.3 million, back to the first half FY '25 result of $92.2 million. Increased gas sales volumes and higher average realized gas prices were the single largest drivers for the improved results. Oil production was down in the first half compared to the same period in FY '25, impacted by flooding in the Cooper Basin. As James stated earlier, production from our Cooper Basin interest is expected to recover in the second half of FY '26. The $4.5 million decrease in cost of sales was largely the result of lower Orbost production costs. As compared to first half FY '25, we did see an increase in certain other costs related to exploration and business development, including to support work associated with ECSP gas contracting. This was partly offset by lower G&A costs linked to savings realized from our continuous improvement program. On Slide 16, we provide a 6 monthly cash bridge from June to December 2025. Here, you can first see the contribution of operations, $98 million (sic) [ 90.8 million ]. This is total customer receipts less total cash OpEx, followed by the impact of restoration costs. After PRRT and interest costs, approximately $138 million in cash after operating cash flows remains. Other draws on cash for the period included cash payments for CapEx of $9.9 million. You can also clearly see here the debt repayments we made in the half, which stem from a combination of organic cash generation and the equity raising completed during the period. Cash at 31 December was $81.3 million. Moving now to our liquidity position on Slide 17. Our reserve-based loan, or RBL, provides financing flexibility and liquidity as the company enters its next leg of growth. The RBL facility limit of $480 million is supported by an assessed borrowing base that is fully available at present. The borrowing base reflects the company's strong credit quality, producing from low-cost conventional gas fields and selling most of our gas into fixed price, CPI indexed medium and long-term gas sales agreements to predominantly investment-grade offtakers. The RBL is a highly effective form of funding for the company, maximizing debt availability while offering a competitive cost of funds with debt service on the drawn portion B -- at BBSY plus 325 basis points. We do expect to draw against the debt facility at some point this calendar year as our CapEx profile increases. I'll now hand you over to Chad to provide an update on our major projects, sliding -- starting on Slide 19. Chad Wilson: Thanks, Ian. We remain very excited about growing production from the Otway Basin, and to that end, the ECSP made substantial progress during the first half of FY '26. I'll come to the live drilling results in a moment, but I wanted to remind listeners what the project means for Amplitude. The program involves new gas production from our existing Annie discovery and up to 3 additional fields in Isabella, Juliet and potentially Nestor, upon exploration success. There's over 260 billion cubic feet of gross mean unrisked prospective resource in the 3 exploration prospects, plus 65 petajoules of gross 2C at the discovered Annie field. Taken together, developing those resources would extend the production life of the Athena plant by over a decade from 2028. Upon exploration success, inclusive of Nestor, we continue to target a production plateau of over 110 terajoules per day for the first 4 years of ECSP production from Athena and the capacity of Athena to produce up to 150 terajoules per day means that we may have the ability to flex production up on peak demand dates or toll third-party gas through the plant. Contracting negotiations for ECSP gas supply are now very well advanced, and we expect to sign foundational gas supply agreements with multiple customers in the near-term. You will have heard Jane say before that there's no better projects in the oil and gas sector than ones that tie into nearby conventional fields to existing infrastructure. These types of projects are nearly always lower risk, faster to bring online and offer better economics. While significant upfront investment is required for the ECSP, the return on this investment comfortably exceeds our internal hurdle rates. We intend to proceed to a final investment decision to undertake the development phase of the project in the coming weeks. The ECSP is one of the most significant new domestic supply projects in Southeastern Australia and on success aims to produce enough gas to meet the needs of over 800,000 Victorian homes from as early as 2028. Moving on to Slide 20. While the recent results at Elanora were disappointing, we continued the ECSP campaign with the Isabella prospect, which is targeting a Waarre C reservoir completely separate to the Waarre A reservoir tested at Elanora. As we've said in the past, on success, Isabella is intended to be a producing field for the East Coast supply project, while evaluation of Elonora was intended to inform our longer term Otway Basin exploration and development plans. Another way to think about this is that Elanora is a cost-effective way of testing a large future exploration prospect, while the primary purpose of this well remains the discovery and development of gas from Isabella. The result at Elanora does not impact our views of the probability of success of Waarre C sand targets such as Isabella, Juliet or Nestor. Drilling of Isabella is very well progressed, and we expect to have initial results here in coming days. If gas is intersected in Isabella, evaluation of the discovery will be conducted to assess gas composition and quality of the reservoir. We plan to case and complete the well with the subsea tree upon success, incorporate a flow test, meaning it's ready for development as part of the ECSP. It's important to note that full evaluation of any discovery may take 1 week or 2 as the resource booking would coincide with our usual process around the end of the financial year. I'll move on to Slide 21 now. The potential restart of our Patricia Baleen field is a prime example of growth initiatives available within the Amplitude Energy portfolio, leveraging our existing infrastructure position connected to the East Coast gas market. Amplitude is currently well progressed through the select phase studies into the project. Current analysis indicates that Patricia Baleen could add around 4 to 10 terajoules per day of additional production through Orbost. There are minimal modifications required to the facility with the key works being focused on offshore repairs. The tight gas market and use of installed infrastructure means that this is a high-returning project and both value and earnings accretive. Amplitude anticipates entering FEED in this financial year following the completion of SELECT phase studies. SGH is also participating in the SELECT phase to assess long-term gas processing options through Orbost. I'll throw it back to Jane now for Slide 22, which helps explain why we are investing in these projects. Jane Norman: Thanks, Chad. I see gas demand growth as the dark hole of the energy transition story. For decades in the developed world, gas is slowly but steadily taking market share from coal in the power generation mix as we now face a new reality where AI and corresponding data center investment is forecast to supercharge global power generation investment. The IEA estimates aggregated global power investment grew at 12% CAGR between 2022 and 2025. Data center electricity demand is projected to double by 2030 and nearly double again by 2040. With 24/7 power needs, data center operators are unsurprisingly investing in conventional dispatchable sources of power like gas, due to its availability and reliability. Back at home, AE's most recent forecast show gas-fired power generation growing strongly as coal exits the market. Gas demand on peak days in the East Coast is projected to more than double, driven almost entirely by the need to firm renewable power generation. It's another reminder that gas is the true enabler of renewables transition and that, that transition isn't all about replacement, it's about stacking. As coal retires, firm capacity must step in where renewables fall short. Batteries manage minutes and hours. Gas carries the system through days and weeks. No alternative yet matches that role at scale or at any realistic cost. Australia does, of course, have gas in abundance. Based on Geoscience Australia data in the Otway and Gippsland basins alone, there is more than 2,000 petajoules of reserves and 4,000 petajoules of discovered resources. These basins are geologically proven, close to major markets and connected to existing infrastructure. They can be developed far faster and at far lower cost than relying on imported LNG from overseas, yet investment is being strangled by regulatory delays, policy uncertainties and political hesitation. The projects that Chad spoke to earlier clearly demonstrate that Amplitude Energy is playing its part on the supply side of the equation. At the same time, we estimate that we will spend nearly $20 million in environmental and other regulatory approvals alone just to get the ECSP up. The local gas industry is currently participating in the federal government's gas market review. We see this as an opportunity for policy changes to incentivize long-term investment certainty for proponents of domestic gas, like ourselves. There is much low-hanging fruit here that doesn't require taxpayer support or legislation changes in any case. These include quicker, more streamlined project approvals to bring gas to market faster, removal of redundant or duplicative industry regulation and bureaucracy, regular acreage releases in all jurisdictions and approval of seismic surveys, recognizing that without both of these, exploration for new resources is impossible and reform to address the onerous consultation burden for offshore gas exploration and development. I'll move to our second half outlook, now starting on Slide 24. Today, we have increased our FY '26 group production guidance to 73 to 77 terajoules equivalent per day, up from 69 to 74 terajoules equivalent per day. Our new production guidance is equivalent to 26.6 to 28.1 petajoules equivalent for FY '26. The increase is driven primarily by Orbost yet again outperforming our expectations at the start of FY '26, together with point forward scenario analysis. Our confidence in recent production rates being sustainable means the top end of the upgraded guidance range now assumes Orbost's production rates moderately above the prior nameplate capacity of 68 terajoules per day. FY '26 guidance for production expenses, other cost of sales and cash expenses and capital expenditure is unchanged. We are tracking well in all of these areas. I'll wrap now on Slide 25. We presented these 4 business priorities for FY '26 at our last results, and I find it useful to assess our performance based on the same objectives. The ECSP is well on track with FEED for the development phase now complete and drilling of the Isabella well underway. While Elanora did not deliver the result we wanted, we expect the results from Isabella very soon, which was always the potential producer field for ECSP. We are pleased that the well operations are running to budget and schedule. Foundation GSA negotiations are also going very well and are advanced. We expect to have more news on this front in coming weeks ahead of the FID on project development. We are ahead of our target to increase Orbost's production to over 70 terajoules per day by the end of this financial year. The plant has run above that level for much of January and early February. There remains potential to increase Orbost's production through further plant debottlenecking, reducing plant reliability losses and longer term through restarting the Patricia Baleen project. We have increased our realized gas prices through greater spot gas exposure, opportunistic contracting and finding new opportunities in higher-priced markets. We've started down the road of gaining access to the gas to electricity spark spread, and we have new contracts commencing this year which substantially increase our average contracted gas price. We have maintained our focus on the cost base, and we are well ahead of our target to reduce Orbost's production cost to below $2 per gigajoule. Our continuous improvement program continues to focus on other opportunities to do things better, reduce costs and improve productivity. That brings me to the end of the presentation today. To summarize, we are very pleased with our progress against our FY '26 priorities with records across all key operational and financial metrics in the first half and further production and gas price improvements expected, Amplitude takes excellent momentum into the second half. With potentially further production growth at Orbost, a 20% increase in contracted gas prices from the 1st January 2026 and continued cost control, the company is on track to deliver solid growth in underlying EBITDAX, operating margins and adjusted cash flow from operations for the full year. We have a very exciting next few months ahead of us on the ECSP with the Isabella drilling results, gas contract finalizations and development FID, all expected in the near-term. I'll end on that note and open the line for any questions. Operator: [Operator Instructions] Our first question comes from Gordon Ramsay with RBC Capital. Gordon Ramsay: Jane and Ian, nice to see you back in the industry. Great set of numbers. My question relates to exploration and the result from the Elanora well. I think there was a comment, and Chad, you might have made this. I just don't know how you can say that Elanora does not affect probability of success at other wells. So the first question I've got is, have you done a postmortem on Elanora? And what have you learned from that well result? And what does that mean for some of the other prospects in the area in terms of the interpretation of the seismic data? Jane Norman: Yes. Thanks, Gordon. So in terms of the Elanora result, there's a piece of work underway right away to assess how we could have got that amplitude support without gas-bearing sands. And what we see from the -- not only the amplitude response, but the characteristics of the reservoir, are that you need structure, reservoir, seal and charge. And so we're looking at where one of those might have been missing. And Chad will talk about that in more detail. Elanora was targeting Waarre A sands. The other prospects are targeting Waarre C sands. What we did get was information around depth of the sands and also confirmation of the seals. So I will hand over to Chad to address that in more detail. Chad Wilson: Yes, sure. So Elanora encountered really good, thick Waarre A sands in the reservoir, probably better than we expected actually for the quality of the reservoir. It was thicker and a bit deeper. We -- from logs, we passed through really good top seal, which was fantastic. The structure was definitely there. We've seen that through the seismic and everything looked good and conforming to the structure. And from a charge perspective, there's actually gas that in the Shipwreck Trough, pretty much persistent through the whole area. So we weren't really concerned about charge. When we started to look at all the seismic data, again, after we had the logging data and compare that to where the tops were all coming in for the different reservoirs and the different sands, what we found was that the leading theory currently is that there was a potential gas deep zone in the adjacent Elanora green sand where that green sand [ abunded ] up to the Waarre A across a fault that was previously thought to be ceiling. So that's kind of the Elanora result. In terms of the other prospects, the actual trapping mechanism and the geological structure for those other opportunities or other prospects is different than the Elanora prospect. And like we said, reservoir Waarre C is a very strong producing reservoir across the whole Otway Basin. The structures in each one of these prospects is independent of the Elanora structure. And the Juliet and Nestor structures are extremely simple structures. As I mentioned, charge is throughout and ubiquitous through the whole kind of area. And with the seals, we don't see the same seal potential issue in the other prospects that Elanora has found. Gordon Ramsay: Thank you very much for the detailed answer. My problem is I'm looking at Slide 20. And maybe it's an old cross-section and it's indicative. I don't have all the data. But when I look at the interpreted gas water contact for Elanora and then look at where Isabella gas water contact is interpreted, I can't help but thinking Isabella is going to be a smaller accumulation now because you didn't hit that gas water contact, if that is indicative of the mapping that was used for the prospective resource at Isabella. So what I'm saying is Isabella is going to be smaller if you do find gas and then what the other -- the next few prospects are quite small. So what does that mean in terms of the goal of filling up the Athena gas plant at least for the duration that you'd like to fill it up to? And does it put more pressure on the company to do M&A? Chad Wilson: Yes. I guess from the cartoon -- we could have updated the cartoon. With the results from -- as we were actually getting the data from the logging and seeing where the tops were coming in, we have moved the Isabella prospect slightly to further up dip. And the good news is that, that Waarre B [indiscernible] kind of quite shaley seal on the bottom, we did get confirmation of that through the expedited palynology. So we have really good confidence in that bottom seal, and we drilled through where we have really good confidence in that top seal. Operator: The next question comes from Dale Koenders with Barrenjoey. Dale Koenders: Unfortunately, my question is probably for Chad still. I just want to expand on what you're saying at Gordon like the -- I guess, the gas fee for the leakage explains the lack of gas, but what's not explained is why you've got the false positive from seismic amplitude versus the presence of gas, which is typically driven by a differential in density between the reservoirs. So I'm just wanted to know, have you got an explanation for that because that's obviously more of an issue for future targets than potentially the seal, which is isolated to Elonora? Chad Wilson: Yes. So that's the bit of work that Jane was talking about where we're going through that detailed quantitative seismic modeling project using the logging data that we had to tie that to the results that we were seeing and really testing to see what could have given that response. What I would say in the other prospects is there's 2 types of direct hydrocarbon indicators. There's the seismic response that we see and then there's flat spots in the seismic data as well. So for our other prospects, we do have flat spots on top of the seismic amplitude -- strong seismic amplitude support. Dale Koenders: Okay. Got you. That makes sense. Secondly, just maybe for Jane and for Ian, probability suggest you should find gas [ in ] next target. But what does FID look like if you don't on this project -- on this current target? Jane Norman: Yes. Look, thanks, Dale. The program was always backstopped by Annie, which is a discovery. And so it was around the opportunity to test a number of exploration targets in a program to understand which of those could be tied in. So the first well we're drilling is testing 2 reservoirs from one surface location. But on success, the plan is to keep the Isabella well as the producer. And the same with Juliet and Nestor. It was about testing exploration targets and then on success, taking them very quickly into development. So overall, with the risk -- the individual probabilities and then the risking across the whole program, there's a high chance of success. And it's really about adding resource to the -- any discovered number in order to move to a higher value, more economic project. Operator: The next question comes from the line of Nik Burns with Jarden Australia. Nik Burns: Again, congratulations on the record result here. Maybe switching talking about Orbost. So you reached 71 terajoules a day. Can you just talk about the performance of the plant operating at these higher levels, what challenges you're encountering at these rates? And I guess, anything you need to resolve around the plant for potentially being able to lift output sustainably higher from those levels? Jane Norman: Yes. Thanks, Nik. So the first step in this was to receive the pipeline capacity increase, that came through late last year. And that's then allowed us to start the trials to push above 68 TJs a day. And through that, we're seeing at times, there's a high pressure differential or pressure drop across the Sole pipeline, and that's ultimately limiting the throughput of the plant to the compression capacity, the South gas compressors. So we are working to try and remove the pressure drop across the pipeline. There are some minor CapEx instrument changes that we're planning to do in the next couple of months when the opportunity arises, and that will help remove one of the risks around flowing at this higher rate, and then we'll be able to push the plant higher. What we are seeing is that as the plant does go and run at higher rates, that helps clear this pipeline pressure drop. So it's incremental steps, but the next step is really to push up into that sort of mid -- low to mid-70s and then continue to monitor the pressure drop across the pipeline from there. Nik Burns: Just to be clear, you're hopeful you'll be able to be in a position to test those higher rates before the end of this financial year? Jane Norman: That's what we're targeting. Nik Burns: Right. Okay. And then you talked about Sole field performance supporting the higher rates as well, and you talked about that further technical studies underway to ascertain whether there is a potential contingent resource booking here. What data are you seeing at the field that gives you confidence there might be additional gas resources here beyond what's been booked? And I'm interested in the fact that you've talked about booking contingent resources rather than potentially increasing the reserve base 2P towards the 3P. How should we interpret that? Jane Norman: Yes. Sure. I'll hand to Chad. Chad Wilson: Yes. Thanks, Nik. Yes. As we've been running at those higher rates, all we're really getting is better and better flowing material balance data. As we did last year, what we ended up seeing was that the data was -- the data just couldn't support the 1P booking being as low as it was. And so once that became obvious that the 1P was there, you look at the 1P and the 3P, the new ranges for that and the 2P came out higher. We're continuing to see that really strong performance, and it appears that there's more energy in the system from gas than there is from water, like the aquifer providing some of that pressure support. So we just need some more running time to be able to make those decisions on that, but we're also seeing more capacity or gas energy in the system as a whole. And that's why we're looking at a contingent booking on top of that is it seems like there's more support coming from somewhere else. Operator: The next question comes from James Bullen with Canaccord Genuity. James Bullen: Congratulations on the result. Just around Nestor, so the JV hasn't approved that. What's holding that up? And do you need to complete the post on the reasons behind the false positive before it gets approved? Jane Norman: Thanks, James. So maybe if I just back up to when OG came into these assets, they acquired the Mitsui stake. And at that stage, the program was the combined Elanora, Isabella well, Juliet and Annie and all the long leads have been secured for those. The joint venture has approved acquiring the Nestor long lead so that we are in a position to take advantage of the rig being in the region, but we're yet to make a final decision to call that slot. So we're progressing and advancing everything as though we're going to do it, but we just haven't yet had to call that slot. So Nestor is a really attractive prospect. It used to be held by us 100%, but we have equalized the ownership with OG right across the Otway Basin to 50-50. So we're fully aligned on the economics. And so we raised equity late last year, as you know, to add that prospect to the program and really to take advantage of all the costs and the approval we already had in place from NOPSEMA to drill that as part of the program. James Bullen: Okay. And just around the potential at Sole and this potential 2C booking, is the best way for us to think about the size of the tank is still the same, but you're looking at higher recoveries from the reservoir? Chad Wilson: No. We're thinking maybe the size of the tank is a bit bigger. Operator: The next question comes from Declan Bonnick with Euroz Hartleys. Declan Bonnick: Great set of results. My question is on the ECSP foundation contracts. You spoke to the Orbost re-contracting hitting the mid-teens per gigajoule pricing. I'm just wondering how the pricing is looking for the ECSP contracts, if it's in the same ballpark? Jane Norman: Yes. Look, thanks, Declan. Yes, pricing is very consistent with our expectations and with recent deals that have been signed in the market. I think one development we have seen is that a number of the large customers are looking at LNG-linked pricing, which is typically a slope to oil as an alternative to fixed price contracts with CPI indexation, and that's really reflecting the alternative supply in the market being a netback from the Wandoan hub in Queensland or direct imports into one of the proposed regas terminals in the South. So that's the biggest change. But certainly, the fixed price CPI contracting is really aligned with recent deals we have done and others have done in the market. Operator: Ladies and gentlemen, this now concludes our question-and-answer session and does conclude today's conference as well. Thank you for your participation. Please disconnect your lines, and have a wonderful day.
Sam Wells: Good morning, everyone, and welcome to Appen's Full Year FY '25 Results Call. I'm Sam Wells from NWR, and I'm pleased to have joining me today from the company, CEO and Managing Director, Ryan Kolln; as well as Chief Financial Officer, Justin Miles. Following a brief summary of the results released to the ASX this morning, we will have some time for Q&A with the management team. There will be a choice of 2 options. First, research analysts will be able to raise your hand via Zoom, should you wish to ask a verbal question of the management team. and we'll also take written submitted questions via the Q&A function at the bottom of your screen from all investors. We will endeavor to get to the majority of questions asked; in some cases, combining questions on the same or similar topic. And thank you. Over to you, Ryan. Ryan Kolln: Thanks, Sam, and hi, everyone. Thank you all for joining Appen's FY '25 full year results presentation. I'll start on Page 3 of the presentation, where I'll walk through some highlights before passing to Justin. FY '25 was a year of meaningful progress for Appen. At the group level, we delivered $230.8 million in revenue, up 4.5% on FY '24 when you exclude the impact of Google. Growth was driven predominantly by new project wins and expansions in generative AI. Generative AI is a clear growth driver for the market and a positive signal that we are executing well against our strategy. On profitability, we delivered $12.2 million in underlying EBITDA, excluding FX. The full year margin was 5.3% with a strong end to the year with Q4 coming in at 18.2% EBITDA margin. Gross margins are moving in the right direction, driven by wins in higher-value generative AI work. We also continue to capture operational efficiencies through technology, innovation and automation. Now looking at our 2 segments. On Appen Global, the full year revenue was $127.9 million, which was down year-on-year. However, we ended the year on a high note with Q4 revenue of $41.4 million, up 56% on Q3 and EBITDA of $10.2 million at a 24.6% margin. The Q4 growth was predominantly driven by new project wins, including a $10 million generative AI opportunity that grew faster than we anticipated and has carried into FY '26. We continue to focus on the operational turnaround and talent is a major part of the shift we are making across Appen Global. In the last 12 months, we have added over 20 experts to the team coming from either customers or direct competitors. Appen China had an exceptional year, delivering $102.9 million in revenue, up 75% year-on-year with EBITDA up 640% to $10.6 million. Growth was driven by both new and expanding generative AI-related projects and the momentum heading into FY '26 is strong. Across the group, 44.1% of Q4 revenue came from generative AI, up from 34.8% a year ago. Finally, we closed the year with USD 59.8 million in cash on hand. We continue to drive operational efficiencies across the business. In FY '25, we realized $10 million in annualized cost efficiencies through technology and automation. In summary, FY '25 was a year that demonstrated real progress. Revenue growth, improving margins, exceptional performance from Appen China and strong momentum as we head into FY '26. We've built a stronger team, and we're winning in the right parts of the market, and we have the balance sheet to continue executing on our strategy. I'm proud of what the team has delivered, and I'm confident in our trajectory. With that, I'll hand over to Justin, who will take you through our financials in more detail. Justin Miles: Thank you, Ryan, and good morning, everyone. A reminder that we report in U.S. dollars and that all comparisons are to the year ended 31 December 2024, unless stated otherwise. Starting with the FY '25 profit and loss snapshot on Slide 5. As Ryan has already mentioned, revenue increased 4.5% to $230.8 million. This excludes the impact of Google. Within our operating segments, Appen China revenue grew by 74.8% to $102.9 million, with Appen Global down 21.1% to $127.9 million. Appen Global delivered a strong finish to the year, which was up 56% quarter-on-quarter. Growth in both segments is predominantly driven by new and expanding generative AI projects. Gross margin improved by 100 basis points to 40.3%, with the improvement driven by a greater mix of generative AI projects. Underlying EBITDA before FX grew 251% to $12.2 million. The increase was driven by gross margin improvement as well as the $10 million cost efficiencies achieved by technology and automation. The cost out is net of talent upgrades. I won't talk to Slide 6 as we've covered this data. So over to Appen Global revenue and EBITDA on Slide 7. The chart on the left shows quarterly revenue and on the right-hand side, it is underlying EBITDA. The chart shows strong momentum in Q4 for Appen Global. The Q4 growth was driven by new project wins and includes the $10 million-plus GenAI opportunity we previously announced. Gross margin improvement was achieved due to higher priority GenAI projects. In addition to the improved gross margins, the $10 million annualized cost efficiencies were achieved within the Appen Global segment. And as I just mentioned, the $10 million is net of talent upgrades, who along with the continued focus on data quality were a vital factor in winning and delivering new projects. It was a strong finish to the year with good momentum going into FY '26. However, the full year was impacted by lower volumes than expected in Q1 to Q3. Full year revenue was $127.9 million, down 21%, excluding the impact of Google, and underlying EBITDA was $5.8 million, down from $9.2 million in FY '24. Over to Slide 8, which shows quarterly revenue and underlying EBITDA for Appen China and reflects the strong market position Appen China continues to hold. Revenue grew each quarter with Appen China achieving $102.9 million in revenue for FY '25, which was 75% growth on FY '24. Growth was driven by new and expanding LLM-related projects. Appen China exited the year with annualized revenue exceeding $135 million. Pleasingly, in addition to revenue growth, profitability improved throughout the year with improved gross margins due to a greater mix of GenAI projects and increased revenue from high-margin prebuilt data sets. Appen China is also capturing scaling efficiencies due to tight OpEx controls as revenue expands. Turning to Slide 9 for the profit and loss summary. I won't talk to all the line items. However, there are a few additional points to highlight. The decrease in employee expenses reflects the benefit of cost-out efficiencies achieved in the Appen Global segment. It was partially offset by some incremental OpEx in Appen China to enable China's delivery of the strong revenue growth. Underlying NPAT improvement was minimal despite the EBITDA improvement due to an increase in noncash amortization. Statutory NPAT was impacted by an additional $5 million acceleration of noncash amortization in relation to acquired platforms. I'll finish up with the cash flow summary on Slide 10. The cash balance at the end of the period was $59.8 million, up $5 million from December 2024. The Australian dollar equivalent of the cash balance is AUD 89.5 million. Cash flow from operations improved by $23.4 million to $22.4 million. The year was positively impacted by the receipt of a payment from a major customer in the first week of January versus December 2024 as scheduled. However, adjusting for this still results in approximately 100% conversion of EBITDA to cash flow from operations. Cash flow used in investing activities was $3.5 million higher compared to FY '24 due to a slightly higher investment in product development and new facilities for the Appen China business. Cash used in financing activities of $4.9 million reflects lease payments. Cash was used to fund operations and CapEx. That concludes the financial performance slides. I'll now hand back to Ryan. Ryan Kolln: Thanks, Justin. I'll now provide an update about the market opportunity and our strategy. I'll start on Page 12 and explain why we're confident about the market that we're operating in. There are 3 structural trends that are driving demand for the kind of work that Appen does. And importantly, all 3 are linked to major economic drivers. The first is the globalization of consumer AI. As AI products are deployed across different countries and cultures, you need human data that reflects the cultural nuance. This is also directly linked to the digital advertising market. As AI powers more personalized, localized advertising experiences across global platforms, the demand for culturally and linguistically accurate data grows with it. That creates a sustained need for the kind of multilingual, multicultural data that sits at the core of what Appen has been doing for a very long time. The second is enterprise AI adoption. McKinsey estimates $2.6 trillion to $4.4 trillion of economic value as its stake across enterprise use cases. As companies move from experimentation to deployment, they need AI models that understand their industry and that requires expert-generated data. And layered on top of that, we're seeing real momentum in agentic AI. These are the systems that don't just answer questions, they take action autonomously. The model builders we work with are focusing heavily on agentic AI right now. It's still very early and moving very quickly, and these labs are actively experimenting and figuring out what good looks like. What's exciting for Appen is that we're in the room with them as they experiment, working closely alongside some of the leading AI labs as they explore and build out these capabilities. We have high expectation that this work will continue to evolve and be a major growth driver for Appen. The third is new form factors, particularly humanoid and industrial robotics. Models that interact with the physical world need data grounded in real-world examples. This is an area where we're already active in with projects covering robotic simulation and real-world data collection. The work we're doing now positions us well as this market develops and investment in robotics continues to grow. Moving on to Page 13. The market opportunity is clear, but what matters is whether we're actually winning projects in the right areas. This slide gives you a concrete view of where we're competing and where we're winning. These are examples of projects that either started in Q4 FY '25 or are commencing in Q1 FY '26. A few things stand out. We're landing projects with new frontier lab customers. That's meaningful because these relationships tend to expand over time. We're also expanding within existing relationships, winning new data modalities and new capabilities like coding with customers that we already work with. The previously announced $10 million-plus opportunity is worth highlighting. It grew faster than we anticipated, driven by the quality of our delivery. The customer expanded the project specifically because we exceeded their quality goals. This is the kind of outcome that builds long-term relationships and is currently ongoing with potential for continued expansion. We're also moving into more advanced projects, including domain-specific coding, robotic data simulation, multispeaker voice model training. These aren't commodity data tasks. They require specialist capabilities, and that's where Appen is increasingly competing and winning. On to Page 14. Winning the kind of work described on the prior page requires the right people with the right technical expertise. And over the last 12 months, we've made deliberate investments in our team. We've added more than 20 industry experts across go-to-market, operations and workforce management. On the go-to-market side, Brian Jenkins leads our sales team and bring experience from Scale AI and Snorkel, and a track record in enterprise sales at Salesforce and Oracle. On the operations side, Jeanine Sinanan-Singh brings a background in AI research from Surge AI and Microsoft with a computer science degree from Harvard. Francisco Rivera leads workforce operations, with experience scaling complex marketplace operations at Uber and Angi. We continue to grow the capability of the team to complement our historical strength at Appen. Moving on to Page 15. Underpinning our ability to deliver high-quality data to our clients is an asset that is difficult to replicate, our global workforce. This is no longer just a generic crowdsourced workforce. It's increasingly a verified pool of domain experts in fields ranging from computer science and law to finance, health science and engineering. When a customer needs domain-specific expertise at scale and with global reach, there are very few organizations that can deliver it. That's a structural advantage and it deepens as our workforce grows and our domain coverage expands. Bringing this together on Page 16, I want to be clear about why we think Appen is structurally well positioned and it comes down to 4 things. First, the next wave of AI data is squarely in our area of expertise. The shift towards generative AI, multimodal models and enterprise AI deployment requires exactly the type of complex domain-specific human-generated data that Appen specializes in. Second is our track record. 30 years of delivering complex large-scale data projects for the world's leading technology companies is not something that the newer competitors can replicate quickly. Particularly as the demand for AI globalization grows, our experiences operating across languages, cultures and regions at scale is a genuine differentiator. Third, our position in China. Appen China's revenue is now significantly larger than our nearest established local competitor. We're the top vendor of choice for Chinese technology companies and model builders. And as that market continues to grow, we are very well placed to grow with it. Fourth is technology. Our platforms and processes are built to scale and adapt with customer requirements. Technology is not just an efficiency lever for us. It's what allows us to take on more complex workflows, deliver them consistently and continue to improve our cost base. I'll now describe our 2026 focus areas and provide an outlook statement. On to Page 18. Our FY '26 priorities are focused and deliberate. There are 4 areas where we believe execution will drive the most value. Data quality is first and it sits above everything else. The reason customers choose Appen and expand with us is because we deliver quality. That doesn't happen by accident. It requires consistent investment in our processes, technology and people. Second is customer growth. We're directing our go-to-market effort towards the segment with the highest spend potential, hyperscalers and foundation model builders. These are the organizations driving the next wave of AI investment and deepening those relationships is where we see the greatest opportunity. Third is new data segments. We're actively co-innovating with our customers to expand into new data modalities and techniques. Working closely with our customers ensures we have close visibility into new growth vectors. And fourth is operational efficiency. We'll continue to drive technology-led efficiencies across the business, building on the $10 million in annualized cost savings we achieved in FY '25. We head into FY '26 with strong Q4 momentum, a clear strategy and a balance sheet that gives us the flexibility to execute. We're focused on building our trajectory and continuing to grow our position in the market. I'll close on Page 19 with an outlook statement. As shared throughout the presentation, we remain highly confident on the AI data market and the potential for Appen to meaningfully contribute to the development of leading foundation models. We continue to see positive signals on LLM-related growth, including from Appen Global and Appen China customers. Tight cost controls remain in place in keeping with the company's focus on managing costs in line with the revenue opportunity. As in previous years, Appen Global revenue continues to be mostly derived from project-based work and seasonality skews revenue to H2. Considering this, we provide the following FY '26 group guidance. Revenue of $270 million to $300 million and underlying EBITDA before FX margin of 5% to 10%. That finalizes our presentation today. I'll now hand back to Sam, who will moderate the Q&A. Sam Wells: Great. Thanks very much, Ryan, and thank you, Justin. [Operator Instructions] Our first question comes from Josh Kannourakis at Barrenjoey. Josh Kannourakis: First question, just with regard to talent. It's obviously been a big focus for you guys, and you have capitalized on some of the disruption at some of the other peers in the market. That obviously translated through to some good deals that have happened towards the end of last year. But can we talk about into '27 as you think to the pipeline, how much of these talent hires really opened up the pipeline and some of the customer relationships you've been able to do? Ryan Kolln: Yes. Thanks, Josh. Good question. The talent that we've brought into the business has enabled us to do far more technical work with our customers. So what it means is that we're really at the bleeding edge of the work and a lot of that work is very early with the customers. And how the LLM development cycles work at the moment, there's a lot of experimentation when we see a model technique that has a positive impact, those projects can expand really, really quickly. So what we're seeing at the moment is a lot more activity across the business in terms of the projects that we're doing, particularly in some of the more advanced types like we laid out in the presentation. And we're really confident that those early relationships we're building with the researchers, getting in on the ground floor on these new modeling techniques, will evolve into much, much larger projects over time. Josh Kannourakis: Perfect. And then just with regard to guidance, like obviously, you have stayed away in more recent times from doing it. So bringing a guidance range out there suggests a heightened level of confidence in this year. But can you talk us through a little bit more just around what needs to happen at maybe the upper and lower end of that guidance? And if there is continued development of some of these new customer relationships, what that means in terms of when there's upside risk to that as well? Ryan Kolln: Yes, sure. So look, we are feeling more confident and there's a few factors there. One is as China becomes a larger portion of our revenue, that is less variable to quarter-on-quarter shifts because it's -- in China, our customers come to us and ask more for an allocation of resources rather than a specific project base. So that gives us a lot more confidence in putting guidance. But in terms of the swings, we just need to be executing well against the projects that we have and making sure that we're catching the next wave of growth in the market that comes through these, like I said earlier, more innovative projects in areas that we know that there's market opportunity that we need to be breaking into. So with the team that we've got, with the projects that we're seeing at the moment, we feel really confident about the opportunity. Josh Kannourakis: Got it. The final one for me, just on the ad side of the business, like obviously, that's going to be a big focus, OpenAI specifically have noted that, you guys have a lot of specific expertise. Can we just flesh that out? I think it's worth fleshing out a little bit more around exactly how you would play into that and what you think that ecosystem might end up looking like effectively where you end up being able to be in that value chain going forward? Ryan Kolln: We're super bullish on continuing to support the digital advertising market. And there's 2 factors to it. Right now, my take is that there's going to be a pretty strong arms race in major U.S.-based technology companies. So I think Meta and Google, who have the dominant position in the market, but also OpenAI and X, formerly known as Twitter as an outsider. There's 2 real things that these companies are going to be focusing on. So one is building great consumer experiences and products, so people are spending their time on the platforms. And the second is building out a really effective digital advertising ecosystem, which makes it easier for advertisers to place ads on the systems, but they're also more effective and targeted. This is very similar to the search and ad relevance that Appen has been doing for a very long time. And what becomes really important to get these models to work, both on the experience side and the digital advertising side is making sure that they work at a global scale because what many of kind of the engineers and researchers would consider works well in the West Coast of the U.S. is very different to what's going to happen in Pakistan and India, in Southeast Asia. So getting the models to work at a global scale requires a lot of feedback about cultural nuance and specific training to make sure that the models are working in those geographical areas. Appen has got a tremendous amount of strength there, and we're already seeing some customers really lean into that. So we're super bullish on this next phase of the digital advertising arms race. Sam Wells: Next question comes from Conor O'Prey at Canaccord. Conor OPrey: Just -- maybe just a question on the -- how you see the unit economics stacking up for this year. China business, strong revenue trajectory, the ex China, the global business, less so. So would you expect a lower gross margin this year? And then with the sort of 23% revenue growth approximately at the midpoint of the range, do you need to invest in the cost base, the OpEx base to support that growth? Ryan Kolln: So I'll start with the second one. We don't see any requirement for any investment in the OpEx base to support the growth. So we're really confident in our OpEx base at the moment. In terms of the gross margin, look, it will play out on the mix between China and non-China, but also the gross margins that we see within the global business unit. But we're pretty comfortable when you look at the FY '25 gross margins, that that's something that we can achieve in FY '26. Sam Wells: Next question, we've got a couple coming through around the China business. Firstly, can you just elaborate on what's driven this growth, please? And specifically what type of customer? Ryan Kolln: Yes. So good question. We work with almost all of the major technology companies in China, which includes companies that are building the foundation models and incorporating them into their applications. So a big driver of growth has been the development and the implementation of generative AI models on 2 horizons. One is for the domestic China use, but it's also for Chinese companies that have international operations where we're helping them expand through data that represents the international markets that they operate in. So very heavily focused on generative AI, both for domestic applications in China and the international expansion. Sam Wells: And just in terms of concentration, specifically within that app in China business, can you elaborate on that at all with respect to top customer? Ryan Kolln: I can talk at a high level. It's a reasonably diversified mix of customers that make up our app in China revenue. Like I said, we work with many of the large players over there. So we're very comfortable with the composition of revenue, and we'll continue to look to drive revenue from those customers. Sam Wells: And with respect to, I think, the relative valuation you pointed out against the domestic peer, what's the company doing to realize this value discount? Ryan Kolln: So we point out the peer in terms of the relative market share that we're getting. We just continue to focus on operating the business. We think we've got a great asset in China. There's a great market opportunity. So it's heads down on focusing on the potential for China. Sam Wells: And just one final question on China. When you think about the performance of the China business versus the, I guess, the contrast this financial year with the Appen Global business, how do you think about allocation of resources into the Appen Global business versus Appen China? Ryan Kolln: Yes. So we do look at a divisional standpoint, and we look at the needs of both of the business units and what we consider appropriate investment, and we make our decisions appropriately. We've been investing in growing China for a while now. We're starting to see the payoff now, which is great. We look to get operational leverage. China -- sorry, Appen Global, we have, as seen through last year, a bit more of a lumpy profile, which is driven by the project nature, but we're confident that the spend levels that we've got at the moment that we can deliver meaningful growth in Appen Global. Sam Wells: Okay. Great. And just on seasonality, can you elaborate on historical seasonality, including first half, second half skew, both on a revenue and EBITDA perspective? And in relation to EBITDA, what specific initiatives have you got in place to drive EBITDA margins through the balance of [ FY '26 ]? Ryan Kolln: Yes. I'll start on the EBITDA margin. Look, we are focused on revenue growth in the business. And as I said, we don't need to add any cost to the business from an OpEx standpoint. Clearly, our crowd costs flex up and down, but we feel really strong about the operating leverage that we can get in the business, which will drive EBITDA as revenue grows. In terms of the first half, second half skew, look, traditionally, as a business, we have seen a skew towards the second half, typically what we see in January and February from some of our customers that run a calendar year planning cycle that there is a bit of replanning that can occur, and that's kind of one of the main factors that drives the skew. Sam Wells: Next question is coming from Jennifer at Jefferies. Jennifer Xu: Just a couple from me. Probably you already touched on some already. So the first one is still about the skew. What you're talking about is traditionally in line with previous. But how do we look at the global and China 2 segments individually? Ryan Kolln: Yes. So China is a little bit harder to call out because it has been driving in the right direction. I would think of it more of an Appen Global skew where we see the mix -- we see more of a H2 being a bit heavier than H1. Jennifer Xu: All right. And on the margins, could you also give us a bit more color on China margin going forward, like financial year '26 and beyond given the customers and the product mix dynamics? Ryan Kolln: Like I said, we're starting to see some operating leverage in the China business, which is really good, and we see that through the kind of improving EBITDA lines. So we feel really confident about kind of that margin trend continuing as revenue grows. Sam Wells: Next question just on cash balance. Do you expect your cash balance to continue to grow further by the end of this calendar and financial? Justin Miles: I'll take that one, Ryan. So the cash on the balance sheet is there to support the working capital requirements. Obviously, it's a decent amount of working capital required as we grow quickly. And that's because we pay the crowd ahead of getting customer receipts in the door. So there is some working capital needed. Obviously, timing impacts it, too, when we're looking at it as at date, at the end of the year or whatever. But as we've kind of called out, we're very confident in the year, we're driving towards profitability. So naturally, you would expect the cash balance to go up over time. Sam Wells: Great. Thank you. How is Appen adapting to the rise of synthetic data and automation? And specifically, is there any second order impact of these observations or trends? Ryan Kolln: Yes, great question. So synthetic data is a really important part of the market. And we're incorporating that into a lot of the projects that we're delivering for our customers, where there's a mix of synthetic data and human data. So it really comes through the solutioning that we're bringing, which is far more, as I called out in the presentation, far more consultative, much more tech-led in the solutioning. So we're definitely incorporating all of the techniques that we can to deliver data for our customers that are high quality, good unit economics, which definitely includes synthetic data. Sam Wells: Thank you. And maybe just time for one more question, more around the longer term. How does Appen -- what areas does Appen see the biggest growth opportunities over the next few years? And how do you think about long-term margins for the business once fully scaled and automated? Ryan Kolln: I think I'll refer back to the presentation where we called out 3 areas that we see really significant growth potential. So first is the B2C market, which is fueled by the digital advertising spend. So we think there's huge opportunity for the globalization of consumer-based AI models. Secondly is the enterprise focus with a real steer towards agentic AI. We are seeing agentica has been around for a while, but we're seeing huge focus from the foundation model builders on domain and expert-specific agentic AI models. We think that's a real area of growth. And then new form factors like robotics, like new language models, AR/VR. I think there's many things that will continue to evolve in the AI market that we don't have great visibility of at the moment, which is really exciting for us as we look towards the future. In terms of margin, we're looking to build a high-growth business with sustainable margins and supporting our customers, delivering high quality. We've put out a longer-term end of FY '27 target of 10%. So I'll leave that point out there now. But over the longer period, again, just driving a healthy business is the focus. Sam Wells: Great. Thank you. I think that's all the time we have for questions today. If you do have any follow-ups, please feel free to e-mail them through, and we'll endeavor to come back to you. And maybe with that, Ryan, I'll just pass it back to yourself and/or Justin for any closing comments. Ryan Kolln: Yes. Thanks, Sam. So thanks, everyone, for joining the call today. We really appreciate the support. I'll just summarize FY '25. Look, it was a year where we demonstrated real progress at Appen and strong momentum heading into FY '26. We're highly confident on the AI data market and the potential to meaningfully contribute to the development of leading foundation models. We've built a stronger team, and we're winning in the right parts of the market, which gives us huge confidence in both FY '26 and beyond. I'm super proud of what the team has delivered and really confident in our trajectory. So thanks again for your support. We really appreciate it and looking forward to seeing you at our next market update. Sam Wells: Great. Thank you very much for joining today's Appen FY '26 results call. Thank you, and enjoy the rest of your day. Goodbye.
Christie Masoner: Welcome to GoDaddy's Fourth Quarter and Full Year 2025 Earnings Call. Thank you for joining us. I'm Christie Masoner, VP of Investor Relations. And with me today are Aman Bhutani, Chief Executive Officer; and Mark McCaffrey, Chief Financial Officer. Following prepared remarks, we will open up the call for your questions. [Operator Instructions] On today's call, we'll be referencing both GAAP and non-GAAP financial measures and other operating and business metrics. A discussion of why we use non-GAAP financial measures and reconciliations of our non-GAAP financial measures to their GAAP equivalents may be found in the presentation posted on our Investor Relations site at investors.godaddy.net or in today's earnings release on our Form 8-K furnished with the SEC. Growth rates represent year-over-year comparisons unless otherwise noted. The matters we'll be discussing today include forward-looking statements, such as those related to future financial results and our strategies or objectives with respect to future operations. These forward-looking statements are subject to risks and uncertainties that are discussed in detail in our periodic SEC filings. Actual results may differ materially from those contained in forward-looking statements. Any forward-looking statements that we make on this call are based on assumptions as of today, February 24, 2026. And except to the extent required by law, we undertake no obligation to update these statements because of new information or future events. With that, I'm happy to introduce Aman. Amanpal Bhutani: Good afternoon, and thank you for joining us. At GoDaddy, our mission is to empower everyday entrepreneurs and make opportunity more inclusive for all. We serve millions of micro businesses around the world who rely on us to power their digital presence. By seamlessly connecting identity, presence and commerce into a unified technology platform at a compelling value, we give entrepreneurs the infrastructure they need to manage their ventures. Starting with 2025 results, we delivered bookings growth of 7% and expanded normalized EBITDA margin to 32% for the full year. This margin expansion reflects ongoing operational execution, reduced cycle times and improved structural leverage, driving strong free cash flow growth of 19%. Importantly, we achieved this while continuing to embrace and develop AI tools and innovative solutions for our customers. These results demonstrate the strong earnings power of our integrated platform and the progress we are making towards our financial North Star. As we look ahead, the pace of change driven by AI continues to accelerate. AI is reshaping how businesses are built and run. Customer expectations around speed, automation and integration are unprecedented. Our global brand, domain leadership, platform scale, engineering talent, velocity of execution and Care organization provide competitive advantages that will continue to differentiate us as the landscape evolves. GoDaddy is adapting with a sharpened and deliberate strategy that builds on these competitive advantages and drives long-term shareholder value. Typically, I walk through our initiatives, including pricing and bundling, seamless experience and commerce. We continue to execute well on these priorities, and they remain foundational to how we run and grow the business every day. Today, I am focusing the conversation on the forces reshaping the world, including our AI journey, our competitive positioning and why we believe GoDaddy is positioned to win. We have accelerated our path to offering the best AI native products and experiences for our current and future customers. Over the last quarter, we have made strong progress on the following 3 components of our AI journey. First, evolving Airo to be the agentic operating system for small businesses brought to life on Airo.ai; second, driving efficiency by leveraging AI adoption across all functions. And third, powering AI agents on the Agentic Open Internet with Agent Name Service. Beginning with Airo, we have made meaningful progress evolving Airo from a generative AI experience into an agentic operating system for small businesses. Our team is building agentic AI experiences that feel like magic, by effortlessly handling customers as jobs to be done, then suggesting the next best action it can take for them. Airo.ai brings this to life. We launched Airo.ai in beta late last year and are ramping traffic this quarter. Airo.ai already has 25 agents live and more are on the way. These agents autonomously perform tasks across the entrepreneurs wheel, including business idea validation, domain registration, website building, application building, marketing tools, compliance and much more. What differentiates GoDaddy is our more than 20 million customers, decades of proprietary behavioral data and deep relationships across identity, presence and commerce, and we are uniquely positioned to train, refine and scale these agents in ways that are grounded in real customer needs. Our distribution at the top of the funnel, combined with an integrated platform and 24/7 care uniquely positions us to deploy agentic capabilities at scale while maintaining trust and reliability. Creating and optimizing this experience is a meaningful part of the opportunity at GoDaddy, and we are capturing value through paywalls within the experience. Engagement continues to build and as adoption scales and monetization becomes more meaningful, we will provide greater visibility into the underlying performance metrics. Second, as we embed AI across the company, we are reducing cycle times and improving how work gets done. AI tools are now generating the majority of our code. New code bases are almost entirely AI-generated, shipping new features at breathtaking velocity and multiple experiments on agent-only dev teams are underway. In our operations, we are excited about our internal AI sales agent, which handles one of the most complex sales use cases without human intervention. In the first 6 weeks of 2026, the sales agent handled thousands of voice calls and text chats with healthy conversion rates and very high engagement rates. As we scale this, we expect to build on the leverage we have already seen in care over the last few years and create new opportunities for sales as well. We have also built AI agents to handle tasks spanning from financial planning to compliance to marketing reviews and much more. As these examples demonstrate, AI adoption gives us confidence that we can drive further efficiencies in our business that will build on the margin improvement we have delivered over the last few years. The third update builds on our global domain leadership to extend digital identity into the agentic era through Agent Name Service or ANS. ANS is designed to anchor agent identity to the global and public domain-based infrastructure called Domain Name System or DNS. This is a unique aspect of our solution that provides multiple benefits and leverages existing Internet infrastructure by linking agents to domain-based identity, ANS introduces a verifiable layer of trust in an increasingly automated environment. And because ANS publishes to DNS, verified agent identities are discoverable worldwide within seconds using infrastructure that already supports identity and authentication across the Internet today. We are pleased to announce that last week, MuleSoft, a Salesforce company and GoDaddy launched an integration between MuleSoft's Agentic Fabric and GoDaddy ANS. This represents an important step in validating the framework and extending ANS into enterprise-grade workflows. ANS has the potential to create monetization similar to domain registration, extending GoDaddy's infrastructure leadership into the agentic economy while reinforcing our position at the center of digital identity. I also want to share a couple of updates on our evolving go-to-market and product efforts. Domains has been and will continue to be GoDaddy's strong, durable cash-generative engine serving as a long-term funnel to drive GoDaddy's growth. To further build on this resilient foundation and bring more quality customers onto the platform, this quarter, we expanded our go-to-market approach with a streamlined purchase experience for new domain customers. Our objective is to broaden the top of the funnel, while strengthening the long-term opportunity for lifetime value expansion. We activated our marketing channels on the streamlined experience and introduced a promotional price for .com domains with a 1-year term. The approach successfully increased new customer volume that purchased domain units with 1-year terms. But the demand for this offer was greater than we expected. And the shift in term mix, combined with the promotional price reduced up front bookings and near-term revenue. Mark will cover the numbers on this in his section. This new cohort of customers had solid attach behavior and post-purchase activation close to our other 1-year cohorts. This early data and our history of strong cross-sell capabilities and customer retention gives us confidence that with iteration, we can optimize this path. We are refining our approach in a manner that balances increased acquisition of new high-intent customers on one side with longer term and higher attach on the other, creating overall greater long-term value. In February, we saw improvement with this effort, and our team is focused on unlocking this value. On the product side, we are excited to share a significant upgrade to Websites + Marketing with a new website builder that brings together powerful AI features and a powerful editor as well. The experience starts with a fully built website based on a description and then allows easy editing with an expanded set of design options in the editor or if the customer prefers, they can continue with an AI-powered chat-based interface. Optimized for GoDaddy customers, the new builder creates design-led sites with amazing ease and at a cost that meets our and our customers' expectations. I am excited to share that new customers are already being opted into this experience. We plan to move fast on this transition. But given the scale of Websites + Marketing, we expect it to take a few months. I look forward to sharing a broader update on this next quarter. In closing, we are executing a sharpened and deliberate strategy in a period of rapid technological change, leveraging the trust we have built with more than 20 million customers. We are leaning into our competitive strengths of domain leadership, global brand awareness, platform scale, engineering talent, velocity of execution and care. We are advancing our AI journey, evolving our go-to-market engine and scaling innovation in our products with measurable proof points and financial discipline. As we look to 2026 and beyond, our path forward is clear. The market opportunity is significant. Our competitive position is strong, and we have the financial flexibility to win. With that, here's Mark. Mark McCaffrey: Thanks, Aman, and good afternoon, everyone. As Aman mentioned, we are operating from a position of strength. We have a business with strong operating leverage that drives meaningful compounding free cash flow. This foundation provides us with the flexibility to invest in high conviction opportunities while continuing to expand margins. And our fourth quarter results demonstrate that. We delivered revenue at the high end of our guidance and exceeded our normalized EBITDA margin and free cash flow targets. Our new 1-year domain offer is driving strong subscription unit growth and solid attach. At the same time, we are building AI tools that enable customers to thrive in the agentic world. While small, relative to our overall business, Airo.ai is already monetized with growing adoption. Through ANS, we are expanding our existing digital identity infrastructure for the long term. We believe this creates an opportunity for GoDaddy to expand our infrastructure offerings beyond hosting and the primary and secondary domain markets. With that, let me first cover our financial results. Beginning with Q4 results, total revenue grew 7% on a reported and constant currency basis to $1.3 billion, coming in at the high end of our guided range. International revenue grew 10% to $420 million and ARR grew 7% to $4.3 billion. For the Applications & Commerce segment, we drove 13% growth in revenue to $498 million on continued solid adoption and attach of our subscription-based solutions. Segment EBITDA margin improved 40 basis points to 47%. A&C ARR grew 12%. Our Core Platform segment delivered revenue growth of 3% to $776 million, driven by the continued strength in aftermarket, up 8% as well as 5% growth in primary domains, partially offset by the softness in non-core GoDaddy hosting. Segment EBITDA margin expanded 70 basis points to 35%. We drove normalized EBITDA growth of 12% in the fourth quarter to $431 million and delivered an expanded margin of 34%, up 160 basis points and exceeding our guide. Continued operational execution aided by AI-driven efficiencies were the main drivers of expansion. Total bookings grew 5% to $1.3 billion largely reflecting the headwinds from .CO and the mix shift towards shorter initial contract terms. A&C bookings grew 11% and Core Platform bookings grew 1%, free cash flow grew 8% to $370 million. Moving on to our annual financial results. We delivered approximately $5 billion in revenue, representing growth of 8% on our reported and constant currency basis. International revenue grew 11% to $1.6 billion. A&C revenue grew 14% to $1.9 billion, and Core Platform revenue grew 5% to $3.1 billion. Total bookings grew 7% on both a reported and a constant currency basis. Growth spanned across our business, reflecting continued solid adoption of our solutions as well as strength in primary domains and strong aftermarket performance. Driving this growth is stronger customer engagement across our products, including productivity and websites. Domains remain the front door to our platform, attracting high-intent customers at a pivotal moment in their journey. Airo personalizes the experience that follows accelerating discovery and increasing attach across identity, presence and commerce. Since its launch, the cumulative annual spend from Airo cohorts has grown in the high teens. Additionally, the velocity of a second product attach accelerated by nearly 30% relative to non-Airo cohorts. This dynamic is expanding lifetime value across our customer base. We see this most clearly in our highest value cohorts who spend more than $500 annually, which grew 11% and that represent approximately 10% of our total base. These customers have meaningfully higher second and third product attach rates and near perfect retention. The result is compounding value creation with ARPU increasing 10% to $242 and overall retention rates rising above 85%. Turning to margin and free cash flow. Our performance reflects the health of our model. Full year normalized EBITDA grew 14% to $1.6 billion and a margin of 32%, representing 150 basis points of expansion over the prior year. Over the past 5 years, cumulative margin expansion of 1,000 basis points reflects our ability to scale efficiently while continuing to invest in the business. This margin expansion flows through directly to cash generation. Free cash flow grew a robust 19% to $1.6 billion with a normalized EBITDA to free cash flow conversion of greater than 1:1. We exited the year with $1.1 billion in cash and total liquidity of $2.1 billion. Net debt was $2.7 billion, representing net leverage of 1.6x on a trailing 12-month basis and within our target range. On shareholder returns, we remain active and opportunistic. In 2025, we deployed 100% of our free cash flow, repurchasing 10.2 million shares totaling $1.6 billion, while maintaining our balance sheet strength. Since 2021, our share repurchase programs have resulted in a gross reduction in fully diluted shares outstanding of approximately 33% and we ended the year with 136 million shares outstanding. Before turning to detailed guidance, let me outline the impact of the go-to-market and product evolution we spoke about earlier. The evolved go-to-market approach increased the mix of 1-year contract terms and reduced initial order sizes for the new cohort. This created a near-term trade-off in our bookings and revenue that carries into our 2026 outlook. As a result, we expect bookings growth rates to trail revenue growth rates in the first quarter by a few points from the combined effect of this go-to-market evolution, the .CO contract termination and tough compare on strong aftermarket performance last year. For the full year, we expect bookings and revenue growth rates to be relatively on par. We also anticipate a modest impact on reported revenue growth rates for the year in both Core Platform and A&C segments as the promotional price is allocated to all products included in the initial purchase. Importantly, total bookings dollars are expected to remain ahead of total revenue dollars throughout the year. With this, our full year revenue outlook incorporates just over 200 basis points of cumulative impact from the expiration of the .CO registry contract, the continued exclusion of high-value aftermarket transactions and the go-to-market and product evolution we spoke about. The .CO and aftermarket impacts represent approximately 2/3 of this amount, while 1/3 is from the go-to-market and product evolution. For the full year, we expect total revenue to be within a range of $5.195 billion to $5.275 billion, representing growth of approximately 6% at the midpoint with A&C revenue growth in the low double digits and Core Platform growth in the low single digits. We expect normalized EBITDA margin to exceed our Investor Day target of approximately 33%. This reflects continued operational efficiencies and AI-driven productivity gains, slightly offset by increased AI cost. We expect to drive free cash flow of approximately $1.8 billion maintaining greater than a 1:1 conversion for the full year. The model continues to demonstrate structural cash generation strength and we continue to be on track to exceed our Investor Day North Star CAGR of 20%. For Q1 2026, we expect total revenue of $1.25 billion to $1.27 billion, representing approximately 6% growth at the midpoint of the range, with A&C growth in the low double digits and Core Platform growth in the low single digits. We project a Q1 normalized EBITDA margin of approximately 32%, an expansion of about 150 basis points over the prior year. On capital allocation, we maintain our returns-based framework, and we'll carefully evaluate all opportunities to drive shareholder return. In closing, let me reinforce 3 key points. First, we operate a durable cash-generative model, supported by strong customer cohorts, expanding ARPU and consistently high customer retention. We are ahead of the financial North Star target CAGR we laid out at our last Investor Day. Second, the near-term impact on bookings reflects deliberate decisions. The underlying engagement metrics remain strong and the structural advantages of our integrated platform position us well for sustained growth. Third, we are executing from a position of financial strength. We are expanding margins, generating robust compounding free cash flow with a strong balance sheet that creates long-term value for shareholders. We look forward to talking about these and other updates at an investor event later this year. With that, I'll turn it back to Christie for Q&A. Christie Masoner: Thanks, Mark. [Operator Instructions] Our first question comes from the line of Vikram Kesavabhotla from Baird. Vikram Kesavabhotla: My first one is on this promotional offer with .com. Can you talk more about why you decided to make that change in your go-to-market strategy? And you referenced seeing some improvements in February. Could you talk more about what you're observing there. And I guess from a higher level, do you think this was a onetime headwind to bookings in 2026? Or is there a potential for this change in the strategy to weigh on bookings as we move beyond this year? And then my second question is on AI costs. As you look at the user behavior recently as well as your product road map that you have planned ahead, how would you characterize your visibility into AI costs at this stage? And how should investors think about the impact to your gross and EBITDA margins as the product evolves. Amanpal Bhutani: Thanks, Vik. This is Aman. Let me take the go-to-market. I'll turn it to Mark for the 2026 comment, and then I'll come back for the AI cost structure. So the go-to-market evolution is really about opening up the top of the funnel and is attracting a lot more high-intent customers. And it's more than just an offer. It's a path, an optimized path that allows customers to come in and convert at a much, much higher rate. So there are 3 core components to it. There's the new path, the optimized path, the offer and the marketing channels that we enable to sort of drive traffic into it. Overall, we're very happy with the results. It attracted a lot of new customers. It was a bit more successful than we thought. So Mike can talk again, some of the financial impact of it. But the improvement that you asked about in February is us optimizing that path and the marketing channels and making sure that we're sort of routing customers to the right places. So that everyone isn't just going into the offer or into a 1-year term, and then we get sort of back to the more expanded view. The other area that we're continuing to work is that these customers, these new cohorts that bought with the offer, they had really good attach rates comparable to our sort of 1 year -- other 1-year cohort. But we think we can do more there. We think we can attach better than what we did over the last couple of months. And as that gets better and better, it means more and more lifetime value. I'll turn to Mark. Mark McCaffrey: Yes, absolutely. Vik, a couple of things going on here. Number one, the -- let's look at it from the multiyear terms to the annual terms. This is impacting our bookings, but has relatively little impact on revenue itself because the timing of the revenue recognition stays consistent. So that's one aspect of it. The other is there is a reduction in our average order size at initiation related to the discount that gets allocated amongst all the products, that does have a little bit of impact on revenue in and of itself. As time goes on, volume picks up, we get better at this offer. We think the major impact is going to be at the end of this year and going into Q1, but we expect that bookings to be in parity for the most part with revenue by the time we get to the end of the year. So we are looking at this as a cumulative improvement as the year goes on. On the AI costs, I'll start, maybe Aman, you can finish. We're very disciplined on the AI cost end of it. We look at where we're spending the money and where we have proof points so that we'll see the return of those monies, whether that's in the innovation cycle or in the product cycle in and of itself. So we feel very good about our visibility and our ability to hit our margins that we set out there for 2026. Amanpal Bhutani: Yes. I think we've been ahead on the margin over the last 2-plus years, right? And it's because we have a disciplined process internally on it. And even as we look to invest in AI or the AI products, as we talked today, we have a couple of exciting product launches powered by AI, all of those sort of followed 2 core things. One, all the AI costs go through one interface so that we are able to stay on top of it very, very closely. It doesn't matter if that's a developer. It doesn't matter if it's one of the products that our customers are using. And two, we are very focused on solving for the objective function where we create products that are at a cost that works for our customers. So what you'll continually see in our products is an already optimized AI solution that then leads to lower cost than what you might see at some other companies. So those 2 things together, the visibility and the operational focus on it and the technological difference of just optimizing for that right within the product is what gives us confidence that we can continue to maintain the margin guidance that Mark has talked about while continuing to fund more and more use of AI, both within the company and with our products. Christie Masoner: Our next question comes from the line of Ken Wong from Oppenheimer. Hoi-Fung Wong: One question that we've been getting in our inbox on this new go-to-market change, was it necessitated by any changes you saw in your pre-existing pipeline, whether it was just pipeline build, conversion? Or is this just really you guys kind of trying to open the funnel a little bit and pursuing a different customer type. Amanpal Bhutani: I think, Ken, both things are true. The world is changing very, very quickly, and I don't think anyone is insulated from it. The idea was to improve our go-to-market approach to expand that approach, but we're sort of conscious of what's changing in the world. When I think about the key metrics that we look at we're looking at traffic. We're looking at conversion. We're looking at attach. We're looking at product activation and we're looking at renewals. And we're very, very strong across those metrics, right? We have strong experimentation muscle in the company that if I go backwards, puts a lot of attention on renewals and activation on attach and conversion. But expanding the top of the funnel in a fast-changing world, gives us more levers as things evolve. As an example, I think, a lot of companies are facing challenges of traffic from search. When you look at GoDaddy, we continue to have a healthy traffic funnel because, one, we're able to go into other channels to drive traffic and two, we're constantly able to improve conversion as we do that. So we're constantly looking at those 5 things in the context of what's happening in the world. Mark McCaffrey: Yes. Our strategy around attracting high-intent customers hasn't changed. We are seeing these customers come in. They're attaching to a second product, similar to other 1-year terms that we had out there. And that gives us a lot more stickiness within that client base that we feel we have the ability to go after. The great news was the offer met a demand cycle that was higher than we expected, and we were able to bring those customers in. So it was a good thing. Hoi-Fung Wong: Fantastic. Really appreciate the insights there. And then, Mark, just some clarity on the bookings commentary. So you mentioned lagging in Q1 relative to revenue. Revenue is fairly consistent from 1Q to 4Q and if it ends up at parity for the year, is it fair to assume that the bookings should outpace revenue as we exit the year? Is that the right interpretation of some of those moving pieces? Mark McCaffrey: Yes, that's right, Ken. We expect to see that the bookings will get stronger throughout the year on a couple of different elements, right? One, we start to add more volume based on this offer. So we're seeing the increase in that. We're also starting to see better attach and the elements that drive our long-term valuation model. So that should improve through the year, and you're looking at it correctly. Christie Masoner: Our next question comes from the line of Naved Khan from B. Riley. Naved Khan: Great. So Mark, you said that there was a little bit of a reduction in AOS in this GTM, the new go-to-market, which had some impact on revenue. So is that then fair for me to say that the trade-off between volume versus the average order sizes, you're getting more volume but not necessarily making up in revenue in year 1. And then what gives you the confidence that this new streamlined experience is then the right trade-off for a higher LTV? Mark McCaffrey: Yes. And Naved, thanks for the question. Just to start, is the shift in terms that we called out, it impacts bookings, right, and not necessarily impacts revenue because of the timing of revenue is pretty consistent regardless of whether -- when you get the cash upfront. There is a slight impact on the AOS, like you mentioned, that will impact us going forward, but that should work itself out as we get to the more volumes and the higher attach that we talked about. Amanpal Bhutani: Yes. And overall, Naved, what gives us confidence about the long term, of course, we'll really know when they renew, right? But we have a number of markers along the way in terms of how customers attach post purchase, what do they buy in the purchase and how they activate products. And those are the data points that we're looking at. And across those data points, when they look very similar to other customers, right? We know exactly sort of what we have to tweak or make work to get these customers to be just as part of the high intent -- the bundle of high-intent customers we have, right? So those are the metrics we are looking at. These customers look very good to us. We think we can do a lot more and actually get the best of both worlds where we get a lot more new customers and we get them to renew at good rates as well. Naved Khan: And then maybe just to kind of build on that. So are you also experimenting with the LLMs for customer acquisition? What are you doing on that front? Amanpal Bhutani: Yes. So part of what we did with this chain is when I talked about the optimized path, it allowed LLMs to review some of our merchandising inflows much better. That's going to be an ongoing work stream. We expect that, that will continue to evolve over time, the LLMs don't switch all of a sudden. But by giving them a clearer path through GoDaddy, we think over time, that will help us as well. But right now, we're not sort of baking any of that in. We want to provide this sort of consistent optimized experience to our customers and the LLM should pick it up over time. Christie Masoner: Our next question comes from the line of Mark Zgutowicz from Benchmark. Mark Zgutowicz: Just maybe a follow-up on the underlying A&C bookings growth, which is a slight decel in fourth quarter. Can you just maybe differentiate between pricing and bundling versus perhaps GPV impacts that you saw on A&C bookings growth. And then my second question is around KPIs with Airo.ai, beta test. Just hoping you could maybe share some there and perhaps relative ARPU that you're seeing. And then when do you expect to formally GA Airo.ai for Websites + Marketing, Managed WordPress and application development. And could that perhaps bring some incrementality to A&C bookings growth this year? Mark McCaffrey: Yes. Thanks, Mark. I'll take the first part. On the A&C growth, Think about it this way. We offer the discount out there, although the discount was specific to the domain because a large amount of the initial orders also contain product attached that are in the A&C, we have to allocate that discount to both A&C product as well as the domain. So what you're seeing in Q4 bookings is a lot of that taking place, and that's the large contributor to where we ended up for bookings in A&C. Amanpal Bhutani: And in terms of Airo.ai, taking that to GA and having the new websites plus marketing website builder within it as well. You're actually going to start seeing the product come in very, very quickly, just so you'll see a change, I think, earlier next week in terms of the website builder. And you'll see it evolve a little bit after that. In terms of GA, we're just waiting to get some data in terms of product market fit. We just want to ramp the traffic to a certain amount organically before we call it general release and start driving traffic externally as well. Sorry, to the last part, you asked about incrementality. I can quickly take that or Mark. We haven't built that much for sort of Airo.AI, obviously, it's all completely new. It went into beta just very, very late last year. But any sort of wins with the new website builder or with Airo.AI would be incremental to what Mark is guiding. Christie Masoner: Our next question comes from the line of Trevor Young from Barclays. Trevor Young: First one, just on active customers. Second quarter in a row here with modest sequential growth, but still trending down year-on-year. As we look into '26, should we expect momentum to build here? And will this be the year in which year-on-year growth turns positive? Is this an important metric in your view? And would the 1-year domain promo be a tailwind to that. That's my first question. Mark McCaffrey: Yes. Trevor, thanks. And yes, we saw a sequential growth in the customers quarter-over-quarter. We continue to like our ability to attract high intent customers and our strategy around that hasn't changed. We're really going after the high intent customer. The customer that's going to get us to annually spending around $500 with us because that's when that second product and third product get attached. That's when we get to that near perfect retention rate. So while we're very happy with our progress on adding customers and being positive and doing that incrementally, our goal remains the same. We want the high intent customer. Amanpal Bhutani: And it does -- the new sort of expanded go-to-market approach does become a tailwind. But just again, I always want to reiterate, we're optimizing it for that high-intent customer, so that we're getting the attach, we're getting the long life -- the larger lifetime value. Trevor Young: That makes sense. And then, Mark, in your prepared remarks, I think you noted bookings were impacted by shorter initial contract terms. Was that specific to Core Platform and the new 1-year domain dynamic? Or is that more broadly that you're seeing shorter contract commitments for other products? Mark McCaffrey: It has a flow-over effect into our other attached products because what happens is the domain signed on for 1 year generally, the attached products are going to be signed on for 1 year as well. So there is a little bit of a carryover effect to our other products that are included in the initial order size as well, in the initial order that the customer makes. Christie Masoner: Our next question comes from the line of Alexei Gogolev from JPMorgan. Eleanor Smith: This is Ella on for Alexei Gogolev. Maybe first for Aman. Aman, you alluded to this in your prepared remarks. Given GoDaddy was founded over 30 years ago and has troves of proprietary data, what advantage might this provide you versus newer entrants in the ecosystem? Amanpal Bhutani: Yes. Our competitive advantages, of course, start with our brand. It starts with our domains funnel, the scale of our platform and the data we have about interaction with our customers, whether it's like 1.7 billion, almost 2 billion data points selected on a daily basis, all the way from interaction on the site to customers calling and chat transcripts and all of that. And we have that data globally. So a ton of that data is available for us to tune agents, to get agents to perform sort of in nuanced way down to the customer grain. That, of course, is one of the amazing value that AI brings is that when companies are no longer looking at segments of customers you're looking down to this customer, what do they need and AI can parse through the data for that customer and provide them with sort of valuable insight or whatever next best action they should be doing. When I think about GoDaddy, our -- why -- our focus is to move towards agentic, to be AI native, to build products that are AI first and other companies that may have started there have to get to all the things that we have, right? And we're excited about the position we have and to get to the new space where we're able to adopt AI, and we're able to build these products and use the rest of our competitive advantages. There is no doubt that GoDaddy is starting in a great position. And AI is the type of technology that it actually is easy to bring into a company like GoDaddy given the capabilities we already have. At the end of the day, what we are bringing forward to the world is and is demonstrated by Airo.ai, is that experience and it's an AI chat-based experience on Airo.ai that brings all the capabilities to the customer. Where the customer doesn't have to go to web page after web page or call in or chat to do various things. They can do it all in one place and GoDaddy brings them all those services right there. And it doesn't even have to be the things that GoDaddy builds alone. We're bringing our partnerships into Airo.ai as well. And it's actually much easier to integrate a partner into Airo.ai than it is to integrate into the funnels because just it's the interaction model is completely different. Eleanor Smith: Very clear. And for a follow-up, could you quantify how much of your customer care and code generation is AI-driven versus employee-driven today? And how do you anticipate that evolving over time? Amanpal Bhutani: Yes. So I shared a little bit. Majority of our code is now AI-driven or AI-generated. We had set a target out that I talked about the 70% of the code. The world is moving so quickly that the algorithm we have, it's like majority -- like large majority of all new code bases are now AI driven. That metric is sort of becoming less relevant now because what you're finding is that 1 engineer can have a team of 5 agents that are all developing. And the way we used to think about coding, it's not the same way anymore. So I would just say, we are well down the path of AI generating all of our code. The next evolution is agents creating code. And along with agents creating code, agents automating the software development life cycle and then the product development life cycle. Those are the areas where we're going into, as an example, the new website builder that we showed you a little clip of that brings together a very powerful editor and a very powerful AI-based chat bot. That's based on learnings we got from the AI builder we have built. And it has been built very, very quickly and well ahead of our expectation. I mean one of the reasons we're talking about it today in a manner that, hey, this is coming, and it's going to be a big change for Websites + Marketing. I think if you had asked me 3 months ago, I would have thought about it later in the year, but it's actually coming up ahead of a lot of other things, like we have pricing and bundling initiatives that are going to have to wait because this new AI-based website builder is just ready to go. So we're going to launch it and get it going. Christie Masoner: Our next question comes from the line of John Byun on for Brent Thill at Jefferies. Sang-Jin Byun: Just 2 questions. On the A&C, there was a question earlier on some of the deceleration. Obviously, you have seen it go from mid-teens to low teens the last few quarters. Understand that there's a little bit of impact from the domain promo. But is this kind of like what should be the new level that we should expect given the scale that you're at now in terms of kind of low teens growth or could we potentially see some acceleration as this top of funnel go-to-market gets settled in? Mark McCaffrey: John. A couple of things to call out. We talked about the fourth quarter and the impact that had on the new offering that we had out there. But as Aman mentioned a few minutes ago, we are also rolling out the upgraded websites and marketing experience, right? And we are not assuming any contribution from pricing and bundling related to the websites as we go through this transition. After that, we'll obviously see on the other side, how we continue with the momentum going into 2027. But those are really the -- what's impacting the A&C growth, not only coming out of this year, but going into next year. Sang-Jin Byun: Okay. Great. And this might be related, but any update on the pricing and bundling tests that you usually discuss in a quarter? That's... Amanpal Bhutani: We continue to execute well on pricing and bundling. Interestingly, one of the things for 2026, I'll give a couple of examples. One is our managed hosting for WordPress doing very well for 2026. You might remember a couple of years ago, we invested heavily, built a new platform, sort of expanded it to reach a little bit bigger customer. And now we're seeing good growth in units, with good growth in bookings on that product. So the new pricing, new bundle that's coming out. And maybe the other one I'll mention is that the LLC formation bundle is growing. We're still mostly cross-selling it within Airo. That's where a majority of that is coming. But very soon, you will see some bundles around that as well. So we're pretty excited about that one, too. Christie Masoner: Our next question comes from the line of Arjun Bhatia from William Blair. Arjun Bhatia: Just maybe going back to the go-to-market changes. And I'm trying to maybe tie it in with the broader competitive dynamics because obviously, we've seen the new entrants in the space come in over the last year or 2. So I'm curious, just as you looked at your old funnel, was there anything that sort of was indicating that the competitive intensity was increasing, especially from some of the Vibe coding players out there. And Aman, I think you touched on the moat there a little bit, but I'm curious how the new motion will maybe help you sort of defend against some of the competitors that are coming into the space? Amanpal Bhutani: When I look at the competitors in the AI space, we still continue to see a lot of that focus being on enterprise employees, like product managers, people that work within enterprises or people that are a little bit sort of working for agencies or companies like that. We see less of that behavior with our direct customer, the person who is the roofer, the cleaner, some micro business owner. So we see less of that. Our expansion of go-to-market is really about being able to bring more high-intent customers into the domains funnel, which is our largest funnel and then attach to it very well. Like that is the primary motion at our company, and we want to continue to reinforce that more and more. I'm not suggesting that we are immune to what's happening in the world, we just have not seen very large impact of that in our funnel yet or at this time. Arjun Bhatia: Okay. Understood. That's very helpful. And then just one thing. I know you mentioned that just in the forecast for 2026, Airo.ai is not contemplated. But if you are able to sort of get it to be generally available shortly here. Is there a potential upside? Like could it have an impact in a handful of months? Or how do you think about the ramp once it's out and generally available? Amanpal Bhutani: Yes. I'll take it first, and Mark can comment on it again. Overall, it's very similar to how I talk about the go-to-market approach. Airo.ai has to find product market fit the same way. It has to be about traffic. It has to be a conversion. It has to be able to attach, activation of the product and then some renewal. Of course, renewal goes by -- goes back a bit, but the other 4 we're able to see pretty quickly. Now it's still early. We're getting what is relatively still, I would say, a smaller amount of traffic given the large amount of traffic we get at godaddy.com. In that small traffic, the metrics look good, but you don't really know the metrics until you get to a certain scale. So that's what we'd like to get to. And when I talk to Mark, my view is, let's get to that minimum threshold of scale where we can see all these metrics perform and then it makes more sense to include in the financials. Mark McCaffrey: That's right. Now we haven't included any contribution from it this year. While we're seeing monetization relatively small compared to our size. So without including it, yes, any progress we would make on that would be upside. Having said that, we'll keep updating everybody as we go throughout the year to what we're seeing, what are those metrics and how we think it will impact us going into the future. Christie Masoner: Our next question comes from the line of Jamesmichael Sherman-Lewis from Citi. Jamesmichael Sherman-Lewis: Two, if I may. You noted Airo drove a nearly 30% lift in product attach. So what offerings are seeing the greatest uptick? And how is the typical path different for an acquired Airo customer versus other cohorts? And then I have a follow-up. Amanpal Bhutani: Yes. Airo as an experience really goes to being a vehicle that attaches mostly to the domain customer. And over the last couple of years, as a result, we saw higher attach, higher average order size. And a couple of years into the Airo cohort, we can tell you with high confidence as we see very good renewal. I think Mark, included in his remarks, customer retention continues to improve in a nice way, and those Airo cohorts are performing for us. The products that are attached the most over the last couple of years had been -- like the biggest product attach was still websites and then e-mail. But now more recently, we see some of the new products, for example, the LLC formation starting to attach well, too. Jamesmichael Sherman-Lewis: Helpful. And then on ANS, understood it's early days, but how has feedback been from partners in the developer community? Could you revisit the broader opportunity and how you'll drive adoption with modernization similar to domain registration. Amanpal Bhutani: On Asian -- did I hear on ANS, just to clarify? Jamesmichael Sherman-Lewis: Yes, ANS. Amanpal Bhutani: Yes, we continue to work with a number of companies on ANS, Super excited to have the integration with MuleSoft, which is a Salesforce company. But there's a lot more to do. Agent Name Services, it's a simple, scalable, very elegant solution to what I believe is going to be a very large problem in the world, which is how do we know who owns what agents and how do we trust those agents. And ANS solves that problem using the DNS infrastructure that the Internet already relies on. So we do see some sort of good reactions from folks that understand, but just like when the Internet came along, it took a little while for DNS to work for people to realize that it really powered it. I think we're committed to that same level of effort to go and sort of explain to people why this is the easiest way to do it across the world. And why it has so many benefits for the open Internet for everyone. Christie Masoner: Our next question comes from the line of Kishan Patel on for Brad Erickson. Kishan Patel: This is Kishan Patel on for Josh Beck. Just one from us. How are you thinking about the long-term monetization model for agentic experiences? And what factors would lead you toward subscription, usage, outcome-based or hybrid approach? Amanpal Bhutani: Yes. We have an opportunity to think about this a lot. We continue to lean towards the hybrid approach where there is an upfront subscription model that it unlocks a certain number of credits, and there is a model to add credits. You'll see some of that come into Airo.ai, especially with our Airo Builder, but we're just going to roll those things out slowly. We want to be able to have one monetization path, which we already have for subscription, and then we'll add more layers to it. Christie Masoner: Our next question comes from the line of Katie Keyser on for Elizabeth Porter at Morgan Stanley. Kathleen Alexis Keyser: Awesome. This is Katie on for Elizabeth. A bit of a higher-level question, maybe a 2-parter. Mark, we've heard you talk about kind of what the SMB wallet looks like in the past, how GoDaddy's ARPUs are positioned within that. You guys are delivering a high caliber of innovation that should enable that broader wallet share capture to move up over time. I guess how are you thinking about levels that this can ultimately inflect to? Can the entirety of the customer base kind of reach that $500 sweet spot? And I think also I'd heard you speak to a bit of green shoots of Airo.ai bringing a bit of a different customer persona onto the funnel, one that's a bit more sophisticated. So are there any kind of structural differences you're thinking about in capturing wallet share of those 2 groups, that would be great. Amanpal Bhutani: Yes. Let me touch on 1 or 2 of those pieces and Mark can fill in whatever I miss. So just starting with the end first, on Airo.ai, we see completely different interaction model. Customers not only do the chat base, they really go after the suggestions that come back from the AI. So we're seeing, as an example, in Airo.ai through a partnership, we've introduced customers being able to create a privacy policy or an end user license agreement. And customers are finding that and buying it. And it's not something that we even sell on the website today. And if we had to sell it on the website today, it would be a very complex thing to add to the current path. The testing required. We introduced that in adding that friction, but taking friction out somewhere else, be pretty complicated. But within this chat interface, it has fit seamlessly. And so when we see -- when we get learnings like that, it really is sort of opening up our mind on what is truly the one-stop shop and how broad that one-stop shop can be because it's really, really low friction for the customer. I think on the wallet side, and I'm sure Mark wants to jump in on this and customers reaching $500. Our customers have continued to grow with us, right? You've seen the improvement in ARPU over the last few years. And of course, we want more and more of these customers like Mark has said, they have great attach rates on second and third products. They have near perfect retention rates. And ultimately, it demonstrates a customer that's not just successful with GoDaddy, they're successful in their venture. So obviously, we want more and more of those. And that's why our go-to-market continues to focus on high-intent customers because those are folks that have the best chance to get there. Mark McCaffrey: And I think that's right. We've often talked about the durability of the model, the fact that we get high intent customers. Our ability to attach when they get to the second and third product, the retention rates go to near perfect. That drives the LTV, ultimately drives the compounding free cash flow that we generate year after year. And we believe our ability to cross-sell into that customer base because we focus on the micro business is stronger and getting stronger as we introduce these new products as we introduce these new agents. So we feel really good about our progress moving forward and our ability to continue to look at that $500-plus customer. Amanpal Bhutani: Yes. And just the strong retention just drives the lifetime value at the end of the day. We make obviously, a lot more money when customers stay with us over the long term, and that's the magic of the model. Christie Masoner: That concludes our Q&A. I'll hand it back to you, Aman, for closing marks. Amanpal Bhutani: Well, I'll just say thank you, everyone, for joining, and a big thank you, as always, to all GoDaddy employees. A lot of exciting stuff coming out from products, from marketing across the board, a lot on our AI journey and a lot more in front of us. So excited for 2026.
Operator: Thank you for standing by and welcome to the Flight Centre Travel Group Limited Half-Year Result Presentation. [Operator Instructions] I would now like to hand the conference call over to Mr. Haydn Long, Investor Relations. Please go ahead. Haydn Long: Good morning, everyone. Thank you for dialing in today for our half-year result announcement. I'm joined by the usual suspects, and you'll hear from them in the usual order. First up will be Adam, Adam Campbell, our CFO and the GBS CEO; Chris Galanty, the Head of the Corporate Business, calling in from the U.K.; JK, the Leisure CEO; and also Skroo, the Global MD. We'll also be joined by Greg Parker, the Head of Supply; and Mel Elf, the Head of Productive Operations, for the Q&A session after this. I'll now hand over to Adam. Adam Campbell: Thank you, Haydn. And welcome, everyone. I want to start this morning by briefly talking about what we see as being the key elements of our ongoing competitive advantage, which we would summarize under 5 broad headings that you see on Page 4 of the pack. Firstly, the enduring strength of our leading leisure and corporate brands, which is demonstrated by the ongoing resilient demand and record TTV being seen across both divisions through the half. Secondly, our ongoing innovation and proven ability to adapt to changing market conditions. This has been the case for many years as the industry has evolved, and more recently has been seen with the use of AI as an enabler of increased consultant productivity, reduced cost to serve, and the delivery of a more personalized and consistent customer experience. Our diversified leisure offerings are also a competitive advantage with recent examples being seen through the strong specialist brands growth, scaling digital channels and accelerating momentum in the cruise and luxury segments. Our corporate growth engine with its TTV and profit growth over recent years, and new revenue streams in payments, meetings and events, and consulting services, also serve as an advantage to the group. And finally, our ongoing improvements in efficiency and productivity, with cost margins now well below pre-pandemic levels and a productivity uplift across the group highlighted by a 13% improvement in our corporate businesses. These competitive advantages have combined to deliver what I believe to be a pretty strong result for the first half, and importantly, sets us up for a solid full-year result in line with our current expectations. Some of the financial highlights for the first half are shown on Slide 5, including TTV growth of 7% to $12.5 billion, revenue increasing 6% to $1.4 billion, underlying EBITDA increasing 9% to $213 million, and underlying PBT increasing 4% to $125 million. The difference between EBITDA and PBT growth was primarily due to much lower interest income being generated during the period as official interest rates were reduced and our cash reserves were lower during the period due to our ongoing share buyback. As a result of this strong first half, we've seen an increase in today's declared interim dividend to $0.12 per share and an increase in EPS for the period to just over $0.28 per share. It is worth noting that trading conditions in the first half weren't all smooth sailing, with the volatility that we saw in the last quarter of 2025 continuing into the first quarter of this year, which makes the TTV and profit growth for the half stronger than they may look at face value. As Skroo will discuss later on the call, pleasingly, we've also seen this momentum continue through the early stages of the second half. During the period, we've also continued to invest in network enhancements, digital capabilities and AI, high-growth sectors and new revenue streams. So whilst our focus has been very much centered on the current year results, we've also continued to keep a strong eye on the evolution of our business for future years' success. Moving to Slide 7. Chris and JK are going to discuss their respective divisional results shortly, so I won't spend a lot of time duplicating those comments. As you can see though, Corporate's top-line growth of 6% converted to profit growth for the half of 20%, as the investments made over recent years in productivity and efficiency now start to flow through to operating leverage, and the Asia business returns to profitability. Leisure's profit for the half was down on prior year, as we had expected, but their TTV grew at a faster rate in the second quarter than it did in the first quarter, and second-quarter profits were also above the prior periods for that quarter. This momentum continued into early trading for the second half, and at the end of January, the division's profits on a year-to-date basis were also once again above the prior year comparative. We've rebranded the old "Other" segment to now be called our "HQ" segment. There's been no changes to what gets reported in this segment, it's just a name change to more accurately reflect the nature of the businesses and group services reported in there. That segment has increased reported losses this half, predominantly due to the lower interest income that I mentioned earlier, and that gets reported through that segment. As can be seen on Slide 9, the business that we now operate is very different to that from 6 or 7 years ago and continues to evolve. Our corporate TTV has moved from less than 40% of the group's total to now be the major contributor. Flight Centre brand contributed nearly a 1/3 of the group's TTV and is now around a quarter. And back then, we only had around 6% of Flight Centre's TTV transacted online, which is now approaching 20%. In the same time period, we've also reduced our underlying cost base and increased our productivity by over 60%, with TTV per FTE exceeding $1 million for the first time ever during the first half of this year. Throughout this period of evolution and change, we've held certain core nonfinancial assets constant, which you can see on Slide 10 of the pack. These assets have always been important to us and include brand equity and trust, customer loyalty and proprietary data, differentiated travel technology, people expertise to navigate complexity, and supplier relationships and access. Whilst we've held these nonfinancial assets constant, we've also continued to innovate, including the development of both Sam and Mel in the corporate division, and a co-consult in leisure, which was built on Anthropic technology, as well as partnering with leading AI innovators. I'll finish by talking to 2 key areas of focus for us over the last few years: capital management; and our ongoing portfolio simplification and strategic reallocation. On Slide 12 of the deck, you'll see that from a capital management perspective, we continue to actively manage our convertible notes on issue. In the first half, we issued new longer-dated notes totaling $450 million, which enables the full retirement of the 2028 notes in May of this year, as well as a further reduction in the face value of the 2027 notes, and also the partial funding of the Iglu acquisition late last year. We've also continued our on-market share buyback of up to $200 million, with $126 million executed to date, retiring just under 10 million shares and enhancing our EPS. Finally, today we've announced an increased $0.12 per share fully franked interim dividend. I should note that due to our utilization of carry-forward losses, our final dividend for 2026 will likely be partially franked, and we will also likely revert to unfranked dividends for FY '27. As we regularly do in light of the impending conclusion of our current share buyback process in May, our convertible note balances, and our franking credit balance, we will review our future capital management strategy over the course of the second half. Finally, as you can see on Slide 13, it's worth revisiting the outcomes of our ongoing portfolio simplification and strategic reallocation program, where we've seen the divestiture of noncore assets such as Cross Hotels during the first half of this year. The closure of underperforming businesses such as Discova Americas, GoGo, the Travel Junction, and StudentUniverse. Strategic pivots in businesses such as Topdeck, which is now small-group focused, and Liberty, which has been rebranded to Envoyage. The acquisition of businesses with defensible moats in high-growth sectors such as Iglu and Cruise Club in the cruise sector, and Scott Dunn in the luxury sector. And organic expansion in key sectors such as meetings and events, stage and screen, and energy and marine in the corporate division, and TA Reserved, Cruiseabout, and Cruise HQ in the leisure division. I'll now hand over to Chris to give some more color around the performance of our corporate division. Chris Galanty: Thanks, Adam. I'm very pleased to give some more details on what has been a very strong first-half corporate performance. And encouragingly, we're seeing good momentum building in the second half as well. But before I do, I'd just like to reiterate a few points about our corporate business. Firstly, we continue to address the market with 2 world-class brands: Corporate Traveller in the SME space; and FCM in the large global and enterprise space. We see this as a competitive advantage as we think our customers have very different needs in these 2 different segments. And unlike virtually all of our competitors, we approach the market with distinct brands which have separate management teams, different products, different pricing, different customer acquisition, and different service models. And we believe avoiding this sort of typical one-size-fits-all approach gives us strong customer centricity and a competitive advantage. And these are 2 global businesses. As you know, we generate roughly a 1/3 of our TTV and revenue from Australia, New Zealand, EMEA and the Americas, and roughly 10% from Asia. And this global approach means we can build things globally but address the market and the customers locally. We consider ourselves a people-led digital business. And what this means is we invest heavily in terms of both time and money and expertise in building world-class technology. And this digital product is something our customers hugely value and is one of the reasons we continue to win and grow. However, behind that technology are our people and our culture. And it's important that whilst many of our competitors focus solely on technology, we very much believe in the dual benefit of people and technology to deliver value. And also our broadening revenue mix. As we've been saying for the last couple of years, we're investing in new higher-end areas to deliver customer value and also generate revenue for ourselves. And this includes things such as meetings and events, payment and expense, consultancy, VIP travel, and some specialist travel sectors. And this is all about deepening customer relationships as well as generating more value to ourselves. And if you look at this Venn diagram, I think this sums us up quite clearly. We traditionally focused on travel management within our FCM and Corporate Traveller brands. But increasingly now we're making heavy investments in our meetings and events capability. This is something we've always offered customers, but we're investing to ensure that we can offer it all around the world and offer global customers M&E capability for the first time, right through from creative services through to managed meetings. We also are focusing on professional services, things such as; payment and expense, loyalty, consultancy. And this means that these 3 different areas of expertise allow us to generate new revenue streams and give a more holistic experience to our customers. And our aim is really to deliver all 3 areas to all of our customers, or certainly as many customers as possible. And in the coming years, you're going to see more and more customers experiencing all 3 areas from us. And we think this makes customers stickier, we think it improves retention, and we think it'll obviously improve our economics as well. So getting back to the results that Adam touched on, I'm pleased to say we did deliver a record TTV. We've got a solid pipeline of new accounts secured across both brands and our meetings and events business, which means momentum will continue to build for the rest of this year and into the next financial year. And please note that Corporate Traveller is well on track to surpass $5 billion of TTV for the first time ever this year, which makes it the largest SME-only TMC in the world. And particularly pleasing is a strong performance in the Northern Hemisphere, with the U.S. in particular, our largest market opportunity, growing at 13%, which is great because it's a very competitive market. M&E and professional services contribute over 10% of our corporate revenue. It's a larger amount in FCM, and we see a huge opportunity to grow this in both brands in all 4 regions in the coming years. Profit growth exceeded TTV growth quite considerably at 20%. And this is really starting to show the scale benefits of what we've spoken about and we call Productive Operations, which is our digital transformation. And we expect to see further gains flowing from Productive Operations in the coming year. On the call, we have Mel Elf, who's our Global COO and Managing Director of FCM. And she's led with her team the Productive Operations initiative. And I'm really pleased to say they've done a great job, and we're generating meaningful financial and operational benefits this first half. We expect to see further benefits as initiatives are embedded in the business, and we're on track for full deployment of some of this key project effort by the end of this year. And really this is all about creating a more automated workflow. And it's about delivering our customer-facing platforms, Melon in Corporate Traveller and FCM platform in FCM, and making sure that those platforms are fully integrated with our consultant operating platforms as well. And it's about building a global operating model and platform for both brands, which gives us real economies of scale and consistency across the board. And for our people, it means they only have to learn one system no matter where they work, which gives us a lot more flexibility in our workforce, gives us much more streamlined processes across all of our markets. For customers, it gives them, and this is particularly important for FCM customers, much consistency and quality across the board in all of our markets. But it does allow us, because we can configure this operating system locally, to preserve our local expertise. And for our business, it gives us economies of scale which leads to efficiency. It reduces cost and complexity, but it still enables us to maintain our market agility. And we are now seeing strong returns on this investment and compound productivity growth quarter-by-quarter, month-by-month, year-by-year. And we expect this to continue as the project comes to completion and we move into a phase of really optimizing a global operating system rather than deploying it. So it's been a big success, a lot of hard work from our people, and we've really tried to make this massive change, which I think is the biggest project in Flight Centre Travel Group's history, without any disruption to our customers. So moving forward, what are the key growth drivers that we're focusing on? Well, firstly, our AI transformation. And unlike many of our competitors, we don't just see AI as about having chatbots in the marketplace. We really see AI as a foundational technology. And I'm really pleased that our team had the foresight to invest in our AI Center of Excellence over 2 years ago, which has meant we do have a competitive lead in many areas. And by foundational technology, what we mean is that AI is embedded in all of our platforms. Our customer-facing platforms, Mel is the AI capability in Melon and Sam is the capability in FCM platform, but also in all of the platforms we deployed in Productive Operations. Which means that this intelligence layer gives a much more personalized experience to our customers and a much more productive experience to our business. So we'll continue to invest heavily in this and we're getting great feedback from our customers. We'll also continue to invest in our global booking platforms, Melon in Corporate Traveller and FCM platform in FCM. And it's really important that we design and control this digital experience because it gives us much more control over obviously customer experience, but also content access and productivity. We'll keep focusing on organic growth, investing heavily in FCM and Corporate Traveller marketing and sales to make sure we keep growing by winning new customers and retaining existing ones. However, we also want to invest more in accelerating new growth models. As I said, meetings and events, specialist travel areas like stage and screen, which is our corporate travel business that focuses on the performance area of music, sports, and entertainment. And of course payment and expense, which is a really important way that we can deliver more value to customers, but also more revenue to our business as well. We're calling out something called brilliant basics, which is really making sure that as we deploy this global operating system we optimize it. Which again gives order consistency and scale benefits, and this leads to productivity growth, more automation which lowers cost for transaction as well as improving customer experience. And finally, and most importantly, our people. Every time I talk to customers, and I talk to customers pretty much every day of the week, they say to us that they like our technology and all the investments we're making, they enjoy using our products, but fundamentally it's our people that make the difference. And I think it is our people all around the world who've contributed to this great result this year. And it's a testament to our culture and our belief in the value of technology and people that has made that true. So I'm really pleased with the results, really pleased with the momentum building into the second half. And on that note, I'll hand over to JK to give an update on our leisure business. James Kavanagh: Thank you, Chris. And hi everybody, good morning. Well, to begin with, the leisure business, it looks very different to 5 years ago. We've really transformed from a shop-heavy, single-channel focused model to a diversified, digitally-enabled business that's really built around 4 categories, which is mass market, luxury, specialist brands, and a range of independent brands too. And each of these are now generating over $1 billion in annual TTV, which shows great diversification. The portfolio model itself is really multi-channel by design. And we know that customers really choose a brand or booking channel based on trip complexity, product offering, trust and price. And we saw our online sales grow 14% this half to almost $900 million, which is now making up about 15% of sales overall. And what this does is really frees up our stores and our call centers to handle high-value, complex work. So turning to the numbers. Well, Adam introduced some of the numbers, but to go a bit deeper, TTV was up 10% to just under $6 billion, with all 4 categories growing. Revenue also grew, 6% to $690 million, and our underlying PBT of $61 million, which is slightly below prior year's $64 million. But it really reflects a few things. Firstly, the shift in mix in our business, and the shift in destinations that we saw to shorter haul, more lower margin international travel, as well as some front-loaded investments; sales staff, product design, technology and stores, which we previously flagged. So the good news is the mix is actually already reversing. And you'll see on the slide that in January, we delivered a record leisure profit, which was the strongest month in our company's history, which we're really proud of. And as you can see, TTV and profit are both tracking ahead on a year-to-date basis. Some of the call-out performers for the half were Scott Dunn in our luxury division. TTV was up 20% and profit was up almost 80% with all countries growing. The U.S. has been a standout and Asia is also performing as we expand into Hong Kong with the Scott Dunn brand. Our specialist category, you can also see the list on the slide there, has also grown, with TTV up more than 30%. And a real focus for us has been to grow in the cruise industry, with Iglu now underway with integration. We are on track to exceed $2 billion in cruise TTV this year alone. And our ambition in this space is to become a leading global cruise seller. We're building genuine scale here and some great capability, which you can see illustrated on the slide in terms of the numbers. So everything that I've described here really maps back to our 3 big moves, which is also on the slide. We've talked about these for some time. Flight Centre makes up about half of the leisure portfolio, and growing the core is very important to us. The brand's omnichannel model is really maturing. And the proof point here, which we're proud to actually share, is that the online channel has now delivered over a 2% PBT margin in January alone. And this result is down to enhanced content that we've been investing in to make it available to our customers, as well as change commercials in this channel. In fact, flightcentre.com now makes up about 50% or just over 50% of our bookings are made online. So that really shows that we've got a profitable digital business that is sitting alongside a high-touch retail network, and both are growing in basket size, productivity is also growing, as well as net promoter scores. Big move two for us in leisure is all about betting on winners. And firstly, I call these our margin engines, which is really luxury, cruise, tours, package holidays. And these are all high margin, complex, and defensible business models. The Scott Dunn results speak for themselves. But in the Ignite business, you can see here that our packages model is really thriving. In fact, we sold about $50 million worth of cruise in January alone, versus 2019 across a full year we sold $19 million. So this model has been one that we've been investing in a lot, and it's starting to pay dividends as we expand the model into the U.K. When I look at our volume engines, the independent network is scaling across five markets. Our foreign exchange business, Travel Money, launched a wholesale offering, and that brand itself is up 46% in the half, as well as Jetmax, another low-cost OTA business, which is up 15% and PBT doubled. Big move #3 for us is about launching and lifting loyalty. I'm really proud of the work the team have done to deliver World360 rewards. It's now live across 3 brands, Flight Centre, Cruiseabout, and Travel Associates. This is an app-first program, it's integrated across our new CRM and loyalty management platform, and the early signs are really promising. In fact, we're attracting about 54% of members that have either never booked with us, or they haven't booked with us in the last 3 years. The largest cohort of members in the Flight Centre brand alone are those in the age of 20 to 29, which is really showing that it has broad appeal as a program, and we're excited about more younger customers booking with our group. The launch airline partners include ANZ, Bupa, Caltex, and over 300 retail partners. And this really is becoming a new engine of growth for Flight Centre with a free and paid membership that will generate new revenue streams and give our customers more reasons to book with the group. So what connects all 3 moves is our investment in core platforms, data and personalization. And this is where I believe we're building genuine competitive advantage. For the first time we have a single customer view in leisure that is connecting retail, online, loyalty and behavioral data in real time. We're capturing what our customers tell us what they want, we're also capturing their behavior and what they're likely to buy, and we're also seeing their profile with much more rich information about what they can afford. And this data is really proprietary to us. It deepens with every interaction, and we believe it's becoming increasingly difficult to replicate. Built on this data set is our first AI co-consulting tool. It's live in the Flight Centre brand, and it's actually saving our consultants nearly 30 minutes per itinerary. What it's doing though is surfacing personalized recommendations, it's ranking conversion likelihood, and it fundamentally changes how our consultants work. As Adam mentioned, we're partnering with Anthropic, and this is really going to accelerate AI across the group. So looking into the second half, a record January is already in the bank, which we're very happy about. Key investments that were front-loaded in the first half, they're covering 5 core areas. We've got more sales staff, new product lines, enhanced platforms, and well-positioned stores, as well as new commercial partners. And I believe this sets us up nicely for great upside in what we call our seasonal H2 peak. So leisure is on track for profit growth in FY '26, and we're well positioned now for a record second-half TTV as well. And I just want to say a big shout out and thanks to all of our people who have contributed to these great results. Over to you, Skroo. Graham Turner: Thank you, JK. Very good. And thanks, everyone, for joining us here today. Just as you heard from Adam, I think I'm happy to reaffirm our FY '26 guidance of $315 million to $350 million in underlying profit before tax. The midpoint of this is about $332.5 million. This represents 15% year-on-year growth and implies a 38%-62% skew between first-half and second-half earnings. This is consistent with the trading patterns we typically see across the business in the past. So as we enter this peak trading period of the second half, we believe we're pretty well placed for the full financial year. As you heard, January delivered a record leisure profit and TTV. And importantly, both the leisure and corporate divisions are now tracking for year-on-year profit growth. Now while some of this momentum will be partially offset by losses in Global HQ, driven largely by those interest costs, the group's operational performance remains good. We continue to invest where we feel it matters. FY '26 CapEx remains at about that $85 million, aimed more towards systems and technology to drive scale, efficiency, and that long-term capability across the organization. We are, of course, continuing to open shops and growing physical teams in certain brands, certain locations, particularly where we feel underrepresented. At a macro level, underlying travel demand continues to be pretty good. According to IATA, global passenger traffic is expected to grow by nearly 5% this year, with APAC forecast to grow even faster at over 7%. On the corporate side, 84% of global travel buyers expect their travel spend to hold or increase, reinforcing what we see as resilience in the category, and we see the opportunity for further expansion here. All of this gives us some pretty good confidence in the year ahead. And this is because we've got strong brands, good momentum in corporate, differentiated and some AI-driven profitability capabilities, and a leisure portfolio positioned for sustainable, good quality growth. With these attributes, we believe we're well placed to deliver on our FY '26 targets and continue to build a stronger, more productive, more competitive Flight Centre Travel Group over the next few years. As you've seen in our half year results, Flight Centre Travel Group enters the second half with some pretty good momentum and a strong position that leaves us well placed to benefit from our growth across our 2 core sectors, leisure and Corporate Travel. Our global model various and various well-trusted brands continue to show their strength. Even in the challenging trading environment, demand has remained resilient, and we've delivered some record TTV in the first half. That consistency speaks to these brands enduring value and the effectiveness of our longer-term plans across both corporate and leisure. Also, our corporate business continues to outperform the market. We delivered record TTV and a significant profit uplift supported by our operational performance, our significant productivity gains and our new revenue streams beyond traditional travel management. We're expanding into other areas, of course, such as payments, meetings and events and consulting, broadening our relevance to clients, expanding our addressable markets and giving us more revenues to capture growth as corporate travel generally continues to grow. Thirdly, we're embedding AI at scale across the group, creating real operational leverage as volumes grow. In corporate, AI is already handling millions of inquiries and supporting more consistent service delivery across the group. In leisure, our new co-consulting tools saving consultants, as you heard, I think, from JK, up to 30 minutes in itinerary. These gains allow us to effectively serve more customers, improve the speed and accuracy and support margin growth as that holiday market grows. Finally, our diversified leisure business is building momentum. Specialist categories are growing strongly. Our digital channels continue to scale. And the integration of Iglu is accelerating our cruise offering, one of the fastest-growing sectors globally. Combine this with our World360 Rewards program proposition, the leisure division is now positioned to deliver effective and profitable year-on-year profit growth. So as the industry continues to grow, Flight Centre Travel Group is well placed to outperform. We have those strong brands, the corporate growth momentum, the differentiated AI-driven productivity capability and of course, the diversified exposure to high-growth leisure segments. These advantages give us confidence in reaffirming that financial year '26 guidance and in our ability to continue delivering sustainable, profitable growth into the future. So thank you very much. Haydn? Haydn Long: Thanks, Skroo. I think we're now ready for Q&A. Operator: [Operator Instructions] Our first question comes from Michael Simotas from Jefferies. Michael Simotas: Can I just start with productivity? And I'd be interested in having the conversation across both corporate and leisure. There's been a lot of work done on productivity initiatives, and we can see it coming through the P&L. If you sort of looked at the programs that you've got underway, how much is in the P&L now versus how much is still to come? Haydn Long: Michael, I might send that to Chris initially. I've got Mel Elf sitting here with us as well, so Mel might have a few words to say. Chris, do you want to address the corporate side? Chris Galanty: Sure. Yes, thank you for the question, Michael. Yes, obviously, we are seeing gains already, and that's largely because our staff numbers have been consistently coming down this year whilst we've been growing turnover, revenue and transactions. Look, I think we're confident we've got a lot of future benefit to come, and it comes from 2 main areas. One is obviously we win more business without adding staff. We get more self-serving through both Melon and FCM platforms, so customers can do more things themselves as we add more features. And then the work that Mel has been doing with productive operations in her team, we see more automation, whether it's robotics or AI. So we think there's more to come. But Mel, do you want to add a few words to that as well? Melissa Elf: Yes, look, I think as we continue to deploy the systems and start to optimize those systems, we'll not only get the benefits as we go through to future markets, but just optimizing the existing markets and getting our consultants more productive on new systems as well, we'll start to see more productivity gains there. And then also moving into our support businesses as well that obviously support our front end, and that's a focus for the coming 12 months. Haydn Long: JK? James Kavanagh: Yes. And Michael, it's JK here. Just to give you a view on leisure, firstly, we have also grown productivity. Our TTV has grown 10%, and our employee benefits has not grown at the same growth rate for a few reasons. One is actually our employee benefits costs have actually uplifted, so we're not actually seeing it materially benefit the P&L at this stage, but it's actually resulting in more cost avoidance to make sure that we don't need to grow our employee benefits at the same rate as what TTV is growing. We have been investing in staff numbers to generate sales, and as you know this is really the period, the first half, is when we invest. We've got over 100 new staff to be able to get ready for our peak H2. Michael Simotas: Okay. And then maybe one on the corporate market for Chris. There's been a lot of change in the market with consolidation and some challenges faced by one of the competitors. Is that changing the competitive landscape, or do you think that benefit is still to come? Chris Galanty: Well, there's separate things here. I think the consolidation in the marketplace has been happening over many years, as I'm sure you know, and the most recent big move was Amex GBT taking over CWT, and we think there's still some benefit there with more RFPs coming out this year. I think with the competitor I think you're referring to, I mean, I suspect that there may be some opportunities still to come, certainly in the Australian market. But again, Mel, do you want to have an Australian view? And the reason I touched on Australia is we don't really come up against them very much in North America or Europe. But anything to add there, Mel? Melissa Elf: Yes. Look, you're right, we're not really seeing it in a global space, but certainly here in Australia, we're starting to see a lot more RFP activity, a lot more inquiry, starting to see a bit of conversion. But yes, there's definitely heightened activity over the past 6 months or so. Michael Simotas: Okay. And can I just squeeze one quickly in on the loyalty program, and just the setup costs? So you've taken $16 million below the line in the first half, it sounds like another $10 million in the second half. Is that $26 million for the setup costs, and then it will just sort of fold into the leisure business, or should we expect more development over time there? James Kavanagh: Look, it will be, it will mostly roll into the leisure business as we go into the year ahead. There's a few caveats there depending on how much we invest in new markets and other ventures as we expand the program, but broadly, we expect it to roll into the leisure results next year. Operator: Our next question comes from Ben Gilbert from Jarden. Ben Gilbert: Just following on from the corporate, how are the contract wins or the wins looking in terms of the run rate that you're at? And also, just interested in sort of the ability to continue to ramp. Obviously, you've had a lot of profit -- a lot of wins over the last 12 to 18 months, just that maturity profile from a margin standpoint in corporate? Chris Galanty: Sure. Mel, do you want to start with FCM, and then I'll touch on Corporate Traveller? Melissa Elf: Yes, sure. So we're actually ahead of where we were this time last year in terms of new wins, and that's certainly across both activity and bid volumes coming through. So we are actually starting to see a lot more activity in the market generally, which is helping our position. We're winning on value, not price at the moment, so we're actually seeing that a lot of our solutions and a lot of our technology and positioning is really starting to resonate in the market. But yes, we are doing well, our pipeline is strong, so we still have a solid pipeline in play at the moment. We've got a number of key active opportunities which we hope we can see materialize within the next 6 to 12 months, but yes, we're definitely seeing more activity, which is positive. Chris Galanty: And in CT, look, it's a similar story. We've actually had a record first 6 months of wins, and the good news is a lot of that is coming out of the North American market, which we've always identified as our largest opportunity market, mainly the U.S., but also Canada is important too. And the great news for us really is that we're winning in that market, which is probably the most advanced with digital disruptors. So the Melon product, which we've invested heavily in, is really holding its own against some of the new disruptors there. So we're pretty pleased, actually, it's been a good first 6 months, and we do expect that to carry on into the second half. Ben Gilbert: And a second one for me, maybe for you, Adam. Could you just help us remind what you're cycling through in the second half? Because you've still got what, $5 million to $10 million of the Asian ticketing piece from the PCP, appreciate most of that washed in the first half. Liberation Day, I think that had a pretty material impact on your numbers sort of through April, and then obviously the Middle East tensions in the June quarter really knocked around the overrides. I appreciate -- you probably won't be able to put numbers around all those, but just remind us of those comps because you do cycle over some easy periods in the second half. Adam Campbell: Yes, Ben. I mean, look, as you say, the key things that we're cycling against. First of all, Asia issues that we had, and they were relatively heavily weighted towards the second half. As you've seen in the first half results, we've pretty much got that back on track now, and we have released about $4 million to $4.5 million I think, Mel, of provisions that is sitting in that Asia result. So excluding that, the Asia segment overall was probably about $1 million or thereabouts, so a very small profit, but as we expected it to be. And we probably expect the second half for Asia, excluding any further releases of provisions, to be about the same run rate. So a small profit in that market with added some cost as we've stabilized the region, and it's also still relatively volatile, a bit softer market for us in that space. So the Asia segment, we are expecting to be profitable, small profit excluding the release of provisions. We're not expecting as high a release of provisions in the second half. We have had to utilize some of those as we've completed discussions with some of our customers and the like. Some we've still got we're holding there as well. So I think it'll certainly be a positive for us in the second half for Asia like-for-like. And then, as you said, we saw that last quarter impacted by some external things like the ongoing impact of Liberation Day and the Middle East tensions. So that last quarter was pretty soft for us across the board, and that did impact down on overrides. So we are expecting, all things being equal, that we'll be comping against what wasn't a great final quarter for us. Ben Gilbert: And April was pretty poor as well, wasn't it? You had a pretty material drop in the U.S. on the back of Liberation Day? Adam Campbell: Yes, it started in April that we saw a lot of that impact coming through, and then really did continue through the last couple of months of the year. James Kavanagh: Yes, Ben, it started a little bit earlier in some markets too. I think Canada and the leisure business, they had their downturn sort of around January, February when Trump first made his tariff comments. So -- but as Adam said in Australia, it was more like April we started to see it. Operator: Our next question comes from Sam Seow from Citi. Samuel Seow: Maybe if I can just follow on and just dig into that fourth quarter 2025 comp a little bit more. I mean, now from our perspective, it looks like volumes are down kind of mid to high single digits, you're telling us we had minimal overrides. Just wondering, was that fourth quarter 2025 actually loss-making for the business, or anything financially you can kind of give us as context? Adam Campbell: No, it certainly wasn't loss-making. And when we say our overrides were minimal, we do have guaranteed levels with most of our supplier agreements now. So I think what we were talking to last quarter, in the last quarter of '25, Sam, was we were pretty much operating at guaranteed minimum levels for those overrides. We just weren't seeing any uptick in them coming through. So not quite that we were not really getting any overrides, more that they were at that base level. Chris Galanty: Sam, the business was significantly profitable in that fourth quarter. It's just the fourth quarter is normally a very big quarter, and the fourth quarter wasn't massively bigger than some of the others, and normally it would sort of swamp the other quarters. Samuel Seow: Got it. That's helpful. And then when you talk about that weak fourth quarter, was it impacting the corporate or leisure business more? Adam Campbell: We certainly saw it coming through in leisure, was heavily impacted by it. So -- and a lot of that was due to those minimum guarantees in the overrides but flowing from top line. JK, do you want to talk to the impact in leisure? James Kavanagh: Yes, it was mostly leisure. We saw the biggest decline when April hit to the U.S., and we dropped about 20% in volume in that month alone. May recovered a little bit, and then June dipped further. So the biggest impact was literally what was happening from the U.S., but then we also had June the political unrest that was happening in the Middle East, and there were a few other things that happened. So all things combined, it just meant that travel volume dipped down below expectations, and then we just didn't hit those override tiers in terms of the growth rates. Chris Galanty: So we still saw, Sam, people were traveling, but they shifted destinations. And that's when you started to see that Japan was already looking pretty popular, but Japan really took off at the same time as America started to drop off. So I think if you look at outbound departures, I think you'll see that Japan is up about, say, 10% and America has dropped about 10%. So not all of those people would have shifted obviously, but one has kind of gone through the roof and the other one has dropped off. With Japan, a little bit closer to home out of Australia obviously, and dominated by an airline like Jetstar, which doesn't necessarily pay us as much as some of the other airlines would. Samuel Seow: Got it. So then as we think about your guidance, you've guided to -- you're telling us there's a fairly weak comp, and you've given us a conservative skew compared to historic periods. Is there something that we're missing in the second half that's a headwind, or is it you guys just being a little bit conservative? Adam Campbell: Look, I think there are a couple of things. I think the second-half comparative, I think we're looking at what was it 38%-62% of profit in the second half. I think that actually is probably more in line with expectations. It's been fluctuating a bit over the last few years, but probably more in line with what we might traditionally expect to see. I think that, certainly from our perspective, we don't want to get ahead of ourselves. I think we need to actually see how things play out over the next couple of months because they are our busiest trading months. And there will always be things that move around in the world, and it's not entirely settled out there at the moment. So whilst we're seeing some good momentum finishing off that first half, coming through January, certainly don't think we should be getting too far ahead in terms of what's to come. So there may be a bit of conservatism in there, but I think it's probably appropriate conservatism from us at the moment in terms of how we're looking at the business. Haydn Long: And yes, just bear in mind too, mate, that we're only 4% up at the moment, and to get to the midpoint we've got to be 15% up. So we are banking on a kick already, and part of that is because we think we'll do better in the fourth quarter. Operator: Our next question comes from Damen Kloeckner from CLSA. Damen Kloeckner: Just a couple of questions on the leisure business, please. So you called out customer destination mix is improving into the second half. I think you mentioned a reversal in some of the trends you've seen between Japan and the U.S. Which other regions are driving this, and which are still lagging? And are you continuing to see this more as a trading-down cost-of-living pressure effect, or are there other factors at play there? And then the second question on the leisure business, the margin drag that we've seen in this first half, can you give us a sense of how much of that was due to weaker super overrides versus some of that front-loaded OpEx investment that you were talking about? Thank you. James Kavanagh: Sure. So the recovery that we're seeing, and if you look at the month of January, we highlighted a record month. And that's attributable to a number of brands where we're seeing the likes of Scott Dunn, their biggest month of the year is January, and they outperformed that month. We also -- and Scott Dunn has also seen travel returning to the U.S., and their U.S. business is also performing. So we're quite pleased to see that luxury travelers are typically at the front of the recovery. And then you see the mass market follow soon after. But other destinations that are starting to open up more is we're seeing a lot of return to Europe again. Japan is still super popular. The U.S. is challenged from different markets, but Asia, more broadly speaking, is still very, very popular. Our packages business that does a lot of long-haul travel, Ignite and so on, is really starting to take off as well. So there's a lot of good positivity in a number of brands in the month of January that gives us good indication that we're starting to see a bit of the tide turning, but it hasn't turned fully, and we certainly haven't seen the U.S. recover to the levels that we would like it to across the board. The second question about business mix is really the driver for the revenue drop in the first half. And to give some color behind that, our lowest margin brands, who have performed very strong in the first half, these are typically brands that make up less than 11% of revenue margin, and on a comparative basis, they shifted from about 34% of the portion of the profile -- portfolio to about 38% in the first half. So as a result of that being a lower margin brands it really dove a significant shift in terms of revenue margin, coupled with the destination shifts as well. We haven't really seen much of a softening in terms of overrides at all, that gives us any concern. But we typically start to take up overrides more in the second half as we get more confidence at hitting those next tiers in the various contracts. Operator: Our next question comes from Wei-Weng Chen from RBC Capital Markets. Wei-Weng Chen: Just sticking with leisure again. Interesting you guys called out a record leisure PBT and profits in January. I'm not sure if you've seen it as well, but Helloworld also this morning said that January was up 12% for them. Is your sense that a large part of these improvements are kind of macro or kind of cyclical factors rather than sort of self-driven factors such as improved marketing or conversion, et cetera? James Kavanagh: Look, these things are always a blend of both. When the macro swings in your favor and your business strategies are actually starting to take off and your investments that you've made are aligned, well then arguably you should see, by luck, good management, good strategy, it's a combination of all of those things that's really driving performance. But I think there's been a fair degree of -- there's volatility and uncertainty, but at the moment you can see that January is that peak holiday period, and we've been investing to make sure that we can do our best in this month, and it paid off. Wei-Weng Chen: Yes, cool, cool. And then apologies, I missed a lot of the initial presentation, but just the acquisition of Iglu, how's that going? And then I guess, is there any appetite for further acquisitions at Flight Centre, either corporate or in the leisure segment? James Kavanagh: On Iglu specifically, the transaction closed 10 December, and integration is going well so far. Their biggest month as well now is really that kind of January, February period. The U.K. market has -- they've been outperforming the market in those months, and we're very happy with the engagement so far. It's still very early days, but we know it's a very good business, and we've got good plans for the cruise category overall, as you'll see in the presentation pack. In terms of broader acquisitions, I might hand over to Skroo on that. Thoughts around broader acquisitions. Graham Turner: Thanks, JK. Look, we won't be rushing into acquisitions, but in the areas that are doing well, and whether that's in specialist corporate areas or in the leisure, the luxury and cruise type leisure, we're certainly looking at these. So -- but yes, we're obviously being reasonably cautious. There are macro issues in various countries which, from Iran to what the administration is doing in America. So we're modestly cautious at the moment, but we're certainly looking at some that fit those strategies that we are focused. Operator: Our next question comes from Brian Han from Morningstar. Brian Han: In leisure, I'm not sure whether you've ever spoken about this, James, but what do you think the demographics of your leisure customers look like? I mean, is it more heavily skewed to older cohorts who are sort of less hostage to economic volatility? James Kavanagh: It's really mixed, Brian, across the portfolio. And it's also mixed by need state as to how customers are thinking about their holidays as to where they shop in the various channels. Broadly speaking, we haven't seen too much of a shift in terms of older demographics, and the average has been holding still for our Flight Centre brand as an example. Offline in-store bookings are typically around that mid-50s, whereas our online channel, which is one of the fastest-growing channels, is around that mid-40s. When we look at our luxury customers, Scott Dunn as an example, the average age in that brand is actually mid-40s as well. And we're actually attracting more and more younger customers with some of the latest investments in our loyalty program and so on. So we really look at all the various cohorts, and we're designing the right product line, and we've got the best channels to be able to service those various demographics dependent on their need state, because we think customers shop that way as opposed to just thinking I'm a certain age group and I only do X. It's not like that anymore. It's very much a case of need state, and we've got the right solution. Brian Han: Just at the group level, on your portfolio simplification initiative, is there a timetable you're working to in terms of divesting noncore and underperforming businesses? Adam Campbell: Brian, it's Adam. I mean, no, there's not. I mean, we've been reviewing for the last couple of years our businesses, and it's an ongoing thing. I think it should be part of any business like ours with a fairly diverse range of businesses and portfolios. We're looking to see, always, how best we can get the true value out of those businesses coming through, and that could be through divestiture like we did with Cross Hotels. It could be some rebranding, it could be organic growth, it could be M&A bolt-on, or it could just be holding the line with the strategies that we've got in play and organically growing those. So there's not a time line in place. We've done most of that heavy lifting though, I've got to say, over the last couple of years now. And we think that we're in a reasonable position, but it will be an ongoing piece of work that Chris and his team in corporate do, that JK and the team in leisure do, and that us as a CEO group with Skroo, myself, and Greg attached to them, will continue to do as well. Brian Han: When you say noncore and underperforming businesses, are we still talking mostly in that HQ division that you call it now, or are you talking across the other businesses too? Adam Campbell: Well, it's about looking at -- it's not just about noncore, and it's not just about underperforming. It's also how do we accelerate performance and get to the value that we believe into the businesses. So no, we're looking at different brands and businesses through corporate, through leisure and in those HQ businesses as well as to how we do that. So an example of that is if you look at the cruise segment in leisure, the purchase -- the acquisition of Iglu was a way to really enhance the growth there and to take us more quickly towards the value that we could see extracting out of that sector of the leisure business. And we've got other areas, meetings and events in corporate that we're at the moment organically supercharging to try and grow and extract the value from as well. So there's a bit of a mixture. It's not just about those businesses that are so-called underperforming, it's also how do we accelerate performance. Operator: Our next question comes from John O'Shea from Ord Minnett. John O'Shea: Just a question, and I may have missed some of this early on, but directionally where do you see the revenue margin going for the business in the second half and into FY '27? Obviously, revenue margin down a couple of percent in the period, but -- not a couple of percent, but 13 basis points. Where do you see it heading directionally? Adam Campbell: I might get JK and Chris to talk about it from a corporate and leisure perspective. JK, do you want to kick off? James Kavanagh: Yes. Across the portfolio, if I take the brand-by-brand view, John, I expect revenue margin to lift, and that's typically the second half is our highest margin broadly speaking. The mix, though, will depend on which brands perform the fastest rate in the second half. But we do expect to see an uplift in revenue margin in H2 versus H1. Chris Galanty: I think, John, from a corporate perspective, our revenue margin was flat for the first 6 months. It was the same as versus last year. I don't really expect to see much change. I think revenue margin is holding, which is good as we grow. So really we see net margin improvements through productivity, but probably reasonably consistent revenue margin. Operator: Our next question comes from Alex Mclean from Evans & Partners. Alex Mclean: I just had a question on the Iglu business that you bought. You basically gave an implied EBITDA earnings base when you took over the business in December, and there was some uncertainty around where it'll wash out at the PBT level. Do you have a better sense for where that sits now that you've had it, I guess, in the portfolio for a couple of months now? Haydn Long: Yes, mate. Haydn, I might start off and hand over to JK. So we obviously, when we bought the business, we increased our guidance at the same time, and that predominantly reflected the contribution we thought Iglu would make, and that's obviously based on underlying PBT. We also -- we are seeing some reasonably positive trends in the business as well, so potentially a little bit of movement there, but captured within our overall range. The PBT uplift of $10 million, we felt that that would cover the PBT range that the business would deliver, but as you said, it was a little bit difficult to work out. The business also loses money in December, which we knew about, and then makes a lot of money in January and February, and that's the way it's panned out so far. I might let JK talk to you about expectations though. James Kavanagh: Yes. That's pretty much the expectations as Haydn has covered it. And then it's really just making sure that they perform to plan, and things are going okay so far. Alex Mclean: Okay. And then maybe while I've got you, JK, just attachment rates in the leisure business. Are you seeing any improvement there with what you're doing rolling out AI to your frontline agents? James Kavanagh: We have, actually. Yes. We've rolled out quite a few new solutions, and it's been quite positive. But you can imagine the last half we've been heavily testing a whole range of initiatives that have been AI-generated. A lot of them have been in POC proof-of-concept stage, and then as we've scaled up quite a few, we've seen an uplift particularly with our novices in terms of attachment and conversion more so in some of their bookings. But I have to say it's too early to tell in terms of forecasting into our numbers as to what the uplift has been. But it's showing some positive trends in terms of just some of the conversion rates and also accommodation rates in terms of prompting things like next best action with hotels and that for our consultants to be able to convert more. So early signs are promising, but we'll be able to share more next time we speak. Operator: [Operator Instructions] Our next question comes from Belinda Moore from Morgans. Belinda Moore: JK, if I could ask you, this leisure uplift you've seen of 4% in January, I mean that obviously includes Iglu, so what would the base business be doing ex that, please? And then for Adam, how should we think about the full-year loss from Other, I know you've changed the name today, but from that division, please? James Kavanagh: So first question, we swung over into year-to-date growth excluding Iglu, and then if we add Iglu onto it, then it's just extended out to the 4% lift. Chris Galanty: I think, Belinda, just to clarify, I think the 4% is year to date, correct? Yes. The 4% wasn't the swing in January. It was 4% down at the end of the half, and by the end of January, it's actually up 4%, so the swing is a little bit bigger. Adam Campbell: Belinda, just in relation to the other segment or the HQ segment, we did, I think from memory, we did about a $75 million PBT loss in that business last year. I'd expect interest to continue to be a headwind for us in the second half at a similar run rate to what we saw in the first half. Now that could change obviously if we see some changes in interest rates over the next couple of months, but that's my initial expectations. Outside of that, other costs, we're certainly going to be investing another couple of million in technology in the second half, but that should start to be offset by a lot of the changes we put in place in terms of changing operating model that we've been investing in the first half through both our enterprise technology business and also more broadly through GBS. So at a gut feel, I would suggest that including interest being up, you're probably looking around about a $90 million to $95 million loss for that HQ segment for the full year. Operator: And our next question comes from Tim Plumbe from UBS. Tim Plumbe: Guys, sorry most of my questions have been asked, so I might throw a different one in there. Following on from the Asia losses, guys, in the corporate business, if we looked at the corporate underlying... Chris Galanty: Sorry, Tim -- excuse me, Tim. Can we ask you to speak up a little bit? Haydn Long: You were very soft, muffled mate. Asia, you were talking about? Tim Plumbe: Yes, sorry, guys. So Asia into the corporate business, if we thought about the corporate underlying PBT growth, do we just take off the $4 million provision that's been released, or can you talk to what the kind of growth in corporate PBT was ex Asia? Chris Galanty: Yes, I mean, our PBT growth, most of it actually came out of -- it wasn't really Asia. Asia contributed some, but a lot of it came out of Australia, New Zealand, the Americas, and particularly the Corporate Traveller business in the Americas. So Asia contributed about $4 million of the release there, but some of the other Asian improvements came just from operational improvements as well. So yes, Asia contributed, but it certainly wasn't, yes, the lion's share of the contribution. Operator: And in showing no additional questions at this time, I would like to turn the floor back over to Mr. Campbell for any closing remarks. Haydn Long: Haydn impersonating Adam. Just thanks, everyone, for dialing in. Thanks for your time today, I know it's very busy for a lot of you. Shoot us through any other questions that you have, and we'll try and get back to you as quickly as we can. We'll see a few of you over the next few days. Thank you very much. Operator: And with that, we will conclude today's conference call. We do thank you for participating. You may now disconnect your lines.
Operator: Thank you for standing by, and welcome to this Cytokinetics, Incorporated Fourth Quarter 2025 Earnings Call. This call is being recorded and all participants are in a listen-only mode. After the speakers' remarks, we will open the call to questions. We will allow for one question per participant. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. And if you would like to withdraw your question, press star 1 again. I would now like to turn the call over to Diane Weiser, Cytokinetics, Incorporated Senior Vice President of Corporate Affairs. Please go ahead. Diane Weiser: Good afternoon, and thanks for joining us on the call today. Robert I. Blum, President and Chief Executive Officer, will begin with an overview of the quarter and recent developments. Andrew M. Callos, EVP and Chief Commercial Officer, will discuss the commercial launch of MYCorzo in the U.S. and readiness in Europe. Fady Malik, EVP of R&D, and Stuart Kupfer, SVP and Chief Medical Officer, will provide updates related to our clinical development programs. Sung H. Lee, EVP and Chief Financial Officer, will provide a financial overview of 2025 and discuss our 2026 financial guidance. Robert will then make closing remarks and review key milestones for the year ahead. Please note that portions of the following discussion, including our responses to questions, contain statements that relate to future events and performance rather than historical facts and constitute forward-looking statements. These include statements regarding expected timing and potential outcomes of clinical trials, including ACACIA-HCM, expectations regarding regulatory interaction and the potential for regulatory approval, expectations regarding commercial performance, and statements about our financial guidance and capital allocation. Our actual results might differ materially from those projected in these forward-looking statements. Additional information concerning factors that could cause our actual results to differ materially from those in these forward-looking statements is contained in our SEC filings, including our current report regarding our fourth quarter 2025 financial results filed on Form 8-K that was furnished to the SEC today and our annual report to be filed on Form 10-K in the coming days. We undertake no obligation to update any forward-looking statements after this call. I will now turn the call over to Robert I. Blum. Robert I. Blum: Thank you, Diane, and thanks to all for joining us on the call today. The 2025 marked a defining moment for Cytokinetics, Incorporated with the FDA approval of MYCorzo for the treatment of adults with symptomatic obstructive HCM, the first medicine we have advanced from discovery to commercialization. In fact, in the span of a single week, Cytokinetics, Incorporated received approvals for MYCorzo in both the U.S. and China, plus a positive opinion from CHMP for MYCorzo in the European Union, that latter milestone preceding last week's announcement of the European Commission's approval of MYCorzo in the EU. Together, these milestones represent the culmination of years of focused scientific, clinical, and regulatory execution and we now turn the page onto a new chapter for Cytokinetics, Incorporated as a global commercial-stage biopharmaceutical company. More importantly, the approval of MYCorzo offers a new treatment option to patients living with obstructive HCM, a serious condition that can profoundly impact quality of life. As Andrew will discuss, since the FDA approval in December, our teams have been focused on executing a disciplined and deliberate commercial launch. Our ongoing priority is to implement the systems, the education, the promotion, and market access pathways to support physicians, patients, and payers while also building initial and sustainable launch velocity and momentum. While it is still early, we are encouraged by our progress thus far and the initial engagements we are seeing from the cardiology community. In fact, the level of interest in MYCorzo as a new treatment option is high. With an eye toward the longer-term U.S. commercial launch trajectory, during the first quarter we submitted the supplemental NDA for MAPLE-HCM to the FDA. We expect FDA to conclude its review of the sNDA in Q4 2026. We believe that the potential inclusion of results from MAPLE-HCM into an expanded label for MYCorzo could boost category penetration depth and breadth, so more patients may ultimately benefit. Of course, we also anticipate the readout of results from ACACIA-HCM in non-obstructive HCM and we are on track for top line announcement in the second quarter of this year. nHCM is a different patient population with significant unmet medical need. Should this trial prove positive, it could also represent a potential growth driver for MYCorzo. Outside the U.S., following the recent approval of MYCorzo in the EU, we have now shifted into full execution of our commercial readiness planning, with our first planned launch in Germany expected in the second quarter. Additionally, during the fourth quarter of last year, Health Canada accepted for review the New Drug Submission for aficamten, and a potential approval for aficamten in Canada could come later this year. As we look ahead, we enter this next phase of our corporate development with strong momentum and also solid financials. The progress we delivered last year positions us well for continued growth and value creation while we also keep a close eye on capital structure and capital allocation. Sung will speak to our financial guidance and position as we ended 2025, as well as operating expense guidance for 2026. That guidance reflects the priorities of launching MYCorzo and advancing our muscle biology pipeline, both with disciplined execution and attention to capital efficiencies. We are confident in the foundation we are building for our specialty cardiology franchise and to deliver for both patients as well as shareholders. I am going to now turn the call over to Andrew. Andrew M. Callos: Thanks, Robert. Our U.S. commercial launch process began immediately following FDA approval of MYCorzo in December. We have built our customer support systems around a team of HCM navigators who serve patients in a one-on-one relationship. These navigators started taking calls within days of approval, ensuring patients and HCPs had support. Immediately following FDA approval in December, we launched our patient and HCP marketing campaigns, leveraging surround-sound assets and activations such as quick start guides, patient brochures, websites, and social media advertising to help drive awareness and educate patients. Our sales representatives, whom we call Cardiovascular Health Specialists, began engaging with HCPs immediately following the New Year’s holiday and certifications within the MYCorzo label. Within weeks of approval, the online portal for the MYCorzo REMS program went live and MYCorzo became available for prescription. On that same day, we also launched “Corzo & You,” our patient support program offering personalized support, access, reimbursement assistance, and affordability programs for eligible patients, including a free trial program, bridge program, co-pay assistance, and patient assistance program. On the first day of product availability in channel, HCPs began to be certified in REMS and patients enrolled in Corzo & You. Within days of availability, the first prescriptions for MYCorzo were dispensed. In January, we also hosted our first national speakers’ broadcast with strong attendance from across the U.S. This was only the start of what will become an extensive peer-to-peer physician education program, which is a key element of our strategy to ensure HCPs are aware of this new treatment option. All of these integrated commercial launch programs were synchronized to roll out and support our ambitious plans for MYCorzo in the United States. While we are still early in our launch, so far customer feedback has been positive. HCPs have expressed enthusiasm for another cardiac myosin inhibitor as a treatment option for obstructive HCM, with particular interest in the clinical evidence demonstrating sustained reduction in obstruction and improvement in symptoms with no treatment discontinuation due to ejection fraction drops as observed in SEQUOIA-HCM. Our understanding is that a substantial portion of HCPs also appreciate the flexible dosing and ability to rapidly titrate as early as every two weeks, the adaptable monitoring schedule that allows for echos to be completed within a two- to eight-week window, and that drug-to-drug interaction counseling is not required as part of the REMS for MYCorzo. While it is still early in our launch, we are encouraged by the initial level of engagement, REMS certification, and overall demand. Within three weeks, we had over 700 HCPs REMS-certified across HCM specialty and non-specialty centers, a leading indicator of HCPs planning to prescribe MYCorzo. And as mentioned, patients were on therapy within the first week that MYCorzo was available. The level of demand in REMS patient enrollments and therapy is so far reinforcing our conviction in the commercial prospects for MYCorzo. In addition, we have already achieved over 12,000 customer engagements, including our Cardiovascular Account Specialists having engaged over 95% of the 700 HCPs who account for the majority of CMI prescribing today. Our current focus remains on educating HCPs on the prescribing information, preparing them for the REMS requirements, and encouraging them to identify patients for MYCorzo. From market research conducted post launch, we have learned that on an unaided basis, 90% of HCPs surveyed are aware of MYCorzo, the majority of which have stated they plan to prescribe MYCorzo for their obstructive HCM patients. They further state they recognize the potential benefits of the MYCorzo clinical profile for efficacy, safety, and tolerability as well as the differentiated REMS and dosing flexibility. As we have stated, starting with our Q1 earnings call, we will report on three key metrics to measure the pace and velocity through our launch: number of HCPs who are actively writing prescriptions, the volumes of prescriptions an HCP writes, and the number of patients on MYCorzo. We see these as leading indicators of launch depth and breadth that will read on our overall progress. As we continue this launch, our goal for MYCorzo is to achieve greater than 50% of CMI new patient preference share by 2026. We also intend to grow the overall CMI category. Our confidence is based on three launch drivers: clinical evidence, our bespoke patient support services, and the differentiation of our REMS program. First, the clinical evidence from SEQUOIA-HCM supports that MYCorzo is associated with rapid and sustained reduction in obstruction and improvement in symptoms, that it provides flexibility to titrate as early as two weeks with a flexible monitoring schedule for both patients and HCPs, and was not associated with treatment interruptions or clinical heart failure events. Second, our patient support program called Corzo & You provides a single point of contact for patients to deliver an experience that balances empathy and individual connection with consistency and seamlessness. And third, the MYCorzo REMS program allows for the flexibility to titrate as early as two weeks with echo monitoring required within a two- to eight-week window following dose initiation and any subsequent dose change, with no DDI monitoring. Importantly, a patient’s dose may be titrated after each echo with no delay. These three launch drivers are what we believe will fuel the uptake for MYCorzo and preference share. Driving access for patients is also a high priority. We have been engaging with payers for some time ahead of FDA approval to educate them on the evidence from our clinical trial as well as the clinical and economic burden of obstructive HCM. We have already met with all key payers earlier this year following approval. Our goal is to have Medicare access comparable to Camzyos in the first quarter and commercial access comparable to Camzyos by Q4 2026. In Europe, with EC approval for MYCorzo now secured in the European Union, we are moving quickly toward our first European commercial launch in Germany, planned in the second quarter. Our German medical and commercial teams are hired, and launch plans are accelerating. We also now have hired country leads in all EU4 countries and the UK to prepare for subsequent European launches in later 2026 and in 2027. We also continue to advance European commercial readiness activities, including preparing HTA dossiers for all key European markets. It is a privilege to be in the position of launching MYCorzo globally, and it is our priority to establish awareness and confidence. As proven by other launches, the early work of establishing awareness and confidence in access is critical to unlocking long-term momentum and velocity. We are encouraged by initial engagement and are focused on converting these engagements into consistent, scalable execution with positive commercial success as the year progresses. And with that, I will turn the call over to Fady to address our medical and clinical development activities. Fady Malik: Thanks, Andrew. In support of the launch of MYCorzo, our medical affairs organization continued to expand its engagement with the HCM community ahead of and now during our commercial launch. The field medical affairs team has been in place for several years now, working with our clinical trial sites during the conduct of SEQUOIA-HCM and MAPLE-HCM, building deep relationships across the HCM community. Immediately upon approval of MYCorzo, our U.S. field medical teams, including Therapeutic Medical Scientists and Managed Health Medical Scientists, were fully trained and operational, allowing them to hit the ground running and engage in 2026. Since approval, our U.S. TMS team has rapidly scaled scientific engagement, conducting over 500 interactions with HCPs in support of MYCorzo. Our U.S. MHMS team, in collaboration with our U.S. payer account managers, has expanded engagement by conducting more than 50 access-related interactions, reinforcing the economic profile, clinical profile, and safety considerations most relevant to access decision makers. At the ACC next month, our presence will underscore our leadership in HCM, with accepted oral and poster presentations covering the real-world treatment implications, additional data from MAPLE-HCM, and important safety and efficacy analyses drawn from our late-stage clinical programs. Supportive of our global development strategy, our partner Bayer completed enrollment in CAMELLIA-HCM, a Phase 3 clinical trial of aficamten in Japanese patients with obstructive HCM. Additionally, we completed enrollment of the Japanese cohort of non-obstructive HCM patients in ACACIA-HCM, both intended to support potential marketing authorization for aficamten in Japan. During the fourth quarter, we presented additional data from MAPLE-HCM in three late-breaking sessions at the HCM Society Scientific Sessions and the Scientific Sessions. Responder analyses showed that significantly more patients on aficamten achieved a positive response compared to patients on metoprolol. Additionally, treatment with aficamten resulted in significantly greater improvements than metoprolol on symptoms and cardiac biomarkers. The results from MAPLE-HCM have resonated strongly across the cardiology community, highlighting the evolving thinking around the standard-of-care treatment in HCM and the need for new therapies. Now I will hand it over to Stuart to speak more about ACACIA-HCM as well as our ongoing development programs in heart failure. Stuart Kupfer: Thanks, Fady. Our next important data readout will come from ACACIA-HCM, the pivotal Phase 3 clinical trial of aficamten in patients with nHCM. We remain on track to share top line results of the primary cohort, which excludes Japan, in the second quarter. We anticipate the top line press release will remain relatively high level so as not to jeopardize presentation of the full results at a potential medical congress later in the year. nHCM is a highly underserved patient population with no approved therapies. We look forward to reporting the results of ACACIA-HCM and to evaluating whether aficamten can demonstrate a clinically meaningful benefit for these patients. As with any pivotal trial, a range of outcomes is possible, and we will provide a thorough review of the results at an upcoming medical congress following the top line release. As we previously guided, the conduct of ACACIA-HCM remains within its design parameters and closeout is going according to plan. Given our expertise and experience in designing and managing trials in HCM, we believe that we have successfully executed a well-designed clinical trial. We continue to be confident in ACACIA-HCM and look forward to seeing the results in the second quarter. Now moving on to our clinical development programs in heart failure. During the quarter, we continued conduct of COMMUN-HF, the confirmatory Phase 3 clinical trial of omecamtiv mecarbil in patients with symptomatic heart failure with severely reduced ejection fraction less than 30%. We now have 100% of U.S. sites activated and over 90% of European sites activated. We soon plan to expand the trial into China to increase the global footprint of this important clinical trial. We also continued AMBER-HFpEF, the Phase 2 clinical trial of olicamtiv, in patients with symptomatic heart failure with preserved ejection fraction of at least 60%. We continued enrollment in cohort one of AMBER-HFpEF and expect to complete enrollment in this first quarter. After an interim safety review is conducted, we may assess whether to begin to enroll in cohort two for evaluation of a higher dose. We are encouraged by the continued progress and execution across these ongoing clinical trials, reinforcing our focus on disciplined development and advancing innovative medicines within our emerging specialty cardiology franchise. And with that, I will pass it to Sung. Thanks, Stuart. Sung H. Lee: We are pleased to report our fourth quarter and full year 2025 financial results. Starting with the balance sheet, we finished 2025 with approximately $1,220,000,000 in cash, cash equivalents, and investments, compared to $1,250,000,000 at the end of 2024. The 2025 year-end balance includes $100,000,000 in proceeds from the drawing on tranche five of the Royalty Pharma multi-tranche loan. Excluding the proceeds from this loan, cash, cash equivalents, and investments would have declined by approximately $134,000,000 during 2025. Turning to the income statement, total revenues in Q4 2025 were $17,800,000 compared to $16,900,000 for the same period in 2024. Total revenues for the full year 2025 were $88,000,000 compared to $18,500,000 in 2024. Total revenues for the full year 2025 benefited primarily from the successful completion of the technology transfer totaling $52,400,000 to Bayer in 2025 and the recognition of $15,000,000 in milestones in 2025 related to the approvals of MYCorzo in the United States and China under the Sanofi license agreement. As we announced previously, MYCorzo became available to patients near January, and as such, we expect to report product sales of MYCorzo with our Q1 2026 results. R&D expenses for the fourth quarter were $104,400,000 compared to $93,600,000 for the same period in 2024. R&D expenses for the full year 2025 were $416,000,000 compared to $339,400,000 in 2024. The increase from 2024 to 2025 was primarily due to advancing our clinical trials, higher personnel-related costs including stock-based compensation, and medical affairs activities. G&A expenses for Q4 2025 were $91,700,000 compared to $62,300,000 for the same period in 2024. G&A expenses for the full year 2025 were $284,300,000 compared to $215,300,000 in 2024. The increase from 2024 to 2025 was primarily driven by investments toward commercial readiness, including the hiring of our U.S. sales force primarily in 2025, and higher non-sales personnel-related costs. Net loss for Q4 2025 was $183,000,000 or $1.50 per share compared to a net loss of $150,000,000 or $1.26 per share for the same period in 2024. Net loss for the full year 2025 was $785,000,000 or $6.54 per share compared to a net loss of $589,500,000 or $5.26 per share in 2024. Turning now to our financial guidance for 2026. As this is our first year of launching MYCorzo, we are not providing product sales guidance at this time. In terms of expense, we expect our GAAP combined R&D and SG&A expense to be between $830,000,000 and $870,000,000. Stock-based compensation included in the GAAP combined R&D and SG&A expense is expected to be between $120,000,000 and $130,000,000. Excluding stock-based compensation from the GAAP combined R&D and SG&A expense results in a range of $700,000,000 to $750,000,000. The GAAP combined R&D and SG&A expense does not include the following: collaboration expenses, including reimbursed expenses and cost of inventory sales of aficamten to partners; subject to the results of ACACIA-HCM and regulatory review, potential costs related to commercialization of aficamten in nHCM; and the effect of GAAP adjustments as may be caused by events that occur subsequent to publication of this guidance, including, but not limited to, business development activities. Our capital allocation priorities are as follows: first, launching MYCorzo in the U.S. and funding commercial readiness activities in Europe; second, advancing our pipeline with important label expansion opportunities for aficamten and ongoing clinical trials of omecamtiv mecarbil and olicamtiv; and third, investments in our muscle biology platform and pipeline. We will continue to be disciplined in our approach to capital allocation and remain good stewards of capital as we embark as a global commercial-stage company. With that, I will hand it back to Robert. Robert I. Blum: Thank you, Sung. Before we open the call to questions, it is worth pausing to reflect on what this moment represents for Cytokinetics, Incorporated. After years of focus, discipline, and unwavering commitment to our science, we have crossed an important threshold from pursuing possibilities to delivering impact. The approval of MYCorzo marks the beginning of a new chapter, one for which our work impacts the daily lives of patients and the decisions made in clinics around the world. This is a moment we have been working toward for nearly 28 years at Cytokinetics, Incorporated, and it reflects unstoppable resilience, dedication, and a rigorous focus on translating our science into medicine for the benefit of patients. With that transition comes a deeper sense of purpose and dedication to our core values, which define how we do what we do. Chief amongst them is our value of “Patients are our North Star,” and during the fourth quarter, we announced our support for a three-year initiative led by the American Heart Association to address disparities in access to care, diagnosis, and treatment for people living with HCM. Through this longstanding commitment, we hope to help close the gaps between evidence, guidelines, implementation, and equities in health care delivery for HCM. Progress at this stage is not only about innovation, but also about our responsibility to show up for patients and the communities we serve. What we have discussed today reflects years of focused work across the organization from discovery and development through regulatory, manufacturing, and now commercial execution. What made all of this possible was the enduring dedication and the passions from our employees, for which I have endless gratitude. As we enter this next chapter as a commercial-stage company, our focus remains clear: execute ambitiously, advance our pipeline, and deliver meaningful, longer-term impact for patients and shareholders. Now I would like to share our 2026 milestones. For aficamten, we expect to report top line results from ACACIA-HCM in the second quarter 2026. We expect to launch MYCorzo in Germany in the second quarter 2026. We expect to receive potential FDA approval of the supplemental NDA for MAPLE-HCM by Q4 2026. We expect to complete enrollment in the adolescent cohort of CEDAR-HCM in Q4 2026, and we expect to receive potential approval from Health Canada in the second half of this year. For omecamtiv mecarbil, we expect to continue patient enrollment and the conduct of COMMUN-HF through 2026. For olicamtiv, we expect to complete enrollment in cohort one of AMBER-HFpEF in Q1 2026 and complete enrollment in cohort two of AMBER-HFpEF by 2026. And finally, for our preclinical development and ongoing research, we expect to continue ongoing preclinical development and the research activities directed to additional muscle biology-focused programs. Operator, with that, we can now open up the call to questions, please. Operator: Thank you. And just as a reminder, please one question. Your first question comes from Tessa Romero with JPMorgan. Please go ahead. Tessa Romero: Hello, good afternoon, Robert and team. Thanks so much for taking ours this afternoon. So one from us on ACACIA. Is it true that the study will be successful if at least one of the endpoints reaches statistical significance? And then along these lines, in your study protocol, did you specify which endpoint you would need to hit to properly claim success? In other words, either KCCQ or peak VO2, or is either fine? Thank you. Robert I. Blum: I will start, and I will turn it over to Fady and Stuart. To define success, you have to also consider with whom you are engaging. And, obviously, the clinical community is going to have one set of expectations and interests, as might FDA, but also they could diverge. But it is true as we have designed this clinical trial, it will be deemed positive if it hits on either or both of the prespecified clinical trial endpoints. With that, I will also turn it over to Fady and Stuart if they want to add anything. Fady Malik: I think the only thing to add is that either endpoint is considered equally positive. Robert I. Blum: Either one is positive, the trial would be considered positive. One is not weighted more heavily than the other. Operator: Your next question comes from the line of Roanna Ruiz with Leerink Partners. Please go ahead. Roanna Ruiz: Good afternoon. Afternoon, everyone. Hello. So a question for me. I was thinking about MYCorzo and its initial launch in cardiologist engagement. Could you share any color on how long it is taking sites and clinical centers to get through the REMS certification and start to prescribe? Are the field reps noticing anything so far in their detailing? Robert I. Blum: I will start again and turn it over to Andrew. And we very purposely are focusing on engagements, inputs, if you will, on this call because it is early in the launch. But we are indeed impressed by how many HCPs have already been REMS-certified and the speed at which that happened shortly after product was in channel. And I will ask Andrew to elaborate. Andrew M. Callos: Sure. So the REMS certification, as you are maybe aware, is a quick self-study training and a 10-question Q&A that is scored. It takes 10 to 20 minutes generally for cardiologists, sometimes even faster. So it has really not been a barrier to be REMS-certified. I think there are many HCPs and cardiologists we were talking to that were waiting for MYCorzo to be approved and had patients that were also waiting, and, you know, we have gotten strong engagement across a broad base of cardiologists, both in centers of excellence and outside of centers of excellence in not only REMS certification, but also getting patients REMS-certified and prescribing. And, also, to add, knowing that this is not the first but now the second cardiac myosin inhibitor, these cardiologists were accustomed to a REMS, were awaiting one, and when we did launch and have product in channel, I think they were poised, well-positioned to move swiftly with REMS certification, and we are seeing evidence of that. Roanna Ruiz: Got it. Thanks. Operator: Your next question comes from the line of Mayank Mamtani with B. Riley Securities. Please go ahead. Robert I. Blum: Hello, Mayank. Mayank Mamtani: Yes. Good afternoon, team. Thanks for taking our questions, congrats on a very productive recent few months. So on ACACIA, if I may, could you comment on your placebo arm response expectations for both KCCQ and peak VO2? And if you would expect consistency to what we have seen in preceding nHCM trials? And if you could also comment on whether you would expect a similar NT-proBNP reduction that you saw in the earlier OLE experience at the time point that you have here, and if you expect that to be correlated to the exposure that you may have from a dose intensity standpoint? Robert I. Blum: I am going to ask my colleagues to answer your question, but I will remind you and also them that as we are approaching the conclusion of the study, and as we would be expecting to proceed to database lock and unblinding, we should answer your question with regard to what was the original design expectations. And I want to make certain that we are not in any way front running anything that might be understood regarding the progress of the trial, rather its design and conduct. Fady Malik: It is important to realize that we are still blinded to the data, so we have really no clue as to what the placebo arms are doing. But based on past experience, the peak VO2 arm generally—the placebo response—is close to zero. Robert I. Blum: It may be a little higher, may be a little lower, but in our prior studies the placebo response—there is not much of a placebo response to peak VO2, and, again, we based ACACIA’s design on— Fady Malik: A placebo response in line with our prior studies. You know, expect four to five points, perhaps six points. But just to— Robert I. Blum: Emphasize, the statistical design of the study does not rely on the magnitude of the placebo response. It relies on the difference between the active— Fady Malik: Response and the placebo response. And so that difference in the case of KCCQ, which we powered the study on, was five points— Robert I. Blum: Difference between placebo and active. And then your last, I think, point was with regards to NT-proBNP. Fady Malik: We certainly would not have any— Robert I. Blum: Expectations that are different from what we observed in the Phase 2 or the open-label extension with regards to how NT-proBNP has declined during treatment with aficamten, but we are blinded to those data as well. Mayank Mamtani: Thank you, team. Operator: Your next question comes from the line of Joe Pantginis with H.C. Wainwright. Please go ahead. Robert I. Blum: Hey, Joe. Joe Pantginis: Hey, everybody. Thanks for taking the questions. So a question on early market uptake, and I am glad Andrew made an earlier comment as well that I wanted to ask. So with regard to the U.S. first, Andrew, you made some comments about—and previously about patients that docs have been having in—wanted to know if there is any uptake there that you thought might have been in line or even quicker than expected. And secondly, with regard to ex-U.S., you know, China, for example, what would you describe as any commercial differences? I know you have started to put a team there or potential headwinds that you could expect versus what you would see in the United States? Thanks. Robert I. Blum: Andrew, do you want to take that? Andrew M. Callos: Sure. So maybe start backwards. China is partnered—Sanofi is commercializing in China. We are not doing that. So that is an important element. I think back to the U.S. patients in reserve, I think that the demand we are seeing and where we are seeing it from is what we were expecting. So we were not surprised by the patient demand. I think it will be reflected in research we were seeing when we were doing primary market research pre-approval—things like demand studies, things like awareness studies—that there was broad awareness. The physicians certainly were aware of not only SEQUOIA, but also MAPLE that were presented at congresses. So I think we are where we were expecting to be knowing that we have been in the market with product for about three weeks. Robert I. Blum: Maybe I can just add to the point of Andrew’s market research, but also as equity research analysts from Wall Street have done their own surveys, there was clear evidence that the current cardiac myosin inhibitor category was only penetrated 15% to 20% at most and that there would be a large number of patients still eligible for treatment. What we heard, what analysts heard, is that there would be a number of patients that could be started promptly and the early evidence would suggest that there were patients that were held awaiting a potential approval. And we will be in a position to comment more about that in time. Joe Pantginis: Thank you. Operator: Your next question comes from the line of Cory Kasimov with Evercore. Please go ahead. Cory Kasimov: Hey, Robert. Hey, guys. Thanks for taking the question. So I had a follow-up on ACACIA and wanted to also ask between these two primary endpoints of KCCQ and peak VO2, and we think specifically about U.S. investigators. Is there a view from, like, domestically on whether one of these endpoints is more important than the other? I know the original primary was KCCQ—does that—is that a reflection of how U.S. physicians are thinking about it? And then from that standpoint, I know how it is, again, powered, but what is considered to be a clinically meaningful change from a physician point of view? Thank you. Robert I. Blum: So here again, I am going to remind our colleagues of the fact that we chose to have co-primary endpoints not because we originally thought one was more important than the other, but rather because regulatory authorities wanted to see a harmonization across the study as could be best achieved by putting equal weight and emphasis to the two co-primaries. Maybe Fady and Stuart, I will ask you if you want to say anything else. Fady Malik: I will just add I do not think physicians will lean one way versus the other. I think they will look at the totality of the evidence and not just the primary endpoints, but also the secondary endpoints that include NYHA class, and other metrics of exercise, biomarkers, and things like that. So, you know, in this field, there are no treatments for non-obstructive HCM. Physicians are looking for improvements in their patients’ status, and there are many dimensions— Robert I. Blum: Upon which they can improve, and, you know, I think they and also regulators will look at the totality of the data. To answer your question about minimally important differences, for this being in HCM, and to reiterate what Fady said, there is no approved drug for these patients in this population. What is going to be considered important and clinically meaningful is going to be hopefully a function of this trial, as we learn what is concordant—how the endpoints move together, and what ultimately defines larger magnitude improvements versus what may be otherwise. So I think we are going to learn a lot from this study that is going to be informing the clinical literature and hopefully what ultimately may be medical guidelines. But we do not have reference standards or benchmarks that we can point to. Instead, this study is intended to test those hypotheses and determine what should be important and meaningful. Cory Kasimov: That is helpful. Thank you both. Operator: Your next question comes from the line of Salim Syed with Mizuho. Please go ahead. Salim Qader Syed: Great. Thanks for the question, guys. One for us just on the disclosure. When you said high level, should we be thinking more along the lines of how Bristol had their press release for Odyssey, which was just completely qualitative? I think it was just one sentence like, did not hit on the dual primaries. Or should we be thinking somewhere more along the lines of SEQUOIA, how you guys did it, which had a lot of numbers in it, or somewhere in between. And if it is all qualitative, would you be willing to comment on each of the co-primaries in the press release? Thank you. Robert I. Blum: Ultimately, this will be a function of the data and what is deemed material, and also what would be, upon receipt of those data, what can be negotiated with the medical congress. Disclosing more would be an objective if that can be permitting of the full presentation at an important medical meeting. And in the case of SEQUOIA, we disclosed more, but at the expense of being able to present it at the medical congress where it would have been more appropriate. So we would like to be able to do both: disclose as much as we can, but still preserve the opportunity to present at the appropriate next-level congress. If it is going to be more qualitative, I imagine we will have to speak to both endpoints. I do not think we could speak to one and not the other. But in terms of what would be contained beyond that, I think it all depends on the data, magnitude of effect, p-values, and what we can be enabling of at a congress. Fady, anything you want to add? Fady Malik: The presentation of the data is important to the academic community, and in the past, I would say that if you look at the presentation of MAPLE at the ESC Congress last year, it was tremendously impactful that way. So there are many considerations and important trade-offs here— Salim Qader Syed: In terms of all the stakeholders involved. Robert I. Blum: We are fully aware of the significance and the importance of these data both to the medical community as well as to the Wall Street community. And we are going to try to do our best. Salim Qader Syed: Okay. Got it. Thanks so much, guys. Operator: Your next question comes from the line of Yasmeen Rahimi with Piper Sandler. Please go ahead. Yasmeen Rahimi: Thank you so much for all the color. My question is just related on ACACIA also. I think, you know, one of the questions we have been getting is have you done payer work or uptake work to understand whether the usage would still be strong if you showed a three-point placebo-adjusted difference in KCCQ, or just commentary—as long as you have a statistical separation, the magnitude of delta difference in KCCQ is irrelevant. Appreciate color, and I will jump back in the queue. Robert I. Blum: Maybe that is a question for both Fady and Andrew. In terms of your specific example of a three-point difference in KCCQ, I assume you picked that number arbitrarily. But maybe, Fady and Andrew, if you want to tackle that. Fady Malik: Let me just start by saying that in MAPLE and SEQUOIA, you see a range of strength of response. And while the average response, say, in your example of three, may represent an all-comers average response, you see responses that are far larger than that, and, obviously, you see some patients that do not respond very much at all. Robert I. Blum: And so I think in a lot of ways, the— Fady Malik: The average number that is coming out of the trial will certainly color how physicians maybe look at the importance of the results, but— Robert I. Blum: We also enrolled 500 patients in the study, and many of them will go into open-label extension, and— Fady Malik: Many of these investigators will have a chance to evaluate on their own—are patients improved? And I think ultimately, this will be probably a case of: if you try it and you have a sizable response, and it is important to you, then continue therapy; and if you do not, then you do not have to continue therapy. And it is a little different than drugs where we treat to lower risk, where you do not really know if you are the one that is going to benefit from the drug, and thereby absolute differences are far more important to understand your potential benefit. Robert I. Blum: So I hope that helps from a medical perspective. Fady. Andrew M. Callos: And from a demand point of view, provided that the study is statistical and that MYCorzo would be approved for non-obstructive, the care demand is driven, you know, significantly higher. You know, we hear things like HCPs being able to use one product across all of HCM, not worrying whether it is oHCM or nHCM, especially given the profile that you know and we know from SEQUOIA. That would drive up use both in oHCM, obviously, as well as nHCM. So it has a significant impact on nHCM, and maybe not significant, but definitely an impact on oHCM as well. Robert I. Blum: And I think, just to maybe culminate here, simply achieving clinical significance is not alone enough. The magnitude of change needs to be meaningful, especially relative to an instrument like KCCQ where there is history of a placebo effect. So our goal is to demonstrate with this trial, above and beyond a placebo effect, a meaningful impact on KCCQ. Operator: Your next question comes from the line of James Condulis with Stifel. Please go ahead. James Condulis: Good afternoon. Congrats on all the progress, and thanks for taking my question. Actually wanted to ask one about HFpEF, and I was curious, in the context of ACACIA, how important or meaningful you think an ACACIA win would be helping to kind of de-risk that broader HFpEF opportunity given some of the overlap in kind of pathology here. And just curious if you could also help frame out kind of when we may see initial data there and what a win looks like. Thanks so much. Robert I. Blum: Good question, and I am going to ask Stuart to comment, but I will also highlight that we learned a lot from what we can glean from those data from ODYSSEY. And that obviously has impact and implication to what we hope to see with our study, ACACIA. But to your point, ACACIA can also inform what we might expect from HFpEF and the translation of this mechanism of a cardiac myosin inhibitor to an adjacent population. That is certainly our objective. And with that, I will ask Stuart maybe to comment. Stuart Kupfer: Thank you, James. You hit upon an important evidence base that really informed this hypothesis about the potential benefit of a CMI in patients with HFpEF and, more specifically, those patients with hypercontractility. So, you know, many of the features structurally are similar between patients with non-obstructive HCM and with HFpEF and hypercontractility. So I think the outcome of ACACIA could further inform the potential benefit of a CMI in HFpEF. With respect to when we expect results from AMBER-HFpEF, I think it is a little bit too soon to say that, but we will continue updating you in terms of the progress of the trial. Robert I. Blum: But underscoring what Stuart said around hypercontractility, ensuring that everybody appreciates that the way we are thinking about HFpEF is not the entirety of that population, but those whose disease and anatomy is defined by hypercontractility, and that is where we believe there is an adjacency to nHCM. Thank you for the question. Your next question comes from the line of Jason Butler with Citizens. Please go ahead. Jason Butler: Hi. Thanks for taking the question. Just wondering if you could give us any color on the centers that are signing up in the REMS program right now. Are you getting any health care prescribers that are either not current CMI prescribers or have never prescribed CMI? Or is it fair to say the majority of the sign-up are current CMI prescribers? Andrew M. Callos: Thanks for the question. The majority are current CMI prescribers, but we do have prescribers who are REMS-certified who are not CMI prescribers today, and we do have prescribers that are first-time CMI prescribers as well. But as you would think, the majority are current CMI prescribers. Robert I. Blum: And that tracks with the ways in which our Cardiovascular Account Specialists are focusing their energies. As Andrew commented in his prepared remarks, our activities are more focused to those targeted cardiologists who are already high-volume prescribers, and that is where he commented on percent engagements. But it is nice to see that already we are seeing outside of that circle use of a cardiac myosin inhibitor where it had not been previous. Jason Butler: Great. Thank you. Operator: Your next question comes from the line of Maxwell Skor with Morgan Stanley. Please go ahead. Maxwell Skor: Great. Thank you for taking my question. So assuming positive ACACIA readout, how should we think about any incremental uplift to the obstructive HCM launch trajectory in 2026? If you can maybe quantify or speculate that would read through. And also, can we expect ACACIA to read out in the early part of the second quarter or maybe later on in the second quarter? Thank you. Robert I. Blum: I will tackle that latter question and ask Andrew to do the former. We are not going to guide to when in second quarter. I imagine analysts will do their own math and make their own handicapping and projections, but we are not going to comment on that. And then I will ask Andrew to speak to your first question. Andrew M. Callos: Yeah. I mean, I think, obviously, we are not going to be promoting or talking about 15% to 20% uplift. To be able to comment on the data, we will have to do additional market research to assess how that might inform use in HCM and what kind of spillover there may be, but underscoring we intend to be very much by-the-book compliant with regard to what our field colleagues would be able to speak to. Operator: Your next question comes from the line of Serge Belanger with Needham. Please go ahead. Serge Belanger: Hi, good afternoon. Thanks for taking my questions. I will pile on ACACIA too—seems to be the topic du jour. So I know you are still blinded to almost all the data, but I think in the past, you have talked about monitoring the variability in the endpoints. So just curious if there has been any change in that variability in what you can glean from that? Thanks. Robert I. Blum: I will turn to Fady, but I will emphasize yet again that in light of the fact that we are now nearer to what would be database lock and unblinding, we cannot comment on something like what you asked with regard to standard deviation. Rather, instead, we can comment on what the study was designed to demonstrate. Fady Malik: The study was designed to demonstrate a five-point delta on KCCQ, assuming a standard deviation of 15, and a peak VO2 of 1 with a standard deviation of 3. Robert I. Blum: Ninety percent power, with being able to detect statistically significant differences— Fady Malik: At differences that are less than that, with less power, obviously. And as I stated in the script, the study remains within its design parameters, and, you know, we will not commit to updating those statements going forward. Serge Belanger: Got it. Thank you. Thank you. Operator: Your next question comes from the line of Jason with Bank of America. Please go ahead. Unknown Analyst: Hi. This is Jackie on for Jason. Congrats on the progress, and thanks for taking our question. So real quick, can you report what you have seen thus far this year in terms of patient start forms and also about how much of your early efforts have involved more community practices and what has the uptake been like specifically within these offices? Thank you. Robert I. Blum: Thank you. Andrew? Andrew M. Callos: Sure. So we are not going to give numbers—we will do that in the first quarter relative to start forms. All I can say is what we said in the script, which is our demand in the three weeks and the engagement we have seen with physicians is at, if not above, what we expected internally. In terms of community versus centers of excellence, the 700 physicians that were 80% of the market—that is where the majority is coming from. But there is also strong engagement from the community. There is strong engagement from new prescribers—probably new prescribers who have never prescribed a CMI—those numbers are higher than we were expecting. So I think we are seeing a good balance across all types of prescribers. And the majority, obviously, are the ones that we are calling on and educating. In our first quarter call, we will give more color around patients and engagement—centers of excellence versus non-centers of excellence, prescribing depth, etc. So, you know, more to come, but too early to say with just three weeks of data. Robert I. Blum: I see. It is early innings, but we are pleased. Operator: Understood. Thank you. Your next question comes from the line of Srikripa Devarakonda with Truist Securities. Please go ahead. Alex (for Srikripa Devarakonda): Hi. This is Alex on for Kripa. Congrats on the progress. I am very excited to see how MYCorzo’s REMS can also improve the patient and physician experience. A question on the REMS: Could there still be an option to modify the REMS requirement in the future? And could Cytokinetics, Incorporated go back to the FDA at some point with updated post-marketing data and get it re-reviewed to potentially make it even more favorable? Robert I. Blum: We have already seen that the FDA was accepting of an opportunity to see real-world evidence data in support of a modification of the Camzyos REMS. But for our REMS, we are not guiding to any changes in the near term, but certainly, over a medium to longer term, it is reasonable to expect that real-world evidence could inform changes. But what those changes might look like would be premature to speak to today. Fady or Stuart, anything you want to add? Fady Malik: The REMS itself is, you know, quite straightforward in terms of what is required to execute it. But the real-world data will inform potential future modifications to it. But as Robert says, still too early to decide what it is that we may pursue. I think we just need some real-world data to understand what may be our pinch points and how those real-world data would support altering the REMS as might relieve those pinch points. Operator: Your next question comes from the line of Ashwani Verma with UBS. Please go ahead. Unknown Analyst: Hi there. This is Natalie on for Ash, and thanks again for taking our question. So just on ACACIA, could you talk about how the discontinuation rate in ACACIA compares to prior studies? And then also for the baseline patient population, could you give us a sense of the percentage of patients that might have the concentric LVH phenotypes? Fady Malik: I can talk to, you know, discontinuations. And, again, the study was designed to withstand a 10% discontinuation rate, and I think as I have said in the past, we have been within that metric, and in my earlier comments, reaffirmed that, but we will not commit to updating that going forward. And then, you know, we have not released any of the baseline characteristics, and so I cannot really comment on your last question. But what I can say is that our group of HCM specialist physicians review every echo of every patient that is enrolled in the trial, and unless they feel it is an echo consistent with hypertrophic cardiomyopathy, the patient would have a query raised to the site to gather more information that might support the diagnosis. Operator: Got it. Thanks so much. Thank you. Operator: Your next question comes from the line of Leonid Timashev with RBC Capital Markets. Please go ahead. Leonid Timashev: Hey, guys. Thanks for taking my question. I just wanted to go back to the MYCorzo launch and the patient starts. I guess, can you provide any color on the types of patients that are being started versus what you might expect from the initial mavacamten launch? Anything specific about the patients that are being put on? Is it just new patients? Are there any switches? Is it patients who maybe needed higher efficacy or had lower baseline ejection fraction? I guess I am just curious how docs are thinking about the initial use of aficamten as they now have the ability to use the drug. Thanks. Robert I. Blum: Good evening. Thanks. Just keeping in mind we do not always have insights into patient-level data, but we only hear things maybe a bit more anecdotally. I think “all of the above” may be a way of addressing your question. But maybe, Andrew, you have something else you want to add. Andrew M. Callos: No. I think you said exactly what I was going to say, which is that patient information is protected. We do not see exactly who is put on and for what reason. You know, the data is too early to see if there are switching, etc. But I do think we are seeing all of the above, as Robert said. Operator: And that concludes our question and answer session. I will now turn the conference back over to Robert I. Blum for closing comments. Robert I. Blum: Thank you, operator, and thanks to all of you for joining us on this call today. Obviously, we reflected on the importance of this moment. I will not repeat those statements other than to say we understand the significance of this as we turn the page on to commercialization, and we want to do the right thing by these patients for the benefit of their care and do right by health care professionals who attend to their care. We also recognize and acknowledge that this is an important milestone for Wall Street, as Cytokinetics, Incorporated is now a global commercial company, and we take that very seriously as well. We look forward to providing you insights as we have more substantial information relating to the launch of MYCorzo in the United States, its expected launch in Germany and other European countries, and we will know more and be able to share more through the remainder of this year. Moreover, as we have access to results from ACACIA, expected in Q2, we look forward to sharing those with you, and we recognize the significance of those too. So thank you for your interest and attention to all that we are doing at Cytokinetics, Incorporated. We look forward to keeping you abreast of progress. With that, operator, we can now conclude the call. Operator: Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation and you may now disconnect.
Operator: Hello everyone. Thank you for joining us and welcome to the CareDx, Inc Q4 2025 Financial Results Earnings Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. To withdraw your question, press 1 again. I will now hand the call over to Caroline Corner, Investor Relations. Please go ahead. Caroline Corner: Thank you, operator. Good afternoon. Thank you for joining us today. Earlier today, CareDx, Inc released financial results for the fourth quarter and full year 2025 ending 12/31/2025. These results are currently available on the company's website at www.caredx.com. Joining me on today's call are John Hanna, President and Chief Executive Officer, Keith Kennedy, Chief Operating Officer, and Nathan Smith, Chief Financial Officer. Before we get started, I would like to remind everyone that management will be making statements during this call that include forward-looking statements. Any statements contained in this call that are not statements of historical facts should be deemed to be forward-looking statements. All forward-looking statements are based upon current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results to differ materially from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. Information concerning the risks, uncertainties, and other factors that could cause results to differ from these forward-looking statements is included in our filings with the Securities and Exchange Commission. The information provided in this conference call speaks only to the live broadcast today, 02/24/2026. We disclaim any intention or obligation except as required by law to update or revise any information, financial projections, or other forward-looking statements, whether because of new information, future events, or otherwise. This call will also include a discussion of certain non-GAAP financial measures. These non-GAAP financial measures should be considered in addition to, not as a substitute or in isolation from, GAAP measures. Reconciliations of our non-GAAP financial measures to the most direct comparable GAAP financial measures may be found in today's earnings release, which is posted on our website. With that, I will now turn the call over to John. John Hanna: Thank you, Caroline, and welcome to everyone joining today's call. 2025 was a transformative year for CareDx, Inc. We advanced our market leadership across heart, lung, and kidney transplantation with an expanded commercial footprint including a broader sales and medical presence to execute our solution selling strategy that drove growth across all business segments. We launched new products to further differentiate our offerings such as AlloSure Heart for Pediatrics to service the entire heart transplant market, Alisure Plus, our AI-derived model for kidney transplant risk assessment, and HistoMAP Kidney, our first tissue-based gene expression classifier for identifying rejection subtype. We generated meaningful evidence to further build clinical belief in our molecular testing solutions including multiple published manuscripts from the large prospective SHORE and KOAR registries in heart and kidney transplantation, respectively. At the same time, we invested in critical infrastructure including significantly advancing our revenue cycle management function through automation and AI deployment, and launching Epic Aura, designed to improve our customers' experience with test ordering and reporting by reducing sample holds and supporting faster, more reliable test processing. Our innovation strategy and disciplined execution have set us on a path to achieve the long-range plan we laid out in October 2024. I believe CareDx, Inc is well positioned for our next phase of innovation, scale, and sustained growth as a leading precision diagnostics company. In my prepared remarks today, I am going to highlight some of our accomplishments from the fourth quarter and then detail our key growth drivers for 2026. Then I will turn it over to Nathan to review the quarter and full year 2025 financial highlights and our full year 2026 financial guidance. Briefly, our fourth quarter financial performance was strong. We delivered revenue of $108,000,000, representing 25% year-over-year growth. Testing volume accelerated to 17% growth year-over-year. We maintained a 69% non-GAAP gross margin and generated positive adjusted EBITDA of $7,000,000 in the quarter. We continue to be disciplined in our capital allocation and maintain a strong balance sheet. In the first quarter, we returned capital to shareholders through an additional $12,000,000 of share repurchases. In total, in 2025, we have repurchased approximately 9% of our outstanding shares. We ended the quarter with approximately $200,000,000 in cash, cash equivalents, and marketable securities and no debt, providing significant financial flexibility. Overall, I believe our results reflect disciplined execution, improving cash generation, and a solid foundation as we continue to execute our growth strategy. Now on to the business highlights. Testing services growth was strong across all three organs, heart, lung, and kidney. Revenue was $78,000,000 for the fourth quarter, an increase of 23% year-over-year. We delivered approximately 53,000 tests in the fourth quarter, up 17% from the prior year. Kidney testing continued to lead our growth, supported by both increased surveillance protocol adoption and expanded for-cause use of AlloSure Kidney at transplant centers. Generally, when a center initiates a surveillance testing protocol, they will start newly transplanted patients on that testing schedule. As centers restarted their surveillance protocols throughout the year, it had a gradual layering effect of increasing test volumes, leading to a strong fourth quarter. Although the number of kidney transplants was relatively flat year-over-year in 2025, we are encouraged by the year two IOTA proposed rule which reinforces the need to increase kidney transplants, including through the use of expanded organs that are considered medically complex. Based on CMS' forecasted growth rates, IOTA may be an additional tailwind for our testing services business, where our growth rate is already outpacing the market. We believe the proposed framework aligns well with our portfolio and positions testing services to benefit as IOTA progresses into its second year. In heart transplantation, during the fourth quarter, we announced the publication of the third manuscript of the Surveillance Heart Care Outcomes Registry, or SHORE, in the Journal of Heart and Lung Transplantation. This large multicenter study analysis included 1,934 heart transplant recipients across 59 centers and demonstrated that HeartCare's combined molecular testing provides independent prognostic information beyond biopsy alone. Patients with an abnormal HeartCare result at any time from two months to five years post-transplant were associated with approximately threefold increase in the 30-day risk of graft dysfunction and cardiovascular death, even when there was no biopsy evidence of rejection. These findings reinforce the clinical value of HeartCare in identifying higher-risk patients who may benefit from closer monitoring and more personalized post-transplant management, further strengthening the scientific foundation of our heart transplant franchise. Over the course of 2025, we progressed from stabilizing our revenue cycle management function to demonstrating clear RCM strength. After installing our new team in 2025, collections improved consistently in the third quarter and accelerated in the fourth quarter. For the year, reimbursement improved materially, with claim rejection rates declining by more than 60% over the course of 2025 through September, and overall zero-pay claims improved by approximately 10% through the same period. These improvements were supported by increased automation, streamlined workflows, and more effective appeals execution, driving what we expect to be more predictable and durable revenue capture. Just as important, we improved the patient experience. We are more proactively managing prior authorizations, timely claims submission, and appeals to help patients receive their insurance benefits and diminish uncertainty. We believe this disciplined execution strengthens provider and patient confidence in CareDx, Inc as their laboratory of choice. Across 2025, we delivered meaningful improvements in cash conversion and reimbursement reflecting stronger execution across billing, collections, and appeals. I will turn now to Patient and Digital Solutions, which includes our transplant pharmacy, software tools, and remote patient monitoring services. Our solution selling strategy is working. We delivered a strong fourth quarter with revenue of $17,000,000, up 47% year-over-year. Our integrated patient and digital offerings continue to meaningfully deepen customer relationships. As we continue to engage our customers with these solutions, we are seeing the benefits of tighter integration across the transplant journey, improving the experience for patients and care teams while reinforcing the value of our overall precision medicine platform. Turning to the Lab Products business, we delivered solid performance in the fourth quarter, with revenue of $13,000,000, up 17% year-over-year, reflecting continued demand across both domestic and international markets. Growth was supported by ongoing adoption of our HLA typing and analysis solutions as well as stronger customer engagement at key scientific forums. During the quarter, we continued to advance our product portfolio, including launching Alisig TX11 and SCOR 7, which are designed to improve workflow efficiency, scalability, and regulatory alignment for transplant laboratories. AlloSeq TX11 is our next-generation HLA typing solution, featuring enhanced class II loci coverage to improve donor-to-recipient matching in both solid organ and stem cell transplantation. We also achieved important regulatory milestones, including IVDR certification for AlloSeq TX and QType in Europe, positioning the Lab Products business for sustained growth and broader global adoption going forward. Looking ahead to 2026, I want to lay out our key growth drivers for the year that will allow us to sustain a high level of product innovation and extend our leadership position in existing markets through our solution selling strategy. These initiatives span our pipeline advancement, go-to-market strategy, and evidence generation, and together, they reinforce our ability to rapidly launch, iterate, and scale products across the platform. Importantly, this is a connected operating model designed to fuel growth and extend our leadership over time. These drivers are not just about scaling what we do today, they are about applying our platform to new high-impact markets. This year, I am placing a significant emphasis on advancing our cell therapy pipeline, which we have referred to as Transplant Plus. On our February 12 investor call, we announced pivotal clinical validation results for Allaheme, our first AI-powered NGS surveillance solution designed to predict relapse in patients with AML and MDS following allogeneic cell transplantation. Alegeme represents an important milestone in our Transplant Plus strategy, positioning CareDx, Inc to expand beyond solid organ transplant and into cell therapy, hematology, and oncology, areas where there remains a significant unmet need for sensitive, noninvasive relapse detection. The data were generated from the ACROBAT study, a prospective multicenter trial conducted across 11 U.S. transplant centers and demonstrating strong clinical performance recently presented at the Tandem 2026 Annual Meeting. In this analysis, Allaheme identified relapse a median of 41 days earlier than clinical detection, with 85% sensitivity and 92% specificity. In patients with a positive Allaheme result at six months post-transplant, there was a 12-fold higher risk of relapse compared to patients with negative results. These findings underscore the potential of a universal blood-based surveillance approach to provide earlier risk insight than traditional bone marrow-based or marker-specific methods. Strategically, we expect Allaheme to broaden the long-term growth opportunity for CareDx, Inc by extending our molecular surveillance expertise into a large and growing cell therapy market. In the call, I laid out our anticipated pathway to commercialization, starting with publishing the results of the ACROBAT trial, CLIA readiness in 2026, followed by commercial introduction in early 2027, and anticipated payer coverage in 2028. While still early, we believe Allaheme has the potential to become a foundational component of a broader molecular monitoring platform for cell and hematologic malignancies, consistent with our disciplined, data-driven approach to innovation and portfolio expansion. Advancing our cell therapy pipeline is a top priority for 2026, and I plan to share more updates on this work throughout the year. John Hanna: Turning to go-to-market, I view our operational excellence initiatives and placing the customer experience at the center of everything we do as a key part of our go-to-market strategy. That message has resonated across the country with the more than 50 transplant centers I visited with personally over the last year. In 2026, we are placing a significant focus on Epic to make the customer experience simple and streamlined. Our pipeline of customers willing to integrate is significant, and we believe these integrations will drive further volume growth. As of today, seven transplant centers are fully live on our Epic Aura instance, making us one of the fastest implementers to date according to Epic's team. An additional 14 transplant centers are in active implementation, with several more expected to formally kick off in the near term, including large multi-site systems. Our pipeline for 2026 implementations is strong. Importantly, we are beginning to see early operational and commercial benefits from these integrations. As anticipated, Epic Aura implementations are improving the quality of electronic order data, and early indications show roughly 40% in login-related issues, which meaningfully improves the experience for clinicians. We are also encouraged by early signs of growth at initial live sites, where active levels have increased following go-live. While it is still early, these signals reinforce our confidence that Epic integrations can support improved adoption, operational efficiency, and long-term growth as implementation continues to scale. In addition, in 2026, we are migrating our LIMS infrastructure to Epic Enterprise Solutions. This is a strategic infrastructure decision that allows us to establish a platform for lab test workflow and reporting that has two key advantages. First, the flexible infrastructure allows us to more rapidly launch new products in our lab, such as our cell therapy products, which I view as key to future growth. Second, we are able to exchange data with Epic centers more seamlessly for patient treatment purposes even if we are not Epic Aura integrated with the center. For example, if we need medical records to verify a patient's date of birth, today, we have to call the center and ask for that information. With Epic Enterprise, we can reach into the EMR and pull the data seamlessly to help eliminate interruptions in the timeline of patient test results or claim billing. Turning to clinical evidence, evidence is the foundation for building clinical belief in our testing solutions as the standard of care in solid organ transplantation. We think about evidence generation in 2026 across three dimensions. First is translational research, under the umbrella of our Immunescape program. This January, we announced our strategic collaboration with 10x Genomics to launch Immunescape, a multi-omics research platform that we believe represents a significant advancement in our precision transplant medicine innovation pipeline. This initiative leverages 10x's cutting-edge single-cell and spatial biology technologies to decode the complex immune mechanisms underlying transplant rejection, particularly antibody-mediated rejection and microvascular inflammation. Immunescape builds on our existing diagnostic portfolio, including our recently launched HistoMap Kidney platform, and is designed to generate high-resolution biological insights that may inform our future clinical diagnostic development pipeline. By mapping immune cell populations and pathways at higher resolution, this collaboration positions us to drive the discovery of next-generation diagnostic solutions that can better predict therapeutic response and improve treatment selection in transplant care, while reinforcing our commitment to advancing personalized medicine. Second, observational studies are a core pillar of our 2026 strategy, because they demonstrate the real-world utility of our testing services and their impact on physician behavior. We expect continued publications across kidney, heart, and lung that are critical to building belief, reinforcing adoption, and supporting market access. Large registries such as KOAR, SHORE, and ALAMO allow us to show longitudinal clinical utility across diverse populations and care settings. Importantly, this real-world evidence also fuels innovation by informing new algorithms, refined thresholds, and expanded clinical context of use, creating a durable engine designed to promote product differentiation and long-term growth. And lastly, as the use of our products matures, and new insights are generated around the impact they may have on guiding interventions in clinical practice, we are launching interventional trials in heart and kidney designed to demonstrate how molecular insights actively can inform treatment decisions and improve patient management. Trials like HARBOR and MERIT are designed to show that our testing is not just informative, but actionable within clinical workflows. We believe this level of evidence strengthens differentiation, supports guideline inclusion and reimbursement, and creates a foundation for new contexts of use. Together, these interventional efforts have the potential to help establish as the standard of care and support durable, scalable growth across our platform. And now, I would like to hand it off to Nathan to cover our Q4 and 2025 financial highlights and our 2026 guidance. Nathan? Nathan Smith: Thank you, John, and good afternoon, everyone. In my remarks today, I will discuss our fourth quarter and full year 2025 results before turning to 2026 guidance. Unless otherwise noted, all financial measures discussed are non-GAAP. For further information, please refer to GAAP and non-GAAP reconciliations per our press release, earnings presentations, and recent SEC filings. Starting with financial highlights for the fourth quarter, total revenue for the quarter was $108,400,000, an increase of 25% from the same quarter of the previous year. Testing services revenue for the quarter was $78,400,000, an increase of 23% from the same quarter of the previous year. Testing services volume was approximately 53,000, an increase of 17% from the same quarter of the previous year. Average revenue per test for the quarter was $14.80. That included $5,100,000 in cash collections in excess of receivables on historical claims consistent with our guidance for the quarter. Patient and Digital Solutions revenue for the fourth quarter was $16,800,000, an increase of 47% from the same quarter of the previous year. Lab product revenue for the fourth quarter was $13,300,000, an increase of 17% from the same quarter of the previous year. Non-GAAP gross profit for the fourth quarter was $74,300,000, representing a gross margin of 68.5%. Fourth quarter non-GAAP operating expenses were $70,000,000, including a $6,700,000 one-time cash bonus instead of equity awards for nonexecutives. We reported adjusted EBITDA for the fourth quarter of $6,500,000, a decrease of 34% compared to the last year. Our adjusted EBITDA includes approximately $7,000,000 of operating expenses for compensation in lieu of equity grants for nonexecutives in 2025, reflecting our continued focus on managing shareholder dilution and achieving a three-year average employee equity burn rate consistent with industry benchmarks as outlined in our 2025 proxy statement. Turning to cash, we collected $115,800,000 in the fourth quarter, representing an increase of 37% over the same quarter in 2024. During the fourth quarter, we repurchased $12,000,000 of common stock, acquiring 773,000 shares at an average price of $15.79 per share. And now I will turn to financial highlights for the full year. We reported full year 2025 revenue of $379,800,000, an increase of 14% year-over-year. Testing services revenue was $274,500,000, an increase of 10% from last year. Testing volumes of approximately 200,000 increased 14% year-over-year. Patient and Digital Solutions revenue for the full year was $56,900,000, up 31% year-over-year. Lab product revenue was $48,400,000 for the full year, an increase of 19%. Non-GAAP gross profit for the year was $263,100,000, representing a 14% increase over 2024. Gross margins for 2025 were 69.3%, consistent year-over-year. Non-GAAP operating expenses totaled $240,100,000, or 63% of revenue, in line with the prior year as a percent of revenue. Adjusted EBITDA for the year was $31,700,000, representing a 14% increase over 2024, and as noted earlier, lower by $6,700,000 due to the one-time cash bonus in lieu of equity. Continued execution of initiatives to transform our RCM processes helped drive cash collections of $405,600,000 for the full year 2025, a 32% increase compared to the previous year. These collections drove a $22,500,000 year-over-year reduction in accounts receivable and a 42% annual improvement in DSO, which decreased from 71 days to 41 days. During the year, we bought back $88,000,000 of common stock, purchasing 5,800,000 shares at an average price of $15.16 a share. We ended the year with $201,400,000 in cash, cash equivalents, and marketable securities, 50,900,000 shares outstanding, and no debt. Turning now to guidance for the full year 2026, in line with what we shared previously, if the draft local coverage determination for solid organ transplant is finalized, we expect a full year negative revenue impact of approximately $15,000,000. We expect the LCD policy to be finalized midyear, and we included a $7,500,000, or half-year, impact to revenue and adjusted EBITDA in our guidance. With that, we expect full year 2026 revenue of $420,000,000 to $444,000,000. The midpoint of 2026 guidance represents approximately 14% year-over-year growth. For Testing Services, we expect full year Testing Services revenue of $306,000,000 to $326,000,000. We expect full year testing volume of 220,000 to 228,000 tests. The midpoint of the 2026 guidance represents approximately 12% year-over-year growth. Turning to average revenue per test, on 01/01/2026, our new PLA code went into effect that reduced AlloSure Kidney reimbursement by 4% from $2,841 to $2,753. As a result of that change and the anticipated impact of the LCD, we are modeling revenue per test to start at $1,400 in the first quarter, and the full year blended revenue per test in the low $1,400s. In 2026, we expect to recognize approximately $5,000,000 in revenue from prior-period collections, with the majority occurring in the first quarter. In 2026, we expect our accrual window to age into the new normal of cash collection. From that point forward, we expect any impact from prior-period cash collections will be immaterial. Turning to Patient and Digital Solutions and Lab Products, we expect full year 2026 revenue to be $114,000,000 to $118,000,000. Working down the P&L, we expect full year non-GAAP gross margin to be approximately 69% to 71% for the full year 2026. We expect our 2026 adjusted operating expenses to be in the range of $68,000,000 a quarter, plus or minus $1,000,000. That would be approximately 63% of revenue, plus or minus 1%. Included in our adjusted operating expenses is approximately $10,000,000 related to strategic investments in enterprise systems, including Epic Enterprise LIMS, which we believe will be an important contributor to future growth. Turning to adjusted EBITDA, we are assuming 2026 annual depreciation expense of $9,000,000 that will be added back to operating profit, resulting in full year 2026 adjusted EBITDA to range between $30,000,000 and $45,000,000, representing an approximate 20% increase over the full year 2025 at the midpoint. The first quarter is typically our softest EBITDA quarter due to the annual reset of employee benefit costs, including 401(k) matching and payroll taxes. In addition, 2026 will reflect the first full quarter impact of recent hires. As a result, we expect adjusted EBITDA on an absolute dollar basis to be in the high single digits in the first quarter. Lastly, I want to share that I decided to transition from my role following the completion of our filing of our Form 10-Ks. After several demanding years in executive finance leadership roles, I feel it is important to step back and dedicate meaningful time to my family. This decision is personal and not a reflection of my confidence in the business. I am proud of what we have accomplished and believe the company is well positioned for the future. I am deeply grateful to John and the entire CareDx team for the opportunity to serve alongside such talented and dedicated people in advancing our mission. And now I would like to turn the time back to John. John Hanna: Thank you, Nathan, and thank you for your contributions to the company. We wish you the best in your future endeavors. Alongside this news, I would like to announce the appointment of Keith Kennedy as the company's Chief Operating Officer and Chief Financial Officer. Keith will oversee the company's finance organization, effective February 26. Keith brings seven years of public company CFO experience, and under his leadership, we expect to continue modernizing the company's financial systems to deliver sustained, profitable growth. Lastly, as I reflect on 2025, I am proud of the progress we have made, not just in our financial performance, but in building the foundation for what comes next. We have strengthened our platform through solution selling, expanded evidence generation, and the infrastructure required to scale innovation. Recently, I spoke with a transplant clinician who told me that what has changed most is not just having better data, but having insights they can actually act on earlier, more confidently, with less friction in their workflow. That conversation captures what we are building at CareDx, Inc. As we move into 2026 with continued investment in observational evidence, interventional trials, and new markets like cell therapy, we believe we are entering a new phase of precision medicine, one defined by faster product iteration, deeper clinical impact, and durable long-term growth. And with that, I would like to open the call for questions. Operator? Operator: We will now begin the question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. To withdraw your question, press 1 again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from Brandon Couillard of Wells Fargo. Your line is open. Please go ahead. Brandon Couillard: Hi. Thanks. Good afternoon. Just starting with the volume guidance for the year. I mean, 12% seems like somewhat of a low bar relative to the 17% exit rate. Can you just talk about the contribution from Epic Aura and, John, are you assuming that transplant procedures get any better over the course of the year? Thanks. John Hanna: Thanks for the question, Brandon. We are not assuming transplant procedural volume increases in our guide. And we think it is too early to say right now what the lift from Epic Aura will be. We have seen, you know, nice growth in the handful of accounts that we have integrated with over the past, you know, month or two. But that signal is a little too early to give a guide around what we think the lift will be for the full year. I anticipate that when we get to our Q2 call, and we have at least six months of integration under our belt with, you know, 10 plus sites, that we will be able to give more guidance on what we think the longer-term impact of those Epic integrations will be. Brandon Couillard: K. That is fair. And then I would like to just focus on the Patient and Digital Solutions business, which has really accelerated in the last two quarters. The guide consolidated it with products. So could you break out the Patient and Digital Solutions piece, sort of the sustainability of kind of 40% growth that we saw in the back half of 2025? And what does the margin profile of this business look like today given mostly software? Thanks. Keith Kennedy: On the Patient and Digital Solutions, we are assuming we are going to grow the Product, Patient, and Digital Solutions collectively in the range of 8% to 12% next year. We are early in the year. These businesses have outperformed, as you saw last year, every quarter. So we, you know, we have high hopes that these guys are going to deliver a better return. And so, hopefully, on the first call, we will know more and have more to discuss around that. Brandon Couillard: The margin, in terms of the margin profile of that business? Keith Kennedy: That range is anywhere on the software side into the mid-sixties. So 60% to 70% margins in the software business. And then on the products business, that goes anywhere from, say, 50% to 60%, and that depends on the absorption. Which is one of the things, you know, I have been working on is taking some of the manufacturing in-house and controlling, you know, our manufacturing and overhead. So as you are making these kits, it is a pretty manual process. I have been working on technology around that so that I can normalize that around the margin. Brandon Couillard: Great, thanks. Keith Kennedy: Yes, sir. Operator: Your next question comes from the line of Mark Massaro of BTIG. Your line is open. Please go ahead. Vivian: Hey, guys. This is Vivian on for Mark. Thanks for taking the questions. So I just have one on the guidance. Could you just walk us through some of the assumptions of the high end versus the low end? I just wanted to confirm if that was primarily being driven by the Medicare LCD, or are there any other swing factors to call out? I think I heard you on the prior-period collections and pricing reset as well. Just wanted to check if there was anything else going on there. Thanks. Keith Kennedy: Vivian, that is a great question. Let me walk you through an illustrative example of how we model this at the midpoint of the guide, and I will try to, you know, show you the low and high end of the range and how we think about it. The midpoint of our revenue guide is $432,000,000, and we have a $12,000,000 band on the low and the high end. As I turn to Testing Services, the midpoint of the testing volume, which drives that business, is 224,000 tests, which represents 12% year-over-year growth. Our band around that on the high and the low end is 4,000 tests, or 1,000 tests per quarter. That goes between 220,000 and 228,000 tests. So to Brandon's question, that will go between 10% to 14% annual growth in line on the high end of that range earlier in the year, obviously, as we try to predict what is going to happen over the next four quarters. 14% growth on the high end. In terms of seasonality in testing volumes, we modeled a 1,000 test step up from Q4 2025 to Q1 2026, a 2,000 test step up in Q2. We have seasonality out; we are flat from Q2 to Q3, and a 2,000 test step up in Q4. Remember, we had a 3,000 test step up in Q4 of last year. So we are a little bit light to that, as we are earlier in the year and we are watching how the momentum picks up in the business. Based on the continued success in RCM, we anticipate recognizing $5,000,000 in out-of-period revenue in 2026. And I assume that we would generate $3,000,000 in the first quarter and $2,000,000 in 2026. This out-of-period revenue, and to the earlier points, as we discussed, and you spread the $5,000,000 over the 224,000 tests at the midpoint of our guide, our 2026 revenue per test is higher by $22 per test. The revenue guide includes, to your point, Vivian, $7,500,000 in revenue reduction, as Nathan outlined, from the implementation of the LCD. Spreading the $7,500,000 over the 224,000 tests at the midpoint, our 2026 anticipated revenue per test is negatively impacted by $33 per test. Again, this is built into the guidance, impacting revenue and adjusted EBITDA. Our guidance assumes testing revenue per test of approximately $1,410 per test at the midpoint, with a range bound of plus or minus $20 per test, and I, conservatively, I hope to beat that, but that is the range bound on that number. In terms of the guide build, again, our revenue per test is lower by $33 per test associated with the LCD and higher by $22 from the out-of-period revenue. On the Product, Patient, and Digital Solutions, back to Brandon's point, we modeled the revenue at $116,000,000 at the midpoint, plus or minus $2,000,000. This represents a 10% increase for these service lines, range bound at 8% to 12%, and I would apply that equally to those businesses. So I would take last year's revenue, and I would take that range around 8% to 12% and apply that to each of those businesses. Turning to gross margin, as Nathan mentioned, we anticipate a midpoint of 70% gross margins with a range of 69% to 71% based on the calculated revenue and gross profit that I just covered. And on the OpEx line, the midpoint of the guide range assumes that we average quarterly OpEx spend of $68,000,000, plus or minus $1,000,000. I will note we obviously can control expenses. 60% of our expenses are labor, but we are investing for the future. And so we think that is a pretty range bound where we plan to end up in terms of OpEx spend on the year. Adjusted EBITDA ranges from $30,000,000 to $45,000,000, and as Nathan mentioned, it includes a $9,000,000 add-back for depreciation which is included in operating expenses. So, hopefully, Vivian, that will give you a good, you know, foundation for the build to the midpoint and the range bound. Answer your question? Vivian: Yes. Yes. That was perfect, and thank you much for the transparency, Keith. I just have one follow-up. As far as the SHORE manuscript publication, I was just curious as far as any dialogue you have had with MolDX since then. I think it is our understanding that this was the prospective study that they were looking for. So if any nuggets to find there or any sense of where you might be in the review queue? Thanks. John Hanna: Thanks, Vivian. We provided an extensive comment letter to the draft local coverage determination back in August. And that comment letter included the data that was published in the SHORE-3 manuscript. That data had previously been presented at a conference, and we were, you know, relatively confident that that publication was going to be in press in the near term, and so we included that data. And then, of course, once that publication came out in press, we shared it with the MolDX team. But I think on the last point of your question, we continue to anticipate that the LCD will be finalized sometime midyear. So we are not really in the queue necessarily for, like, a new LCD. Really, the rules around draft coverage determinations contemplate that they should be finalized within one year of the draft being issued, which was 07/15/2025. So we are somewhere in the June to July timeframe that the LCD will be finalized. Vivian: That is super helpful. Thank you, guys, for taking the questions. John Hanna: Yep. Thank you. Thank you, Vivian. Operator: Your next question comes from the line of Tycho Peterson of Jefferies. Line is open. Please go ahead. Tycho Peterson: Hey, thanks. Maybe just on the Epic, I know you are kind of doing Epic, you know, Beaker in the lab, and you have talked about this can really help with appeals, you know, because a lot of those get timed out. Can you maybe just help us think about that opportunity, quantify it, and, you know, what is the path to, you know, ultimately get to, you know, $2,000 in reimbursement? Over what time frame do you think you will get there? Keith Kennedy: Internally, in terms of the reimbursement—to last question first, Tycho—first, thank you for your question. This is Keith. Internally, we are targeting—the team is driven towards a three-year goal on the $2,000 test. Obviously higher than our guide, and that is what we are working on internally. Part of doing this is making sure that all of these workflows are executed in such a way that when claims are denied, you have met all and checked all the boxes. So getting eligibility checks so you file for the right insurance company, making sure you get the prior auth filed in time, and those things. That is a moving target, and the only way to really do this effectively at this high volume is to have real-time information that informs your initial claim. And so this is where we think getting to that $2,000 or even higher—it is highly important that we integrate and streamline these operations so that that can happen on a clean claim. Tycho Peterson: Got it. Keith Kennedy: Let me just expand on this. You did not ask this, Tycho, but we are spending $10,000,000 to essentially upgrade and integrate between Epic—this includes Epic Aura, Epic Enterprise, okay, so this is their full feature and function, so similar to what Exact has in their operation—and this includes integrating six lab information systems. So that is a lot to do. And that is going to take us about 18 months to get all this done. We are phasing this in a multiple phase approach. And of that money, I am probably talking $6,000,000 would be a recurring fee. So my bogey is about $6,000,000. There is $4,000,000 that is cost to implement that software, to be less recurring. And then Epic would tell you, A, you are going to get a lift on your volume, right, because it is easier to order and access the test, and therefore, you get that. B, you are going to get better information, have cleaner claims, and you are going to offset that expense. Right? So it does not take a heavy lift to make $5,000,000 up, or even $10,000,000, in terms of, say, a $500,000,000 revenue company at the time. So that is how we are thinking about it in terms of the P&L and the contribution down the road. Tycho Peterson: Okay. That is certainly helpful. And then I guess just thinking on kind of the back of the ACROBAT data and the commercial readiness, you know, activities, you know, ahead of launch, can you maybe just talk about other kind of gating factors and steps you are taking ahead of the commercial launch for Elohim next year? John Hanna: Yes. Thanks for the question, Tycho. I mean, I think there is a broad clinician education effort that we need to engage in around the product. Right? So we presented data at the Tandem meeting and at the hematology meeting in the, you know, fourth quarter, now for two years in a row. But certainly, we have not educated every clinician that could potentially order the product. And so what we want to do is, you know, have an intense focus on making sure that the manuscript gets submitted so that we can get that data and evidence in print. We will start educating centers on that data through personal promotion. And then we will complete our CLIA readiness, which allows us to prepare our technology assessment packet and submit for reimbursement, which I anticipate will get done this fiscal year. We will get it submitted. And that gives us enough time to, you know, generate revenue and coverage in the 2028 timeframe. So that is how I am thinking about the cascade of activities. Of course, in the back, we are also working on our broader cell therapy pipeline. So I talked in the call on the twelfth about persistence monitoring in CAR-T therapy. Right? So we have another product in that indication that we are working on, and several other product ideas that the team is kicking around to really fill out that portfolio along with the broader set of solutions that we offer, like digital products to bone marrow transplant centers. So there is a fair amount of work for us to do around education and really priming the market for the launch of this product so that the volume can accelerate. Rather, we can see this be a market-leading product in the cell therapy space. Tycho Peterson: Sounds good. Alright. Thanks. John Hanna: Yeah. Thanks for the questions. Operator: Your next question comes from the line of Andrew Brackman of William Blair. Your line is open. Please go ahead. Andrew Brackman: Hey, guys. Good afternoon. Thanks for taking the question. Maybe back to Brandon's question around sort of the Digital Solutions business, can you maybe just sort of unpack for us sort of what specifically is driving the strength that you are seeing there? And as we sort of think about the halo effect for the rest of the business, how are you sort of thinking about this as being sort of a leading indicator for share wins in the Testing Services side of the business as well? Thanks. John Hanna: Yeah. Thanks, Andrew. That is a great question. I mean, I think that we have been gaining share of the addressable in Testing Services, and that is a testament to the 17% year-over-year growth we experienced in the fourth quarter. And I really think Jessica, our Chief Commercial Officer, has done an outstanding job rebuilding this commercial team and field team around solution selling, so that when we walk into a transplant center, we are focused on what are their challenges for the year, what are their goals, and how can we help support them have success? And that is driving the sale of the Patient and Digital Solutions. Previously, the company, you know, had had teams split between testing and digital. They were not selling together, and so you lost some of that synergy. And when Jessica came in, she really turned that around, and you can see now the acceleration of that digital and patient solutions. Collectively, in those businesses, we see a lot of demand for our MedActionPlan product, which is a patient discharge planning tool and medication therapy management tool. We see a lot of demand in our ZynQAPI platform, which is our quality reporting tool that has been updated to include the IOTA calculation so that centers can see in real time where they are in terms of their IOTA scores. So on the digital side, those are driving. And then on the pharmacy side, we have a very elegant solution where our pharmacy is a transplant-focused pharmacy, so we understand the issues that these patients go through with their transplant immunosuppression meds, and that is attractive to these centers especially as they use more medically complex organs. And so we are seeing that growth. On the product side, we continue to benefit from this transition toward NGS for HLA typing away from PCR, and that is a global transition that we are leading. We are the market leader in that space. We have expanded the number of countries that we sell in around the globe. And then in the U.S. market, we continue to innovate by launching products like AlloSeq TX11 with greater resolution in that matching process, and then I talked a little bit on the call about our goal of launching what we call AlloSeq Nano, which is a nanopore sequencing platform. So we are continuing to innovate in that business, and that is what is driving the Lab Products business forward. Andrew Brackman: Okay. Appreciate all that color. And then if I could, just one on the balance sheet. I think you ended the year just over $200,000,000 in cash. You bought back close to $90,000,000 in stock last year. You just talk to us about capital allocation priorities, how you sort of weigh potential tuck-in M&A versus continued share buybacks for 2026? Thanks. John Hanna: Yes. It is a great question, Andrew. I think first and foremost for us is growing our core business. Right? So we see—we continue to see opportunities to grow, and where we do, we are going to in the core. And you see our sales and marketing spend increasing throughout the year. And, you know, we feel like we have invested significantly in that space, which gave us the freedom to go ahead and buy back some shares at a lower share price. Obviously, we are going to be opportunistic around M&A when we see something that fits within the CareDx, Inc portfolio and our strategy. Right now, we are very focused, though, on Allaheme and our cell therapy pipeline as our core area of investment and capital allocation. Andrew Brackman: Got it. Okay. Thanks, guys. John Hanna: Yep. Thank you. Operator: Your next question comes from the line of Bill Bonello of Craig-Hallum. Your line is open. Please go ahead. Bill Bonello: Hey, guys. Thanks a lot for taking my question. And congratulations, I think, Keith, on assuming more responsibility. So question on the $7,500,000 LCD impact. You walked it through in detail in Q2, but can you just remind us again, does that $7,500,000 assume that AlloMap Heart is essentially no longer reimbursed as part of HeartCare, so that that piece of the draft policy? John Hanna: Yeah. Thanks for the question, Bill. The $7,500,000 is a half-year impact of what I laid out as the first scenario in the Q2 call, which is the LCD is implemented as it is written today, the draft LCD. And that LCD contemplated there being a 12 timepoint bundle for heart transplant, and then that bundle would pay for only one test per date of service. And so whether that is AlloSure or AlloMap, I think, is TBD. But in general, when we model that, we assume we were going to get paid for 12 timepoints for one product, and which is what the current draft LCD states. And in that scenario, where today, we do five to six HeartCares on average in the first year, that impact was, you know, awash more or less. Bill Bonello: Yep. That—okay. That is what I thought, but I wanted to confirm. So can—just as a follow-up, if that proposal is—you know, you have got the SHORE data out there that you have presented to them. If that piece of the policy is changed, should we be thinking about the LCD as potentially being actually a net positive for you guys? John Hanna: Well, I think all that we know today, Bill, is what is in the draft. Right? And so we provided that scenario around what would happen if the LCD is finalized as it is written today. We are not going to provide guidance around any modifications to that draft. I think we have a strong sense of how 2026 is going to play out, and we included that $7,500,000 headwind in our 2026 guidance. Keith Kennedy: Yes. I mean, the news from the last call to this call is that we thought it would be done in Q1. Now, we think it is going to be done in the middle of the year. But we do not have any new information as to what would happen in the LCD. But we will have calls with you. This will happen as John goes on vacation on the July 4, so you can just expect it to happen right before the July 4. Bill Bonello: Perfect. And then just the last thing, the EBITDA guide, does that also assume a similar level of one-time cash bonus, or was that a sort of once and done thing? John Hanna: No. That was a one and done. So it does not include any one-time cash bonus in lieu of equity in 2026. Bill Bonello: Okay. And—but continue to expect sort of a lower level of, you know, stock compensation expense? Or how should we think about that? John Hanna: Yeah. I think that we are targeting to have somewhere around a 4% or sub-4% burn rate for 2026. And so, yeah, it is a slightly lower stock compensation expense than what we experienced in 2025. Bill Bonello: Great. So much. John Hanna: Thanks, Bill. Operator: Your next question comes from the line of Andrew Cooper of Raymond James. Your line is open. Please go ahead. Andrew Cooper: Hey, everybody. Thanks for the question. A lot already asked. So maybe first, starting with some of the growth, I mean, I know you mentioned surveillance and for-cause growth contributing to the number here in 4Q. But can you give a little bit of the magnitude of how much sort of surveillance uptick or reuptake you are seeing relative to penetration in that for-cause space or additional adoption in that for-cause space? John Hanna: Yeah. Thanks for the question, Andrew, and for joining the call. The growth has been relatively distributed between the two categories. I think that there has been a significant amount of literature, including the Nature Medicine paper from 2024, talking about different for-cause uses of AlloSure in kidney transplantation. And the result of that has been a reemergence of its use in surveillance testing, but also in the for-cause setting where you see the use of AlloSure in cases where, for example, a patient has undergone rejection already and you are trying to dial in the immune dosage and see those cell-free levels come down. So we are seeing, you know, consistent growth and utilization in both settings. Of course, surveillance was important for 2025 and contributed to the growth for the year, but we do see for-cause testing increasing. Andrew Cooper: Okay. Helpful. And then one last one on the EBITDA trajectory. Even if we add back sort of the $4,000,000 in one-time spend out of that $10,000,000 investment you talked about, looks like the midpoint of the guide is a little bit shy of 10% EBITDA margin. John, I think I heard you say the targets from the Investor Day back in 2024 are still on the table. So how do we think about that ramp to sort of 20% EBITDA margin targets for 2027 that you talked about given the 2026 starting point. Keith Kennedy: Let me take this—yeah. Sure. So the way we are thinking about this internally—and this, obviously, there is a lot of moving pieces in running a company and whether or not you have to get ahead with investment or not having investment—we feel like we are making a few strategic investments that make the top line much stickier. So we think that is worth doing. But we think about the gross profit dollars, and 50% of the incremental dollars should go down to the investors. So if you are at $440,000,000, you are going to grow 15% the next year, half of that growth drops down to EBITDA, is how we think about, like, a disciplined growth profile. Does that make sense? Andrew Cooper: Yeah. I will stop there. John Hanna: Yeah. So, I mean, we still believe we will get to 20%. I, you know, Veracyte said, like, 28%. Business we ran prior to coming over here. And we feel like long term we will get, you know, significantly—we will get to 20% in this business. I mean, we have a recurring testing model. We have 250 transplant centers. You know? But getting to Salesforce, we have accelerated the investment in the Salesforce higher than the volume growth, but that is not a long-term trend. We are not going to be doing that, you know, year after year in that business. I see it as more as a stepwise function as we get the commercial organization aligned and the messaging around marketing, etcetera. Andrew Cooper: Okay. That is helpful. I appreciate it. Thank you. Operator: Your next question comes from the line of Mason Carrico of Stephens Inc. Your line is open. Please go ahead. Mason Carrico: Hey, guys. Appreciate you taking the questions. Could you give some color on what the testing volume guide bakes in around incremental kidney protocol adoption this year? I realize there is a lag between when they are established and kind of when the benefit shows up in volumes. But do you think you could hit your testing volume target based on what is in place today? Are additional protocols upside? Just any color there would be great. John Hanna: Yeah. Thanks, Mason. You know, I think we build the guide around, you know, how much growth potential we see in the marketplace. Even within centers that did implement protocols during 2025, many of them do not always, you know, utilize the testing to the extent that they had intended to in the protocol. Like, patients miss blood draws or something does not get ordered, etcetera. And so there is still substantial growth that can occur in those existing centers that have already adopted a protocol. That is number one. Number two, as I shared previously, we continue to see for-cause testing growing, and so we anticipate that that trend will continue through 2026. And then third, yes, we believe there are more protocols to go get. We have many centers that we still are talking to about implementing their protocols and how they want to go about doing that in particular populations in their center. And so we will continue that effort. And all of that in aggregate gives us confidence in our guide on volume for the year that there is that opportunity to go get. Mason Carrico: Got it. And maybe it is somewhat of a follow-up to that. Could you give us an idea of what percentage of total kidney transplants could be attributed to centers that have protocols in place today? John Hanna: That is—I do not have that number off the top of my head, Mason. We would have to go back and look into that. Mason Carrico: All good. Alright. Thank you, guys. John Hanna: Thank you. Thanks, Mason. Operator: Your final question comes from the line of Yi Chen of H.C. Wainwright and Co. Your line is open. Please go ahead. Eduardo Martinez: Hi. Thanks for taking the question. This is Eduardo on for Yi. I guess a general question based on the evolution of the use of GLP-1s and the growing clinical evidence that they could have a meaningful impact on reducing kidney disease. I am curious what your thoughts are and its impact on the evolution of kidney transplants because you get some tailwind, right, because you could also lower BMI, then the other eligibility of donors, but maybe some headwinds in the reduction of kidney disease in general and then, therefore, the need for transplant. I am curious how you see that market moving forward. John Hanna: Yeah. Thanks, Eduardo. It is an interesting question, and we agree with your assessment generally. Although I would say that there are upwards of 400,000 patients in the U.S. on dialysis today that could get a kidney transplant, and then 100,000 on the transplant waitlist. So we do not see any, you know, diminishing demand for kidney transplantation as a function of GLP-1s anytime in the near future. But certainly, as you point out, GLP-1s are advantageous to driving more transplantation. As you know or may know, one of the key kind of metrics around determining whether a recipient is eligible for undergoing a transplant is their BMI. And so if a patient cannot get their BMI down to an acceptable level where, you know, in historic studies, it is shown that they do better post-transplant, then they are ineligible to get that organ. And so there are many patients today on the transplant waitlist that are actively being put on GLP-1s to prep them for the transplant procedure. And my understanding from the clinicians I have talked to is that this has been a favorable development for those populations, and that they are going to continue to use those therapies, especially as newer, more effective therapies come out for those individuals. Thanks for the question. Eduardo Martinez: Perfect. So much. Congrats on the year and quarter. Keith Kennedy: Thanks, Eduardo. Operator: There are no further questions at this time. This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Good afternoon. And welcome to First Solar, Inc.'s Q4 and full year 2025 Earnings and 2026 Guidance Call. This call is being webcast live on the Investors section of First Solar, Inc.'s website at investors.firstsolar.com. All participants are in listen-only mode. Please note that today's call is being recorded. I would now like to turn the conference over to your host, Byron Jeffers, Head of Investor Relations. Good afternoon. Byron Jeffers: And thank you for joining us on today's earnings call. Joining me are our Chief Executive Officer, Mark R. Widmar, and our Chief Financial Officer, Alexander R. Bradley. During this call, we will review our 2025 results and discuss our outlook for 2026. After our prepared remarks, we will open the line for questions. Before we begin, please note that today's discussion contains forward-looking statements and actual results may differ materially due to risks and uncertainties. We undertake no obligation to update these statements due to new information or future events. For a discussion of factors that could cause these results to differ materially, please refer to today's press release, our SEC filings, and the earnings materials available at investors.firstsolar.com. On this call, we will also reference certain non-GAAP financial information. This non-GAAP financial information is not intended to be considered in isolation or as a substitute for financial information presented in accordance with U.S. GAAP. A reconciliation of our non-GAAP items to their respective nearest U.S. GAAP measure can be found in our earnings press release and our earnings presentation. With that, I will turn it over to Mark. Mark R. Widmar: Beginning on slide four, good afternoon, and thank you for joining us today. I will share key highlights and accomplishments from 2025. We entered the year on the new U.S. administration with a back-weighted shipment profile that required staging production to fulfill contracted commitments concentrated in the second half. Amid a persistently uncertain policy and trade environment. Over the course of the year, we navigated a budgetary reconciliation process which created the One Big Beautiful Bill Act, evolving tariff scenarios, customer negotiations, and regulatory developments, including Section 232 actions, FEOC restrictions, and AD/CVD investigations that are still unresolved and could ultimately prove to be either headwinds or tailwinds. Throughout, we remained anchored to a core guiding principle and a key differentiator valued by our customers: contract certainty, both in pricing and in timely delivery. To honor our obligations, we maintained sufficient capacity to fulfill international module commitments and actively pursued various contractual protections to address shifting tariff dynamics and, in some cases, contract terminations. Given that backdrop, we took a disciplined, selective approach to customer contracting throughout the year. That approach is proving effective. Since our last earnings call, we secured gross bookings of 2.3 gigawatts excluding domestic India volume, and 0.1 gigawatt of low-bin inventory clearance. We booked 1 gigawatt in our key U.S. utility-scale market at an ASP of $0.364 per watt, inclusive of applicable adjusters. By remaining patient, selective, and opportunistic, we capitalized on demand that recognizes the differentiated value of our products and contracting structure, strengthening the forward earnings profile of our backlog and positioning us to navigate and potentially benefit from ongoing policy and trade uncertainty. We are pleased to have delivered record sales of 17.5 gigawatts of modules in 2025. Net sales of $5.2 billion were at the top end of our most recent guidance range and represented a 24% year-over-year increase. Full year diluted EPS was within our most recent guidance range at $14.21 per share. We ended the year with $2.9 billion of gross cash and $2.4 billion of net cash, coming in above our guidance range. Our growth continued in 2025 as we advanced our U.S. capacity expansion, highlighted by initiating commercial production in Louisiana, our fifth U.S. factory. In addition, we announced plans to onshore the finishing of Series 6 modules initiated at our international factories by adding U.S. finishing capacity with a new facility in South Carolina. We expect production from this facility to begin in 2026 and ramp through 2027. We also advanced our CdTe-based CURE semiconductor platform. Following a limited commercial production run from Q4 2024 to Q1 2025, we delivered initial CURE modules to customers in 2025. Based on laboratory and field testing results, CURE has demonstrated the expected advantaged energy profile driven by industry-leading temperature coefficient and long-term degradation rate with improved bifaciality. These results continue to support a disciplined factory-by-factory CURE conversion rollout expected to begin next month starting at our Ohio Series 6 factory. In parallel with our CdTe-based CURE platform, we advanced our next-generation perovskite thin film program. Our focus remains on efficiency, energy attributes, reliability, and a scalable path to high-volume, low-cost manufacturing of this potentially transformational thin film. We launched the perovskite development line at our Perrysburg campus and reached full in-line processing capabilities in Q3, marking an important step in the lab-to-fab transferability and enabling production of smaller form factor modules using anticipated manufacturing tools and integrated processes. In late 2025, we initiated sourcing for a perovskite Series 6 module form factor pilot line, which we expect to reach operational readiness in early 2027. While we made promising progress in 2025, additional work remains before more broadly scaling our perovskite program. Lastly, we continue to actively enforce our intellectual property rights, including our TOPCon patents. Notably, in Q4, the U.S. Patent and Trademark Office denied three separate petitions filed by foreign-headquartered manufacturers that sought to invalidate aspects of our TOPCon portfolio. This outcome reinforces our confidence in the strength of our patent portfolio. I will now turn the call over to Alexander R. Bradley to discuss our most recent shipments and booking activities as well as our Q4 and full year 2025 results. Thanks, and beginning on slide five. As of 12/31/2024, a contracted backlog totaled 68.5 gigawatts, valued at $20.5 billion, or approximately $0.299 per watt. For the full year 2025, we sold 17.5 gigawatts of modules, secured 7.4 gigawatts of gross bookings, and recorded 8.3 gigawatts of debookings, primarily due to our termination of contracts as a result of contract breaches by customers, resulting in net full-year debookings of 0.9 gigawatts. We ended the year with a contracted backlog of 50.1 gigawatts valued at $15 billion. As a reminder, the contracted backlog reflects the base ASP. A significant portion of our existing contracted backlog includes pricing adjusters that may increase the base ASP, contingent on achieving specific milestones within our technology roadmap and manufacturing replication plan. At year-end, approximately 23.2 gigawatts of contract volume included these adjusters, which we estimate could generate up to an additional $600 million, or approximately $0.03 per watt, the majority of which we recognize in 2027–2028. Turning to the P&L on slide six. Q4 net sales were $1.7 billion, a $100 million increase sequentially. Full year net sales were $5.2 billion, a $1 billion increase year over year, driven primarily by a 24% increase in module volume. Gross margin in Q4 was [percent omitted in source], an increase from 38% in the prior quarter. The increase was driven by a higher mix of U.S.-manufactured modules benefiting from Section 45X tax credits, lower nonstandard freight charges due to reduced international shipments, and the resolution of the glass supply chain disruption experienced in Q3 at our Alabama facility. These benefits were partially offset by ramp and underutilization costs for Louisiana, a higher proportion of sales into the India market, and the termination amounts recognized in the third quarter related to breach contracts by affiliates of BP. Full year 2025 gross margin was 41%, a decrease from 44% in the prior year. The decline was primarily driven by tariff costs as well as the impact of tariffs exacerbating warehousing expense associated with a back-weighted revenue profile, detention and demurrage, partially driven by supply-demand imbalance following certain contract terminations due to customer default and underutilization from the curtailment of our Series 6 international facilities. These headwinds were partially offset by $1.6 billion of Section 45X tax credits recognized in 2025, plus $1 billion in 2024, driven by a higher mix of U.S.-manufactured module volumes sold. As an update on warranty-related matters, we resolved certain claims and have continued to advance negotiations with additional customers regarding warranty claims for select Series 7 modules produced prior to 2025. Based on our settlement experience, the estimated number of affected modules, and projected remediation costs, we believe a reasonable estimate of potential future loss will range from approximately $35 million to $75 million. Within this range, we have recorded a specific warranty liability of $50 million, representing our best estimate of the expected impact associated with this issue. We are aware of certain statements, including in recent counterclaim filings by affiliates of BP, relating to overall PV plant underperformance. While we will not comment on existing litigation, we do encourage a review of our initial complaint filed last year as well as our answer to those claims and our motion to dismiss filed earlier this month. To relate to overall PV project, we would note that solar plant performance relative to expectations is influenced by a broad set of environmental, design, operational, and grid-related factors. These include, but are not limited to, third-party prediction modeling, weather variability, terrain variability, local microclimates, shading and soiling, procurement and design decisions relating to trackers, inverters, trunk transformers and other plant components, design and construction parameters including EPC quality, DC and AC system design, construction and handling, and operational factors including tracker algorithm design and fidelity, open circuit conditions, and overall O&M scope and quality. In short, a solar plant's performance reflects its total environment and system design. As we have consistently stated, First Solar, Inc. fully stands behind its module warranty obligations. To the extent a customer has a valid module warranty claim, we remain ready, willing, and able to perform our responsibilities pursuant to the procedures agreed to in our warranty. SG&A, R&D, and production start-up expense totaled $117 million in Q4, a decrease of approximately $27 million relative to the prior quarter. The decrease was primarily driven by the reduction of start-up costs associated with the Louisiana facility commencing commercial operations. For the full year 2025, operating expenses were $523 million, an increase of $59 million year over year. This includes a $42 million increase in R&D expense, driven by higher depreciation, maintenance and utility costs associated with our research facilities as well as increased headcount and compensation. SG&A increased by $15 million driven primarily by higher allowance for credit losses on aged receivable balances and supplier loans. Our fourth quarter operating income was $548 million, which included depreciation, amortization and accretion of $141 million, ramp and underutilization costs of $29 million excluding depreciation, production start-up expense of $1 million, and share-based compensation expense of $3 million. For full year 2025, our operating income was $1 billion which included depreciation, amortization and accretion of $529 million, ramp and underutilization costs of $140 million, production start-up expense of $86 million, and share-based compensation expense of $19 million. Interest income, interest expense, other income, and foreign currency losses totaled $3 million in income in Q4, and $16 million expense for the full year. Income tax expense for the fourth quarter was $30 million compared to a tax expense of $4 million in the third quarter. This quarter-over-quarter increase in tax expense was primarily a function of Q3 benefits including a $20 million discrete tax benefit associated with the acceptance of a filing position on amended tax returns in a foreign jurisdiction, and incremental share-based compensation benefits recorded in the prior quarter. We recorded full year income tax expense of $53 million. Q4 earnings per diluted share were $4.84 compared to $4.24 in the previous quarter. For the full year 2025, earnings per diluted share were $14.21 compared to $12.20 in 2024 and within our guidance range. Turning to slide seven, I will cover select balance sheet items and summary cash flow information. The aggregate balance of our cash, cash equivalents, restricted cash, restricted cash equivalents and marketable securities was $2.9 billion at year-end, an increase of $800 million sequentially and $1.1 billion year over year. Both the sequential and full-year increase in gross cash were driven primarily by proceeds from the sale of Section 45X tax credits generated during the year and positive operating cash flows, partially offset by capital expenditures for our Louisiana facility. We monetized €800 million of 2025 Section 45X tax credits in the fourth quarter, and $1.4 billion during the full year. Notably, in January 2026, we also received $118 million for 2024 Section 45X tax credits where we elected a direct pay option in our 2024 tax return filed in October 2025. The sale transactions highlight the liquidity of the Section 45X tax credit sale market. The IRS refund provides insight into direct pay election turnaround times, providing additional visibility and flexibility to optimize credit monetization and manage overall liquidity. Accounts receivable and inventory decreased both sequentially and relative to the prior year, reflecting improved customer collections and higher volumes sold. Capital expenditures were $172 million in the fourth quarter compared to $24 million in the third quarter. Full year 2025 CapEx was $870 million compared to $1.5 billion in 2024. Our year-end net cash position was $2.4 billion, an increase of $900 million from the prior quarter and an increase of $1.2 billion from the prior year. Now I will turn the call back to Mark, who will provide an update on market conditions, policy, and technology. Mark R. Widmar: All right. Thank you. Turning to slide eight. In 2025, the policy and trade environment remained complex. While we are experiencing significant direct and indirect tariff impacts, in our view, on balance, the environment is net favorable for First Solar, Inc., an example of genuine, long-standing U.S.-based solar manufacturing. In contrast, in our view, headwinds beyond reciprocal tariffs and commodity cost increases continue to build for the crystalline silicon industry. A combination of tighter trade enforcement, potential retroactive tariffs, pending Section 232 actions, expanding Foreign Entities of Concern (FEOC) restrictions, and greater intellectual property enforcement is increasing cost, timing, and compliance risk for developers relying on crystalline silicon products with ties to China. With respect to trade, it is notable that the Trump administration has withdrawn its appeal against a U.S. Court of International Trade ruling in the Auxin litigation requiring the retroactive collection of previously suspended AD/CVD tariffs. If this ruling is maintained, which appears increasingly likely, mounting contingent liabilities for AD/CVD duties associated with this unlawful two-year moratorium could represent an as-of-yet unrealized material financial impact on those foreign producers that relied on it. In fact, one recent industry publication noted that “U.S. Customs is suggesting that no panels that came in during the moratorium qualified for the moratorium.” In support of true domestic manufacturing, we are encouraged by interim Treasury guidance issued earlier this month that, in our view, clearly signals the administration's intent to address gamesmanship by China-tied solar manufacturers seeking to evade U.S. regulations and benefit from tax incentives by artificially shuffling ownership stakes, voting rights, or IP licensing with the intent of evading FEOC status. We anticipate that the forthcoming FEOC restrictions will be aligned with the legislative intent of prohibiting access to tax credits for entities with sudden corporate restructuring lacking business purpose. We also commend Commerce's preliminary CVD determinations issued earlier today as part of the broader Solar 4 AD/CVD investigation into Laos, India, and Indonesia, which reflect subsidy rates of approximately 81%, 126%, and 104%, respectively. Note these preliminary CVD rates do not include preliminary antidumping rates, which will be additive and are expected to be determined in April. It is expected that final aggregate AD/CVD duties will be decided in September. We expect that the final AD/CVD duties applied in Solar 4 will again support a level playing field against the illegal and unfair trade practices of Chinese-headquartered and other silicon producers who strategically evade U.S. trade laws. Finally, IP enforcement must be considered within the overall legal framework that includes these recent legislative and regulatory headwinds confronting the crystalline silicon industry. Earlier today, we filed a petition with the U.S. International Trade Commission (ITC) against 10 groups of foreign-headquartered manufacturers that we believe are producing products infringing on one of our U.S. TOPCon patents. Now this is a separate action from our three actions seeking monetary damages against affiliates of Adani, Canadian Solar, and Jinko in the U.S. District Court. If the ITC institutes an investigation based on our complaint, we expect that the matter would be decided in approximately 18 months. If our case is successful, the ITC may issue a general exclusion order preventing importation of infringing TOPCon products made by foreign entities, or in the alternative may issue a limited exclusion order preventing the importation of infringing TOPCon products by the entities named in our complaint. In addition, the ITC may issue a cease and desist order preventing the sale of infringing TOPCon products currently in the United States. Note the IP-related headwinds confronting the crystalline silicon industry are reflected not just by First Solar, Inc.'s recent and continued enforcement efforts, but also by the recently reported $236 million settlement entered into between Maxeon and Aiko just days before a U.S. patent court was due to decide their patent dispute. In summary, the policy and trade environment, together with sustained intellectual property enforcement across the industry, have continued to generate mounting uncertainties for U.S. developers that are dependent on suppliers tethered to China-tied supply and/or IP. On the topic of technology, turning to slide nine, our strategy remains anchored in a simple premise. Customers ultimately buy lifetime energy, not just nameplate efficiency. And our roadmap is designed to optimize the balance of efficiency, energy yield, and cost, while leveraging our industry-leading thin film expertise. We continue to believe the next step change in solar will be enabled by thin film platforms such as perovskites. We are well aware that many in the industry are seeking to crack the code of this potential next generation of advanced thin film technology. However, we believe the winner of the perovskite race will also need to have the ability to manufacture the product cost-competitively in a high-volume manufacturing environment. As the world's leader in thin film PV technology, and the world's only manufacturer of thin films at scale, we believe we are uniquely positioned to advance this prospective device, given our nearly three decades of not only thin film R&D learnings, but high-volume thin film manufacturing experience. Our technology strategy continues to be primarily concentrated on two core thin film–focused pillars. Firstly, we are executing a disciplined, phase-gate introduction of CURE, responsibly bringing this new technology to market with proven laboratory results and expanding field validation. Consistent with our prior outlook, we expect to permanently convert the Ohio lead line to CURE in Q1, providing a pathway to enhance the energy attributes and competitiveness of our Series 6 platform, and then rolling out these enhancements to our Series 7 platform at successive factories. Executing CURE remains strategically important because it is designed to enhance the attributes that translate into lifetime energy, including improved temperature response and degradation behavior, which are highly valued by utility-scale customers. With adding the improved energy attributes of CURE to the current energy advantages of thin film CdTe, such as superior spectral and shading response, CURE can deliver up to 8% more lifetime specific energy yield than crystalline silicon TOPCon technology in the markets we serve. Our second pillar, perovskites, is a key part of our effort to develop next-generation thin film semiconductors that can be deployed at commercial scale in both our traditional utility-scale markets while potentially expanding our addressable market segments. Today, we have achieved reliability results we believe are comparable with best-in-class R&D efforts, by continuing to advance efficiency and stability—two of the industry's key hurdles to scaling perovskite technology. A major enabler of these efforts is our dedicated perovskite development line in Ohio. As announced prior to the beginning of the call, we have entered into an agreement with Oxford PV, the holder of what we believe is the most fundamental portfolio of perovskite-related patents. In terms of this agreement, Oxford PV will license to us on a nonexclusive basis its existing issued and currently pending patent applications. We believe that this agreement will advance our freedom to develop, manufacture, and sell crystalline-silicon–free perovskite-based semiconductor modules in the U.S. utility, commercial, and residential markets. I will now turn the call back over to Alexander R. Bradley, who will discuss our 2026 outlook and guidance. Alexander R. Bradley: Thanks, Mark. Before turning to our financial guidance, I want to briefly reiterate our approach to managing the business amid a dynamic market, policy, and trade environment. We entered 2026 with a backlog of 50.1 gigawatts, despite taking a highly selective approach to bookings over the past two years. We expect to continue this strategy in 2026 as we await the outcome of and impact on forward module demand and pricing from the numerous political, regulatory, and legal matters discussed earlier in the call. We believe our market position with non-FEOC and high U.S. content supply on a proprietary thin film platform remains long-term advantaged, and our existing contracted backlog relative to our production capacity provides us with the ability and flexibility to be patient. Regarding 2026 U.S. deliveries, many of our customers continue to face both regulatory and commercial challenges, including federal permitting approval delays. As we previously stated, we will continue to work with customers to accommodate schedule shifts where possible, consistent with our philosophy of supporting our long-term partnerships, even while we are not contractually required to do so. We entered 2026 with a fully allocated position for our U.S. production. Given tariff uncertainty, our India production is assumed to be sold into the India domestic market. We will continue to monitor opportunities to export products into the U.S. where it is margin accretive to do so. Our guidance assumes our India facility operating at full capacity, with the ability to flex production as needed through the year in response to changes in demand signals. Demand for our Series 6 international products produced in Malaysia and Vietnam remains constrained. Our decision in 2025 to establish a new finishing line in the U.S. allows us to make use of a portion of the front-end of these Southeast Asian facilities, optimizing freight, tariffs, and domestic content for the sale of incremental products into the U.S. domestic market. We intend to run our remaining end-to-end in Malaysia and Vietnam at low utilization rates this year, despite the financial impact of doing so, maintaining a near-term option to increase throughput should catalysts such as the political and regulatory matters discussed earlier drive incremental profitable demand. Slide 10 shows our capacity and forecast production for 2026 and into 2027. Nameplate capacity reflects current output entitlement at full scale, throughput, and yield, with downtime solely for planned maintenance. Production reflects nameplate capacity adjusted for factory ramp, other downtime including for technology and tool upgrades, and any planned reduction in throughput including due to market demand. As it relates to technology, as previously noted, we expect to recommence running Series 6 CURE products in Perrysburg this quarter. Assumed in our 2026 production forecast for India is downtime associated with tool upgrades, with the intent of beginning CURE production on our first Series 7 line in India in early 2027, followed by the remainder of the Series 7 fleet thereafter. Additionally, our Southeast Asian capacity is reduced significantly in both 2026 and 2027 due to the removal of tools destined for our U.S. finishing line, as well as their reuse in our perovskite development work. By 2027, U.S. finishing is forecast to be 3.5 gigawatts, with the remaining Southeast Asia capacity of 1.8 gigawatts for fully finished international Series 6 modules. The projected U.S. nameplate capacity of 14.9 gigawatts in 2026, growing to 17.1 gigawatts in 2027 with the scaling of Louisiana and South Carolina. We expect global nameplate capacity of 19 gigawatts in 2026 and 22.1 gigawatts in 2027. And note, we expect U.S. nameplate to continue to increase as we drive technology, throughput, and yield improvements. In terms of production, as previously noted, we expect significant underutilization of our international Series 6 facilities. India is assumed to run high throughput, with the ability to flex production as needed based on local demand and international sale options. We forecast U.S. production of 13.0 to 13.3 gigawatts this year, and 14.9 to 16.1 gigawatts next year. This results in total forecasted production of 16.5 to 17.5 gigawatts in 2026, and 18.9 to 20.5 gigawatts in 2027. Turning to slide 11 and other assumptions embedded within our guidance today. Spectrum volumes sold of 17.0 to 18.2 gigawatts is above forecast production, as we reduce inventory levels by year-end. We forecast a U.S. ASP of approximately $0.308 per watt, slightly above our contracted backlog. This includes certain freight, tariff and commodity recovery, and technology upside. We expect limited ASP upside from CURE sales in 2026, largely as a function of contractual notification deadlines relative to the timing of the decision to recommence CURE production. Combined with India domestic sales, the majority of which we expect will book and deliver within the next year, we forecast the global ASP recognized at approximately $0.287 per watt. Cost per watt sold is forecast to remain relatively flat year over year at approximately $0.267 per watt, which includes the impact of tariffs and the impact of reshoring U.S. manufacturing, largely recognized through ramp and underutilization expense, and excludes the benefit of Section 45X credits generated by domestic manufacturing. Including the benefit of Section 45X credits, cost per watt sold is projected to be down approximately $0.03 per watt year over year. Cost per watt released from inventory is expected to increase approximately $0.02 per watt year over year. Approximately half of this increase is forecast to come from a mix shift as both Southeast Asia production reduces and Louisiana/Alabama increases. The other half to come as a result of multiple factors, including increases in tariff costs, increases in core bill of material costs, increases in utility rates, and downtime for technology upgrades. Period costs are expected to decrease by approximately $0.02 per watt from a combination of lower standard sales rates due to greater domestic mix shift, effective elimination of nonstandard freight charges as a function of reduced international product imports, reduced warehousing costs, and other period cost reductions. To provide some more color, we forecast total net tariff cost impact across bill of material and finished goods imports, recognized in both cost of goods produced and period costs towards cost of goods sold, at $155 million to $175 million. Net of expected contractual recoveries on finished goods sold, we expect a total tariff impact of $125 million to $135 million. This assumes a Section 122 tariff in place for 150 days at 15%, impacting all bill of materials, works in progress, and finished goods imports in that time period. In addition, certain commodities, including aluminum, are subject to long-lasting higher rate Section 232 tariffs. Note that we recognize the P&L impact of tariffs at the time of product sale. Our total tariff impact in 2026 reflects higher tariff rates paid on bill of materials, works in progress, and finished goods imports incurred prior to the recent Supreme Court decision. Tariffs also indirectly lead to underlying commodity cost pressure for our variable U.S. bill of material, including relating to aluminum, steel, glass, interlayer, targets, and spares. In addition, electricity rate hikes increase fixed costs. These cost increases are not contractually recoverable from our customers. Sales rates are forecast to be approximately $0.014 per watt in 2026. Warehousing-related costs of approximately $200 million are down from 2025, but remain high and are part of the function of underutilization of space driven by a forecast Southeast Asian curtailment. Beginning in 2027, we expect to reduce warehouse costs to a longer-term run rate of approximately $100 million per year. Forecast ramp and underutilization expense of $115 million to $155 million are a function of curtailing Malaysia/Vietnam capacity as well as the ramp of our U.S. finishing line. Start-up cost is expected to be $110 million to $120 million, driven primarily by the ongoing depreciation and logistics associated with idle finishing equipment in transit, as well as certain tariff-related costs incurred to import that equipment and warehousing such equipment for use at our new South Carolina facility. And finally, a note on capital structure. Our strong balance sheet remains a strategic differentiator and allows us to navigate periods of volatility, including near-term supply and demand imbalances in certain international markets, while continuing to support R&D investment, technology capital spend, and capacity growth, including localizing the U.S. solar supply chain in support of energy security and national policy objectives. We ended 2025 in a strong liquidity position and have since enhanced financial flexibility by entering into a new $1.5 billion senior unsecured revolving credit facility with improved commercial terms, greater flexibility, and more relaxed covenants. In 2026, we intend to fund CapEx through cash on hand and operating cash flow. We plan to prepay the remaining balances outstanding under our India credit facilities, including our loan with the DFC, ahead of its scheduled maturity. Doing so enables us to optimize our jurisdictional capital structure, increase the capacity of our local working capital facilities, while reducing exposure to India rupee volatility-related hedging costs. Separately, while not assumed in our guidance, potential monetization of 2026 Section 45X tax credits provides additional liquidity optionality. Our capital allocation priorities remain unchanged. Firstly, we prioritize maintaining a resilient working capital reserve of approximately $1.5 billion to $2 billion to account for industry cyclicality and uncertainty, and short-term supply and demand imbalances. Secondly, we deploy cash to fund growth and replicate technology improvements across the fleet. Thirdly, we invest in innovation through R&D and targeted capital investments, as well as strategic enablers such as licensing arrangements, to advance our technology roadmap, including perovskite optionality. Fourthly, we will consider M&A, which we are actively evaluating to pursue complementary technology-adjacent opportunities to reinforce our strategic differentiation. As we near the conclusion of recent years of sustained high CapEx associated with manufacturing capacity growth, we will evaluate applying cash generation in excess of the above capital priorities to share repurchases. We will provide an update on this later in the year, pending clarity around certain factors including policy catalysts, realization of new bookings volume, and any decisions around 2026 Section 45X tax credit monetization. I will now cover the full year 2026 guidance ranges on slide 12. Our net sales guidance is between $4.9 billion and $5.2 billion. Gross margin is expected to be between $2.5 billion and $2.6 billion or approximately 49.5%, which includes $2.1 billion to $2.19 billion of Section 45X tax credits, and $115 million to $155 million of ramp and underutilization costs. SG&A expense is expected to be between $215 million and $225 million and R&D expense between $285 million and $290 million. The primary driver for our increase is due to higher investment in advanced research, including expanded perovskite and innovation center activity, and planned headcount additions. SG&A and R&D expense combined is expected to total $500 million to $515 million. Total operating expenses, which includes $110 million to $120 million of start-up expense, are expected to be between $610 million and $635 million. Clearly, within our R&D expense guide for 2026 are approximately $100 million of costs associated with perovskite development. Going forward, we intend to guide on an adjusted EBITDA basis, which we believe provides the accuracy of our underlying operating performance and enhances comparability across periods. We forecast full-year adjusted EBITDA of $2.6 billion to $2.8 billion. From a first-quarter earnings cadence perspective, we expect module sales of 3.4 to 4.0 gigawatts, Section 45X tax credits of $330 million to $400 million, resulting in adjusted EBITDA of between $400 million and $500 million. Capital expenditures in 2026 are forecast to range $800 million to $1 billion. Approximately half of the spend is for capacity expansion, primarily the South Carolina finishing line and the Louisiana plant. Remaining spend is expected to be split evenly between CURE in India and R&D technology replication and maintenance. We expect to end 2026 with gross and net cash balances between $1.7 billion and $2.3 billion and assume a full repayment of our India credit facility with the U.S. International Development Finance Corporation by 06/30/2026. With that, we conclude our prepared remarks and open the call for questions. Operator? Operator: We will now begin the question and answer session. Please limit yourself to one question. If you would like to ask a question, please press 1 on your telephone keypad. To withdraw your question, press 1 again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Our first question comes from the line of Brian K. Lee with Goldman Sachs & Co. Your line is open. Please go ahead. Brian K. Lee: Hey, guys. Good afternoon. Thanks for taking the question. I guess just on the ASP front, Mark, you mentioned the $0.364 per watt, including adders for the U.S. bookings this quarter. How much did the adders add there? And then is that sort of the level of entitlement, 36 and above, that you would expect for U.S. bookings through the rest of the year? Maybe can you comment on visibility you have on the pricing environment from this point forward? And then just secondarily on the gross margins, I would be curious, I mean, if you factor out underutilization and the 45X credit, it is implying kind of a 10% component gross margin in the guidance even if I know there are a lot of moving pieces, Alex, but when do you get back to high teens, 20% type of gross margin for components the way you were at in 2024? And what are some of the big bridges to get back there? Mark R. Widmar: Alright. I will do the ASP conversation and probably suggest Alex cover gross margin. So there is about, call it, 2.5 to 3 cents of the value of the adder in terms of the ASP, that $0.364. So that is about the numbers. The CURE attributes will give you close to 3 cents. Now not everything that was booked in that $0.364 actually had the adder. So if you broke it out a little bit, you are potentially going to see slightly higher prices for the CURE attributes for the product that we booked with the CURE attributes. But, you know, look, I think the entitlement-wise, I feel good about the pricing that we are at now, but I think there are some more catalysts that could still happen. I think some are leaning in with all the uncertainty that we referenced on the call in terms of what happens with FEOC and what window are they trying to book into given the constraints with FEOC. And I think if we continue to see more momentum there, we just obviously saw the Solar 4 announcements, which obviously are going to address imports coming in from those three countries that we referenced. So there are potentially more tailwinds, depending on how they play out, that could support even better pricing as we move forward. But I think, visibility-wise, I think that is kind of a good indication of where we expect the market pricing to be relative to the CURE technology. Alexander R. Bradley: Yeah. Brian, on the gross margin, so if you back out the 45X, it is about a 7% gross margin. And if you think about that against the $5 billion revenue profile, about $350 million of gross margin. So, if you try and walk that back up to, call it, the 20% number we have talked about before, this year we have got about $165 million of tariffs sitting in there, about $135 million on underutilization. So you are about $300 million or so there, about six points of margin. You have got about $200 million of warehousing. I think we said in the prepared remarks that will come down to about $100 million on a run-rate basis next year. So pick up another $100 million there—another two points to margin. And if you look at the adjusters we talked about, $600 million in the backlog mostly recognized in 2027, 2028—so take $300 million across each of those years—that is another six points of margin that kind of walks you back up to around about $1 billion of gross margin and a 20% number. So tariff is obviously still in there. That is an impact that we are still wrestling with. But I would also say you have got incremental volume coming in next year which is not backed against that, and the contribution margin benefit of that, even ex-IRA, is going to be meaningful. I would also say we are trying to look at this on an ex-IRA basis, but it is challenging to do that to some degree because we are adding incremental costs both by U.S. manufacturing and also by the mix shift to bringing more production into the U.S. And we are doing that, and that allows us to enable us to capture that 45X credit. So I know we are looking on an ex-IRA basis, but if you think about it with the IRA included with that 45X, yes, the core shows 7% this year and the walk-up that we talked about just now, you have got 43 points of IRA. So the gross margin on a GAAP basis will be 50% this year relative to 41% last year, which is the highest we have seen. So obviously, we want to keep growing the core underlying non-IRA, and there is a path there, as I said, that takes you back up to that 20% and or about $1 billion at that $5 billion revenue profile. But you cannot ignore the two and the interconnectedness of the fact that we are reshoring capacity, and that does come at a cost, both direct cost and mix shift cost, to enable us to capture those 45X benefits. Mark R. Widmar: And, Brian, maybe I want to add a couple things too. One, back on the pricing environment, because I also want to make sure this is clear, is that product—or that ASP—is also reflective of, largely influenced by, a domestic content product, right? Now what we do a lot of times is it is agreed to around some number of points, which allow us to bring in some amount of international volume, assuming the tariff rates are amenable, such that we can blend international. But if we ended up doing a straight-up international deal, for example, with some of the capacity we have available with our Malaysia/Vietnam facilities, I would expect that price point to be closer to $0.30. So I just want to make sure that is clear. So if we actually end up booking some of that international volume as we go forward, you may see a lower ASP there because of that dynamic. I want to make sure that is clear. Then the other one just to Alex’s point around tariff. The other thing that is creating some headwind for us this year is—and we have mentioned this before—there is insufficient glass supply in the U.S. And we have been working to bring in basically brownfield and mothballed facilities and getting them up and operational. But to support the scaling that we have right now, we are bringing in some sun glass internationally and using it in our U.S. production. And that is creating a cost headwind. My inbound freight costs are higher. I am bearing the cost of the tariffs. And what we would expect to do as we scale up our supply chain here in the U.S., which we are in the midst of doing, is we will see less of a dependency on that import of glass, which will also help us a little bit on our gross margin profile. Operator: Your next question comes from the line of Julien Patrick Dumoulin-Smith with Jefferies LLC. Your line is now open. Please go ahead. Julien Patrick Dumoulin-Smith: Thank you. Thank you all very much. Appreciate the opportunity to connect here. If I can ask you first off, just to reconcile on the volumes produced versus sold. Can you comment a little bit about just what you are seeing here of late? Separately, can you comment a little bit about what you are actually seeing in terms of sell-through on volumes out of Asia? I know your prepared comments had some nuance on this, but elaborate a little bit about both Southeast Asia and India—what you are assuming here in 2026 and what you are seeing preliminarily for 2027 as well? Alexander R. Bradley: Yeah. So, if you go to the slides, we give you a walk on what we are expecting to produce versus sell. The delta between the two is about 700 megawatts coming out of inventory. So that is the gap you are seeing between produced volume and sold volume. And we gave you the U.S. number for sold. You can see it in there—it is 12.129. So the 9.33 in the script—I will come back to you. But, yeah, the delta is coming out of inventory. What was your second question, Julien? Mark R. Widmar: I think part of it is your question was on the sell-down in Southeast Asia, I think, is what you are asking. Julien Patrick Dumoulin-Smith: Yeah. On Southeast Asia. What are the dynamics? So let us talk through that. Alexander R. Bradley: So India is going to produce, call it, 3 gigawatts or so this year and will be sold into the Indian market. We are actually going to have a really strong quarter. We had a really strong Q4 and we will have a strong Q1 in India. So demand in India is strong. So we have 3 gigawatts or so, a little bit north of that because we have some inventory sell-through, that we will sell in 2026 in India—domestically manufactured, sold into the India market. Now on Southeast Asia, those factories are kind of running 20% or so. I mean, they are extremely underutilized. And what Alex said in his prepared remarks is that we are looking at this almost as option value. Now some of that capacity will be fully utilized once we get our South Carolina facility up because the front-end capacity for, call it, half of the Southeast Asia manufacturing will come to the U.S. So that will solve a piece of that underutilization. The other half is going to continue to be underutilized at a very low utilization rate. But we are looking at this as really an option to allow some of these potential tailwinds around FEOC and other things to play themselves out to see what the impact of that could be to create more demand for those international operations. We also, as we indicated in our last call, are trying to work with a couple of counterparties on potentially meaningful volume offtake for that international production. But that is all still in the works. It is still going to be largely tethered back to what happens in the policy environment. But we are incurring significant underutilization and cost headwinds because what we are trying to do right now is figure out, let us create an option, let us evaluate what we continue to see in the market. And we have been wearing this for over a year now. It was about a year ago when these tariffs came in place, and we started to throttle down, kind of towards the ’22, ’23. And we have run at a very low utilization rate to try to buy some time to see how these tariffs ultimately get played out. Operator: Your next question comes from the line of Mark Wesley Strouse with JPMorgan. Your line is now open. Please go ahead. Mark Wesley Strouse: Yes. Good afternoon. Thanks for taking our questions. Within the last couple of months, there was an individual with a vast amount of resources that is talking about ramping up a supply of U.S.-based solar panel production over the coming years. Just curious if that is having any real impact on the conversations you are having with your customers, especially as you look out to later this decade? And I have a quick follow-up. Thanks. Mark R. Widmar: Yeah. Look, I was very much aware of the announcement and the ambitions. From my understanding, a lot of that is not necessarily focused for our utility-scale market that we are primarily focused on. I think it is primarily looked to be captive for their own consumption for their own programs that they are envisioning. It is also out in the horizon, and I think there is also a pretty strong realization of some pretty significant challenges to try to get to that type of scale. And if you are really thinking about as fully vertically integrated all the way from polysilicon forward, if you are only trying to solve the constraint at, let us say, the cell level, you have to think through how do you solve the wafer, how do you think through the polysilicon, and the capital investment to try to move all that forward is going to be pretty overwhelming. And the technical aspects around it as well of understanding freedom-to-operate issues. We have already talked about there are IP infringements all over the place within the crystalline silicon world. And everybody is going to stand up and try to protect their IP where it makes sense. So, it has not really impacted our conversations yet. I think if they got to a realization where you started to see sites being announced, actual equipment being purchased, operations being commenced, then I think it could maybe start to inform our customers’ use of other thoughts and ideas. But as of right now, it is having very little impact. Alexander R. Bradley: Mark, just wanted to comment around that. And as you are well aware, the constraint that we are seeing in the market for hyperscalers right now is access to power. We have just gone through the process of looking to site our new finishing line. The biggest constraint we faced around that was land with available power to connect. So again, Mark mentioned you have got capital constraints—which even that could be overcome—constraints around knowledge and know-how. You have also got the constraint of how you would power these facilities if you are trying to build to that scale. You would be in the same constraints that the hyperscalers have today. Mark Wesley Strouse: Okay. Thank you for that. That makes sense. And then I just want to ask a clarifying follow-up to Brian Lee’s question earlier. When you said the $0.364 is for the domestic content, are you saying that that is the blended rate—so it would be a higher amount than that for the U.S. domestic content averaged with whatever, $0.30 for international—or is that $0.364 how we should be thinking about the domestic content portion? Mark R. Widmar: Yeah. So the way—we tried to mention this a little bit last time. The way we actually price is we negotiate with the customer some number of points that they need, given their already procured strategy around procurement strategy around the IRA in particular, and then what are the incremental points that they need relative to the window that they plan on putting the project into service. And so we will negotiate a points construct, which then gives us the optionality to blend whatever percentage we can internationally. And we are in a pretty good balance between the domestic S7 and the international S7. We can optimize there pretty well, assuming we choose not to sell into the India market. Where we are a little bit more misaligned is really with only having, call it, 3 gigawatts of capacity for S6 in the U.S. and then trying to match that up with 7 gigawatts of international production, which makes it harder because you cannot really blend that much international to achieve, let us say, a 30% or 40% or 50% requirement that a customer has. Now moving some of that finishing capacity into the U.S. also brings in some domestic content, so that helps move that equation a little bit. But what I was trying to say is that if you have no domestic content at all embedded into a blended price construct, you are going to see a much lower ASP. So if I go out and say, okay, I want a customer to buy 500 megawatts of international only with no domestic content value, and you may see some of that in some customers that are doing a PTC project as an example, because the uplift on the PTC is not as meaningful as it is on the ITC, those prices are going to be lower. And I just want to make sure that is clear and that is understood—that you could see a delta. I know I said $0.30 or somewhere in that range. If you are selling just a pure international S6 product into the U.S. market, you would see a lower ASP clearing price. Operator: Your next question comes from the line of Philip Shen with Roth Capital Partners. Your line is now open. Please go ahead. Philip Shen: Hey, guys. Thanks for taking my questions. First one, just was wondering if you could give us a little more color on why no EPS guide for 2026. And then secondly, in terms of the ASP implied for the 2026 guide, it seems like the U.S. ASP might be a little bit low. I think in 2025, it was closer to $0.324, but the implied U.S. ASP in the 2026 guide seems to be closer to $0.308. So I was wondering if you might be able to give some color on that. And then finally, on Oxford PV, can you share what kinds of efficiencies you are able to generate? What are you seeing in your test modules, if any? And then what is your sense of timing as to when commercial volumes could actually ramp? Thanks, guys. Alexander R. Bradley: Yes. So on the EPS, we are moving to guiding to EBITDA. We think it gives a better view of operational performance and better comparability year over year. And especially in a year like this year, where you have got significant costs associated with both underutilization of our Southeast Asia facilities as we are deliberately curtailing those—as Mark mentioned, waiting for an option around whether there is profitable capacity or profitable production to be had there to serve the market—and we have got significant start-up and ramp production. Historically we have not done that, but this is a lot different where start-up costs are as we are moving that equipment from Southeast Asia to the U.S., and so effectively taking tools we already have in the ground and idling them for a significant period of time. That makes it more comparable. On the tax side also, we have got potential challenges around Pillar Two this year, which will make the tax number very noisy going down to EPS. So on a kind of core non–Pillar Two basis, expect very low tax expense for the year, but because the agreement is not yet been finalized, there is a potential chance we will have to accrue significant Pillar Two expense, which ultimately we do not believe will ever get realized on a cash basis. But until those agreements are finalized, we would have to accrue that. I think it helps us with comparability as well. On the ASP side, so your number is right, $0.308. If you look at what is in the backlog, it is around $0.30. So about what is in the backlog coming out of that ASP with a little bit of uplift relative to some adjusters we get around freight and around commodities. And then there is a little bit of upside on the tech side as well there. If you think about—we mentioned on the adjusters going forward about $600 million or about $0.03 a watt on average of adjuster value sitting aligned with the CURE platform, and most of that we said will be realized in 2027–2028, which is when we will start having much more CURE product available to us. So this year, we have limited CURE production, and given the timing of our decision to run that CURE relative to the notification timings in the contracts, we are going to see very limited upside from that this year. So that is why you are seeing that U.S. ASP around $0.308. Mark R. Widmar: And I think the other thing, Phil, when you are looking at your year on year, you have to remember that last year, as we realized throughout the year a handful of terminations—obviously the largest one being the Lightsource bp termination—which obviously impacts revenue, but you would have to normalize, pull that out of your top-line revenue, then do your math from that standpoint. But that clearly provided some incremental uplift to the reported ASP last year because of some of those terminations. As it relates to Oxford PV, or just our perovskite program, basically what we are doing right now, Phil, is we have a development line where we are doing small form factor modules. Think they are like 60 centimeters by 20 centimeters or so. These are actual fully functional small form factor modules that we are producing in an actual integrated production process and doing all of our conversion of some of the efforts that we do in our advanced research, whether it is in California or whether it is in Sweden, and then we are doing all that testing within our development line. And if you look at our—as we said in the prepared remarks—if you look at our efficiencies and what we are seeing in stability, we are best in class from many, many, many ways—many different dimensions. So I feel good about where we are from a program standpoint, but there are still fundamental challenges that have to be addressed, and we are very good at understanding the nuances of thin films. We understand the issue of metastability. We understand the impact of encapsulating the thin film to protect the thin film. We have a number of what have been identified as best-in-class particular Chinese perovskite products. And if you put those out into a test field as we have, first off, they will even tell you in their literature that they give you: do not expose the module open circuit, which means effectively once you install it, it has to be immediately energized. And if you choose to expose it to open circuit, it degrades almost instantaneously in some cases. There are others that because their encapsulation is insufficient, the film just starts to over time effectively pull apart. So there is a huge significant delamination that happens with the film, and it cannot sustain itself over extended periods of time. And so there are many, many factors that factor into how you commercialize a product. So our view is we need to think about—we are working on all of those—the development not just to drive the efficiency, also to drive the attributes to a point where they are competitive and then to manufacture that in a way that creates an enduring product that can be in the field for 30-plus years and perform at attributes that are relatively close to the current thin film technologies that we have, and then we can do that all in HVM and do that in a way that we can do it cost-competitively. So there are many different things that we are working on in that regard, Phil. So I would just say we are pleased with where we are. Our next phase is we will be investing—we have already started our procurement process—to put together a pilot line that will make full-size modules, largely still for development purposes. We will deploy those modules in the field as well, some commercially with customers. And then as we evolve the development program, as we evolve the HVM issues in larger form factors—because anytime you scale from something that is, call it, 20 by 60 centimeters to something that is 2.5 meters, there are issues you will have to deal with through that scaling process, and especially the uniformity of the film. Once we are better informed around how well that is progressing, that will determine overall commercial readiness. But the entitlement here is an efficiency number that is 20% plus, an LTR that is competitive, a bifaciality that is, call it, 70%, and a tempco that is, you know, somewhere in the mid-teens, which is better than we have now with CdTe. That is the aspiration of what we are trying to accomplish, but a lot of work between now and then. Operator: Your next question comes from the line of Vikram Bagri with Citi. Your line is now open. Please go ahead. Vikram Bagri: Good evening, everyone. I wanted to ask sort of a two-part question about CURE and potential for cancellations. First on India, can you talk about the pricing environment? I was wondering if you can give confidence that the sales in the market are viable, the pricing is stable, is expected to stay stable throughout the year. Understand there is no sizable spot market in the U.S., but is there a possibility some of that volume can be redirected to the U.S. given 15% tariffs now in place? And then finally on India, it seems there is a lot of domestic capacity for panels being ramped up. How do you think about that capacity in the long term and the viability of that market for solar panels? And then as a follow-up on cancellations, you have historically mentioned pricing and EU players pulling back investments from renewables in the U.S. market has created this risk of cancellations. With lower tariffs, how are the conversations going with customers? Is that risk much lower now? And if you can quantify how much of the contracts are potentially at risk of cancellations. Thank you. Mark R. Widmar: Alright. I will deal with the India question first, and I do not know if you got the tariff question. Okay. So, look, what I would say is right now, pricing is a point to look at in India—it is lower. What I would say, though, is we are effectively realizing high-teens to low-20% gross margin. So if you want to look at it from a gross margin standpoint, because I think you have to understand the cost of manufacturing in India is significantly lower than what the cost of manufacturing is in the U.S. So, yes, lower pricing, but you basically balance that out with a lower cost of production. You are realizing high-teens to low-20% type gross margin in India. So that is obviously where we stand right now. And if you look across the horizon of how would we optimize that production—and one of the things I think you said is the risk of overcapacity—look, I agree that there is that risk, but there is also what is counterbalancing that and why there is also robust demand for our product and technology in India is that the Approved List of Models and Manufacturers in India is now moving further upstream. So it started off with the module itself. Now, effectively, for any project that is commissioned in April or Q2, there will now be a cell requirement to be made domestically, and then they have also foreshadowed already a wafer requirement that effectively starts to come into effect in 2028. And there is not existing vertically integrated manufacturing capability in India at this point in time. And I think what manufacturers have seen is that it has become more challenging as they try to get into cells, and then even more so as they try to get into the wafer. And then, obviously, they are trying to figure out the poly side of the house as well. So a lot still needs to happen from that standpoint. We also believe that from a cost standpoint, even if that vertically integrated supply chain were to happen, we will be cost-advantaged with our vertically integrated manufacturing facility with everything being done within the four walls of a factory. So there is a cost advantage, we think. We also believe we have an energy advantage, which will be further enhanced when we implement our CURE technology in India, which will start in 2027. So I look across the horizon, feel like I have a better product, better technology. I have a better policy environment that should continue to advantage us in terms of India. As a backdrop, to your point, we will continue to evaluate the construct of potentially bringing some of that product into the U.S. market, and we will do some of that with a view of creating some competitive tension into the domestic market, because I do not want customers to believe that they do not have an alternative path other than selling into the domestic market. I would like to be able to say, sure, if it is the right tariff construct, we can also redirect the product and blend it in with some S7 domestic product and then still command pretty good pricing. It is a little bit choppy to continue to move back and forth because today we primarily make a fixed-tilt product for the India market and then to have to convert the back to make a tracker product for the U.S. market or export market—that is a little clunky and you can incur some downtime and some cost, and transportation of bringing that product into the U.S. is more expensive than what we would like. So, ideally, if we can just harmonize and keep running that factory all out, serving the domestic market, getting good ASPs, that is our preferred path, but we clearly would look at bringing some of that into the U.S. market if the situation and the dynamics are right. Alexander R. Bradley: Yeah. Vikram, you asked around cancellation risk and whether tariffs are playing a part there. Look, tariffs coming down are fairly helpful, but I do not think what you have been seeing on the cancellation side over the last year has really been tariff related. So the two are not necessarily linked. What we have said before and what we have been seeing is more of a strategic shift by certain players, especially oil and gas, and the European utility players, to reallocate capital away from renewable development in the U.S. into some of their more core business on oil and gas development or European utility development. So where we have seen some of those players move away, we have seen others enter into the space in the U.S. to pick up some of that slack and see an opportunity in taking over those projects to develop them. So it is hard to handicap a cancellation risk in the backlog. Sure, it could exist. Historically, what we have seen has been essentially more risk around the international product, just given the value of domestic content. If you look at today, the amount of international product sitting in our backlog is pretty small. You can see that by how much we are producing in Southeast Asia this year relative to U.S. product. And so that product has potentially been more challenged. I think U.S. demand has been strong. And even if there were cancellations, we have much more opportunity to move any terminated U.S. products back into the U.S. market. I would also say that clearly, we have been enforcing termination penalties and fees and making sure that we capture the value in the contract. So if there is a contractual obligation for someone to pay an amount for terminating those contracts, we have been enforcing that. We will continue to do so. Operator: This will be our final question. Our final question will come from the line of Ben Kallo with Baird. Your line is now open. Please go ahead. Ben Kallo: Hey, guys. Thanks for putting me in here. I just wanted to square your time to power—it is a big question or big emphasis out there. And I know you have so many moving pieces. And just bookings, I am trying to square time and power and the need for electrons with how you guys are doing bookings, but, you know, your different moving pieces right now. Thank you. Mark R. Widmar: Look, I think, Ben, you have to remember we have a luxury—we are kind of in a nice position. We have got 50 gigawatts of contracted volume that is going to carry us forward. There is a clear sense of urgency from customers around execution and time to power. There are customers that obviously have safe harbored under Section 48, and they need to get their projects commissioned by the end of 2028. There are others that are safe harbored under 45, and those who are continuing to safe harbor because they can do that up to the middle of this year, then get an opportunity to get projects done through the end of 2030. So there is quite a bit of demand. Our customers are also dealing with a lot of angst of trying to figure out permitting issues and other things they are trying to do, financing issues, getting things in place for the current projects that they are executing against in construction and what have you, and then thinking through a longer position around their portfolio—both earlier stage and late stage development. So that sense of urgency is there. People are being really creative, looking to do more on-site generation, try to get out from underneath the constraint of the interconnections. But if a customer does have an interconnection agreement, they are running hard and they are making sure they are lining up their modules as well as their EPC agreement and balance of system equipment to make sure they can execute on time. So it is a clear catalyst. I also think it is helping us as we engage and we talk with customers around pricing as well. Operator: There are no further questions at this time. This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Hello, and welcome to the CeriBell, Inc. Q4 2025 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. And if you would like to withdraw your question, press 1 again. Thank you. I will now turn the call over to Brian Johnston, Investor Relations. Brian, you may begin. Good afternoon, and thank you all for participating in today's call. Joining me from CeriBell, Inc. are Xingjuan Chao, Co-Founder and Chief Executive Officer, and Scott Blumberg, Chief Financial Officer. Brian Johnston: Earlier today, CeriBell, Inc. issued a press release announcing financial results for the quarter and year ended December 31, 2025. A copy of the press release is available on the Investor Relations section of the company's website. Before we begin, I would like to remind you that management will make remarks during this call that include forward-looking statements within the meaning of federal securities laws and that these are being made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please refer to the Risk Factors section of our public filings with the Securities and Exchange Commission, including our Quarterly Report on Form 10-Q filed with the SEC on November 4, 2025. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, February 24, 2026. CeriBell, Inc. disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. And with that, I will turn the call over to Xingjuan. Xingjuan Chao: Thanks, Brian. Good afternoon, and thank you all for joining us on our fourth quarter and full year 2025 earnings call. 2025 was an outstanding year for CeriBell, Inc. as we further penetrated our core seizure market while significantly expanding our total addressable market, which we believe has grown from $2 billion to over $3.5 billion. We accomplished this while delivering robust financial results, driving rapid revenue growth, and maintaining a strong gross margin profile. I am pleased to report that the revenue for the fourth quarter of 2025 was $24.8 million, reflecting 34% growth over the same period last year. For the full year, revenue totaled $89.1 million, representing 36% growth over 2024. Gross margins were 87% and 88% for the fourth quarter and full year, respectively. We finished the year with 647 active accounts as of December 31, which translates to 32 net new accounts added during the fourth quarter and 118 throughout 2025. The strong performance reflects the disciplined execution of our dedicated team and the predictable, recurring nature of our business model. Beyond driving rapid revenue growth and expanding our account base, we made several critical cornerstones of the foundations for application. Our mission is clear: to make point-of-care EEG the standard of care for management of seizures in the acute care setting, and to leverage our technology and footprint to establish EEG as a new vital sign. The milestones we achieved in 2025 bring this vision much closer to reality. Becoming the standard of care requires demonstrating clear superiority over the status quo. With over 140 peer-reviewed publications and abstracts, we believe we have firmly established that the CeriBell, Inc. system is equipped to address the unmet needs in the acute care setting. But evidence alone is not enough. To achieve our ambitions, we must make our technology widely available. In 2025, we undertook several initiatives aimed at bringing the benefits of our system to all patients in need. First, we expanded our commercial infrastructure from 35 territories in 2024 to approximately 55 territories today. We are starting to see the signs that this investment is paying off, with a very strong backlog of accounts interested in adopting our technology. Based on our experience, the timing of our investments will begin accelerating the rate of account acquisition in 2026, with further acceleration expected in 2027. Second, we demonstrated our ability to accelerate utilization rate through systematic departmental expansions, protocol development, and other growth initiatives. Our playbook is well defined, and with roughly 30% penetration within our installed base, we have plenty of room to drive deeper within our accounts. Third, we broadened access to additional sites of care by achieving FedRAMP High authorization, which unlocked access to all 170 hospitals within the VA system. After a comprehensive and highly successful pilot, the VA has committed to expanding within the system. The first accounts launched in 2025, and we are excited to launch even more throughout 2026. Finally, we expanded our core seizure market opportunity by approximately $400 million following the FDA clearance of our seizure detection products for neonate and pediatric patients. We expect this age range expansion to accelerate account acquisition and to drive deeper penetration into our existing installed base of over 600 hospitals. I would like to spend a few minutes discussing the neonate market. Seizures are the most common neurological emergency in the U.S., and guidelines are clear in supporting the use of EEG. Still, legacy practice falls short in managing these newborns, given limited EEG capacity and the shortage of epileptologists. In this patient population, 90% of seizures are nonconvulsive, and physicians who are supposed to suspect a seizure based on observation alone are incorrect more than 70% of the time. What is at stake is profound. Evidence shows that a total seizure burden of approximately one hour is associated with a 15% decline in cognition and language development score, a difference that can shift a child from normal neurological function to lifelong impairment. Studies also demonstrate that for every hour delay in treatment, seizure duration can double. By identifying seizure earlier and initiating treatment sooner, clinicians can significantly reduce the total time the patient spends in seizure and fundamentally shift their development in a positive direction. In a recent case, a two-week-old infant presented brief abnormal movements after hours. The care team suspected seizure but required EEG for accurate diagnosis. Our neonatal head cap was set up within 10 minutes, and a few minutes later, seizure was confirmed. The infant was promptly sent for imaging, which identified cerebral venous sinus thrombosis, a stroke caused by a blood clot that can be devastating if not treated early. Empowered with this information, the care team was able to promptly and confidently treat the patient. I am happy to share that the infant is doing well today. Following treatment, there has been near complete resolution of the clot and no recurrence of features. This story illustrates how the CeriBell, Inc. system can change the trajectory of care in a matter of minutes, particularly in these vulnerable patients. This story is only one of many. This early clinical experience, in addition to management recognition that neonatal patients are eligible for some of the highest value DRG payments, has driven momentum during our ongoing commercial pilot. We believe that every NICU should have access to point-of-care EEG, and our goal is to enable this as soon as possible. We look forward to bringing this product to the market in Q2, when we anticipate moving from the pilot stage to a full commercial launch. With our expanded sales team, FedRAMP approval, and FDA clearance for neonatal and pediatric patients, we have solidified the foundation of our core seizure market to set the stage for an exciting 2026. We believe we are less than 4% penetrated within a $2.5 billion core seizure market and see significant growth opportunities ahead. Entering 2026, the path to achieving our vision of becoming the standard of care for seizure detection within the acute care setting has never been more clear. Moving now to the second horizon of our vision: to make EEG a new vital sign. We believe that a single platform that can differentiate between the most common and significant neurological abnormalities impacting patients in the acute care setting could fundamentally change the treatment paradigm. Just as patients who have chest pain receive an EKG, we see a future where patients with any sign of altered mental status receive CeriBell, Inc. as a matter of protocol. During the past three months, we achieved breakthrough milestones that position us to deliver a comprehensive neuromonitoring platform for the acute care setting. In December 2025, we received FDA 510(k) clearance for our delirium algorithm, making the CeriBell, Inc. system the first and only FDA-cleared delirium detection and continuous monitoring device. Shortly after, in January 2026, we announced the receipt of FDA Breakthrough Device designation for LVO stroke monitoring in the inpatient setting. We achieved both of these regulatory milestones ahead of schedule. Let me first focus on delirium, where the need for objective monitoring is clear. Sometimes called acute brain failure, delirium affects over 30% of patients in the ICU. Every day in ICU with delirium carries a 10% higher mortality risk, and the risk of developing dementia is at least 60% higher if patients experience delirium in ICU. The current standard of care for diagnosing delirium is a behavior-based nursing protocol. It is subjective, burdensome, and binary. The limitations of this diagnostic tool make accurate longitudinal tracking of delirium impossible. As a result, it can be difficult to assess the effectiveness of management tasks and adjust them in real time. We believe our continuous monitoring solution solves this major unmet need while also reducing nursing burden. Beyond the clear stand-alone need for a delirium monitoring solution, we are excited by the synergistic value of this new technology with our existing platform. Seizures and delirium are highly interrelated. They can present similarly, but the treatment paths are diametrically opposed. The first line medication for status epilepticus is one of the most delirium-inducing agents. Complicating the picture further, 48% of seizure patients later experience delirium and 42% of delirious patients have seizure or seizure-like abnormalities. We believe that an integrated platform that can monitor for delirium coherently with seizure not only provides access to new patients, but also drives broader adoption within our existing patient population. Looking ahead to 2026, we plan to initiate a pilot aimed at identifying patient populations, optimizing workflow, refining our commercial message, and building clinical evidence. In parallel, we are pursuing a New Technology Add-on Payment, or NTAP, to help support adoption. We are extremely excited to be the first entrant to what we believe is a $1 billion greenfield market where no other FDA-cleared monitoring device is commercially available. By leveraging our established installed base and existing sales infrastructure, we expect to be able to bring this technology to market quickly and efficiently. This combined effort will set the stage for anticipated full commercial launch in 2026 or 2027. Finally, turning to stroke, we view our receipt of FDA Breakthrough Device designation as a clear indicator of the life-saving potential and the technical feasibility of our LVO stroke monitoring algorithm. For LVO patients, every minute saved can mean a week of disability-free life. Yet, when strokes occur in patients who are already in the hospital, the signs can often go unnoticed for several hours because these patients have highly varied cognitive baselines and are often sedated, intubated, or recovering from surgery. The symptoms are incredibly difficult to spot. As a result, hospitalized patients who have a stroke face two to three times higher in-hospital mortality compared to those who have a stroke outside the hospital. Throughout 2026, our efforts will be focused on clinical data generation and advancing regulatory milestones for the LVO stroke detection. Seizure, delirium, and stroke together form the core of a technology platform that we believe will be indispensable for the vast majority of neurological patients in the acute care setting. We look forward to sharing more details on the program in the quarters to come. In conclusion, I am extremely proud of the team's accomplishments in 2025 and enthusiastic about what is ahead. 2025 sets the product and regulatory foundations for our near- and long-term future growth. We expanded patient access through FedRAMP High approval and 510(k) clearances for pediatric and neonatal seizure detection. We also expanded our capabilities to include a new and highly related disease state with regulatory clearance of our delirium algorithm. We believe these accomplishments have nearly doubled the size of our total addressable market, which we now estimate at $3.5 billion. In 2026, we will continue driving growth by adding new accounts and driving further adoption of our adult seizure product, which still delivers the majority of our revenue. We expect the upcoming full commercial launch of our pediatric and neonate products to drive upside later in 2026 and throughout 2027. We aim to further drive upside in 2027 and beyond as we work to establish a comprehensive commercial plan for delirium in the coming quarters. We believe that our LVO stroke detection algorithm provides another exciting avenue for growth in the future. Collectively, these efforts position us for a fundamental transformation of our business as we penetrate our large market opportunity with a single, highly integrated brain monitoring platform capable of revolutionizing care for neurological conditions. We are further along in accomplishing our mission to make EEG a new vital sign than ever before, and are increasingly confident in the transformative nature of our platform: transformational for patients, transformational for providers, and ultimately, transformational for CeriBell, Inc. With that, I would now turn the call to Scott Blumberg, our CFO, to provide a review of our fourth quarter results and 2026 guidance. Scott Blumberg: Thank you, Xingjuan, and good afternoon, everyone. As Xingjuan highlighted, total revenue for the fourth quarter of 2025 was $24.8 million, which is a 34% increase from $18.5 million in the fourth quarter of 2024. The increase is primarily driven by increased adoption of the CeriBell, Inc. system across new and existing accounts. Products revenue for the fourth quarter of 2025 was $18.8 million, representing an increase of 33% from $14.1 million in the fourth quarter of 2024. Subscription revenue for the fourth quarter of 2025 was $6.0 million, representing an increase of 37% from $4.4 million in the fourth quarter of 2024. Overall, we are pleased with the continued growth in active accounts and headband purchasing trends in Q4. We ended 2025 with an active account base of 647, an increase of 32 accounts in Q4. This was achieved despite our strategy to avoid launches in the final weeks of the year. Included in our Q4 launches were a small number of accounts associated with our previously announced expansion within the VA system. We anticipate the launch of additional VA accounts in the coming quarters. We also saw an increase in account utilization in Q4, which we believe reflects both the efforts of our clinical account management team and the typical seasonal patterns in which we see increased usage in the winter months when ICU census is elevated. For the full year 2025, total revenue was $89.1 million, representing 36% growth over 2024. Products revenue for the full year 2025 was $67.3 million, an increase of 34% over 2024, and subscription revenue was $21.7 million, an increase of 41% over 2024. Gross margin for the fourth quarter of 2025 was 87%, compared to 88% in the prior year period. For the full year, gross margin was 88% compared to 87% in 2024. The decrease in Q4 reflects partial-quarter impact of our transition to utilizing inventory acquired after the implementation of increased tariffs on products originating in China. As a result of our efforts to mitigate the current tariff environment, including our fully operational manufacturing line in Vietnam and initiatives aimed at reducing manufacturing cost, we expect to deliver margins in the mid-80% range throughout 2026. This assumption does not include any impact from Friday's Supreme Court decision or future changes in policy. Total operating expenses for the fourth quarter of 2025 were $36.2 million, an increase of 24% compared to $29.1 million in the fourth quarter of 2024. Non-cash stock-based compensation was $3.3 million in the fourth quarter of 2025. Total operating expenses in the full year 2025 were $136.7 million compared to $96.5 million in the full year 2024, representing an increase of 42%. Full year 2025 operating expenses included $12.2 million in non-cash stock-based compensation. The increase in fourth quarter and full year 2025 operating expenses was primarily attributable to investments in our commercial organization, increased headcount to support the growth of the business, legal expenses, and expenses related to operating as a public company. Net loss was $13.5 million in the fourth quarter of 2025, or a loss of $0.36 per share, compared to a loss of $12.6 million, or a loss of $0.40 per share, in the fourth quarter of 2024. An average weighted share count of 37.2 million shares was used to determine loss per share for the fourth quarter of 2025. Net loss for the full year 2025 was $53.4 million, or a loss of $1.46 per share, compared to a loss of $40.5 million, or a loss of $3.39 per share, in 2024. Our cash, cash equivalents, and marketable securities as of December 31, 2025, were $159.3 million. Turning now to our outlook for 2026. We expect full year 2026 total revenue to be in the range of $111 million to $115 million, representing annual growth of 25% to 29% over 2025. As Xingjuan mentioned, we currently expect to proceed with the full launch of our neonate and pediatric products in Q2 of this year. While we do anticipate the sales cycle may be shorter within hospitals that are already using the CeriBell, Inc. system for adult patients, we believe in most cases, we will still be subject to a multi-month sales process, including contracting, workflow design, and training. We expect to establish commercial traction across a number of hospitals by the end of the year, but given launch timing and expected sales cycles, the impact on 2026 revenue will likely be modest. Our goal is to establish the pediatric and neonate products as meaningful revenue contributors in 2027 and beyond. Finally, our cash position remains strong, with cash, cash equivalents, and marketable securities of $159 million as of December 31. We plan to selectively deploy capital in incremental R&D and commercial infrastructure investments to capture our untapped market opportunity and maintain rapid long-term revenue growth. That said, we remain committed to our objective to achieve cash flow breakeven with cash on hand. With our gross margin profile, recurring revenue model, and high customer retention rates, we remain confident in our ability to do so. With that, I will turn the call back to Xingjuan. Xingjuan Chao: Thank you, Scott. And thank you all for your time today. In conclusion, we are very pleased with our 2025 performance and believe it positions us well for continued growth in 2026 and beyond. I would like to take a moment to thank the entire CeriBell, Inc. team for the continued dedication to our mission of making EEG a new vital sign. I will now turn the call over to the operator for Q&A. Operator? Operator: We will now begin the question-and-answer session. If you would like to ask a question at this time, simply press. And our first question comes from the line of Travis Steed with Bank of America. Travis, please go ahead. Travis Steed: Hey, congrats on the quarter and all the progress in the pipeline. Maybe to start with the 2026 guidance. If you look at just dollar growth, about $24 million growth, roughly about the same we did in 2025. But your TAM has doubled. You are adding accelerating center adds in the back half of the year. Utilization is increasing. So I wanted to understand some of the moving parts and assumptions on 2026. Scott Blumberg: Hey, Travis. First, I want to state that our guidance philosophy has not changed. As we have said all along, we really appreciate the need to deliver on the numbers that we put forth, and so we have baked in an appropriate level of conservatism into the model. As it relates to the sequential growth, I think it is important to appreciate that the guide last year was consistent with the guide this year. And since philosophy has not changed, we think there is potential for upside if we operate within the principles that we expect to with the investments we have made. As far as the pipeline goes, as we mentioned, we really expect that to start kicking in towards the end of this year and more into 2027. So some neonate is baked in, but it is fairly modest. But we think as we set out for 2027, that could be a contributor next year. Travis Steed: Okay. And maybe can you elaborate a little more on the commercial plan for delirium? I am just trying to understand how you build that up. Will you start to see some potential benefits in account adds and account penetration from that? Or is there a different sales approach on the commercial plan for delirium? Xingjuan Chao: Yes. We are in the middle of the discussion with some accounts already for the commercial pilot, and the majority of these accounts are our existing accounts, with some new accounts as well. So for the commercial pilot, we really are focused on the real-world validation of our clinical impact. So these discussions will be focused with accounts on what are the best target patient populations, the workflow, how to measure the impact, and also generate case studies and clinical evidence. Therefore, this portion, as I mentioned earlier, is largely driven by existing accounts. We also see that will be reflected, at least in the near term, where delirium can drive financial and commercial impact as well. It will be more expanding deeper utilization in our existing accounts. And in that, we see two drivers. One is delirium itself, where we introduce a new patient population that is not seizure. And the other driver we see is there is a big synergistic interaction between delirium and seizure, as I mentioned in the earnings call. So we could see this drive deeper into the seizure population as we introduce delirium as well. Scott Blumberg: Thank you. Operator: Sure. And your next question comes from the line of Robert Marcus with J.P. Morgan. Robert, please go ahead. Lily (for Robert Marcus): Hi, this is Lily on for Robert. Thanks so much for taking the question. As we think about 2026, can you talk through what you see as the main levers of growth that you are pulling this year? I know you talked about accelerating account adds, so how are you thinking about balancing that with driving continued utilization, and what do you see that has the most potential for upside this year? Scott Blumberg: In terms of levers in the model, I can touch on the levers mechanically. Maybe Xingjuan can comment on the drivers. The two core drivers of our adult seizure market remain unchanged: the rate of account adds and the same-store growth. On the account adds, we expect to add more accounts in 2026 than we added in 2025, and that is a result of the strategy we laid out last year, including expansion of the sales team, FedRAMP approval, and the acceleration from the buzz around CeriBell, Inc. Within our base, we are roughly 30% penetrated, and we have got a number of strategies aimed at driving that, including training more physicians, expanding to new departments, and implementing protocols. We have built out a robust campaign to drive those efforts. We have got a lot of opportunity to continue to push that forward. Xingjuan Chao: Yes, and to add to what Scott has said, we have a well-defined playbook in both adding accounts as well as driving utilization. Maybe I will emphasize and cap off new levers in 2026. On the account acquisition front, we are adding a new focus on driving hospital system-level acquisition. So this is more focused on both large systems as well as small and medium-sized systems. Instead of, historically, the territory manager focusing on closing one or two accounts, how can we accelerate the process of closing the entire system, say, a 10-hospital-sized system. So we could see that in the near and long term add more gross leverage. On the utilization front, we started more systematic departmental expansion in 2025, and we have seen consistent impact from that departmental expansion. It could be expanding to the emergency department, to additional ICUs, or even sometimes to the floor. So we expect to further expand what we have established in 2025 and expect to see the impact of departmental expansion on driving utilization as well. Great. That is really helpful. And then as a follow-up, how should we be thinking about spend ahead of launches in all these new indications? It is a pretty big expansion in terms of TAM when you layer on pediatric, delirium, and LVO stroke. And so is there a lot of investment that needs to be made ahead of this in terms of the sales force and commercial infrastructure, or do you think you can largely leverage what you have already built out? Lily (for Robert Marcus): Thanks so much. Scott Blumberg: We intend to largely leverage our commercial infrastructure. The beauty of our platform is that it is the same call point. It is the same platform. It is really just training the reps on the new indications, and it is delivering the message to customers. There will, of course, be some upfront investment related to a product launch in terms of marketing and market development. But in terms of the core infrastructure, we expect to have fairly modest investments there. Lily (for Robert Marcus): Perfect. Thank you. Operator: And your next question comes from the line of Brandon Vazquez with William Blair. Brandon, please go ahead. Brandon Vazquez: Hey, everyone. Thanks for taking the question. I wanted to focus first on the commentary around the neonate launch. Maybe spend a little bit more time on the launch here and dig into it. I think as we have talked in the past, there are some accounts that you are already in that now you can kind of open the neonate or the NICU. And I think, to say a little bluntly, starting to see benefits not until late in Q4 seems a little late. So maybe walk us through why it takes a couple of quarters to start to see those in accounts that you are already in, to make sure we are all level set on when you will start to see those benefits more meaningfully ramp. Xingjuan Chao: Yes. Thank you, Brandon. So let us maybe focus on the neonate NICU expansion for existing accounts. I think that is where you are focusing. We have about 200 level three, level four NICUs in our existing accounts. If you think about the timeline, we plan to launch in Q2. Even though we are already in these hospitals, to expand to a new department, the hospital needs to acquire additional recorders as well as the clarity that is dedicated to neonatal seizure detection. So that often requires going through the vetting committee and additional committees. We expect that sales cycle to be shorter than your brand-new account acquisition, but that still takes several months. And even after that, in the context of the departmental expansion, there will be workflow and patient population discussions. Based on our experience, that often would take a couple of months as well. If you start to think through the timeline, that is why a Q2 launch would lead to financial or commercial impact in Q4. Brandon Vazquez: Okay. And then maybe I will tie this back to a couple of model questions for Scott. As we think about additional recorders and some of that stuff, just reset us and level set us on how we should be modeling some of that. How should we be thinking about where this will be reflected in the model, like ASPs, things like that? And then maybe if I can also tag one modeling one here from the prior question. How should we think about, I will ask more poignantly, on the OpEx line? How should we think about 2026? Is it a point of leverage, or does OpEx have to grow at a higher clip than your total sales growth? Thanks, guys. Scott Blumberg: Sure. On the commercial front for neonate, our model is that we are charging additional subscription costs for adoption of the neonate product. The cost of adopting neonate, if you are already an adult customer, is not double, but it is higher than just being an adult customer. And we would expect the headbands, which are a similar pricing model but slightly higher price, to also be included. The way it will reflect itself in the top line would not necessarily change the number of accounts, with the exception of children’s hospitals that adopt specifically for neonate, but increase both product and subscription revenue through our installed base. As it relates to OpEx, while we do not provide specific guidance, I would be happy to give a little color, kind of going through the different functions, in order to help you with your modeling. On sales and marketing, we believe we largely have the commercial infrastructure in place to deliver on 2026 guidance. We will be selectively investing in opportunities to drive growth in 2027 and beyond throughout the year. That includes the previously discussed regional system function, as well as expansions within the CAM work to support the growing account base. And then, as I mentioned earlier, there may be some additional investments associated with market development activities related to the launch of our new products. But with our platform and our existing infrastructure, we do not expect to materially increase the size of the sales or support functions. On R&D, we see a lot of opportunity ahead of us, so we are going to continue to invest in R&D. We expect a decrease in the growth rate in R&D spend this year, but we do expect R&D growth to be outsized compared to the rest of the departments given what we have ahead of us. And then on G&A, our infrastructure on G&A is largely in place, so we expect to see material leverage there. However, I think it is worth noting that with the cadence of our patent infringement case against Natus, the ITC litigation expenses are heavily concentrated in the first half of this year, so I would expect to see a little bit of elevation in G&A over the coming two quarters or so. Final note on OpEx is in line with what you see out of our peers. We expect an increase in non-cash stock-based compensation expense throughout the year as we continue to transition to public company compensation practices. So hopefully that is helpful. I do expect overall that our OpEx growth to moderate in 2026. You started to see some of that in Q4 with the lowest year-over-year growth rate in OpEx that we have seen. We do want to strategically deploy our capital to drive long-term growth of the business. But as we make investment decisions, we have always got our ROI towards our North Star, which is to achieve breakeven with cash on hand, and we have very high confidence that we can do that. Operator: Okay. Our next question comes from the line of Josh Jennings with D.D. Cohen. Josh, please go ahead. Brian (for Josh Jennings): Hi. This is Brian here for Josh. Thank you for taking my questions. On the revenue guidance, how is the VA expansion accounted for in your sales projections for the year, if at all? And can you review the specific tariff assumptions that go into the mid-80s gross margin guidance for the year? Scott Blumberg: Yes. So the VA is incorporated in our guide in terms of the expansion that has been committed to last year, but further expansion is not incorporated into the guide. And we will be pursuing that with the government budgeting cycle. That is likely to come up for discussion potentially in Q3 for late 2026 and 2027 impact above our guide. As far as the tariff assumptions go, obviously there has been a lot of change over the last couple of days in terms of what our policies are. Our guide does not contemplate any of those changes. What our guide includes is the move from the prior tariff rates since 2018 in China of roughly 25% to the pre-Friday tariff rates, which were in aggregate around 55% in China, mitigated by our move in part to Vietnam with lower tariff rates, as well as some reductions that we have done over the past couple of years on our product manufacturing cost. Without any benefit from potential impact of Friday's Supreme Court decision, we have confidence that we will maintain margins in the mid-80% range throughout the year. Brian (for Josh Jennings): Okay. And then one follow-up, if I could. On the NTAP for delirium, are you saying you are positioned to file for the NTAP, or an NTAP that becomes potentially effective this October, or is this likely to be a 2027 decision for you? Xingjuan Chao: Yes. We submitted NTAP late last year. If we receive it, it will be effective this October in 2026. And the preliminary decision would be released by CMS in April, so in a couple of months. Brian (for Josh Jennings): Okay. Terrific. Thank you. Xingjuan Chao: Thank you. Operator: And your next question comes from the line of William John Plovanic with Canaccord Genuity. William, please go ahead. William John Plovanic: Great. Thanks. Good evening, and thanks for taking my questions. Just for clarity's sake, your operating losses have decreased quarter over quarter the past two quarters. It seems like from the detailed guidance you provided, excluding any IP litigation expenses, that that trend would continue throughout 2026. And then we, you know, I think we are modeling for you to get to adjusted EBITDA positive in 2026. Just any thoughts on any of those statements? Scott Blumberg: I do not want to go beyond the guide and give specific comments. I will say that the investment and the infrastructure we have in place right now is sufficient to carry us forward through 2026, but we are always thinking two, three, four years ahead. And so as we see the impact of the investments in terms of translating into accelerated growth, we do have a desire to invest more to drive outsized growth in the outer years of the model. We always pay very close attention to what that means for our overall cash position. We do not pay as much attention to time to breakeven, but we want to ensure that we are maximizing growth while not putting our ability to break even at risk. William John Plovanic: Okay. And then on delirium, I am just—is that more you just see more utilization? Or I know you are trying to get the add-on, but do you think you can actually charge more? And then what does implementation of that look like with the new algorithm? Is that just a download over the cloud, or do you have to get out in the field and upload the new algorithm? How do you implement that? Thanks for taking my questions. Xingjuan Chao: Yes. Thank you, William. On the pricing of delirium, it is a little bit too early for us to comment, and that is part of the commercial pilot for us to learn better about the market dynamics. We could certainly charge for both the algorithm as well as the headband, but those are the decisions we would like to make later down the road. In terms of how we implement the algorithm, it is rather straightforward in that we can remotely update both the firmware on the recorder as well as the portal, so we can turn on delirium for our existing users and existing recorders remotely rather quickly. William John Plovanic: And then are there any incremental expenses from internal staffing and reviewing the data and the reports or anything of that nature? Xingjuan Chao: As Scott mentioned, on the commercialization front, we leverage the existing sales team. On the R&D and ops front, there will be some marginal investment we need to add, because the portal and device get more features, but it is not significant. We will also invest in marketing and market development and clinical evidence generation. But there is no major significant OpEx increase related to implementing the algorithm. William John Plovanic: Okay. Thanks for taking my questions. Operator: And your next question comes from the line of Marie Yoko Thibault with BTIG. Marie, please go ahead. Marie Yoko Thibault: Hi, good evening. Thanks for taking the questions. Nice to see the new account adds tick higher again sequentially this quarter. And I heard your commentary on acceleration of account adds in 2026–2027. I suppose some of this goes hand in hand with the newer rep productivity that is coming online now, but I wanted to understand the acceleration comment. Is that an acceleration from the low 30s where we are today or from the mid-20s where we were earlier in 2025? And is that something we should expect to continue building throughout the year, given the timing of some of these newer reps that you hired, maybe 12–18 months ago? Scott Blumberg: At face value, the comment was specific to the full year. So I believe we added 118 in 2025, and we expect to add more than 118 in 2026. There will be some lumpiness quarter to quarter, not entirely linear, especially with the new health system strategy where we expect first orders to come in in boluses. So I would not expect it to be totally linear. That said, the reps do get progressively more productive. What we have seen historically is the reps do get progressively more and more productive between year one, when they start to contribute, and year two, when they reach kind of their peak productivity. And so with more reps aging into greater productivity throughout the year, we expect a general trend of acceleration. Marie Yoko Thibault: Alright. That is really helpful, Scott. And you touched on something I want to ask too, which is the process of trying to sell into the entire healthcare system, maybe sort of an enterprise-wide approach. Tell us a little bit more about what is behind the scenes there. Are we starting to see that in accounts already, or is that all to come? I am a little ignorant of how recently this was brought online. Xingjuan Chao: Yes. So we saw a couple of senior territory managers last year and had very significant success in selling to small and mid-sized hospital systems. The success drivers there are: often these senior TMs work closely with the regional director and even the regional sales VP because systems are across different territories or different regions. So we can form a coherent system-level strategy, not just focus on one or two hospitals. Also, they engage with key stakeholders, especially administrators at the system level, and fine-tune the value proposition at the system level instead of a single ICU or a single ED. Because of the success last year, we are expanding that model this year. So we are relatively confident that we can further expand the success we saw. Marie Yoko Thibault: Alright. Very helpful. Thank you. Xingjuan Chao: Thank you. Operator: And your next question comes from the line of Jeffrey Scott Cohen with Ladenburg Thalmann. Jeffrey, please go ahead. Operator: Jeffrey, your line is open. Jeffrey Scott Cohen: Hi, sorry about that. Hi, Xingjuan and Scott. Thanks for taking our questions. Two from our end. Could you talk about any update with regard to the patent case with Natus as far as where you are at and ramifications on any expenses for 2026? Xingjuan Chao: I can talk about the process. We are in the discovery phase, and the preliminary decision point would be November 19. Before that, there will be a whole series of events, and all the milestones and timeline are published and available on the ITC website. You know? Scott Blumberg: On expenses, since we kicked this off in Q3 or so of last year, we have seen relatively linear costs. We expect, given the nature of litigation, that it will not be linear. And what we are seeing is that in the depths of the core of the case, which is happening right now into Q2, we would expect expenses to increase and then potentially moderate in Q3 and Q4 as we reach the late stages, at least of the first path here with the ITC. Jeffrey Scott Cohen: Okay. Got it. And then secondly, first, can you talk about the LVO indication potentially and the call point there beyond ICU? Are you also thinking about or looking into neuro and/or cardiac as well? Xingjuan Chao: Yes. The LVO monitoring would focus on the inpatient setting, and many of these patients actually stay in the ICU. Therefore, again, it is the same call point. That being said, our initial finding is that there is a significant portion of patients who have stroke outside the ICU, on the floor or even in the telemetry monitoring units, and they have even less or poorer training for bedside nursing on identifying stroke. So we expect that this would be a very synergistic add-on to both seizure as well as delirium. I do not fully understand your comments on neuro versus cardiac. Can you reframe that? Jeffrey Scott Cohen: If the majority of patients are in the ICU, is the neurologist involved in the patient care and the equipment being used? Xingjuan Chao: Yes. For LVO, neurologists would definitely be involved, except this would be more stroke neurologists than epileptologists. But usually, the current standard of care is if nursing identifies any potential symptom that would suggest stroke, then the stroke team would rush to the bedside. So there is definitely at least a general neurologist, often a stroke neurologist. Jeffrey Scott Cohen: Perfect. Okay. Got it. Thanks for taking my questions. Operator: And your next question comes from the line of Jason Bedford with Raymond James. Jason, please go ahead. Elaine (for Jason Bedford): Hi. This is Elaine on for Jason. Thanks for taking the question. For delirium, I was wondering, have you started the pilot launch or started any early discussions with hospitals? And if so, could you please share a little color on the early progress and learnings? Xingjuan Chao: Yes. So we started discussions with some accounts already in the context of the commercial pilot, and we do not expect any commercial pilot to go live until Q2, as we are also in the process to make sure all the different algorithm software are fully integrated. In terms of adding color, the initial feedback was very positive. The majority of intensivists have high awareness of delirium and the potential harm delirium would cause and often are quite frustrated with the lack of objective and continuous biomarkers for delirium. Another strong signal is that they recognize certain populations have a very strong prevalence for both delirium and seizure. So the earlier hypothesis validated by the physicians is our device could potentially help them to detect delirium earlier, because not all the nurses are well trained, and the algorithm could potentially help them to give some feedback to know whether or not they are on the right path, and also to really help them to differentiate seizure and delirium under the same population. One example is sepsis patients who have altered mental status—20%–30% of them could have seizure, and then 40% of them could have delirium—while the symptom is very similar: the patient looks very confused. So we are very encouraged by the early feedback from the physicians and the nursing team as well as the administrators. Elaine (for Jason Bedford): Thanks. I appreciate the color. And for my follow-up, would you be able to share your expectations on headband pricing this year? I know you have talked a little bit about the neonate headband pricing, but for overall headbands, do you expect to pass on a price increase this year? This is in general or related to the delirium product? Sorry. This is just in general. Scott Blumberg: We have maintained really strong pricing discipline and consistent ASPs over the years. I think there is a lot unknown about the macro environment, both some headwinds and tailwinds, as it relates to tariffs and people's understanding of tariffs and how companies react to that, as well as some of the pressures on hospitals. We are evaluating it case by case, but in any regard, we expect to maintain very tight pricing discipline. Operator: That concludes our question-and-answer session. We will now turn the call back over to our Co-Founder and Chief Executive Officer, Xingjuan Chao, for closing remarks. Xingjuan? Xingjuan Chao: Well, thank you all for joining the call. Again, we are very proud of what we have accomplished in 2025 and cannot be more excited about 2026. Thank you all. Operator: That concludes today's call. You may now disconnect.
Operator: Good afternoon, everyone, and welcome to the webcast of Alphatec Holdings, Inc.'s fourth quarter and full year 2025 financial results. We would like to remind everyone that participants on the call will make forward-looking statements. These statements are based on current expectations and are subject to uncertainties that could cause actual results to differ materially. These uncertainties are detailed in documents filed regularly with the SEC. During this call, you may hear the company refer to non-GAAP or adjusted measures. Reconciliations of these measures to U.S. GAAP can be found in the supplemental financial tables included in today's press release, which identify and quantify all excluded items and provide management's view of why this information is useful to investors. Leading today's call will be Alphatec Holdings, Inc.'s Chairman and CEO, Patrick Miles, and CFO, J. Todd Koning. I will now turn the call over to Patrick Miles. Patrick Miles: Thank you much, Tiffany, and welcome, everybody, to the Q4 2025 financial results call. You will realize that there will be some forward-looking statements, so please read this at your leisure. So clearly, some very good things are going on at Alphatec Holdings, Inc., and doing some special things. I would call that uniquely positioned and say uniquely positioned in a market that remains disrupted. I think we are benefiting significantly from a 100% spine focus. I think there is no question about it. We are leading in lateral and advancing it. Clearly more complex things. Deformity leadership is in our midst. EOS Insight is out and available and wreaking havoc, meaning it is providing information. We built an infrastructure for a long run. I would tell you that we have durable and profitable sales growth for as far as the eye can see. And so when we talk about profitable growth, Q4 2025 highlights are $213,000,000 in revenue, which is a 20% revenue growth; 21% surgical revenue growth in Q4; 20% revenue growth in established territories—that is same-store sales; 23% new surgeons; $33,000,000 in adjusted EBITDA; and $8,000,000 in free cash flow. So for the full year, it is $764,000,000, which is $153,000,000 in year-over-year growth, which is fantastic. And congratulations to the Alphatec Holdings, Inc. faithful, which is 25% total revenue growth, which gave us an adjusted EBITDA of $93,000,000, which is 12% of revenue. And we had free cash flow of $3,000,000, improving significantly, I shall say. From a key procedural advancement, we continue to evolve our technology and cannot be more proud of the team. So in 2025, we saw the release of our bone mineral density test out of EOS, a lot of EOS Insight pediatric tools, a lot of work in cervical with regard to the retractor and with regard to the segmental plating system, SPS. We have a full line of 3D-printed implants, which have been released. We have a corpectomy device, which has been released, and a number of different biologics. So I would say a productive year. And with that, I will have Todd review some of the financial metrics. J. Todd Koning: Alright. Well, thank you, Patrick, and good afternoon, everyone. I will begin with fourth-quarter revenue performance. Total revenue in the fourth quarter was $213,000,000, up $36,000,000, 20% year over year, and up $16,000,000 sequentially from the third quarter. Revenue was comprised of $190,000,000 in surgical revenue and $23,000,000 in EOS revenue. Fourth-quarter surgical revenue grew 21% year over year and 7% sequentially, representing $33,000,000 of incremental revenue. Procedural volume growth of 21% was driven by continued surgeon adoption, with net new surgeon users increasing 23% in the quarter. Average revenue per procedure was flat, consistent with expectations. In the U.S., revenue per case increased 1.4%, with lateral and cervical both up 6%, partially offset by procedural mix towards cervical cases. U.S. growth was offset by a 120 basis point mix headwind from the international business, which carries a lower average revenue per case. Same-store sales in the U.S. grew 20% year over year, demonstrating strong growth within the established territories. EOS revenue increased to $23,000,000, up 14% year over year. As we exit 2025 and begin 2026, I have never felt better about the sustainability of our top-line growth. First, we continue to dominate the lateral space with increasing clinical relevance of our integrated ecosystem, supported by disciplined expansion of the sales channel. Not only are we taking share in lateral, more importantly, we are expanding the addressable market as we train and develop more surgeons who previously treated patients primarily from a posterior approach. We see this phenomenon clearly in statistics that track surgeon utilization over time, which I will address later in this presentation. Secondly, 2025 showed burgeoning influence in deformity. Once again, it is our strategy of increasing clinical relevance with an integrated ecosystem that is driving adoption. EOS is the unparalleled gold standard in deformity imaging. The growth in our installed base of EOS Edge systems has given us access to accounts that we previously had no access to. In addition to that, we are seeing implant usage within six months of adoption of EOS Insight grow at almost double our average growth rate. The EOS Insight opportunity is significant, as it is currently installed on only a small percentage of the EOS Edge base. All of this comes together when you see the accelerating momentum in surgeon user growth. The last February 2025 showed the highest level of surgeon growth in the last two years. One consequence of our growth in deformity is that it caused a shift in the seasonality of our business. We have all gotten used to the dramatic sequential increase in the fourth quarter. This year's impact was less pronounced, as both second and third quarters were marked by strong deformity volumes. What initially looks like deceleration is masking underlying momentum. Similarly, year-over-year growth in Q4 was less than year-over-year growth in Q2 and Q3, partially due to the seasonality of the deformity business and partially due to the variation in quarter-by-quarter contribution of commercial expansion in the 2024 comparable year. You can see from the chart on the left that we have grown consistently over time, and the chart on the right shows that our $33,000,000 in surgical revenue dollar growth in Q4 was strong and consistent with our historical contribution. When you step back and look at the annual growth in dollars, it allows you to— Operator: Ladies and gentlemen, this is the operator. I apologize, but there will be a slight delay in today's conference. Please hold, and the call will resume momentarily. Thank you for your patience. Ladies and gentlemen, this is the operator. I apologize for the technical issues. I would now like to turn the call back over to— J. Todd Koning: Well, thank you, Tiffany, and I apologize for the technical issues on the line there. So I will start with the Q4 P&L highlights. Turning to the remainder of the P&L, fourth-quarter non-GAAP gross margin was 70.5%, flat sequentially and up 80 basis points compared to the previous year, driven by mix, product mix, volume leverage, and improving asset efficiency. Non-GAAP R&D was $14,000,000 in the fourth quarter. R&D investment was up year over year by $5,000,000 in absolute dollars, reflecting our continued investment in the long-term growth of the business. Non-GAAP R&D expense was approximately 6.5% of sales in the quarter, with top-line growth driving over 100 basis points of leverage year over year. Non-GAAP SG&A of $118,000,000 was approximately 55% of sales in the fourth quarter. SG&A grew 12% year over year compared to our 20% increase in revenue, which drove over 400 basis points of operating margin expansion. We continue to leverage the company's foundational infrastructure investments and improve our variable selling expense, which accounts for about half of the improvement. The remaining half of the SG&A improvement, or 120 basis points, came from leveraging the depreciation associated with our prior-year instrument investments. We reported total non-GAAP operating expense of $132,000,000, which was approximately 62% of sales. Our operating expense investments reflect continued prioritization of strategic growth initiatives supporting sales expansion and new product development. While our foundational infrastructure is in place, we continue to expand the sales force, build out procedural solutions, and integrate technology, data, and information into the operating room experience. The operating leverage we are seeing reflects structural improvements in variable costs and the scalability of the infrastructure we have built. I will turn next to adjusted EBITDA, which grew by 61% year over year to $33,000,000, delivering nearly 400 basis points of improvement compared to the prior-year period. The drop-through on the year-over-year revenue growth to adjusted EBITDA in the quarter was 35% as we lapped the impact of the cost rationalization actions we took early in 2024. We are driving meaningful margin expansion that aligns with the priorities outlined in our long-range plan and is a result of disciplined execution. Our fourth-quarter exit rate of 16% adjusted EBITDA margin reinforces confidence in our 2026 guidance and long-range plan commitments. I will turn next to full-year 2025 results. Total revenue was $764,000,000, up 25% compared to the prior year. The $764,000,000 in revenue was comprised of $687,000,000 in surgical revenue and $77,000,000 in EOS revenue. Surgical revenue grew 26% compared to 2024, driven by procedural volume growth of 22% and average revenue per procedure growth of 3%. EOS revenue was $77,000,000, up 15% year over year. Non-GAAP gross margin was 70.2%, flat compared to the prior year, driven by volume leverage and asset efficiency. Non-GAAP R&D for the full year was $57,000,000 and approximately 7% of sales, an improvement of 140 basis points compared to the prior year. Non-GAAP SG&A was $449,000,000 and approximately 59% of sales, an improvement of 790 basis points compared to the prior year. 2025 adjusted EBITDA was $93,000,000 and approximately 12% of sales, a year-over-year improvement of $63,000,000 and 720 basis points compared to 2024. The drivers of leverage improvement for the full year were consistent with those that we saw in the fourth quarter. Drop-through of incremental revenue dollars to total adjusted EBITDA was 41% for the full year, up significantly from the 31% in 2024. While investing for future growth, we delivered industry-leading revenue growth and significant margin expansion at scale. We are becoming the company we set out to build. Now turning to the balance sheet. We ended the fourth quarter with $161,000,000 in cash on hand. Additionally, we had access to $60,000,000 of available borrowing on a revolving credit line, which was undrawn at the quarter end, making our total cash and available cash $221,000,000. Our positive free cash flow of $8,000,000 in the quarter was again at the favorable end of the $6,000,000 to $8,000,000 range we previously communicated. We generated $21,000,000 of cash from operating activities while continuing to invest in surgical instruments. Free cash flow for the full year was $3,000,000. The company generated $45,000,000 in cash from operating activities during this year while investing $42,000,000 back into the business to fuel growth. 2025 marks our first full year of free cash flow, representing a clear transition to a business that generates cash. We enter 2026 with a strong cash position and the ability to self-fund growth while continuing to strengthen the balance sheet. Next, I will provide detail on full-year 2026 outlook. Continued adoption of our procedural approach is expected to drive revenue growth of 17% to approximately $890,000,000, consistent with the outlook shared in the January preannouncement. This includes surgical revenue of approximately $805,000,000, supported by mid-teens volume growth and low single-digit revenue per surgery growth, and EOS revenue of approximately $85,000,000. This next slide provides context on how our revenue growth algorithm will continue to drive growth in 2026 and beyond. I will begin with surgeon adoption, which is fueled by the impact of Alphatec Holdings, Inc. clinical distinction and our unique procedural approach. You can see in the chart on the left that the growth of new surgeon users has consistently been strong, growing another 20% in 2025. Another consistent and recurring contributor to volume growth is surgeon utilization. The chart on the right depicts the steady ramp in utilization that each of our new surgeon cohorts has demonstrated over time. We compel surgeons to clinical distinction, often beginning with lateral. That initial adoption creates a halo effect across additional procedures, driving predictable utilization growth over time. Each new surgeon relationship that we develop typically unlocks a multiyear utilization growth opportunity. The underlying case utilization for the existing surgeons in each of the past several years has averaged growth in the mid-teens if a store supported by existing surgeons alone, before accounting for incremental new surgeon additions. To recap our financial outlook for 2026, we expect continued strong revenue growth to drive incremental profit margin expansion. We are beginning to see measurable gross margin improvement driven by asset efficiency and cost improvement efforts and expect margins to approach 71% as we exit 2026. We will continue to invest in our priorities, which are expanding the sales channel and new development. Growing operating expenses at approximately 11% while growing revenue at 17% will fuel nearly 400 basis points of operating margin improvement compared to 2025. Given our strong profitability performance in the fourth quarter, we are increasing adjusted EBITDA guidance for the full year 2026 to $134,000,000. The chart on the next slide depicts the consistency of the profitability progress we are making and the tremendous power of our business model to drive future profitability. Our adjusted EBITDA guidance of $134,000,000 will generate an adjusted EBITDA margin of 15% for the full year. Given the profitable revenue growth we generated this year, we continue to self-fund the investment in instruments and inventory to support our future revenue growth. After accounting for cash interest, excess and obsolete inventory, and other working capital requirements, we expect to generate $110,000,000 of operating before incremental asset investment. While we will see our investment in inventory and instruments reflect the $0.75 on the dollar growth relationship, expect to deliver at least $20,000,000 of free cash flow. We are delivering durable revenue growth, expanding profitability, and increasing cash generation, all at scale. The operating discipline across the organization is translating growth into sustainable financial strength. Most importantly, we remain focused on helping surgeons perform better surgery, because that is the foundation for long-term value creation. With that, I will turn the call back to Patrick. Patrick Miles: Thanks much, Todd, and Todd just reviewed the reflection of our work, and so it gives me the opportunity to share with you guys how we are serving the field. J. Todd Koning: And I would tell you that our strategy, if nothing else, is steadfast— Patrick Miles: consistent. J. Todd Koning: We are creating clinical distinction mostly through proceduralization at this point. It is clearly compelling adoption. Patrick Miles: And we continue to expand and elevate our sales force. J. Todd Koning: And so when we speak of clinical distinction, clearly, we have created unrivaled leadership in lateral. It is our growth engine. Patrick Miles: The reason for the continued applied learnings associated with increasing complexity in its application. PTP is being applied to more challenging pathologies. A foundational reason why surgeons have confidence in applying PTP to more complex pathologies is our neuromonitoring platform. It is far and away best in class. It is unique to Alphatec Holdings, Inc. It is a significant moat to precluding others from doing what we are doing. J. Todd Koning: No platform exists outside of SafeOp— Patrick Miles: that provides automated monitoring of not only the nerve location, but also the nerve health. When we think of lateral sophistication, we cannot be more excited about Valence. Valence will continue to serve as a centerpiece of our intraoperative strategy. It is purpose-built to be seamlessly integrated into our spine procedures, namely PTP. Valence is a fully integrated platform that provides both navigation and robotically controlled precision when and where required. It is part of the design workflow of surgery. So it is not anything other than part of the surgery as we have designed it. We are very excited for controlled release throughout 2026, and as the replacement cycle for Stealth avails itself, we will happily assert ourselves. We think our timing and the product is very, very good. So we often talk about our best days are yet ahead. Much of that stems from having a minority market share in an established market, and little in an untapped market. So we think that we can extend lateral surgery through PTP not only in what was traditionally a $1,000,000,000 market space, but also across TLIF and PLIF. We will continue to earn share in the fastest growing segments of spine surgery, and there remains much untapped opportunity. So when we talk about our growth machine, it is predicated on expanding surgeon users and increased utilization. We have reviewed that reasonably clearly. That is what has driven our more than double the outsized growth of anyone else in the space. The reason surgeons adopt is that when we see a prospective operative candidate, a patient, they do not think widgets. They think, what spine procedure can I apply to help this patient? They want a fully thought out and designed contemplation of how to address specific pathology. When they experience that, it creates trust. That trust creates confidence, or a halo, into earning more of their practice. This is how utilizations increase. More surgical success creates more confidence and more users. More confidence creates more utilization. We have earned our customers' confidence. No doubt. J. Todd Koning: You do not grow 25% a year without winning more customers and earning more of their business. From lateral, we go to deformity. Patrick Miles: The number of variables that undermine success in deformity surgery is innumerable. Hence, an end-to-end requirement for an ecosystem. It is not just to help with screw placement that is required for success in deformity. It is the ability to assess through a standing, full-body, weight-bearing image. The magic is that this image is not only standardized, but it is also the standard in deformity surgery. The ability to understand alignment via AI-generated automated alignment measures and bone mineral density in the same scan, again, is unique to Alphatec Holdings, Inc. It clearly elevates the field. It is information that should be available to all who do deformity surgery. To then create a 3D model of those images to better understand and simulate surgery is vitally important. We are building a structured dataset through the modeling of these images to provide predictive analytics that better inform surgical plans. J. Todd Koning: We will then integrate this information into the optics— Patrick Miles: operative experience, surveillance, and collect data to confirm we got what we intended. An example of— J. Todd Koning: how we apply this information to surgery, pediatric surgery, is pictured above. Patrick Miles: Take the most coveted image—standing full-body weight-bearing image—get automated alignment measures with EOS Insight, create a model and 3D plan. Nobody can get a low-dose axial image without EOS 3D reconstruction. To understand the rotational aspect of the deformity is highly valuable. Now we proceduralize with our patient positions, understand where the correction is intraoperatively, assure we have best-in-class implants and instruments to facilitate the correction, and then use SafeOp to assure that there are no neural issues. Most companies only make implants. J. Todd Koning: When Alphatec Holdings, Inc. thinks about how to address pathology, we think in terms of all the elements required— Patrick Miles: for optimal patient outcomes. It is not a small difference. We have started to translate revenue not only through the capital sales of EOS, in the patient-specific implants that are created from the EOS scan. Our ability to understand the specific implant requirements, their reflection on spine correction, and how the spine functions over time is unique to Alphatec Holdings, Inc. Not only do we have a unique axial informatics set for alignment, also bone mineral density. J. Todd Koning: Understanding the underlying bone quality enables greater predictability in what type of surgery will be tolerated. Patrick Miles: Often, the operation is on an elderly or sick patient whose bone quality has been compromised. This again is unique to Alphatec Holdings, Inc. I hope this gives you some insight into our end-to-end ecosystem and why we know that we are advancing the field of spine with our proprietary-driven procedural ecosystem. As if there is another example required that Alphatec Holdings, Inc. is playing the long game, we have signed an exclusive distribution partnership with Theradaptive. Our current knowledge suggests that we will have the next BMP on the spine market. BMP is currently a $700,000,000 product for a competitive spine company. The market is huge, and we are confident that in several years, we will have the most advanced BMP in existence. It will be easy to use. It will have familiar handling. J. Todd Koning: It will have two to three times faster bone formation than the gold standard. Patrick Miles: That is 3,325% higher molar osteoinductivity than the current alternative, and projected to have the highest safety margin of any BMP on the market. So we cannot be more excited about our relationship with Theradaptive and the expectation of what that will provide our procedural strategy. So we have built a foundation from which to scale. We are in a position for long-term profitable growth. J. Todd Koning: We will continue to lever— Patrick Miles: our infrastructure investments— J. Todd Koning: integrate data and informatics platforms into the surgical experience, expand and evolve the procedural approaches, proliferate an algorithm-based sales growth model, deepen partnerships with leading hospital systems and academic institutions, and drive focal international growth. So from a financial outlook, it has been reviewed: $890,000,000 commitment for 2026 in revenue, $134,000,000 in adjusted EBITDA, which— Patrick Miles: is 15% and $20,000,000 in cash flow. I would tell you that we are unique, and there are zero ways about it. And so I would also say that we are the preferred destination in spine. We are executing on the long game with discipline and conviction. We are the preferred destination for both surgeons and sales talent. Our growth is sustainable because our innovation and execution are aligned. So with that, we will take questions. We will now open for questions. In consideration of others, please limit yourself to one question. The first question comes from Mathew Blackman with TD Cowen. Mathew Blackman: Good afternoon, everybody. Can you hear me okay? Yeah, we have you loud and clear, Matt. Great. Thanks, Todd, and I apologize. I am going to ask two questions. I am sorry for breaking the rules right out of the gate. The first one, if you will just indulge me: the shares are trading off after the market. I just want to make sure I am not missing something. So just to recap, Q4, you had already preannounced the revenues, came in in line. EBITDA was a new input, and that came in about 10% higher than consensus. Then 2026, you had already preannounced the revenue guidance of $890,000,000 in that same release in January, but you have now taken up the EBITDA guidance for 2026. I just want to make sure I am capturing all the moving parts and not missing something. J. Todd Koning: That is all correct, Matt. Mathew Blackman: Alright. I appreciate that. Maybe, Todd, if you could, you did mention in your prepared remarks that a complex contribution may be changing the seasonal patterns. I was hoping you could help us with the cadence for 2026, maybe even just starting with the first quarter. I think consensus is about $202,000,000 revenues, $90,000,000 in EBITDA. Is that the right spot to be? And any commentary on how the rest of the year should play out? And I will leave it at that, I swear. J. Todd Koning: Yeah, I think if you look at the full-year growth of 17% and think, as we think about the seasonality of our revenue—and I think you look at the increased seasonality in Q2 and Q3—I am kind of looking at 2025 as being probably where I would like to get folks in terms of the revenue seasonality. And so if you think about the first quarter was about 22.1% of sales in 2025, 24.5% in Q2, and about 25.5% in Q3. And so I think those are kind of the starting point that we are thinking about just to respect the seasonality that we saw on the basis of the guidance that we have. Mathew Blackman: Okay, and the EBITDA pattern should be similar as well? J. Todd Koning: Yeah, I think so. I mean, I think it is probably a little bit more drop-through in the first quarter over the average, and probably a little bit lower than that in the balance of the year to kind of get you to the 32% overall. Mathew Blackman: Okay. Alright. Thank you. I will hop back in the queue. Appreciate it. J. Todd Koning: Yep. Patrick Miles: The next question comes from Benjamin Charles Haynor with Lake Street Capital Markets. Benjamin Charles Haynor: Good afternoon, gentlemen. Thanks for taking the question. Just curious on what you are seeing out in the field in terms of attracting the sales folks that you want. Are you still getting the pick of the litter? And then any territories you are seeing particular strength or penetration in that maybe had not been bright spots in the past? Patrick Miles: Yeah, Ben, this is Patrick. I would say that we have a very clear hiring algorithm, and it is going exactly as one would expect. I would tell you, when we say things like we are the preferred destination, it is our subtle desire to send the message that people are coming our way. And so, without getting into specifics in terms of territorial dynamics, I would tell you that there is great demand for our portfolio both via the surgeons and the people who want to sell it. Benjamin Charles Haynor: Thank you very, very much for taking the questions. Operator: That concludes our question-and-answer session. I will now turn the call back over to Patrick for closing remarks. Patrick Miles: Yeah. Thanks very much for those on the call, and I appreciate your interest in Alphatec Holdings, Inc., and we look forward to the continuation of a long, profitable run. Thanks. Operator: Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.
Operator: We will be going live in five, four, three. Good afternoon. I will be your conference operator today. All lines have been placed on mute to prevent any background noise. After the company's remarks, there will be a question-and-answer session. If you would like to ask a question, press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. Before we begin, I would like to remind everyone that today's call may contain forward-looking statements within the meaning of the federal securities laws, including, but not limited to, statements about BridgeBio Pharma, Inc.'s future operating and financial performance, business plans, prospects, and strategy. These statements are based on current expectations and assumptions that are subject to risks and uncertainties, which could cause actual results to differ materially from those expressed or implied in these forward-looking statements. For a discussion of these risks and uncertainties, please refer to the disclosure in today's earnings release and BridgeBio Pharma, Inc.'s periodic reports and SEC filings. All statements made here are based on information available to BridgeBio Pharma, Inc. as of today, and the company undertakes no obligation to update any forward-looking statements made during this call except as required by law. With that completed, BridgeBio Pharma, Inc. may begin your conference. Chinmay Shukla: Good afternoon, everyone, and thank you for joining BridgeBio Pharma, Inc.'s fourth quarter 2025 earnings call. My name is Chinmay Shukla. I am the Senior Vice President of Strategic Finance at BridgeBio Pharma, Inc. With me today are Neil Kumar, our CEO, who will provide opening remarks and discuss overall corporate performance; Matthew Outten, our Chief Commercial Officer, who will provide more details about our commercial performance, particularly the continued success of Atruby; and Thomas Trimarchi, our President and CFO, who will review our financial results. During today's call, we will review our continued strong commercial execution in Atruby's fourth quarter and first full year on the market. More importantly, we will discuss what we believe is a transformative inflection point for BridgeBio Pharma, Inc., marked by positive top-line Phase 3 results for Encalarec NADH1 BBP-418 in LGMD2I, as well as positive top-line data for infigratinib in achondroplasia. With three successful late-stage readouts across our pipeline, we are entering a new phase of value creation and portfolio maturation. We will also review our robust financial position and how it supports our regulatory launch and life cycle expansion priorities across these programs. Following our prepared remarks, we will open the call for questions. For the Q&A session, we will also be joined by Ananth Sridhar, Anna Wade, and Justin To, who lead Encalarec, BBP-418, and infigratinib, respectively. With that, I will turn it over to Neil. Thanks, everyone, for taking the time today. Neil Kumar: This is our first earnings call since we reported the results of our Phase 3 study with Infograt, which delivered a successful outcome for the community we serve in achondroplasia. Altogether with ATTR cardiomyopathy, this brings us to four large post–Phase 3 programs, and I want to begin my comments today by discussing what that portends in terms of the shape of the firm. In short order, this company will turn from a cash-consumptive business to one that generates significant cash flows. The shape of those cash flows connects to the clinical profiles that we will spend some time discussing today. But before I get into that, I want to take a moment to paint the picture of what the overall economic productivity of our post–Phase 3 pipeline might look like over the coming 24 months. I do so because the immediacy of the transition from a cash-losing business to a cash-flowing business is one that happens quickly and can open up new opportunities for a firm as successful at R&D as ours. Last year, we used $446,000,000 for the year net of revenue. Cash burn declined in the fourth quarter relative to the third quarter and throughout 2025, driven by rising revenues and improving operating leverage. Similarly, while we are going to make significant investments for launch readiness against our next three products, we expect cash burn to roughly hold steady through this year and start declining by the end of next year, given expected increases in Etrubee revenue. That is less interesting to me, though, than the following fact: absent any strategic moves, our current pipeline will begin to generate cash in late 2027 and will be a cash generation engine by 2028. The profile we anticipate having in 2028 will distinguish us in the field of genetic disease, and more broadly would place us in the top 20 to 30 firms in the biopharmaceutical sector from the perspective of cash flow or EBITDA. This projected future is driven by growing and diversified revenue streams connected to our four post–Phase 3 assets, which we believe in 2028 will generate more than $600,000,000 in profit. The value of any firm relates back to ROIC, revenue growth, and cost of capital, and against all three metrics, we believe this firm has a rapidly improving profile over the next three years. Our anticipated profit is even more impressive when one considers that we have been able to advance programs from the preclinical stage through Phase 3 at under $300,000,000, in some cases considerably under that, and at higher probability of technical success than industry average, suggesting an engine that could drive repeatable organic growth. Of course, all of this now highly probable growth is underpinned by clinical data that we have already generated across our four Phase 3s as well as data that we continue to generate, and a commercial engine that continues to grow and grow share in the ATTR cardiomyopathy marketplace. We intend to establish that commercial engine as best in class for both first-to-market and competitive market launches in genetic disease. Despite continued strong execution across our business, our recent share price performance does not reflect the progress we have made. We believe this disconnect is primarily driven by uncertainty surrounding the tafamidis IP situation, which I will address directly in a moment. Importantly, nothing about our fundamentals has deteriorated. If anything, our position is strengthened commercially, clinically, and strategically. As we execute against our milestones, we believe the intrinsic value of BridgeBio Pharma, Inc. continues to increase. We are keenly aware of the gap between intrinsic value and our current market valuation, and we are actively evaluating all appropriate options to ensure that shareholder value is properly recognized over time. More specifically, over the past three months, given the derisking of LGMD2I, our patient finding progress in ADH1, and the clearly differentiated infogratinib readout in achondroplasia, we believe our intrinsic value has increased and its error bars have narrowed. With over a billion dollars of capital on our balance sheet, and additional significant amounts of capital available away from the equity markets, and with the base business fully financed, we believe we have retained optionality to capture the value you all have helped us to create. With that said, I want to spend some time today reiterating some of the important clinical data, especially as it pertains to the infigratinib readout. I want to highlight ongoing commercial readiness activities for LGMD2I and ADH1, and I want to talk about—and Matt will elaborate on this—our continued commercial progress in ATTR cardiomyopathy. On the data side, I will begin with our recent Phase 3 readout in achondroplasia. As many of you know, we were privileged to generate data alongside the achondroplasia community that suggests a differentiated profile infogratinib. This study successfully met the primary endpoint of change from baseline in average height velocity at week 52 with a p-value of less than 0.0001, with a mean treatment difference against placebo of 2.1 centimeters per year. In key secondary endpoints, infogratinib also demonstrated the first statistically significant improvement in body proportionality in achondroplasia, with a least squares mean difference of minus 0.05 with a p-value of less than 0.05 against placebo in children younger than eight years old, which were more than 50% of our participants and in a prespecified analysis. It succeeded on change from baseline in height z-score at week 52 with a least squares mean increase on the treatment arm of 0.41 standard deviations at week 52 associated with a p-value of less than 0.0001. All of these numbers, as a reminder, are best in class and unique to infogradinib. Infogradinib was also well tolerated with no discontinuations or serious adverse events related to study drug. Three cases, or 4% on active, of hyperphosphatemia were mild and transient, with no cases requiring either dose reduction or discontinuation, and no adverse events associated with the inhibition of FGFR1 or FGFR2—for example, retinal or corneal adverse events. As a reminder, infogratinib’s differentiated oral route of administration and its mechanism, which uniquely targets this well-described condition at its source, produced Phase 2 efficacy and safety results that were highly differentiated. Our Phase 3 data have confirmed those efficacy and safety profiles. And interestingly, as we have begun to test this product profile since the readout, we have heartily found that our base case achievable market share has risen from the 52% I mentioned in my JPMorgan talk to in excess of 65% peak year share. In addition, that preliminary market research suggests not only differentiated peak year share, but also significant market expansion, similar to what we have seen when orals enter markets as diverse as Fabry, migraine, hereditary angioedema, and in many other categories. In fact, recent analysis done at our Revenue Institute in partnership with MIT suggests that across indications, the launch of an oral product expands the market by approximately 170% over five years from launch of the first oral product. With regards to our efforts in LGMD2I, we are excited to be presenting the full dataset from our study at the upcoming Muscular Dystrophy Association Conference where Doctor Katherine Matthews from the University of Iowa will give the keynote. We have built and onboarded a dedicated commercial leadership team to ensure we are fully prepared to serve the LGMD2I community from day one. This is a population with profound unmet need. We are ready to execute. At the same time, we are not limiting our focus to the patients already identified. We are actively working to expand awareness, accelerate diagnosis, and help uncover individuals who may be unidentified within the broader LGMD or Becker muscular dystrophy populations. Our goal is simple: to find every patient who can benefit and to ensure we are ready to reach them the moment we are able to. Moving to ADH1, our other first-in-class product, Encalorate, we continue our patient finding efforts, which have already identified in excess of 1,700 unique patients in claims data. We also recently had pre-NDA communications with the agency, which were supportive of our expectations, and we continue to anticipate the launch of both Encalorate and BBP-418 in late 2026 or early 2027. Finally, and most importantly, I want to talk about our ATTR cardiomyopathy franchise, where, as I suggested recently, we continue to elaborate not only on the fullness of the best-in-class stabilizer hypothesis, but also on our differentiation in the real-world setting and our ability to impact patient health as early as one month—by far the earliest impact we see from any medicine in this space. We already preannounced the fourth quarter Atruvi net product revenue of $146,000,000, which corresponded to greater than 25% NBRx share as of 12/31/2025. Over the last few weeks, Atruby’s commercial momentum has continued. As of February 20, we have seen 7,804 unique patient prescriptions written by 1,856 unique prescribers. You will hear more from Matt about what this means in terms of competitive differentiation. And as I alluded to as well in my JPM talk, we are continuing to interrogate the importance of the cardiorenal axis, which seems to be uniquely involved in our early onset of action. We have also noted with great interest the recent PNAS paper that I only had a bit of time to talk about at JPMorgan, which suggests that binding enthalpy best predicts the conformational stabilization imparted by kinetic stabilizers as opposed to binding affinity (Kd) or Gibbs free energy. As we have shown through ITC experiments and as we published in Miller et al., we have a vastly superior enthalpic binding mode than does tafamidis, which in concert with superior binding kinetics continues to reinforce Atruby’s better stabilization profile. A recent bevy of literature further supports that increases in serum TTR are associated reliably with decreases in the relative risk of mortality. These papers suggest that for every mg/dL increase in serum TTR, you decrease the risk of mortality at 30 months by approximately 5%. As a reminder, we observed in our Phase 3 study that patients increased their serum TTR by 3 mg/dL when moving from tafamidis to acaramidis. This suggests a whopping 15% relative risk reduction in mortality when moving from tafamidis to acaramidis. Let me also address the recent stock volatility, which is largely centered on questions regarding Vyndamax IP and the potential for generic entry. First, it is important to separate two things: the legal process around tafamidis and the fundamental strength of Atruby. Our confidence in Atruby is rooted in its clinical profile and market positioning, not a particular IP outcome. On the IP front, the Pfizer decision to withdraw one of its EU patents defending the Vyndamax-equivalent product was unexpected. That said, it did not materially change how we view the EU market given Vyndamax’s orphan drug exclusivity in wild-type ATTR cardiomyopathy through 2030, which is now and how we have always consistently modeled that geography. In the U.S., which is the market of greatest importance to us, we believe the IP position is stronger. The patent claims at issue are narrower than those in Europe, including specific XRPD peak limitations for Form 1 that were not part of the EU case. In addition, U.S. law applies a higher legal threshold for invalidity, requiring that challengers prove by clear and convincing evidence that a prior art process necessarily and inevitably produces the claimed form, not merely that it could or likely would. That said, IP trials are inherently uncertain, and we will reassess as more information comes available following the U.S. proceedings in April. Stepping back, however, our strategy does not depend on tafamidis IP. Atruby has demonstrated near-complete stabilization, rapid clinical benefit, and meaningful differentiation in ATTR cardiomyopathy. It is already priced at a discount to Vyndamax and is less than half the price of the knockdown technologies. We believe physicians are making decisions based on clinical performance, not simply price, and prescribing trends we are seeing are reflecting that. Even in a hypothetical scenario involving generic tafamidis, we do not believe a less efficacious product would undermine the role of a clinically differentiated therapy in a serious, progressive disease like ATTR cardiomyopathy. In short, we remain confident in Atruby’s positioning today and in the years ahead. I will now turn it over to Matt to speak more specifically about the commercial momentum we are seeing. Matthew Outten: Thank you, Neil. Consistent with what we highlighted at JPMorgan in January, we believe 2025 reflected strong commercial momentum for Atruby, and it represented an important step forward in advancing three additional product candidates towards potential commercialization. In the fourth quarter, we delivered 35% quarter-over-quarter growth in net product revenue, ending the year with $502,100,000 in total revenue and $154,200,000 in quarter four. Of this, the net product revenue for Atruby was $362,400,000 and $146,000,000, respectively, while new patient growth accelerated in the latest quarter to reach 7,804 new patient starts. When viewed in conjunction with the IQVIA data, it becomes clear that Atruby is accelerating growth at a significantly faster rate versus previous quarters, while the competition lags behind. This is particularly obvious in first-line patients, where the exceptional data for Etruebe, along with our experienced field teams, have driven sales to the highest levels since launch, surpassing all expectations. We have historically given out the new patient start number each quarter, and have done so again despite the competition not offering similar numbers. Moving forward, we will not be offering new patient start data because of this lack of transparency by others. Continuing to do so would put us at a competitive disadvantage, but our expectations are that Atruby will continue to grow as it has done since launch and as exemplified with today's update. As adoption grows, particularly in the first-line setting, we remain focused on ensuring patients and healthcare professionals have clear, balanced information when evaluating therapy options. That focus is especially relevant given recent updates we have seen in competitor direct-to-consumer communications. After receiving a letter from the FDA several months ago and pulling their television ad from the airwaves, Alnylam has returned to TV advertising, but of note, the safety section has been updated. Besides adding the warning about the risk of vutrisiran lowering vitamin A and potentially affecting vision, the ad now points out the risk for several additional concerns, namely joint pain, pain in the arms and legs, and shortness of breath. In a population already often suffering from these issues, the possibilities of amplifying, compounding, or causing shortness of breath and/or pain in the joints and/or pain in the arms and/or pain in the legs should be highlighted to any patient considering treatment with vutrisiran. The fact that these risks had been omitted but are now stated at the end of each commercial—hopefully all promotional materials and messaging will correct and highlight for patients and healthcare professionals some things to consider with vutrisiran treatment, especially if they are a newly diagnosed patient versus someone who has tried all other options. If we shift back to the reasons for the growth of Atruby, there are several driving factors. First, the number of prescribing HCPs continues to grow, but of equal importance, HCPs who start using Atruby continue using Atruby. We are seeing repeat use and stable patient persistence, which tells us physicians are comfortable with what they are seeing in their practice. We believe the success we have seen in 2025 is driven by Atruvio's differentiated profile as the only near-complete stabilizer on the market. In contrast to therapies that rely on partial stabilization or partial knockdown mechanisms of action, Atruby has also demonstrated the fastest time to separation to date—a attribute that matters as physicians seek therapies that can deliver meaningful benefit quickly. Importantly, persistency and adherence for Etrube continue to exceed our original expectations, which were based on historical ATTR treatment patterns, reinforcing our confidence in the durability of the franchise. We believe we have the strongest commercial teams in the industry spanning sales, marketing, strategy, analytics, and market access. Many team members have worked together for years; we have continued to build on that foundation with targeted hiring of top talent, including the recent expansion of the Atruvio sales team. Overall, Q4 reflects continued progress across key metrics including growth in patients on therapy and ongoing use by prescribers, and we are excited to see continued growth in quarter one as we head into 2026. Turning to the pipeline, we are focused on the next wave of potential launches. We are excited by the recent clinical results for BVP-418, Encalorit, and in fagratinib, all of which exceeded expectations across their primary and secondary endpoints. Based on the strength of these data, we believe each program will be the leader in its respective market, bringing much-needed therapies to families and patients in need of care. Building on the successful launch of Etrube, we have established a proven commercial foundation and are well positioned to extend this model as we prepare for future launches across our pipeline. We look forward to going into more detail as we get closer to approval for each. I will now turn the call over to Tom. Thomas Trimarchi: Thank you, Matt, and good afternoon, everyone. I will now discuss our financial results for the fourth quarter and full year 2025. Please note that our commentary on today's call will focus on GAAP financials unless otherwise indicated. Total revenues were $154,200,000 in Q4 2025, consisting of $146,000,000 of Atrivio net product revenue, $5,300,000 of royalty revenue, and $2,900,000 of license and service revenue, compared to total revenues of $5,900,000 for the same period last year. The $148,300,000 increase in total revenues was primarily driven by a $143,100,000 increase in net product revenue from Atruby, reflecting broad-based growth across market segments, including accelerating first-line adoption, increasing new patient starts, expanding prescriber depth, and strong persistency and adherence, supporting durable revenue growth. We also recorded an increase of $5,100,000 in royalty revenue from ex-U.S. net sales of BEYONDRA in Europe and Japan. For the full year 2025, total revenues were $502,100,000 compared to $221,900,000 for the full year 2024. The $280,200,000 increase in total revenues for the full year was primarily due to a $359,500,000 increase in net product revenue for Atruby and an $11,200,000 increase in royalty revenue from sales of Beyond, partially offset by a $90,500,000 decrease in license and service revenues versus the prior year. Total operating costs and expenses for Q4 2025 were $293,700,000 compared to $231,900,000 in the same period in the prior year. The $61,800,000 increase in operating costs and expenses was primarily driven by a $63,300,000 increase in SG&A expenses, partially offset by a $13,900,000 decrease in R&D, primarily due to decreased R&D activities related to Atruvian Biotrio following regulatory approval. For the full year 2025, total operating costs and expenses were $1,000,000,000 compared to $814,900,000 in the prior year. The $210,600,000 increase was primarily driven by a $242,300,000 increase in SG&A, largely reflecting the company's investments to support the commercial launch and ongoing activities for Atruvio. This increase was partially offset by a $54,900,000 decrease in R&D expenses, primarily due to decreased R&D activities related to Atruvio and Biotra following regulatory approval. Turning to our balance sheet, we ended the year with a cash position of $587,500,000 in cash, cash equivalents, and marketable securities. We completed the issuance of $632,500,000 aggregate principal amount of 2033 convertible notes in January 2026, which provides significant cash runway to continue supporting our transition into a diversified late-stage multiproduct business. With that, I will turn the call back over to Chinmay. Chinmay Shukla: Thank you, Neil, Matt, and Tom. We will now turn the call over to the operator, who will open the line for questions. Thank you. Operator: At this time, I would like to remind everyone, in order to ask a question, press star and the number one on your telephone keypad. Your first question comes from the line of Salim Syed from Mizuho. Your line is live. Hi, guys. This is Bennett for Salim. Bennett (for Salim Syed, Mizuho): Thanks for taking our question, and congrats on another quarter of continued patient growth. If I may, could you comment on why Atruvio continues to show consistent growth even as competitors' growth seems to be slowing down? Can you comment what are the key drivers behind it? And what is the feedback that you feel is resonating more with docs and patients now that we are several quarters in. Operator: Thank you. Neil Kumar: Thanks, Bennett. Maybe I will turn it to Matt to answer that question. Matthew Outten: Sure. Thanks. I think it is multifaceted, but a big part is the field team that we have at BridgeBio Pharma, Inc. The right team makes or breaks a launch, and that is across both commercial and medical. And then, of course, there is the data. No one has been able to show better data or near-complete stabilization. Only Atruby. I think the time to separation is a big factor, and you heard some of that in the earlier comments. And I think finally, we have stayed disciplined and focused on what is important for patients and HCPs. We have category-leading efficacy and safety with consistent results across all patient types. So a great team and a great medicine, I think, is hard to slow down. Neil Kumar: Maybe I will just build on that. You can see in the new patient script number something kind of interesting where we had that rapid acceleration at first, sort of plateaued, and now we have a second wave of acceleration. That is sort of rare if you look and model most launches where you see kind of a burst of activity and then typically you see a slowing. So that really portends one of two things. One is obviously rapid patient identification, which I think we are seeing in the field. And secondly, it is really a second wave of prescribers that are starting to wake up to some of the messages that we are putting forth. So that, I think, is an exciting profile generally for a launch this early in. And, you know, couple that with nearly 1,200 new scripts since I gave my JPM talk, that is a very, very exciting trajectory right now. Bennett (for Salim Syed, Mizuho): Alright. Thank you. Operator: Your next question comes from the line of Mani Foroohar from Leerink Partners. Your line is live. Congrats on continuing to show volume growth. Mani Foroohar: You have talked a lot about the commercial differentiation and differences in your growth trajectory versus competitors; lots of different pieces of data go into that. But I want to look past out into just what the timeline is into whenever tafamidis and discussed generics and beyond about clinical differentiation, which you have identified as core to your strategy to driving continued growth and durability in the face of a generic. Whenever that happens, can you tell us when we will have significant incremental real-world data, longer-term data, from acaramidis to establish that difference in clinical benefit that you guys are hanging that growth tail on. Neil Kumar: Great question, Mani. Thanks for it. I think first, the key is for us to really start to get some of the data that we presented in the last year out into the field and understood. Maybe just a couple pieces that I think have been overlooked or are just starting to really make their way into the field. First and foremost is the early impact—that impact as early as one month that I talked about at JPM. We continue to interrogate the precise mechanism behind it. But as you know from these clinical trials and a lot of the real-world evidence, early CVH is extremely common. So you want to get patients on the drug that can take action as early as possible. Not only for that reason, but obviously, this is an ongoing mass action in deleterious disease, so you want to be on the drug that has the earliest impact. The second is the AF data that we put forth. Nearly 60% of patients in this space suffer from AF or cardiac arrhythmic events. I think the most important piece of data that we put forth when we showed forth the 70% reduction as published last year is that we are having an equivalent effect on or off AF in the AF subpopulation. And so, when you think about AF patients being slightly harder to manage in the context of ATTR cardiomyopathy, here you have a drug that has consistent and high impact—in fact, the highest point estimate we have seen in terms of both reduction in downstream outcomes of 43% and reduction in AF itself of 17%. So that, I think, is the second piece that we need to do a better job of educating on, and I think physicians will find it exciting. And then finally, it is the variant population, the sickest by far of the subpopulations. They do deserve a better drug, and that 0.41 hazard ratio that we presented with statistical significance is even more impressive given the fact that less than 10% of our patients on ATTRIVUE were variant patients. I think that is the best point estimate again with the best statistical significance in the space and extremely consistent with the binding mode that we have articulated, which is differentiated against tafamidis. So those would be the things that we need to do a better job of driving into the marketplace. Right now on a go-forward basis, the two big areas that we are interrogating, number one, are real-world evidence, which you should see by the end of this calendar year, and the second is the cardiorenal axis work that we are doing. We think we have a unique signal that connects interestingly to the early onset of activity and could really, I think, change the shape of this marketplace going forward. So that is what I would say on that front. Mani Foroohar: I have a quick follow-up more on firm-wide strategy. You guys have talked about the transition to cash flow generation over the course of a couple of years. Obviously, that happens when you have multiple high-margin small molecule assets. Can you talk about how you guys think strategically longer term about use of cash—where and how to put that incremental free cash flow to work? I am not saying call for a dividend, buyback, etc., BD, but how you guys think about your strategy and where that capital should go in a 2028, 2029, 2030, etc., free-cash-flow-generating BridgeBio? Neil Kumar: Totally. I would say at the very highest level, and as we have been talking about, I think a little bit more over the last couple of months, we are very pleased with the efficiency of our R&D engine—efficiency both in terms of time and cost and obviously the validity of it as it pertains to probability of technical success. And as we talked a little bit about a few months ago, Mani, I know you and I have connected on this, the pipeline that is attended at Gondola is a wonderful example of the ample substrate available to help patients with genetic disease. And our objective function is to serve as broadly as possible. So given all of those things, with cash flow, we would intend—as long as we could beat our cost of capital—to continue to reinvest into R&D and in some cases in partially owned assets that we have access to through Gondola, and bring those forward into the highly efficient operating model that we have established in mid- to late-stage development and ultimately in the commercial setting. Obviously, the stock is not trading where we would like it to trade, and it is trading quite a ways off intrinsic value. There are opportunities to do other things with cash flows, namely share buybacks and dividends, if indeed we do not feel we can capture the NPV of fully financed assets as they move into the marketplace. So a bit of this will be just to see whether or not we can do a better job of helping investors avail of the value that we create and getting the stock price and cost of capital back up into a normal realm. And then that, we hope, would get us going in terms of growth in the R&D sector. That answer your question? Mani Foroohar: That is good. Absolutely. And congrats again on a good quarter. Operator: Thanks, Mani. Your next question comes from the line of Tyler Van Buren from TD Cowen. Your line is live. Tyler Van Buren: Hey, guys. Thanks for taking the question. So following the three successful Phase 3s in recent months, can you elaborate on your launch readiness and expected field footprint in the context of your burn commentary and the expected cadence of regulatory and commercial catalysts over the next 12 to 18 months? Neil Kumar: Yes. Thanks, Tyler. Maybe I will ask Matt and Tom to comment on that. Matthew Outten: Sure. Hey, Tyler. I think we are going to follow the same rigor as what we did for the Atruvio launch. I think one of the big differences is this time we will be launching on a global basis. And as a part of that, we are building in the U.S., but also ex-U.S. as well. We will have more on that towards the end of the year, in terms of both additional revenue for Atruvi that will be coming rest of world, but also our prep and buildout for the three additional launches in the U.S. and the rest of the geographies as well. But I think what is important—you have seen the recent data readouts. We are setting or resetting the standard of care for each and every one. For LGMD2I and ADH1, it is going to be a first- and best-in-class story. And for ACON, it is going to be resetting the standard with best-in-class data. Thomas Trimarchi: I will take the question on burn. As we have discussed, we have seen over the last several quarters our cash burn has been on a downward trajectory, driven first and foremost by the strong ramp of Atruvi and the gross profit that it provides. But I will also say that it has been due to our disciplined OpEx profile here. As we look to ramp the next three launches, we do expect a gradual increase in OpEx throughout the year. However, we expect burn to hold steady throughout most of the year and drop off again towards the end of the year. We continue to see an expanding operating margin provided by the Atruvio brand. Thanks for the question, Tyler. Operator: Your next question comes from the line of Biren N. Amin from Piper Sandler. Your line is live. Biren N. Amin: Congrats on the quarter. I have a high-level question. As you have demonstrated impressive productivity and outlined BridgeBio way as a sustainable development model, which is highlighted in the Drug Discovery Today manuscript recently in January, with that in mind and as we look beyond 2025, what are the key drivers of momentum for the company and when should investors expect new assets under the pipeline? Neil Kumar: Yes. Thanks, Biren. Thanks for the question. A little bit overlapping with some of my comments against Mani’s question as well. But maybe I will just say, near term, our focus continues to be obviously making sure that these drug products that we just registered successful Phase 3s on are approved and ultimately launched correctly. That is the highest and best use of our time right now. The second best use of our time are the additional indications associated with medicines that we know are safe and effective, such as obviously chronic hypopara in the context of Encalorate, and hypocon and some of the other height disorders that Justin has talked about in the past associated with infigratinib. So that would be the sort of second category of growth. But I think you are asking the right question. At the end of the day, as I mentioned earlier, the scientific substrate available to us to target well-described genetic conditions at their source continues to grow, and we are finding starting points all the way from the clinic back to early-stage discovery where we are probably most adept. And that is highlighted in the ever-growing pipeline at Gondola, which obviously BridgeBio Pharma, Inc. shareholders partially own. So I would think over the course of time, if indeed we are able to correct our cost of capital and trade closer to intrinsic value, number one, and number two, we are able to really stick the landing and effectively get these drugs approved and launched, there will be a moment where we can bring some of those other assets in and prosecute them through the great infrastructure that we have already set up here—namely, mid- and late-stage development, regulatory, and the ability to put them in the hands of a great commercial team—to do all of that efficiently in terms of time and cost. That is kind of the high-level answer. I do not have anything specific on a specific asset that we would bring in like that. I do think you should look for us generally to rely on organic, not inorganic, growth—organic meaning from the ecosystem of BridgeBio activities and BridgeBio companies—and not looking for big M&A or anything like that. We tend to look at that as a rather expensive mode of growth, and one that we probably do not need to take on given the fact that we are getting to INDs in less than $10 or $15 million and through Phase 1/2s in less than $100,000,000. So unless we run out of ideas internally, I do not think we would be aggressively moving toward M&A for growth in the next three to five years. Neil Kumar: Great. Did I answer your question, Biren? Biren N. Amin: Yep. Definitely. Operator: Your next question comes from the line of Cory Kasimov from Evercore ISI. Your line is live. Adi (for Cory Kasimov, Evercore ISI): Hi. This is Adi on for Cory. I wanted to ask on entegraslib. Now with the Phase 3 data in hand, how are you thinking about the competitive landscape across not just the NP pathway therapies, but also other FGFR-targeted programs which are more specific to FGFR3? Thank you. Neil Kumar: Thanks for the question. Justin, do you want to take it? Justin To: Yes, again, thanks for the question. We really believe the balance of efficacy and safety shown in BELL3 proved that infigratinib is not just best in class, but potentially last in class in achondroplasia. On the efficacy side, we had a plus 2.1 centimeter per year change from baseline AHV and the first and only statistically significant improvement in proportionality. Most importantly, we normalize absolute AHV, bringing back kids with achondroplasia to wild-type growth levels of 6 centimeters per year. Across every single measure of efficacy, whether it be in animal models or in the clinic, we have set a new bar here. On the safety side, we had a home-run outcome, with basically no change in mean phosphate levels between the placebo and treatment arms, and no signs of FGFR1 or FGFR2-associated toxicity. Really, I think the other molecules being developed in the space, whether it be CMPs or FGFR3 inhibitors, have two issues. One, on the efficacy side, you actually do not want to overshoot 6 centimeters per year too much. We have heard from clinicians that the skeletons and bones in achondroplasia are not built for too much growth given preexisting low bone mineral density, and we really hit the sweet spot there. On the safety side, we obviously avoid all the well-known issues associated with the CMP class, such as vasodilation. Now the other FGFR3 inhibitors in development trade off selectivity for FGFR1 and FGFR2 for significant VEGFR3 liabilities. There are two issues related to that, and they are not just theoretical risks. The first is on spermatogenesis, and because of this, enrollment in trials is restricted to prepubertal males for these other programs. The second, and potentially even more overlooked issue, is the effect on angiogenesis. Many molecules that have in vitro potency findings for VEGFR3, even without clinical findings, end up with a box warning on their labels for impaired wound healing. A great example of this is fruquintinib. So net-net, we are really happy with where we have landed on data, and our safety profile obviates the need for other FGFR3 inhibitors. We absolutely could go further in dose given our safety data, but we think there is no need to in achondroplasia given that we have gone back to wild-type levels of growth. I hope that answers your question. Operator: Your next question comes from the line of Eliana Merle from Barclays. Your line is live. Eliana Merle: Hey, guys. Thanks for taking the question. Thanks for all the color so far. If you could go over your views in a little bit more depth on the TAF IP and some color there, and specifically your base case for when tafamidis goes generic in the U.S., how you are thinking about it, and can you elaborate on why this does not matter for Atruby? And then I have a follow-up question. Thanks. Neil Kumar: Eliana, thanks for the question. We tend not to comment on the IP situation for our competitors, but obviously it has been a big story for the stock here. Let me turn it over to Chinmay to take a crack, and I am happy to elaborate on it. Chinmay Shukla: Happy to take that. Eliana, thanks for the question. Maybe I will talk about it in two ways. As Neil mentioned, we try not to talk about our competitors’ IP, especially when the competitor is, as we believe, not as potent as our molecule. But I think let us talk a little bit about what we think will happen on the trial and maybe a little bit on strategy for why this does not really matter. I will start quickly on the autops and I know you had some questions there. It is important to note that Pfizer withdrew its patent there, and so that is going to limit the precedential value of this ruling for related parties in other jurisdictions. As Neil highlighted in his prepared remarks, our base case for Europe has always been generic entry in 2030, and that is based on ODE for wild-type ATTR cardiomyopathy. That is still our assumption. There are two more patents in Europe which protect Pfizer, so there may be some upside there. It is also important to note on that front the really strong treatment-naïve share that Bayer has been achieving, which talks a little bit about how physicians, not just in the U.S. but globally, are recognizing the differentiation of acaramidis. Turning to the U.S., which I think is the market which probably matters a little more, Neil had a bunch of comments in his prepared remarks on how we think about it. Based on publicly available information, a couple of things are interesting to note there in addition to what he said. One is that Apotex, which I think is the lead filer, has considered infringement of the '441 polymorph patent. The other interesting thing to note is also that the bar for invalidity is much more in the patentee’s favor under U.S. law. So as Neil mentioned in his remarks, IP is always uncertain, so we will keep monitoring it and seeing what happens in the U.S. trial in April. But we feel good about where we are right now, and we do feel like Vyndamax should have protection into the 2030s, potentially up to 2035. It is important to note, though, that we feel like the tafamidis IP debate is a little bit of a sideshow. It does not really matter for Atruby’s uptake. You heard today from Neil and Matt and everyone else about the tremendous momentum we are seeing for Atruby. The patient weeks and number of patients per week continue to increase as we go forward in our launch and continue to accelerate. I think that is driven by the differentiated clinical data which we have for Atruby. And so even in a scenario where a generic tafamidis enters the market, we just do not believe that a less efficacious product will displace a clinically superior therapy in a serious, progressive disease. We have seen this pattern, by the way, play out in multiple therapeutic areas such as PAH, statins, prostate cancer—very differentiated second-to-market molecules continue to grow even after the first-to-market goes generic. So we feel good about the long-term value of Atruby, and we look forward to executing against that. Eliana Merle: Great. Thanks so much. And just a quick follow-up. How do you see the use of TTR in clinical practice in the real world evolving and your perspective there and how that could potentially show differentiation for physicians? Thanks. Neil Kumar: Great question, Eliana. I would say first and foremost, you probably saw the recent two JACC papers that came out looking at serum TTR elevation and correlating it with downstream relative risk of mortality reduction. Both of those were associated with tafamidis, but they reiterated the point that our publication last year made, which is that ever-higher levels of serum TTR are associated with ever-lower levels of downstream mortality, and that roughly, you could imagine every 1 mg/dL increase leading to about a 5% relative risk reduction in downstream mortality. So that is exciting. Obviously, the studies that Pfizer did had significantly higher levels of variant patients in them, so you are going to see similar serum TTR rise as you saw in our studies, but that is just basically rigged up so that you can see a higher increase because you have many more variant patients. If you normalize for variant to wild-type patients, even in cross-trial studies or cross-study comparisons, you can see that we have a significantly higher serum TTR elevation. But I think the most interesting data from that standpoint were literally the same patients going from tafamidis onto acaramidis in the context of our OLE and ATTRIBUTE, where you saw, as I mentioned earlier, that 3 mg/dL increase when going from a partial stabilizer to a full stabilizer. And I think now we can say—we were having this debate a long time ago—even just what is the shape of that response curve in terms of ever-higher levels of stabilization leading to ever-better outcomes. And I think here, at least we can say it is roughly 5% per mg/dL. So it is about a 15% relative risk reduction in terms of mortality going from tafamidis to acaramidis, putting aside the earlier onset of action and some of the other advantages. So I think serum TTR will become ever more important based on this bevy of publications. It is not broadly used right now, but our hope is on a go-forward basis it will become an ever more important marker of drug action and also therapeutic choice. Eliana Merle: Great. Thanks for the color. Operator: Thanks, Eliana, for the question. Your next question comes from the line of Andrew Tsai from Jefferies. Your line is live. Andrew Tsai: Hey. Good afternoon. Thanks for taking my questions. Wanted to stick on the theme of cash burn and near-term profitability. What are your expectations on priority review vouchers for non-dilutive capital? I think they are going for $200 to $300 million apiece right now. So of your pipeline drugs or even which indication per drug could be eligible for PRVs, and when do you expect to receive them? Thank you. Neil Kumar: Good question. I did not factor that into my earlier comments. Tom, do you want to take that? Thomas Trimarchi: Sure. I will take that. First, absolutely thrilled to see that program has been reauthorized. That has been a hugely successful incentive for BridgeBio Pharma, Inc.—companies like us—in being able to responsibly invest in diseases that affect very few patients and otherwise would be at risk of being left behind. So really happy that that has been extended. We actually have three programs that have already received Rare Pediatric Disease designation, and we expect to be eligible to receive a PRV upon approval. Those are 4-1A for limb-girdle, infigratinib for achondroplasia, and then our Canavan gene therapy program. And as you rightly pointed out, the pricing of these has not only held in but risen in the last few months. So there is significant asset value there, already within our portfolio. Looking out more broadly to the Bridge ecosystem, many of the programs we work on over at Gondola Bio affect children, and so there will, I would expect, be many more PRV-eligible programs in the ecosystem around Bridge. So great day for patients and biotech companies like us that are focused on rare disease communities. Operator: Excellent. That concludes our question-and-answer session for today. I will now hand it back over to the company. Chinmay Shukla: Thank you, investors, for joining us on our call today and for the analysts who asked the questions. We look forward to updating you on our next quarterly call in a few months. Thank you. Operator: That concludes today's meeting. You may now disconnect.
Operator: Ladies and gentlemen, welcome to the report on the Fourth Quarter and Financial Year 2025 Conference Call. I'm Moritz, the Chorus Call operator. [Operator Instructions] The conference is being recorded. The presentation will be followed by a question-and-answer session. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Dr. Dominik Heger. Please go ahead, sir. Dominik Heger: Thank you, Moritz. Welcome, everyone, to our earnings call for the fourth quarter and the financial year 2025. As always, I start out the call by mentioning our cautionary language that is in our safe harbor statement as well as in our presentation and in all the materials that we have distributed earlier today. For further details concerning risks and uncertainties, please refer to these documents and to our SEC filings. We will have 1 hour for the call. In order to give everyone the chance to ask questions, we would limit the number of questions to 2. Thank you for making this work as always. We will begin our full year financial results by reviewing key strategic milestones achieved in 2025, which mark the end of our midterm strategy. Next, we will analyze fourth quarter outcomes and present our outlook for 2026 and different horizons beyond. Let me now welcome Helen Giza, CEO and Chair of the Management Board; and Martin Fischer, our Chief Financial Officer. Helen, the floor is yours. Helen Giza: Thank you, Dominik, and welcome, everyone. It's great to have you with us today. We appreciate your continued interest in Fresenius Medical Care. 2025 was a milestone year for Fresenius Medical Care. We delivered an outstanding step-up in profitability, having achieved the upper end of our 2025 financial outlook and closing the year with an exceptional fourth quarter performance. The progress we realized in 2025 and the momentum we have built over the past 3 years reflects the consistent focus and dedication of our employees around the world. Their commitment is the foundation to our success as we strive to lead kidney care through exceptional care and innovation, and I'm extremely appreciative of the progress we made for our patients and the exciting path we have ahead of us. Before we delve into the fourth quarter specifically, I would like to take a few minutes to reflect on the key highlights of the past year and how we are positioning Fresenius Medical Care for the next phase of value creation. Beginning on Slide 4. At our Capital Markets Day last June, we officially launched our new 2030 strategy, FME Reignite. This strategy is designed to accelerate growth and drive ambitious profitability improvements aiming for industry-leading margins. FME Reignite represents a pivotal step forward for us as we shift our focus towards accelerated innovation and growth. As part of our FME Reignite, we carved out our value-based care business, establishing our third operating segment. This strategic decision further enhances our reporting transparency and reflects the continued growth in value-based care, which generated over EUR 2 billion in revenue in 2025. We not only initiated but accelerated a EUR 1 billion share buyback program, reflecting our strengthened financial profile, further reduced net debt and commitment to regularly returning excess cash to shareholders. In 2025, we marked an important milestone with the successful soft launch of our 5008X CAREsystem in select FME clinics in the U.S. to accelerate to the large-scale clinic conversion in 2026. As we speak, we are rolling out at speed the 5008X CAREsystem to our U.S. clinics and are setting a new standard of care in the U.S. with high-volume HDF therapy. We accelerated our FME25+ savings program through the end of 2025, achieving sustainable savings above our already increased target. This supported a significant step-up in profitability with a group margin of 11.3%, driven by all 3 operating segments and landing well within our target margin band for 2025. Turning to Slide 5. For 2025, we delivered revenue growth at the upper end of our outlook leveraging our vertically integrated business model to overcome a difficult market environment and unanticipated headwinds from lower volumes and elevated medical benefit costs. Supported by an exceptional fourth quarter performance, the 2025 operating income growth of 27%, reached the top end of our ambitious outlook for the year. Next on Slide 6. At the beginning of 2023, we set demanding midterm profitability targets to 2025 as we began a 3-year journey to build a stronger and more resilient company while committing to significant operational improvements. I am proud to say that we have delivered on that commitment. We increased our Care Delivery margin to 13.1%, achieving the middle of our target band for the segment. We more than quadrupled our Care Enablement margin from nearly 2% to just over 8%. If you recall, at the time of setting the targets, we had just 2 operating segments with value-based care still part of Care Delivery. This is why there was not a specific target for value-based care. However, the improved performance in that segment is reflected in the group development. While returning capital to shareholders in the form of dividends and share buyback, we are in a significantly stronger financial position as we have reduced net debt and improved our net leverage ratio from 3.4x at the end of 2022 to 2.5x at the end of 2025. Turning to Slide 7. We also delivered on the committed key strategic initiatives. This execution supported our improved operational performance to date and, importantly, has positioned us well as we transition towards the next phase of growth and innovation. With our FME25+ transformation program, we committed and over-delivered, exceeding our already upgraded sustainable savings target with EUR 804 million in realized sustainable savings to date. We executed our portfolio optimization program at pace, focusing our international clinic footprint to 25 core markets across 34 countries, considerably down from 49 in 2023. A key pillar of our strategic plan announced in 2023 was to unlock value as the leading kidney care company. The launch of our 5008X machine in the U.S. and leadership in renal value-based care are powerful examples of how we are delivering on that ambition while raising the standard of care for patients. Next on Slide 8. Cash generation is an inherent strength of our business model. In 2025, we generated EUR 2.7 billion in operating cash flow, clearly demonstrating this capability. This strong cash performance supported by disciplined capital allocation provided the flexibility to invest in our core business for profitable growth while returning excess capital to shareholders. Through our accelerated share buyback program, we repurchased shares for a total amount of EUR 586 million in 2025 completing the first tranche of our initial EUR 1 billion program, which supported our EPS growth. In January of this year, we initiated the next tranche with around EUR 414 million, further accelerating the share buyback program. For the 2025 financial year, we plan to propose a dividend of EUR 1.49, representing a 3% increase to 2024 and corresponding to a payout of 33% of adjusted net income, well aligned with our target payout ratio of 30% to 40%. Let us now look at our fourth quarter performance, specifically, beginning on Slide 10. The cap off a strong 2025, we delivered a truly exceptional fourth quarter financial performance. We realized strong organic revenue growth of 8% and earnings growth of 53%, resulting in a margin of 13.9%, a remarkable 430 basis point increase over the prior year. This was supported by our FME25+ savings program with EUR 63 million in additional sustainable savings in the fourth quarter alone. We recorded exceptional EPS growth of 68%, driven by our accelerated share buyback program. And in parallel, we further improved our net leverage ratio to the low end of our target corridor. Let's review some fourth quarter highlights from each of the operating segments on Slide 11. Beginning with Care Delivery in the U.S., same market treatment growth was broadly flat as volumes remained under pressure from the follow-on effects of the flu-related elevated mortality in the first half of the year and a high level of missed treatments in December. Our Care Delivery international markets delivered solid 1.7% same-market treatment growth. Underlying performance in Care Delivery was positively supported by favorable U.S. rate and payer mix development. In addition to the underlying trends, Care Delivery performance was boosted by around EUR 40 million higher-than-expected benefit from phosphate binders that fall into the TDAPA regulation, bringing it to around EUR 220 million contribution in 2025. We shared in our third quarter earnings call our quality initiative on bloodstream infection prevention by using different types of catheter-related bloodstream infection interventions. In the fourth quarter, we made significantly faster progress on the initiative than assumed. Both interventions require a physician prescription, and one of those solutions prescribed by physicians falls under the TDAPA regulation until the middle of 2026. It has contributed around EUR 90 million in 2025, and it will be a year-over-year neutral effect for 2026. This has helped us in 2025 to offset around EUR 80 million higher medical benefit costs in the year that we had not anticipated at the beginning of the year. Of course, the higher-than-expected TDAPA contribution in 2025 raises the outlook base for 2026 even higher, and I will address the impact in the outlook section. As I highlighted earlier, we started with the launch of our 5008X machine in select clinics in preparation for the large-scale expansion of access to high-volume hemodiafiltration in 2026. Turning to Value-Based Care. We realized positive operating income in the quarter, driven by favorable savings rates, which was partially offset by an unfavorable effect from CKCC programs. This development brings our 2025 value-based care performance to breakeven, a notable achievement from a historically loss-making position. In the fourth quarter, we realized an increase in member months from further contracting growth as well as the continued growth of our provider network. The fourth quarter in Care Enablement saw continued positive pricing contributions. However, in China, we faced negative impacts from volume-based procurement as well as other regulatory policies, resulting in stricter tender requirements and delayed tenders. This weighed on our revenue and earnings development in the quarter and is also expected to impact 2026. We continue to capture sustainable savings as part of FME25+ driven by disciplined execution of the next level of footprint optimization across both manufacturing and supply chain. And also in Care Enablement, preparation for the large-scale launch of the 5008X and shipments of new consumables continue to advance as planned. I'll now hand over to Martin to walk you through the fourth quarter financials in more detail. Martin Fischer: Thank you, Helen, and welcome to everyone on the call also from my side. I will begin on Slide 12. In the fourth quarter, we achieved organic revenue growth of 8%, supported by Value-Based Care and Care Delivery. At constant currency, revenue increased by 7%. Care Enablement revenue development was negatively impacted by regulatory pressure in China. Divestitures executed as part of our portfolio optimization plan, negatively impacted revenue development by 70 basis points. Adjusted operating income increased by an impressive 53% on a constant currency basis. This increase drove a clear step change in our group margin to 13.9%. Special items negatively affected operating income by EUR 111 million. This comprises costs related to FME25+ and our continued portfolio optimization as well as effects from the remeasurement of our investment in Humacyte. Turning to Slide 13. This slide highlights the remarkable 430 basis point margin improvement, driven by especially strong contributions from Care Delivery due to significant higher contributions from TDAPA regulation than we had expected and Value-Based Care contributed positively as well. Net corporate costs improved by EUR 5 million. This includes a favorable EUR 2 million development in virtual purchase power agreements -- power purchase agreements compared to the prior year period. Foreign exchange rates developed unfavorably with a negative EUR 43 million translational impact. The average U.S. dollar exchange rate in the fourth quarter was 1.16 compared to 1.17 in the third quarter. I will now walk you through the financial developments in each segment, starting with Care Delivery on Slide 14. Care Delivery realized 7% organic revenue growth and 6% revenue growth at constant currency. In the U.S., organic revenue growth of 8% was driven by positive impact from TDAPA regulations, favorable rate and mix effects and reduced implicit price concessions, demonstrating progress in our revenue cycle management initiatives. Care Delivery International delivered 3% organic growth. Divestitures negatively impacted Care Delivery revenue growth approximately by 120 basis points overall. Care Delivery achieved 45% earnings growth and 440 basis points margin improvement to 16.4%. Business growth benefited from higher-than-anticipated contributions from phosphate binders. The significantly higher prescription and adoption rate of one of the antimicrobial catheter solutions that falls under TDAPA regulation also contributed around EUR 70 million in the quarter, helping us to offset the not anticipated around EUR 80 million higher medical benefit costs in the fiscal year. Business growth also supported by positive rate and mix effects in the underlying clinic business as well as the phasing of a content agreement on certain pharmaceuticals. Increased labor costs, which include a significantly elevated medical benefit costs, were partially offset by FME25+ savings. Turning to Value-Based Care on Slide 15. Value-Based Care again accelerated revenue growth, achieving 42% organic growth. This significant increase was driven by further growth in the number of member months largely attributable to further contract expansion. Value-Based Care realized positive EUR 29 million in operating income, driven by improved savings rate, FME25+ savings and partially offset by an unfavorable effect from CKCC programs. For the full year, Value-Based Care was positive EUR 3 million compared to a loss of EUR 28 million in 2024, marking the first year of breakeven earnings development for our Value-Based Care business. I will next turn to Care Enablement on Slide 16. Revenue for the segment decreased by 3%. Lower volumes driven by negative impacts from value-based procurement and other regulatory policies in China were partially offset by overall continued positive pricing momentum. Care Enablement earnings declined by 6%, primarily due to unfavorable business development in China and currency transaction effects. This was partially offset by positive pricing. Further sustainable savings from the FME25+ program, primarily driven by improvements in supply chain and manufacturing compensated for the expected inflationary cost increases. Next, I will look at cash flow development on Slide 17. In the fourth quarter, operating cash flow strongly increased versus the prior year, mainly driven by higher net income, improvement in cash collection and prior year phasing of income tax payments. Our disciplined use of cash fully aligned with the priorities set out in our capital allocation framework. In the quarter, we purchased existing production sites in Germany that had previously been leased for a total of EUR 181 million. We reduced our net debt and lease liabilities compared to the prior period by 6%. We accelerated our share buyback program, repurchasing over 14 million shares for a total amount of EUR 585 million, representing 4.8% of share capital in 2025. Since the end of the quarter, we have repurchased an additional 4.2 million shares for EUR 163 million. We ended the quarter with a further strengthened net leverage ratio of 2.5x, improving to the lower end of our target band. We reconfirm our target band of 2.5x to 3x. I will now hand back to Helen. Helen Giza: Thanks, Martin. I will pick up with FME25+ on Slide 18. In 2025, the FME25+ transformation program further accelerated its positive momentum, delivering EUR 238 million in additional sustainable savings for 2025, ahead of the upgraded target of around EUR 220 million. Accumulated savings of the entire program reached EUR 804 million. The successful execution of FME25+ and the strengthened foundation we have established as a result has allowed us to identify additional opportunities to unlock sustainable savings that were not necessarily visible or accessible before. Also, the flat same-market treatment growth of the last years triggered the decision to further adjust the clinic footprint in the United States while balancing at the same time, the capacity for the expected future growth of 2% plus once mortality has normalized. We have again structurally assessed changes to developing and attractive growth areas across the country and decided to close the least promising clinics in the United States. This results in a footprint rationalization affecting around 100 clinics in 2026. Building on the momentum, we will further accelerate and expand FME25+. We expect costs and savings of EUR 400 million for the years '26 and 2027 for a total of EUR 1.2 billion of sustainable savings by the end of 2027. Let me now move to our outlook section on Slide 20. To frame our 2026 outlook, I will begin with our most important operational priority, the 5008X rollout in the U.S. This represents the largest transition of clinic infrastructure in Fresenius Medical Care's history. Our large-scale launch of the 5008X is now underway with the target of replacing around 20% of the installed base in our own clinics this year. Importantly, this replacement strategy will deliver substantial benefits, including reduced mortality and improved outcomes for patients, increased operational efficiencies and a stronger competitive position for our U.S. clinic network. However, in the first year of the large-scale rollout, our Care Delivery U.S. business will face an OpEx headwind from rollout-related costs. In 2026, we will train over 7,200 nurses and technicians and transition about 36,000 patients to the 5008X machine across 28 states. This requires significant training effort, but we expect to improve efficiency as the rollout progresses. We will start to see operational efficiency benefits in converted clinics ramping up as machines are converted. As a reminder, eligible patient can typically be transitioned from HD to HDF within a few weeks. And once patients are on high-volume HDF for 3 months, the improved outcomes, including lower mortality, will start to ramp up over the following 2.5 years. Therefore, we would expect that the positive effects will only start to become visible later in the year with greater benefit to increasingly supporting results in 2027 and beyond. Still early days, but our rollout is well on track and it's exciting to start to see more and more clinics converted every week. And by the time we get to half year results, I would expect to have a more detailed update on how the rollout is progressing. I now move on to our outlook for 2026 on Slide 21. Following a significant step-up in profitability in 2025, we are comparing against a very high base in 2026, while significant temporary benefits from TDAPA regulations start to phase out in 2026. Our 2026 outlook underscores our disciplined focus on sustaining this higher baseline. While we expect Care Delivery and Care Enablement to grow, we are assuming broadly flat revenue growth, largely reflecting changes in Value-Based Care's risk contracting and related revenue reductions. For earnings, we assume operating income will remain on a consistent level with an upside/downside range of a mid-single-digit percent change. We clearly target to maintain our enhanced profitability while investing for future value creation and navigating regulatory headwinds. This implies a margin range of 10.5% to 12% at group level. I'll now hand you back to Martin to walk you through the assumptions between our 2026 outlook on Slide 22. Martin Fischer: Thank you, Helen. Starting with revenue. For Care Delivery, we carefully assume flat same market treatment growth in the United States, including a normal flu season similar to the '23-'24 season. This does not change our expectations of returning to 2%-plus as mortality normalizes and patient outflows improve. We are excited about the opportunity to reduce missed treatment and patient outflow by further enhancing the quality and patient outcomes as part of our FME Reignite strategy. Increasing penetration of high-volume HDF and antimicrobial catheter solutions, further expansion of Value-Based Care as well as benefits from ESRD patients using GLP-1 are supporting this path to 2-plus percent growth. Internationally, we are assuming solid same market treatment growth in 2026, and we assume the usual moderate reimbursement rate increases. Following a significantly greater than anticipated benefit from TDAPA regulation in 2025, we assume a headwind for the starting phase out in 2026, also on the revenue side. In Value-Based Care, we are assuming negative revenue growth of around EUR 300 million due to changes in risk contracting that result in lower revenue recognition. We do not expect this to impact earnings development. In Care Enablement, we assume a continuation of the solid organic volume growth. China remains challenging, and we are assuming moderately negative impact as we address regulatory policy changes and review our portfolio and strategy accordingly. At the group level, we are assuming a negative 30 basis point impact from portfolio optimization realized in '25 and '26. Our currency assumptions are based on euro-U.S. dollar rate of 1.18. Turning to the earnings side. We are assuming EUR 250 million to EUR 350 million of business growth, driven by favorable pricing developments and revenue cycle management initiatives. We expect incremental FME25+ savings of EUR 250 million with related onetime cost of EUR 350 million. We are assuming inflationary pressure of EUR 200 million to EUR 300 million, which includes a typical 3% net labor cost increase as well as the usual cost inflation across all of our operating segments. We are facing regulatory impacts that we assume will impact earnings development by EUR 150 million to EUR 200 million. In Care Delivery, we assume regulatory headwinds from phasing out of phosphate binder, TDAPA contributions and the negative effect from the expiry of the extended tax subsidies for ACA contracts. Strategic investments of EUR 100 million to EUR 150 million include 5008X rollout costs, mostly in Care Delivery as well as investments in our IT platforms such as the required transition to SAP S/4HANA, supporting the harmonization and standardization of core business processes across our organization. The costs related to the IT platform investment, making up about half of the EUR 100 million to EUR 150 million, will be reflected in our Corporate line. We will continue to further optimize our portfolio in 2026 and assume costs of around EUR 50 million. To help with your modeling, we are assuming Corporate costs of EUR 200 million to EUR 220 million, a net financial result negative EUR 340 million to EUR 360 million and an effective tax rate of 22% to 24%. And driven by our 5008X rollout, we assume an increased operating income intersegment elimination of around minus EUR 100 million. While we do not provide quarterly guidance, from a high-level phasing perspective, we expect a stronger first half of 2026 before TDAPA benefits begin to phase out in the second half of 2026. This phasing is different to normal patterns for our underlying business and industry. I will now hand over to Helen for Slide 23. Helen Giza: Thanks, Martin. We knew 2026 will be a transition year, which does not change our aspiration to achieve industry-leading growth and margins. This aspiration remains firmly intact. The year 2026 will serve as a pivotal milestone as we continue to strategically position ourselves for sustained value creation. During our Capital Markets Day in June, we communicated that margin development in Care Delivery is expected to be more weighted towards the later part of the period, whereas Care Enablement demonstrates a steadier pattern of improvement. To enhance transparency regarding the group's future trajectory, we have added an aspiration for 2028. We see a clear path toward operating income growth, targeting a compound annual growth rate of 3% to 7% through 2028. This growth will be driven by the focused execution of our FME Reignite strategy, which includes the 5008X rollout and our quality strategy to reduce missed treatments and mortality as well as continued progress in revenue cycle management. In addition, increased sustainable savings from our FME25+ program will contribute to this earnings growth. If we exclude the noise resulting from the interim TDAPA tail and headwinds throughout this period, our implied earnings growth trajectory through 2028 would be in the low teens on a CAGR basis. This shows how strongly the underlying operational performance is unfolding. Our 2030 aspirations are fully underpinned by the strategic priorities and momentum of FME Reignite. At the time of the Capital Markets Day, we have not given explicit revenue growth aspirations to 2030 as the Value-Based Care segment has an inherent volatility from changes in risk contracting, which makes top line forecasting less predictable. Therefore, we have excluded Value-Based Care from our revenue growth aspirations. For Care Delivery, we anticipate a lower to mid-single-digit revenue growth CAGR. And for Care Enablement, we expect a mid-single-digit revenue growth CAGR. Our 2030 margin aspirations to achieve industry-leading margins in all of our operating segments remain unchanged. At the group level, we maintain our aspiration to deliver an operating income margin in the mid-teens. We maintain the same 2030 margin aspiration for both Care Delivery and Care Enablement. Recognizing that Value-Based Care is a structurally lower margin business in a relatively nascent industry, we have a low single-digit operating income margin aspiration to 2030. We are well positioned for continued value creation in the years ahead. That concludes my prepared remarks. And now I'll hand it back to Dominik to begin the Q&A session. Dominik Heger: Thank you, Helen. Thank you, Martin. Before I hand over for the Q&A, I would like to remind everyone to limit your questions to 2, please. And with that, I hand it over to Moritz to open the Q&A session, please. Operator: [Operator Instructions] And the first question comes from Hassan from Barclays. Hassan Al-Wakeel: Firstly, if you could please talk about some of the key drivers of the acceleration of EBIT growth from flat at the midpoint of guidance this year to propel you to the midpoint of the '25 to '28 -- 2028 range of 5%? And how much of this is reliant, if at all, on an acceleration in same market treatment growth? And then secondly, on Care Enablement, could you quantify the drag from China tender modifications and delays in the quarter? And how you're thinking about this persisting throughout 2026? Helen Giza: Thanks, Hassan. I think I'll take both of those and make sure I've got your first question covered. So we'll maybe tag teammate if you need more here. Obviously, what you can see is that we have a flat 2026 versus the midterm growth CAGR of 3 to 7. Obviously, you can hear from the talk outline that we have -- in fact, 2026 is a year of investment both in HDF and in systems platforms. And of course, we're calling out quite explicitly, deliberately the impact from the regulatory pieces of TDAPA and ACA. I think the way to think about it is as you look at the headwinds and tailwinds slide that we know was quite detailed this year deliberately that you can kind of see the levers of the pluses and minuses and the range that is there. Obviously, there's a lot of underlying operational work that we're focused on. So once you kind of get past the TDAPA and binders piece, the business growth on rate and mix and kind of the business growth and revenue cycle improvements start to come through. As always, we have the ongoing -- sorry, headwinds of labor and inflation. So kind of -- I think you kind of got the building pieces -- building blocks there. And of course, the accelerated FME25 just adds to all of that. We -- in Care Enablement, that margin improvement is kind of constant over time, both from the top line levers that they're pulling as well as the FME25 levers that they're pulling there. In terms of the kind of the same market treatment growth and what impact, obviously, we're calling it flat. We know where we've been. We kind of obviously have been coming out of December, missed treatments from weather and flu. We haven't seen flu data yet. So we just felt it was safe to call that flat. And then gradually improve over time to get back to that 2% plus by pulling the levers of the mortality improvement that we outlined on the call, not just our antimicrobial measures, but also HDF as well as all of our quality safety measures as well. So kind of a lot going on there for sure. In terms of the China drag, clearly, that's been -- let me just maybe frame up China. For Care Enablement, China is about 7% to 10% of the revenue. It's a great market. We like the market. We like the profile. Obviously, with the change in regulatory policies as well as tendering delays, we did have about a 50 million EBIT impact in 2025. We are expecting an impact in '26, but lower than that. But obviously, at the same time, we are looking at how can we maximize. I'll go to kind of our local China by China policies there. So the team is kind of working on that as well. So while there is an impact, it's a lower impact than what it was in 2025. I think I covered everything. Operator: The next question comes from Veronika from Citi. Veronika Dubajova: Two questions for me, please. And apologies they're both focused on the headwinds, I guess, but just trying to understand the moving parts. Helen, thank you for the phosphate binder comment. I just want to confirm that the number there is EUR 220 million and what your expectation is for '26 and '27, as that sort of unwinds? And then related to that, this catheter -- the antimicrobial catheter benefit, I think I caught you saying something along the lines of it should be neutral year-on-year, if you can elaborate on that. I'm very sorry, I'm missing that sort of link how it flows from '25 to '26. And then my second question is just your thoughts on the ACA subsidy headwinds as we move to '27 and '28. Obviously, your closest competitor has outlined figures for that? Should we use those as a baseline? Or are you expecting the shape of the headwind to look differently either? Martin Fischer: Veronika, I'm more than happy to talk about the headwinds. So we have called out regulatory effects of EUR 150 million to EUR 200 million. And that includes the headwinds from both binders as well as ACA. We have also quantified ACA before at around EUR 50 million. We also said we're going to see how it plays out. So we have only quantified 2026. We have not given a further outlook. And we'll see how that plays out in the next weeks and then we might update our assessment in that. Also in that EUR 150 million to EUR 200 million is the year-over-year decline that we see for binders. To your point, yes, we had about EUR 220 million of positive contribution in 2025. And we have also called out before that we see about EUR 50 million staying in our clinics and another EUR 50 million staying out of our pharmacy business. So there is a headwind or a total positive contribution that stays in '26 for EUR 100 million, leading to a reduction of -- bigger than EUR 100 million from '25 to '26. And those 2 effects combined are the EUR 150 million to EUR 200 million that we have there. To the catheter lock solution, yes, you heard correctly, there's no year-over-year effect. We do not have an effect because it is still under a limited half for the first half. I hope that clarifies the question. Helen Giza: Veronika, I'm glad you're not the only one to pronounce that. The capital piece is half, half 2 '25 versus half 1 '26 impact. So just to put a finer point on that. That's why the impact is because of the short TDAPA period on one of the solutions. We got a benefit in half 2, mostly towards back end of the year and we're expecting a benefit in half 1 before that TDAPA period expires. So that's why year-over-year, it is neutral, but it will add one key phasing for sure. Operator: The next question comes from Oliver from ODDO BHF. Oliver Metzger: The first one is on patient volumes. So can you comment on the impact of higher insurance requirements on your patient volume development? And second question is also on your outlook for the patient volume growth. So you mentioned that missed treatments have stayed at an elevated level, but that's also not really new. Right now, we see flu season is very mild. It's not over yet, but I would say there's a high probability that it's not as goo as it was last year. And later this year, there should also come some of this annualization effect from the higher insurance requirements and as well as slightly improving mortality due to the HVHDF introductions. So if I put all together, it looks for me that the patient volume development must be better than it was in '25. So is it really only, let's say, a conservative stance? Or have I missed anything in this Q&A? Helen Giza: So look, I deliberately used the word careful in terms of our assumption. We're assuming a normal flu season. We saw it go up. We've seen it come back down. I think we can -- looking at what we've seen today, we're saying a normal flu season, not like last year. I think we also know that when you go pick up the headlines this week to see the weather. So we do have elevated missed treatments, whether that be weather, illness, flu. Obviously, as you know we've been pretty consistent on the data lag that we see in 6 to 8 weeks. So by the time we get through Q1, we'll have a better sense. As we get through Q1, we're also going to have a better read on what open enrollment look like and how the ACA kind of choices actually develop. Open enrollment, why you could say it was the end of the year and you should start to see it in first quarter. Actually, it's not until they enroll and pay the first month premium, do you even know what they talked. So that's going to give us a lag as well. So I think we're watching that closely. Obviously, you'll see the headlines on what the overall enrollment looked like. And obviously, if it didn't drop as much as we expected, then we'll be able to reconcile that accordingly. And then, as you say, with HDF, we're full steam ahead, converting clinics, converting patients. And while it's too early to see results, we should get the benefits kicking in there. And in fairness, along with the overall underlying improvements that we're working on in -- on mortality, including the catheter lock solutions and just kind of the patient outflows. But we felt with where we are, the right thing to do was to call this flat for 2026. We know we're talking small numbers on small numbers and the small number piece were plus 0.1 or minus 0.1. We know that doesn't make a difference on the kind of on this EBIT range. So we feel like that is the right place to call it for 2026, and we'll update accordingly. Oliver Metzger: Okay. Can you also comment on the higher insurance requirements, please? Helen Giza: Maybe I'm not understanding the higher insurance requirements question. Are you talking about those people that maybe didn't enroll in ACA and then had to go to a different insurance policy? Oliver Metzger: Yes. Or let's say, I'm speaking about the active improving -- actively steered improving patient mix, choosing your patients more selectively. Helen Giza: Okay. I think our -- sorry, thank you. There's a lot happening on insurance and enrollment. So thank you for clarifying that. So yes. Look, I think on mix, we're feeling good about our patient mix. I think the only piece that we're watching is -- and that's why it maybe does come back to the ACA comment is how did open enrollment really end up? And did that change -- did we change anything when -- once we see that kind of first month payment come through, but nothing else. I think that nothing else there. Operator: The next question comes from Hugo from BNP. Hugo Solvet: I have 2. First on U.S. volumes. Helen, if I can push you a bit further. One of your competitors mentioned that they expect a very slow start into the year in negative territory. So just the question is like whether or not you expect to see the same trends at play? And as a result, and assuming that you would also agree with the statement of getting back to 2% volume growth by 2029, how much of U.S. dialysis volume recovery is a prerequisite to achieve the mid-single-digit growth CAGR in Care Enablement? So I guess, how much of the Care Enablement growth is intertwined with the volume recovery in the U.S.? And second, on FME2025. Historically, you guys had a balanced recognition of both benefits and costs from the efficiency program in FY '26. It seems that you have a bit more of one-off costs that you recognize. So just curious about where exactly the lag between the cost and the benefits comes from. Helen Giza: Thanks, Hugo. I'll take the volume question, and Martin can give a bit more color on the benefits and costs. We touched on some of it. Look, I -- Q1 is always a tough quarter to know where your volumes are going to be, both with the weather and the flu-related effect. So look, I know where we ended up and you see where we ended up in Q4. I think we just got to wait to see the data to know how Q1 is going to play out. I'm not going to comment on a quarterly phasing here. We kind of really need to kind of see what that first quarter is going to look like with this -- with some of the messiness that we're seeing, particularly on weather. Look, I -- and I'll say market treatment growth, I think all the efforts that we are doing, and I think particularly the excitement around 5008X and all of our patient safety and patient quality initiatives that all go toward reducing hospitalization, improving mortality, reducing missed treatments, all of that will continue to give benefit over time. So I'm not time stamping it, but clearly, we have improvement built into our 3-year and 5-year outlook. Martin, you want to do FME25? Martin Fischer: More than happy to cover the FME25. So you're right, we are front-loading 2026 a bit. And also, we have then in '27 a higher savings contribution. And as you would expect, at the end of the program, a lower onetime cost because we want to have savings effectiveness in 2027 as well. On the '26 front-loading, you see that a lot of the measures are tilted of the remaining EUR 400 million also towards Care Delivery with 40% contribution. And there, the clinic footprint optimization that Helen referred to as well as efficiencies that we drive in real estate are more front-loaded on the onetime cost and then they will contribute subsequently to the savings. I hope that gives a bit more color. Operator: The next question comes from Graham from UBS. Graham Doyle: It's just on the Q4 point around what was obviously a really strong beat, particularly in Care Delivery. I'm just trying to work out the phosphate binder and then this TDAPA catheter contribution. It just looks to me like that was pretty much all of the growth, I suppose, effectively year-over-year. Is that TDAPA payment, does that -- is that like more than half of the EUR 90-odd million that you categorized for the full year '25? And then just a follow-on. When we think about whatever about '26, when we think about '27, it looks to me that there's still like a further EUR 250-maybe million to come out from TDAPA plus phosphate binders into '27. Is that overstating it? Or how do you think about that in terms of your ability to grow then in '27? Martin Fischer: Yes. So Graham, let me tackle the TDAPA contribution and because I outlined in quarter 4 that, yes, there was a contribution from the catheter lock solution of about EUR 70 million in the quarter, and that was due to the much higher than anticipated adoption and prescription that we saw for one of those 2 dilutions that was under TDAPA and the other one is not. So that was something that drove some of the higher contribution, so to say. We outlined that, that solution will be year-over-year, not a head or a tailwind because we expect that it's a similar contribution for 2026. In wholesale in '25, we had EUR 90 million and it was Q3 and Q4 and then in Q1 and Q2 '26. So it will be a non-year-over-year effect, yes. To the earlier point, I think I was very clear on binders where we ended the year with EUR 220 million, and I outlined how that is. So I'm not going to repeat and dig into that again. But I think with the EUR 150 million to EUR 200 million regulatory headwinds, we have provided also a very clear building block. Helen Giza: Yes, Graham. And maybe I'll just pick up on your -- go ahead. Graham Doyle: I was going to say just the relevance for '27, like it just feels like this TDAPA piece was a bit of a -- obviously, a great positive surprise. But just when we think about modeling it going forward, what's going to happen in '27? Helen Giza: Yes. So look, on the -- on both actually, expectation is that TDAPA period ends in 2026, and there will be a payment that then goes into the bundle. So we don't know what that bundle payment will be in 2027 yet or actually even halfway through 2026 for the catheter lock solution. So obviously, we know that some of that's going to stay in the business. And on our pharma business, it doesn't go to 0. What we're going to have to see is go through 2026, so we have an assumption is how the pricing -- how the generic -- sorry, how the branded pricing erodes as the kind of the move towards these products going into bundle develops. So we're not breaking this out year-by-year. It's why we've given the 3-year CAGR. And you also heard me speak to the low teens CAGR we get past all of this binder piece. So I think there's obviously positive benefit in '25 and '26. It starts to erode in '26, and we have to see how much it erodes that doesn't stay in the bundle in '27. But on the back of that, we've got all the other initiatives taking hold, particularly in Care Delivery, where we start to see a significant benefit from the back-end load of HDF and all the other initiatives. So look, I think what we were trying to do, we've been very explicit on trying to size the TDAPA piece because we recognize -- agree, it's great, always wonderful to have that benefit. But we also recognize how high a base it is giving in 2025. And our goal here is to maintain that high base in '26, regardless of the tail off of these issues -- I shouldn't call it issues, the TDAPA regulations. And we're investing in the future. So we've got this front-end loading for the training costs for HDF and we're investing in systems platforms that will also drive efficiencies in the future. Operator: And our last question comes from James from Jefferies. James Vane-Tempest: Two, if I can, please. And just first one, just a clarification. Can you confirm you said Corporate costs were EUR 200 million to EUR 220 million and intercompany were EUR 100 million for this year. I understand you're prioritizing your own clinics in Care Enablement, so we should see higher eliminations. But why such a large increase in Corporate costs? And is this a permanent step-up as part of your '28 growth outlook? And then I'll come back for a follow-up. Martin Fischer: So on the intercompany profit elimination, yes, you're right. We called it out EUR 100 million, and it has to do with the prioritization of the rollout of high volume HDF and that is something on the Corporate line that is being eliminated. So confirming that. On the Corporate cost, the EUR 200 million to EUR 220 million. I did call out that we have in the Corporate line, the IT platform investments that we included in the investment line that drives a year-over-year increase. That's why the assumption is higher. And in addition, you know that we have that FX impacts that we normally have from the gross charge out of the Corporate line and the global functions, and that is also contributing a low double-digit million in the increase year-over-year. So those 2 effects are explaining the year-over-year. James Vane-Tempest: That's great. And then my follow-up question is, if you could just talk a little bit more about the number of missed treatments in the U.S. At least like the treatment numbers, I think they were lower by 150,000, which I know includes some divestments. And you talked about weather and flu, I think, in some of the comments earlier, but just wondering if you could comment on the perspective, this actually might be a structural headwind because we do understand if patients are entering dialysis, they're increasingly older perhaps kind of post COVID. Maybe they've got more co-morbidities, so they require more hospitalizations and they're missing treatments. And if so, like how can this trend reverse, which does seem to be key to unlocking the same market treatment growth if the funnel is slowing? Helen Giza: Yes. Look, we don't believe it's a structural issue. We do see elevated missed treatments, and we also see specific targeted initiatives that we are targeting that can help bring that down, whether that be the improving mortality, the hospitalization days, the kind of the things that we've talked about. We do have kind of -- and if anybody has picked this up, but we do have 1 treatment day less in 2025 compared to 2024. That's just a function of how the end of year Christmas holidays and New Year in particular fell. So that's obviously playing into the '25 number. But we feel good about the work that we have ahead of us, and we have line of sight into all these initiatives that will help improve the outflows and kind of confident in that, that will turn to 2% plus same market treatment growth. And we'll start to see that progress as we obviously continue with HDF as well. Thank you for the question. Dominik Heger: Thank you. Good. We do have no further questions in the call. So thank you for your patience. Thank you for your interest. Thank you for your good questions. And we'll see all of you or many of you on the road, I hope, in the next 2 months. Helen Giza: Yes. Thanks, everyone. Martin Fischer: Thank you. Helen Giza: Great dialogue. Thank you. Bye-bye. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
Operator: Good morning, and welcome to HealthStream's Fourth Quarter and Full Year 2025 Earnings Conference Call. At this time, I would like to inform you that the conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Mollie Condra, Head of Investor Relations and Communications. Please go ahead, Ms. Condra. Mollie Condra: Thank you. Good morning, and thank you for joining us today to discuss our fourth quarter and full year 2025 results. Also on the conference call with me is Robert A. Frist, Jr., CEO and Chairman of HealthStream; and Scotty Roberts, CFO and Senior Vice President of Finance and Accounting. I would also like to remind you that this conference call may contain forward-looking statements regarding future events and the future performance of HealthStream that involve risks and uncertainties that could cause the actual results to differ materially from those projected in the forward-looking statements. Information concerning these risks and other factors that could cause the results to differ materially from those forward-looking statements are contained in the company's filings with the SEC, including Forms 10-K, 10-Q and our earnings release. Additionally, we may reference certain non-GAAP financial measures relating to the company's past and future expected performance on this call. The most directly comparable GAAP financial metrics and reconciliations are included in the earnings release that we issued yesterday. So with that start, I'll now turn the call over to CEO, Bobby Frist. Robert Frist: Thank you, Mollie. Good morning, everyone, and welcome to our fourth quarter and full year 2025 earnings call. We do have a lot to talk about this morning, and there are several topics. We'll definitely cover the topic of the emerging landscape with AI. We're going to talk about our financial performance for the quarter and the full year. We'll go through some business and product updates at the end and turn it back over to you guys for questions. So nothing like the numbers first. Let's just kind of jump in. We finished the full year 2025 with revenues up 4.3% and adjusted EBITDA up 7.5% year-over-year. For the fourth quarter, revenues were up 7.4% and adjusted EBITDA was up 16.4% year-over-year. And then looking forward to 2026, probably the reason we're all on the call today, we expect HealthStream to show continued growth in each of the areas where we provide financial guidance as we anticipate revenue between $323 million and $330 million. Net income between $20.4 million and $22.8 million and adjusted EBITDA between $73 million and $77 million. These guidance ranges do not include any acquisitions we may complete during the year, though our strong cash balance of $57 million, untapped line of credit and no long-term debt position us well to take advantage of M&A opportunities as they arise. Later in the call today, I'm going to describe some of the exciting developments on our application suites, which we've talked about for years and our rather newer career networks, which we'll cover in a little bit of detail, the newest at the end of the call. But first, I want to talk a little bit about how HealthStream is positioned relative to the emerging context of AI and which trends we think or categories of trends we think help favorably position us in that landscape. There's 4 categories I'm going to kind of discuss that are really more broadly positioning categories. So we talk about relative strength to others as we enter this massive period of change. First category because there's this concept of this SaaS Armageddon or SaaS Apocalypse is to think about how AI might affect our end users. And so this first category is talking about the expansion of the health care user base. I think unlike companies that fear seat compression due to AI agents minimizing the number of their human subscribers, our user base of health care providers is expanding. In fact, the number of health care providers is projected to increase significantly in the coming years, particularly in the nursing workforce, which is our greatest strength as a company. In January of 2026 alone, health care accounted for approximately 82,000 of the 130,000 new jobs added in the U.S. According to the Bureau of Labor Statistics, that trend will continue with roughly 1/4 of all new jobs in the U.S. economy over the next decade being in health care. On average, hospitals hired 13,600 net new personnel each month in 2025, and nurses continue to be a strong component of this growth. From 2020 to 2024, registered nurses increased 9.4% overall, while nurse practitioners increased 38.5% according to BLS. So this first trend translates into expanded opportunities for growth in our user base. And I just think fundamentally, there's lots of areas of the market where there's lots of white papers, projections, futurists are saying those jobs may be eliminated. And I think in our market, we're just not seeing those kind of projections. What we're seeing our projections of shortages and projections of increasing demand. And so at our core is the health care workforce and at its core is the nursing workforce. And so we think that with our acute focus on that workforce pool, we have a relatively strong position as we enter the projections of how change, how dynamic of change will -- AI will impose on our marketplace. In fact, when we think about it, the positive dimension of AI in our workspace is I believe that AI will enhance the roles of nurses. It will make them more human and have more contact with patients as some of their paperwork and other functions get automated. And so kind of in a great irony though this is one of the skills jobs that I think survives the apocalypse and in fact, is enhanced by allowing the millions of nurses in our country to spend more time by the bedside with patients instead of less. So that's the first trend I want to talk about. The second is our data profile. And I think everybody has to get a grip around companies and organizations data profile. And I think that can be broken into 2 categories. The first is thinking about the role of the software plays for the organizations it serves. And I think for several of our solutions, our systems serve as the system of record, kind of a foundational source of truth. For example, in the learning space, we have an authoritative position maintaining the horizontal and longitudinal learning records of millions of health workers over decades. And that strength of position as a system of record positions us well for the future of AI. AI is increasingly used to drive efficiencies and develop insights. The systems of record on which AI relies are becoming increasingly important. In terms of learning and compliance, I feel confident that we serve as a system of record for more health care organizations than any other company. Customers value having a single system of record for the whole of their learning program because it allows them to easily store, report and gain actionable insights into the development and assessment of their workforce, whether that is in the form of the use of AI or other tools. Traditionally, the data feeding into the learning system of record was generated solely from the use of one of our SaaS applications, such as the HLC, the HealthStream Learning Center. That continues to be the case. But encouragingly, we're also seeing customers push other learning records they have into their HealthStream system of record. They are accomplishing this through our learning API, which, of course, is included in their hStream subscription. So all that to say is just to reinforce that some of our core systems do serve as a system of record on behalf of our customers. And I think in a relative positioning world, I'd rather be there than just be a point solution. In terms of physician credentialing, our customers often refer to us as a single source of truth. And this means that we maintain the system of record status of which key functions such as physician enrollment and privilege granting, those functions originate and are maintained and spin off of our system of record. So whether it is for Learning or Credentialing, HealthStream's customers trust us to maintain secure, reliable and organized systems of record on their behalf. If AI is to make a true impact in health care, we believe and our company believes and I believe they -- it will need to rely on these systems of record going forward. The second component of data, if you think about a data profile when you enter this world of change is trying to determine whether an organization is an aggregator of kind of publicly available data or their originator of unique data about their customers and customer organizations, what is their relative data position. And I would say through our career networks, which we'll talk more about at the end, students, professionals like nurses, CNAs that interface directly with HealthStream for a variety of reasons, whether it's to find their first clinical rotation in a hospital as they're graduating or find their next shift or they're socializing with colleagues. These interactions create that access to this proprietary data that I would call original data. You take our virally growing NurseGrid career network, for example. It's adding about 2,000 new nurses a week and now has over 670,000 monthly active users. That's a staggering 1 out of 5 nurses in the U.S. using NurseGrid. And they tell us who they like to work with, who they like to work for, when they want to work, how much monetary incentive will persuade them to pick up an extra shift. HealthStream is originating this proprietary data. And more importantly, we're using it to the mutual benefit of the individuals who provide it and the organizations that want to employ them. By connecting individuals with employers to help both realize their goals, health care itself improves. Everyone knows that AI requires data to be effective, and we believe that the data we are originating can be among the most valuable and beneficial for managing the health care workforce. That brings me to the third category, which is our platform and our platform strategy. We call it our hStream Platform. Essentially, for over 5 years, we've been working diligently underneath the scenes and behind the scenes, investing in the creation of our platform. This is distinguished from our group of SaaS applications. The platform is a series of capabilities, of which, by the way, AI is one of the 10 core elements of the hStream Platform that allows interoperability and allows our SaaS applications to behave more like an ecosystem than separate distinct SaaS applications. And we're also, through this platform, able to connect to the backbone of these career networks. And so it's really an interesting kind of ecology that's evolving around the platform that we've built. So I just want to remind you that the platform strategy we have is an advancing strategy. It puts us in a more primary situation with our customers as they use the APIs of the platform, the data of the platform, the data services of the platform. The interoperability they can enjoy between the different applications creates more of an ecology effect instead of just stand-alone kind of workflows that we're excited about. And so for example, one of the core elements of the platform is the hStream ID, which is a fundamental building block needed to drive interoperability and innovation in the health care workforce technology we're building. So what we observe is the number of APIs from the platform, their utilization by customers and industry partners [Technical Difficulty] Mollie Condra: Okay. This is Mollie Condra. I'm going to pick up and finish off this section for Bobby while we figure out what's going on. I apologize for that. We were leading up to the fourth category, which is our ecosystem. And with that, you can have a great business vertical, a great data profile or a great platform. You can even have all 3. But if you don't bring them together at scale to form an ecosystem, then it really doesn't create durable value. There are many dimensions to HealthStream's business, all of which work together to form a whole that is greater than its individual parts. Something that AI cannot create is an ecosystem of millions of individual caregivers, like those choosing NurseGrid or myCNAjobs, the thousands of health care organizations, like those using our SaaS application suites and dozens of industry partners like the American Red Cross and world-class health care organizations. Combining those elements with our 30-plus years of experience and our hStream platform architecture, and you have something that's difficult to replicate. The organic life of such a thriving ecosystem is not something that AI can simply code, but it's something that AI can enhance and something that can turn and enhance AI. At least that's our strong belief. Now before we go further on the call, I want to briefly summarize our business for the benefit of anyone who's new to the HealthStream story. And this is something we do every quarter. First and foremost, keep in mind that HealthStream is a health care technology company dedicated to developing, credentialing and scheduling the health care workforce through SaaS-based applications, each of which are becoming more valuable because of the interoperability they are achieving through our hStream technology platform. We've also started to open our sales channels directly to health care professionals and nursing students through our 3 career networks for helping nurses, CNAs, and students throughout their career journey. The company holds 20 patents for its innovative products, which have been awarded over 40 Brandon Hall awards. Historically, we sell our solutions on a subscription basis under contracts that average 3 to 5 years in length, which makes our revenues recurring and predictable. In fact, 96% of our revenues are subscription-based. So we are profitable. We have no interest-bearing debt, and we reported a strong cash balance of $57 million at the end of the fourth quarter of 2025. This strong cash balance allows us to allocate capital to product development, to M&A, share repurchases and dividends, all of which we've done in the fourth quarter. We are solely focused on health care and more specifically, the health care workforce of those preparing to enter it. The 12.6 million health care professionals and nursing students in the United States comprise the core total addressable market for our solutions. So at this time, right now, we're going to turn our attention back to our results in this call. And Scotty Roberts, our CFO, will provide a more detailed discussion of the financial metrics in the fourth quarter and full year 2025, along with further comments about how we view our financial outlook for 2026. So I'll turn it over to you, Scotty. Robert Frist: Hi Scotty, Mollie. By the way, sorry, I didn't realize that dropped. So I was beautifully ad libbing on the script. But thank goodness, we had such a solid script. And Mollie, you jumped right in as needed. So fantastic. I just caught the last minute of your presentation. Nice job. We're fine. But I did do a lot of great ad libbing, which maybe people were grateful. I didn't go off script, at least those that helped develop it. So thank you, Mollie. And Scotty, we'll turn it over to you. I'll try to keep my iPad live, so I don't get cut off again. I'm not really sure where I dropped off. Sorry for that. I'll be available in the Q&A, and I'll pick it up in the last third as well. So Scotty, you're on. Scott Roberts: All right. Sounds good. Thanks, Mollie, and thanks, Bobby, and good morning, everyone. Before going over the financial results, I want to first point out several exciting events that took place during the fourth quarter. We completed 2 acquisitions, Virsys12 in October and MissionCare Collective in December. Our Board of Directors authorized a $10 million share repurchase program in November with $5 million of the repurchases made in the fourth quarter and the remainder was purchased in January. In December, our CEO contributed $3.8 million of his personally owned stock to the company in order to facilitate the grant of equity to company employees in recognition of their contributions to the company and to further align the interest of those employees with our shareholders. The accounting treatment of this Stock Grant resulted in $3.5 million of non-cash compensation expense and $0.3 million of employer taxes and administrative costs, which negatively impacted our financial results for the quarter. It's also worth noting that this Stock Grant resulted in no dilution of shares to any existing shareholders of the company other than our CEO. Now with that backdrop, let me go over the financial results for the fourth quarter. Unless otherwise noted, the comparisons will be against the same period of last year. Additionally, I'll reference certain non-GAAP comparisons to adjust for the impact of the CEO Stock Grant. Revenues were a record of $79.7 million and were up 7.4%. Operating income was $2.4 million and was down 48.8%. Net income was $2.5 million, down 48.1%. Earnings per share was $0.09 per share, down from $0.16 per share and adjusted EBITDA was $18.8 million and was up 16.4%. On a non-GAAP basis, our non-GAAP operating income was $6.2 million and was up 31.7%. Non-GAAP net income was $5.4 million and was up 9.5% and non-GAAP EPS was $0.18 per share, and it was up $0.02 per share. Our revenues increased by $5.5 million or 7.4% and were $79.7 million compared to $74.2 million in last year's fourth quarter. Revenues from subscription products were up $5.8 million or 8.2%, while professional services revenues were down $0.3 million or 11.6%. Our subscription revenue growth was supported by continued strong performance from our core solutions. With CredentialStream growing by 21%, ShiftWizard growing by 31% and Competency Suite growing by 27%. Now while a portion of the strong revenue growth in CredentialStream and ShiftWizard are from conversions from our legacy credentialing and scheduling applications, revenues from those legacy applications declined by 27% compared to last year. Revenues from the 2 acquisitions that we recently completed were $1.6 million in the quarter. In addition, revenue increases from the annual pricing escalators that we began introducing into new contracts last year also benefited the year-over-year growth. Moving on, our sales team finished the year with strong contract bookings, which led to an 11.2% increase in our remaining performance obligations, which were $691 million as of the end of the fourth quarter, and that compares to $621 million for the same period of last year. We expect that approximately 39% of the remaining performance obligations will be converted to revenue over the next 12 months and that 67% will be converted over the next 24 months. Gross margin was 63.8% compared to 66.2% in the prior year quarter, and gross margin was impacted by an increase in our cloud hosting costs and software licensing costs, which primarily come from the CredentialStream application and the hStream Platform. The gross margin was also impacted by the non-cash compensation expense associated with the CEO Stock Grant. This grant reduced gross margin by $1.3 million or approximately 170 basis points. Our operating expenses, excluding cost of revenues increased by 9% or $4 million, of which approximately $2.5 million of the increase was associated with the CEO Stock Grant. We also incurred over $600,000 in transaction costs associated with the 2 acquisitions that we completed in the fourth quarter. Net income was $2.5 million and was down 4 (sic) [ 48.1% ] from $4.9 million last year. Again, this decline was significantly influenced by the non-cash compensation expense from the CEO Stock Grant. On a non-GAAP basis, net income was $5.4 million and was up 9.5% from the $4.9 million last year. And finally, adjusted EBITDA came in at $18.8 million, which was up 16.4%, and our adjusted EBITDA margin was 23.6% compared to 21.8% last year. Switching to the balance sheet. We ended the quarter with cash and investment balances of $57 million, which compares to $92.6 million last quarter. And during the quarter, we deployed $35.1 million for acquisitions. We paid $6.8 million for capital expenditures. We returned $0.9 million to shareholders through our dividend program, and we repurchased $5 million of our common stock under the share repurchase program that we announced in November. Our Days Sales Outstanding remained steady at 35 days for the quarter, which marks the sixth consecutive quarter that DSO is at or below 40 days. For the year, our cash flows from operations were $63.3 million compared to $57.7 million in the prior year, which is an increase of 9.8%. Free cash flows were $31.1 million compared to $29.5 million last year, an increase of 5.5% and our capital expenditures were $32.2 million compared to $28.1 million last year, an increase of 14.3%. Ending the quarter with $57 million of cash and investments, free cash flows and no debt, we are well positioned to deploy capital to improve shareholder value. We maintain a disciplined approach to capital allocation and how we prioritize our use of capital. Our utmost priority is making organic investments back into the business, which is evident by our annual capital expenditure and R&D plans. The second is pursuing acquisition opportunities, which we have a long track record of executing. The third is returning a portion of profits back to shareholders in the form of cash dividends and our fourth priority is that our Board may authorize share repurchase programs. In regard to M&A investments, on October 8, we announced the acquisition of Virsys12, a health care technology company focused on payer credentialing. The consideration paid for Virsys12 consisted of $11.4 million in cash, taking into effect customary purchase price adjustments and a post-closing working capital adjustment. And up to an additional $4 million of cash consideration may be paid over a 3-year period following closing, contingent upon achievement of certain financial targets. And then on December 15, we announced the acquisition of MissionCare Collective, a health care workforce company primarily focused on connecting nonmedical caregivers and CNAs with job placement and numerous job-related programs. The consideration paid for MissionCare consisted of $24.6 million in cash and $4 million in our common stock, which also takes into effect customary purchase price adjustments and is subject to a post-closing working capital adjustment. And up to an additional $10 million of cash consideration may be paid over a 3-year period following closing, which is also contingent upon achievement of certain financial targets. In respect to our dividend program, yesterday, our Board of Directors declared a quarterly cash dividend of $0.035 per share to be paid on March 20 to holders of record on March 9. This represents a 12.9% increase over the previous quarterly cash dividend. In November of 2025, our Board of Directors authorized a $10 million share repurchase program, of which $5 million of share repurchases were made in the fourth quarter of 2025 and the remaining $5 million were made in January of 2026. Also in May of 2025, the Board authorized a $25 million share repurchase program that was completed in the third quarter of 2025. To recap the full year, we achieved $304.1 million of revenue, $18.3 million of net income, $21.2 million of non-GAAP net income and adjusted EBITDA of $71.8 million. We made $30 million in share repurchases. We paid $3.7 million in dividends to shareholders, deployed $39.1 million of capital on M&A and $32.2 million of capital expenditures. We remain focused on consistently growing the business both organically and inorganically while remaining disciplined with our capital allocation strategy. I'll go ahead and wrap up my portion of the call this morning by going over our financial outlook for 2026. We expect that consolidated revenues will range between $323 million and $330 million, which equates to a growth rate range of 6.2% to 8.5%. And to begin the year, we estimate that the fourth -- the first quarter revenue growth rate will be approximately 8%. We expect quarterly revenues to improve sequentially across the year with higher growth rates in the first half of the year than in the second half, which is primarily due to the timing of the 2025 acquisitions. We expect that inorganic revenues will be approximately $13 million for the year. We expect that net income will range between $20.4 million and $22.8 million, that adjusted EBITDA will range between $73 million and $77 million, that capital expenditures will range between $31 million and $34 million, and we expect that our effective tax rate will be approximately 22%. This guidance does not include the impact of any acquisitions or dispositions that we may complete during the year, any gains or losses from changes in the fair value of nonmarketable equity investments or contingent consideration or impairment of long-lived assets. In closing, I'm excited about the opportunities we have in front of us and have confidence in our ability to deliver on another solid year of financial performance while continuing to create value for our stakeholders. Thanks for your time again this morning, and I'll now turn the call back over to you, Bobby. Robert Frist: Thanks, Scotty. Well, let's see. Let's pick up here with the business updates at the last third year. So I'll start off as I usually do with some core business updates that cover our learning, credentialing and scheduling application suites. And then we'll talk about the newest career network, myCNAjobs. So let's start with the learning product family, which includes kind of a subset of what we call our competency suite. Many customers are increasingly taking advantage of the opportunity to purchase a bundle of several of our most popular workforce applications and content libraries, which we call the Competency Suite. Customer purchases -- the customers purchased a subscription to the Competency Suite for all of their employees, which comes in an unlimited use format. Key sales of the Competency Suite during the fourth quarter include some of the nation's top health care organizations like Intermountain Health, Northside Hospital and Dartmouth Health. We think about our credentialing area where our flagship product, CredentialStream, also finished the year strong in terms of new sales, expansion sales and importantly, conversions from legacy products. Revenues from sales of CredentialStream in the fourth quarter were up approximately 21% over the same quarter last year, and we saw growth of approximately 23% year-over-year. Our largest sale in the quarter was a result of our winning a highly competitive RFP. Our next largest sale came from a referral from our partner, Virsys12 and represented a competitive takeout because the customer loves our comprehensive solution, API integration capabilities from our platform and the use of cutting-edge data infrastructure that allows them to get greater insights faster, things their previous system could not deliver. Additionally, we are pleased that an existing health system customer decided to expand their CredentialStream access. As they standardize on the CredentialStream across all their facilities and also invested in our case review and performance metrics products. The quarter for CredentialStream was not only about sales success. As a result of infrastructure enhancements we made earlier in the year, CredentialStream delivered excellent system performance and high reliability, both of which were recognized and lauded by our customers. We are also pleased that some of our large legacy credentialing customers completed their conversion from EchoCredentialing and MSOW. For example, UPMC Health System, a major health system, and Sutter Health being notable among those that successfully transitioned to our CredentialStream application. Through CredentialStream, we're committed to helping those customers speed time to revenue for the physicians they onboard, which will improve their financial performance and ability to provide quality care. To conclude my update on our credentialing business, I will say that 2025 saw total revenue contribution from CredentialStream edge out total revenue contribution from all of our legacy credentialing products combined. As customers continue to see the value of CredentialStream, we expect this trend to continue and accelerate in 2026. Now let's move to scheduling, where our core product, ShiftWizard, continues to deliver strong revenue growth, with fourth quarter revenues from sales up approximately 31% versus the fourth quarter of the previous year and up 24% year-over-year. It continues to be our top-performing product in our scheduling application suite. And in 2025, revenue contribution from ShiftWizard was greater than revenue contribution from all legacy scheduling products combined. This, too, is a trend we expect to continue in 2026. ShiftWizard is a good example of how vertically focused health care-specific applications benefit customers in ways that generic horizontally focused solutions simply cannot. In fact, our 2 largest sales last quarter were takeouts of a major provider in both the horizontal provider, and both customers selected ShiftWizard because of the health care-specific advantages that it offers. For example, both customers identified that the ability to gain greater visibility into and control over managing and engaging their clinical workforce is something that differentiated ShiftWizard over and above even the best horizontal solutions. Scheduling and staffing clinicians is simply different than scheduling a labor pool for retail or factory shifts. Increasingly, the market is realizing this fact and choosing ShiftWizard as a result. On our last call, I introduced an exciting new area of focus for the company, our emerging career networks like NurseGrid for nurses and myClinicalExchange for students. Remember, career networks provide value directly to the individuals who deliver care. You can contrast that with our enterprise application suites, which provide value to health care organizations. Also made an important point on the last call that bears reiterating to really address the complex issues of today's health care workforce, we think that you have to have solutions for both individuals and for organizations. And here's the more important part. To really change the game, you have to connect both of them together through a common platform, and that's exactly what we're beginning to do at HealthStream. On December 15 of last year, we acquired MissionCare Collective, whose primary offering is myCNAjobs.com, which we're introducing as our newest career network. MyCNAjobs helps recruit and retain a large set of providers that includes home health aides, home care providers and CNAs, which are also incredibly in high demand. And we also expect, for example, in the CNAs, the demand for them to increase, particularly in the post and pre-acute markets. MyCNAjobs originates data directly from individual caregivers, enriches that data through proprietary technology and then utilizes that data to help pair those caregivers with health care organizations that want and need to hire them. Both the individual and the organization benefit as a result. As we get the individuals using myCNAjobs issued an hStream ID, they're better able to help manage their data and longitudinal record across both applications and employers. I want to close by giving you an example of how our customers are increasingly turning to HealthStream as they manage the entirety of a clinician's journey from nursing school to retirement and everything in between. It's my view that many of the smartest health systems, and I'll name a few, like HCA and Intermountain Health, are putting nurses at a center of their workforce strategy. In some cases, these health systems are doing things like launching their own nursing schools. That's how much demand there is for these nurses and how much they realize the need to develop their competence and upskill them. They're actually getting into the nursing schools themselves. They're also purchasing our competency suite at scale, and they're engaging with our career networks so they can officially recruit -- be efficient in the recruitment, the development and that transitional onboarding that they do between the career network and to full-time employment. And they use our software then to recruit, retain, develop and onboard that professional staff. It's my belief that other hospitals and health systems will look at these market leaders and see their extreme focus on this nursing workforce and their investment in it. And they'll see that it's generating a competitive advantage for these thought-leading and market-leading health systems like HCA and Intermountain Health and that HealthStream's solutions are a central part of helping them achieve that strategic focus. I want to remind everyone that if you're interested in a profitable recurring revenue health care technology company that expects to deliver growth, then maybe HealthStream is the right investment for you. If you're interested in a company whose core user base, the clinical health care workforce is expanding faster than any other sector in the job market, then maybe HealthStream is the right investment for you. If you like a company whose software serves as a system of record on behalf of health care customers, then maybe HealthStream is the right company for you to invest in. If you favor ecosystems over point solutions, then maybe HealthStream is the right investment for you. For all of these reasons, I believe HealthStream is positioned for another exciting year helping the nation's top health systems find, develop, credential, schedule, onboard efficiently and then retain this growing health care workforce. And I think that maybe if those are traits that you value in an emerging health care technology company, then HealthStream is the right investment for you. I'll now put it back over to the operator so we can begin our question and answer. Operator: [Operator Instructions] Our first question comes from Matt Hewitt from Craig-Hallum Capital Group. Matthew Hewitt: Maybe first up, MissionCare, I think you noted that the inorganic contribution to revenues this year is roughly $13 million. I'm just curious what the MissionCare margins look like. Were those similar? Or is there an opportunity there to maybe get those in line with the corporate average and so we could see some incremental margin lift over the course of the year and into next year? Robert Frist: It's a fair question, Matt, but we don't report margins on a per product line basis. We've talked about our blended gross margins. And you could see a little bit of compression of that. I don't think that was due to the acquisitions, though. It's just due to how we're investing. Some of our cost of goods are going up on some of our application suites, which we're working on right now. In fact, we're conducting an RFP to consolidate some of our growing expense of our hosting services where we keep our content and our highly engaged applications. So we generally only comment on margins, not at a product level. But look, I think all of our products are trying to push for higher margins than our legacy applications or our legacy business, I'll say, which includes the high cost of goods of royalties. And so in general, all of these software businesses, I think, have the potential to pull our blended gross margin up over time. Even though right now, we're experiencing a bit of a surge in costs and things like our hosting costs as we expand the utilization of our applications, which is great news, but we probably need to negotiate a little better on these -- some of these core services, the cost of goods underneath them as well. Matthew Hewitt: And then maybe a second question. Press release and in your prepared remarks talking quite a bit about AI and the impact that, that can have on the market, how you're more sticky. And I think during your prepared remarks, in particular, you talked about how some of your customers are actually pushing other records into the HealthStream platform. And I'm just curious, one, is that there's some M&A opportunities there with those other platforms that are now being pulled into your platform? And two, does that further highlight the stickiness of HealthStream, meaning that AI isn't going to displace HealthStream or your platforms, but rather it's a contributing factor and you should be able to not only weather any potential storm in the future, but quite frankly, survive better because of it. Robert Frist: Sure. What I tried to do is just give these categories where -- I mean, the world is changing, jobs are changing, business models are going to have to adapt. And there's definitely something real here to how AI changes everything. And so we first wouldn't say there's no threat to -- everything is, in my view, at risk of change and impact. That said on many key dimensions, you kind of have to think about how well a company is positioned in each of those types of positions. And I think this idea of being a system of record is an important concept to differentiate kind of long-term winners from losers. And so it's really encouraging for us to see our API libraries that are part of our hStream platform that our customers get access to, they're starting to use those APIs to push data from other third-party providers that's relevant to the system of record into our core datasets, which shows, again, it kind of emphasizes the difference between being a system of record and not being a system of record, being a point solution whose data is sucked into other systems of record. And so in several cases, like in our learning network, we see growing use of those import APIs, which means that they're saying, look, we would rather have our data on the learning journey about our workforce consolidated at the HealthStream platform level than spread across multiple systems or multiple point solutions. And so it's just one indicator of a relative strength of our company as we enter this ever-changing world that's changing at a really rapid pace. And so we can't say that we're going to conquer everything, but AI is a fundamental component of our 10 components of our hStream platform. So it's well in development. We are huge utilizers of the emerging AI tools ourselves in how we build our products more efficiently. And then on this one dimension, and we covered others, but on this one dimension of whether your software is a system of record or a point solution, we tend to lean towards being a system of record, which, by the way, is also true, for example, in our credentialing system. I think we made that point in the script as well. Although I'm not exactly sure where I got cut off on the script, so I apologize for that, Matt. It looks like my device timed out and cut me out of the conference, and I was waxing poetic about these ideas and didn't catch that until the end. But anyway, I think -- thanks for the question. On that one dimension, I just would say companies should -- when you evaluate companies for their viability and strength as they enter this change that being a system of record is one characteristic of a long-term survivor and grower instead of one under assault. Operator: Our next question comes from Constantine Davides from Citizens. Constantine Davides: Maybe, Bobby, just a question on career network, that strategy. With something like myClinicalExchange that you've owned now for 5 years or so, just give me a sense for what interoperability features are resonating most with customers and prospects in terms of integration between that legacy type of solution and the rest of the platform? Robert Frist: Yes, sure. So first of all, it's not a legacy application. It's a growing -- the business has tripled since we bought it in terms of just absolute revenue. I think it's around $2 million we bought it. It's pushing over $6 million or $7 million now. And so the myClinicalExchange has grown, its revenue contribution and margins to the company. So it's an exciting growth area for the company. The second is exactly what you pointed out is what is the idea of the link between this career network for students in this case and say, HR at a health system using, say, our learning record. And so one little example of interoperability, which is happening today. We found when we surveyed those students that very few of them, less than 25% or 30%, felt that the hospitals where they were doing their rotations were properly addressing their career opportunities and say, "Hey, we see you're doing your rotation in a hospital. We'd love for you to take a full-time job with us when you graduate. And so in other words, there's a huge disconnect between the hospital operations and the clinical student doing a rotation at that hospital. And so what we did was we built a little widget that goes on a product called MyTeam, where all the managers are in our network. And so we have this application that's broadly used by managers. And we were able to tell them that today, 3 students were doing rotations on the second floor of their hospital, and they'll be there the next 5 hours, and here's their names and their backgrounds, go say hi to them. And so we're able to directly connect these clinical rotating students that was kind of there as a previously almost a side thought hospitals kind of put that under their operations. But now we've turned it into a recruiting opportunity. We're giving information that Bobby Frist is on the floor as doing their clinical rotation today, maybe go say hi to them. And we found that large health systems are attributing that simple flow of information across the transom from the student who enrolled in that rotation using the myClinicalExchange software to their arrival on the hospital where then kind of the resume pops up in the application, my team on a little widget and says, "Hey, there are 3 students a day at the hospital, go say hi to them. It will improve our odds of hiring on them when they actually graduate and become a professional. And so that's an example of using the data as a tool. And it's just a simple data flow, but that reminder, we see health systems taking advantage of that function feeling they have a competitive advantage on recruiting those students when they graduate. That's one example of the workflows that expand to become more ecology like, like there you're crossing from the SaaS world through the platform to the student enrollment world on myClinicalExchange. So I hope that one little example gives you an insight to how we're thinking, but it's just a manifestation of the data across this platform transom, which gives a competitive advantage to recruiting that student in the future. Constantine Davides: Just shifting gears a little bit to legacy product headwinds. I think you said legacy revenue was down 27% from the prior year in the quarter. How much legacy revenue is still left on the platform? And I guess, at what point do you start considering a sunsetting strategy is something that's viable? Like how low does revenue have to get for that to be in focus for you? Robert Frist: Yes. When we look at classifying legacy revenues, they are true legacy revenues, meaning they're on applications that we're no longer selling. And they're maintained and we allow our customers to renew on them. And they -- but we don't carry a quote on them. We don't sell them. And so they're effectively -- they maintain that legacy status. But they're supported. They're beloved applications. We do our best to keep customers happy on them until they decide to transition or our worst-case scenario, they leave for another solution in the market. And so that business, we were able to report the totality of the legacy portfolio in credentialing has been surpassed by the go-forward CredentialStream application. So at least in the credentialing space, if you take the total of all of our software tools, and the legacy revenues are combined across all the legacy applications, which are 2 or 3, they're now less than the revenue from CredentialStream. And that is also true in our scheduling business, where all the legacy businesses combined are less than the go-forward growing ShiftWizard revenue stream. And so we now have the majority of our work and growth is now on the go-forward application in both of those circumstances. Overall -- and this is a little tricky to provide this, but I'm going to go ahead and do it. Overall, our legacy revenues across the company and remember, these are good revenues. These are not -- legacy doesn't mean we don't want them. It just means that we're not selling any more of those products. And there's a good probability that those renew year-to- year and year. So this revenue stream could continue for a long time until it's either transitioned or lost. But approximately -- a little less -- around about 10% of our total revenues are in that bucket across the company. So we've now kind of scoped the size of that. And remember, it's important to remember that, that approximately, we'll just say a little bit over $30 million is desired revenue. Because we're calling it legacy, it doesn't mean it's not desired. It has a margin in most cases, has an EBITDA contribution. It's just not growing anymore, and we're waiting to encourage those customers to transition. And excitingly, in this quarter, we were able to talk about 2 very large credentialing customers that made that move, and we believe they're happy customers on CredentialStream, for example, we identified Sutter and I believe UPMC were successful migrations from that legacy category to, in that case, CredentialStream. So now we've kind of quantified it, but it's a tricky thing to quantify because, again, it doesn't mean that revenue is going away. It just means those products we're not selling anymore. And then you brought up the final question is, well, when do you start to force the decision? And we call that a sunset product. And in that bucket of revenue, a little over $30 million, we have not told those customers, and we have not picked a date to officially change it from legacy to a sunset product. And I would say, over the next few years, we'll evaluate that and certain of those products will achieve what I'll call sunset status. And at that point, customers have been notified of an end date when that technology will not be supported. So they need to start to plan and make a decision to move off of that legacy application. Again, we haven't done that yet, except in a few cases. And that's something we'll consider as the overall bucket of legacy becomes smaller and smaller. And by the way, it's getting much more compelling to move to the newer applications every day for reasons like we talked about that little widget, for example, that makes one application even more powerful. If you're on a legacy product, you're not getting the advances of the ecosystem that we're building that we mentioned in the earlier case. So I hope that helps kind of quantify it overall, scale it and scope it and tell our ambition with it. And again, that bucket of revenue is generally a happy set of customers that we're trying to maintain. We do product releases. We -- the customers there are in a good spot, but we want them to be in a better spot. We want them to migrate or transition or convert to the go-forward applications that are all plugged into the platform. Operator: Our next question comes from Ryan Daniels from William Blair. Ryan Daniels: Bobby, thanks for all the conversation on AI. I really appreciate that. A question for you in regards to that and a bit of a follow-up from an earlier one. You mentioned data origination is kind of a key competitive advantage because you can create that proprietary data. And I'm curious if that changes your capital deployment mentality at all, whether it's either via internal product development or how you look at the M&A markets to kind of go forward and create more of that proprietary data such that you can withstand any future AI headwinds? Robert Frist: It certainly does. Super exciting. As I mentioned, AI is one of the 10 core elements of our platform that we're developing. And so there's capital already going into that to make it a fundamental kind of capability set, a framework for deploying AI into our product sets. And several exciting products, enhancements, extensions where we're deploying capital are underway now. And we'll have to wait to reveal some of those directly, but I couldn't be more excited about some of the advances we're seeing. And specifically as it relates to data, we really are focused on trying to identify catalog, manage. And so investments are increasing in the area of kind of data management, data classification, data rights management across all of our network. And so yes, capital is flowing into that area. Yes, organizing our data. For example, one of our core tenets of our platform is to get all of our data from all of our 27 applications updated nightly into Snowflake and getting that organized and then, of course, getting all that data relevant to each other through the hStream ID, another core tenet of the platform is critical. So yes, capital is flowing to this area. Yes, we're trying to distinguish, which data is kind of aggregated data, which data is proprietary data, which data can lend competitive advantage in the long run, which data might train AI, for example. And I think in all cases, there's an increased emphasis and awareness of that from our Board to our operators. Ryan Daniels: And then maybe another one just on the AI marketplace. Again, very rational conversation of why you're relatively well positioned. But I'm curious, if you talk to your sales team, are they seeing any hesitation in the market either with longer-term contracts with the elevated pricing each year, the inflationary pricing or any pause in buying decisions as the market CTOs kind of look at all the potential AI solutions out there? Or is it generally still business as usual on your sales cadence? Robert Frist: Well, let's see. I would characterize our fourth quarter as exceptionally strong. In some areas, it was just fantastic. And just remember, there are product sets in there that are just incredibly unique as they blend technology, content, data analysis together to solve a real problem. For example, our partnership with the American Red Cross is thriving. We think we have a really great partner there and a great product set. It's an interesting solution set that meets essentially a compliance-oriented need. And there are several of our products that are doing really well that are a complicated blend of SaaS technology, data and benchmarking, reporting capabilities, physical. In this case, the Internet connects to these physical manikins that evaluate the skill and then branded high-quality scientifically valid content. And so in that case, we're seeing that product growing very nicely and well positioned for continued growth. So in the fourth quarter, we saw wins in each of these areas, including things like our American Red Cross Resuscitation Suite, but we also saw some system wins on our Competency Suite at scale. Some of our largest deals, I guess, I'd say, in our history were closed in the fourth quarter. So I think there's hesitancy in thinking through all this, and CTOs. We're doing our best to educate the market about the emergence of our platform this year and make us more relevant as a consolidator of services, not just a point solution here and a point solution there. I think there's more and more potential every quarter for us to position as a core consolidation platform. And yes, it has SaaS capabilities. And yes, those can be more rapidly built by competitors. But I think it is this interesting dynamic that we talked about of more ecology-like behavior than point solution or SaaS workflow behavior that we're seeing. So I hope that gives a little bit more color on it. Overall, I believe there's a tremendous amount of change coming to all businesses to almost all workforces. But on these 4 or 5 dimensions we talked about today, I think we're relatively well positioned to learn, iterate provide value and capitalize on the value people expect to get from AI as it advances. Operator: Our next question comes from John Pinney from Canaccord Genuity. Richard Close: Yes. This is Richard Close. Just a quick question, maybe a housekeeping, Scotty, to begin with. We jumped on late. And just curious whether you gave the acquisition contribution Virsys12 and MissionCare for the fourth quarter. And then just to clarify, you said $13 million from the acquisitions in the '26 guidance? Scott Roberts: Yes. So the -- I guess the fourth quarter impact for both acquisitions combined was $1.6 million. And then you're correct on the full year guide was $13 million. Richard Close: And then, Bobby, maybe just on the AI front to continue to go down that rabbit hole. I'm just curious if you can provide some examples in terms of how you guys are integrating Gen AI, agentic AI and into various offerings that you have. Again, I apologize, we got on late, if we missed that. Robert Frist: Yes. I think that road map will unfold in more detail over the course of the year. But needless to say, every one of our products has an AI road map. and really interesting and fascinating projects underway to take advantage of the benefits that we would expect from AI. And so the workflows are being automated. We have an agentic framework around some of our learning capabilities that we're working on. We have this concept of the quantification of self-using a vector analysis for some of the individual profiles in our system, making it kind of a tokenizable unit. There's just so many interesting things happening. And I think we'll let that road map unfold over the course of the year. But every product manager is required to have an AI framework and an AI road map and all of our developers are now using AI. And many of you probably follow this in the last 30 days, there have been significant enhancements in the tool sets people are using to build applications, which just gets us more excited because we can get to more of our vision faster if we use these tools properly. But like everybody, we're learning to use the tools. So there's an internal application of them, there's the external extension of them. And I think what I can say today is that of the 10 elements that we use to define the hStream platform, AI is one of the 10, and it has been for some time now. So we're not -- we're also not new to the idea of AI and how it's going to impact workflows and applications. And so I hope -- I don't know I just have to give a generic answer now that it's in our road maps. It's part of our kind of our DNA. It's part of how we're thinking. And we're doing our best to learn and stay on the curve with everyone else. And then we've talked about, of course, these categories of impacts kind of are we better positioned or less better positioned to take advantage of the changes coming. Richard Close: And then maybe just to expand on the AI front. Just I'm sure you're out in the market talking with various health system executives. And I'm just curious what their conversations with you is gleaning with respect to separate AI budgets versus looking for AI in -- you said the systems of record and whatnot. I'm just curious if you have any experiences that you can share on your -- the conversations you're having with clients and potential clients. Robert Frist: Yes. There's a lot of dimension to that. One is the CIOs of the country at these health systems are tired of having 400 point solutions. And so in that regard, if you're just a point solution and you're not a platform, I think there is a definite high degree of interest in moving to fewer platforms that work together than, say, as many as 400 point solutions. And this is true. If you ask a CIO of a health system, their software profile, I think they'll tell you they have 2 or 3 platform choices, EHR would be one choice where they pick between 1 of the 3 big ones. ERP would be another. And then they have 500 point solutions. So the first point of dialogue with, say, the executive suite, particularly the CIOs is, look, we need to make sense of these 500 point solutions. And I think that's exactly what HealthStream is trying to do with our hStream platform is take 3 or 4 of them that are core that are point solutions like scheduling, credentialing and learning and make them interoperable. And then we're bringing this other dimension, which is the second point is which problems are you solving for me? And if I have a nursing shortage, how are you helping me more efficiently onboard these nurses? How are you helping me move costs from those nurses from when they're employed to when they're pre-employed. And I think it's our theory of connecting this through the platform to these career networks that lets us have a business dialogue, not an AI dialogue, but a business dialogue about shortening the onboarding cycles and improving the value proposition of moving the cost from the health system, say, to the student period or getting the ready to work. This is a ready-to-work concept. So we're able to talk about business value propositions that are kind of universally the problems they're trying to solve, like with their labor pool size and the recruiting of nurses. And so our dialogue isn't so much about just whether your budget of AI is going to shift, it's about how you're going to consolidate point solutions and about whether the vendor standing in front of you, in this case, HealthStream can help solve a value proposition and do something more effectively. So I tend to lean into those. We can help onboard physicians more efficiently. We can help recruit nurses and find the future high-quality employees, the students that are going to be the best in your environment and help you match them. And so again, we just stick to the fundamentals of providing value to our customers on that journey. And then we can show how AI will facilitate those workflows. Richard Close: So would you characterize the environment as not necessarily clients or potential clients being distracted by AI that they're still focused on these key areas of business improvement? Robert Frist: I think the smart ones are. I don't know how to say it the other way. I mean, yes, I mean, obviously, even just through this call, everyone is trying to understand the implications and impact of AI. And HealthStream is in that group, all the CIOs we talk to are in that group. So yes, it's a lot of discussion on it. At the end of the day, I think the leading health systems are focused on the fundamentals of providing better patient care. And then they come back to the fundamental questions like, well, what is our cost of finding and developing a talented workforce and retaining them at the expense of our competitors. How do we have a better, higher-quality workforce. And so we keep trying to steer the conversation there and then show how all of the tools of HealthStream, including the unique dimensions like our career networks bring value to that equation. So just doubling down on the fundamental values that we provide is what we need to do. It doesn't mean that the dialogue isn't all consuming about the future -- the impact of AI. But like I said, health care is a local business. It's a service provision business. It's a hands-on nurses and doctors on patients business as is surgery. And here, I think AI is kind of an augmentation process instead of an automation or replacement. Now there are plenty of back-office functions and efficiencies that can be gained with AI, and there are certain roles that we expect fewer of them. But at its core, as I mentioned earlier, the nursing workforce is expected to grow. And I think they're going to grow and be more human through the use of AI. And those are the things that we talk to our customers about. Operator: Our next question comes from Vincent Colicchio from Barrington Research. Vincent Colicchio: Yes. Most of mine have been asked, Bobby, just perhaps if you could just talk about the price accelerators. It was nice to see the contribution for the year. Has this mechanism played out as expected? What are your thoughts there? Robert Frist: Vince, it's so good that it took us about 3 years to put escalators in place. And we know it was kind of an industry norm. We had always focused on our negotiations around volume, commitment and term. And we didn't have these built-in escalators. So it took us a while to design the contractual infrastructure, the deployment, train the sales organizations. But now it is the norm and it is the norm across software to include inflationary level price escalators in contracts. And it helps everybody strangely. It helps the customers because if you're on a contract for 4 or 5 years with those small escalators, you don't get hit with a big price increase necessarily when you renew. And so the escalators are kind of a smoothing function for budget planning. They're negotiated, but generally accepted. And I would say that every renewal and every contract now in all 3 of our major application suites include escalators in the contract. And so yes, we were excited to see that it started to impact us financially. And it is a slow roll because if we do 3- to 5-year contracts, that means, let's say, on average, every 4 years, a contract. Every 3.5 years of contract comes up for renewal. And then the escalator takes effect on the second year of the renewal, right? Because it comes in year 1 and then year 2. So as we go through renewals and as we include escalators, it's having kind of an impact, but it's a slow movement through these thousands of customers. But it's underway and every renewal includes an escalator. Operator: This concludes the question-and-answer session. I will now turn it back over to Robert Frist for closing remarks. Robert Frist: Thank you, everyone. I apologize for -- I was kind of head down and thinking about what I wanted to say, and I was telling this big story about AI. And I realized I looked up and my iPad had timed out. And I think Mollie Condra stepped in. Mollie, I know you did a great job. I hope we got all the questions done in Q&A. Thanks for listening. I look forward to reporting the next report. I'm proud of the contributions of 1,100 HealthStreamers in achieving these results. And we've got another tough year in front of us with full of opportunity and challenges, and we're ready to take it on. Thanks all. We'll see you on the next earnings call. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Option Care Health Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Nicole Maggio, Senior Vice President of Finance. Please go ahead. Nicole Maggio: Good morning. Please note that today's discussion will include certain forward-looking statements that reflect our current assumptions and expectations, including those related to future financial performance and industry and market conditions. 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 as well as in our Form 10-K filed with the SEC regarding the specific risks and uncertainties. We do not undertake any duty to update any forward-looking statements, except as required by law. During this call, we will use non-GAAP financial measures when talking about the company's performance and financial condition. You can find additional information on these non-GAAP measures in this morning's press release posted on the Investor Relations portion of our website. With that, I will turn the call over to John Rademacher, President and Chief Executive Officer. John Rademacher: Thanks, Nicole, and good morning, everyone. Thank you for joining us, and we're excited to share updates on our productive year and the 2025 results today. Before I do this, I want to take a moment to say thank you to the entire Option Care Health team for their consistent execution and commitment to our mission of transforming health care by improving outcomes, lowering total cost of care and delivering hope to our patients and their families. Before I get into the details on our business and financial performance, I'd like to reinforce our critical role across the health care industry. Option Care Health is uniquely positioned as the nation's largest independent provider of home and alternate site infusion therapy. We built a strategy on a national scale that starts with putting the patient at the center, provides high-quality care with cost advantages and fosters clinical innovation with local responsiveness. Last year, we served over 315,000 unique patients across a range of therapeutic categories, ranging from IV antibiotics to some of the most sophisticated rare and orphan products in the marketplace. In fact, last year, we completed over 2.5 million infusion events. Our 50-state licensure, expansive footprint and comprehensive nursing team help us deliver consistent clinical outcomes and same-day service for large health systems and national payers across the country. This includes helping payers shift care into lower-cost settings and reduce inpatient utilization where clinically appropriate. With the ongoing economic pressures the health care industry is facing, we are on the right side of the health care cost curve, partnering to provide high-quality care at an appropriate cost in a setting in which patients want to receive it. As we reported this morning, our results were in line with what we preannounced in January. Meenal will provide more detail, but I wanted to highlight the solid execution that drove our performance this past year. In 2025, the Option Care Health team continued to capitalize on industry dynamics and made significant progress in our efforts to create a sustainable growth enterprise. We opened new infusion suites and pharmacies, deployed innovative technology, deepened our referral base and expanded our formulary, while navigating a dynamic environment and shifting economics on certain therapies. As we reaffirmed this morning, our current views on 2026 are also in line with the guidance that we communicated in January. The team continues to execute at a high level every single day and the strength of our platform, our clinicians, our local market operations and the consistency of clinical outcomes across our national infrastructure continue to differentiate us and provide value to our stakeholders. Our partnership with payers continues to deepen as we help them navigate affordability challenges and find opportunities to rightsize care. We understand the pressure our payer partners are facing with rising health care costs as well as rate pressure for those with Medicare Advantage exposure. We see strong alignment between our capabilities and the outcome the payers are trying to achieve, and we expect that momentum to continue. We have active site of care programs with the largest national payers. And this year, we added 5 new programs with regional health plans and 2 additional with nontraditional payers. These programs are seeing traction, and we expect that number will continue to grow in 2026 and beyond. We remain committed to leveraging our platform to help manage the total cost of care, while producing quality outcomes through clinical oversight and helping to ensure adherence to medication care plans. On the formulary front, we see a strong pipeline of infused and injectable drugs to treat clinically complex patients, and we're encouraged by the engagement with pharma manufacturers and innovators, who are seeking partners with our capabilities. Our comprehensive clinical competencies, including one of the nation's largest network of infusion nurses as well as broad market access, national scale and local pharmacy resources positions us as a partner of choice to help new-to-market products reach their targeted patient cohorts. And our pharma partnerships also continue to expand, including earlier involvement through clinical trial support and enhanced service and data insight programs. We continue to invest in and strengthen our programs to create specialized service offerings, clinical effectiveness reporting and operational discipline to scale and configure programs with efficiency capture. Today, we are privileged to operate over 20 enhanced programs in service to pharma manufacturers, and we are excited about the pipeline of new programs we expect to launch in 2026 and beyond. Our referral source relationships remain strong as we have proven to be a reliable partner across health systems and specialty prescribers. Our consistent and disciplined approach helps us capture additional demand through increased reach and frequency with these referral sources. With the specialty prescriber base, we have aligned our commercial resources to improve focus on key call points. We see attractive growth vectors in neurology, autoimmune, dermatology, oncology and rare diseases, and we expect these therapeutic areas to play a larger role over time. The breadth of our portfolio continues to expand as additional therapies and indications are added, and we are excited about the opportunities ahead. We also continue to invest in growth across our platform throughout 2025. We added talent across commercial sales, operation and our clinical teams. We strengthened our technology stack to drive efficiency and scale. We continue to deploy artificial intelligence and automate key patient administration functions, including invoice processing and cash posting. Today, approximately 40% of our claims are processed without human intervention. We believe these initiatives will help us to grow without significant incremental labor within these functions, while improving the quality and productivity of our team members. Our ambulatory infusion clinic investments continue to progress well with over 25 centers offering advanced practitioner capabilities. These additional investments complement our home-based and alternate site model, expand patient choice and can support higher acuity therapies in cost-effective settings. To provide some context, on a pro forma basis for Intramed Plus, which we acquired in 2025, our infusion clinic visits grew over 25% in the fourth quarter over prior year. And we've seen continued momentum in both the Intramed Plus sites in South Carolina as well as within our other infusion clinic locations. We expect to further leverage our model as we navigate regulatory compliance and identify strategic locations for new clinics. Additionally, over 34% of our nursing visits this quarter occurred in one of our infusion suites or clinics, and we expect to continue to leverage the infrastructure we've built, which contributes to the results in both clinical capacity and efficiency. And with that, I will turn over to Meenal for a closer look at the financial results. Meenal? Meenal Sethna: Thanks, John, and good morning, everyone. As John noted, 2025 was a strong year for the organization, and our results reflect both the resilience of the business and the strength of our team. For the full year 2025, net revenue was $5.6 billion, up 13% over prior year, driven by balanced growth across acute and chronic therapies. Our teams continue to capitalize on evolving industry dynamics to capture volumes from both health systems and specialty prescribers. Acute revenue grew in the mid-teens, while chronic therapies grew in the low double digits. As discussed in our third quarter call, we began to see Stelara biosimilar adoption, which carries a lower reference price and reimbursement. For the full year 2025, we absorbed a company revenue headwind of 160 basis points from patient transitions to Stelara biosimilars impacting our chronic portfolio. Gross profit dollars grew 7.4% and our SG&A percent of sales declined 50 basis points versus last year to 12.1% as we continue to see the positive impact of our efficiency initiatives and leverage. Adjusted EBITDA of $471 million increased 6% over prior year, and our EBITDA margin was 8.3%. Adjusted diluted EPS was $1.72, growing 9% and reflecting the strength of our operating performance and the impact of repurchasing our shares over the course of the year. We generated $258 million in cash flow from operations for the full year 2025 and finished the year at a net debt to leverage ratio of 2.0x. As we shared in early January, we expected to finish below our prior guidance of $320 million. Consistent with prior years, we executed on some opportunities for strategic inventory buys, where we could achieve some favorable economics, including some opportunities that arose later in the fourth quarter. Additionally, we ramped up our working capital for certain limited distribution therapies more than we had estimated as clinical and operational investment is essential to support long-term growth. And overall, as we grew sales 13% this year, we naturally have some higher working capital carry to support the growth of our business. We are setting our 2026 operating cash flow guidance to be greater than $340 million, reflecting a 30-plus percent growth in cash generation versus last year. We are already executing on initiatives to reduce our working capital with a focus on inventory as we believe a significant portion is timing related. We are also taking a fresh look at our processes and practices around working capital management to continue driving our strong cash conversion cycle. Consistent with prior years, our cash generation is seasonal with the first quarter historically being the low point and the majority of our cash being generated in the back half of the year. Turning to capital allocation. We executed on all fronts in 2025, and our priorities remain consistent. Our primary focus remains internal investment to support profitable growth, capacity and efficiency initiatives. In 2025, we added over 80 infusion chairs as we continue to build out our suite in clinic footprint, where we identified strategic geographic growth opportunities, but we remain focused on maximizing utilization within our current infrastructure. We also invested in adding key clinical and commercial resources to the team. On our second priority, M&A, we remain active on identifying complementary tuck-ins and adjacencies. We acquired Intramed Plus earlier in the year, and the business and financial performance beat our initial expectations. We will continue to exercise discipline as we evaluate potential acquisitions, ensuring they are both strategic and financially attractive. And finally, we will periodically buy back our shares. We repurchased over $300 million of our shares during 2025. And as we announced in early January, the Board expanded our share repurchase program authorization by $500 million. As we look forward to 2026, we are reaffirming the guidance we announced in January. We expect full year 2026 revenue of $5.8 billion to $6 billion, which reflects a 4% growth at the midpoint and a 400 basis point revenue growth headwind driven by Stelara IRA and Stelara biosimilars conversion. We are guiding to adjusted EBITDA of $480 million to $505 million. This includes a $25 million to $35 million gross profit headwind related to Stelara and Stelara biosimilars conversion with the financial impact expected to be realized evenly over the year. We expect adjusted diluted EPS of $1.82 to $1.92, and as I noted earlier, expect to generate at least $340 million in operating cash flow. On some modeling items for the full year 2026, we're forecasting net interest expense to be in the range of $50 million to $55 million. We are estimating a full year tax rate in the range of 26% to 28%, and we are assuming a share count of 159 million shares for the first quarter. We are confident in the guidance we are putting forth and look forward to continuing our track record of execution. And with that, I'll turn it over to the operator to open up for questions. Operator? Operator: [Operator Instructions] Our first question comes from David MacDonald of Truist. David MacDonald: Just a couple of quick questions. John, can you talk in a little bit more detail? I mean, it's hard to kind of get through a day without hearing about affordability. You talked a little bit in your prepared remarks about the payers. But can you also talk about not only just what you're seeing in terms of the payers? It sounds like those conversations are certainly incrementally ramping up. Let me know, if that's accurate. And then secondly, just what you're seeing in terms of conversations with potential hospital systems, just given some of the pressures that they're seeing and chatter around things potentially down the road in terms of maybe like site neutrality. Just any additional color there would be helpful. John Rademacher: Yes, absolutely. Dave -- so on the affordability, as I said in the prepared remarks, we're working closely with the payer community around helping to enable their focus around total cost of care and reducing that as it moves forward. We have in place, as we called out, site of care initiatives that help to identify opportunities to transition patients on to service with us and help to reduce that total cost of care, whether it's in the home, whether it's in one of our infusion suites or in one of our infusion clinics. So we've had programs in place. I would say the pace of those conversations has increased as the payers have been focusing around really their MLRs and looking for opportunities to maintain quality, but do it at a lower cost. And we're encouraged by those conversations and the opportunities that we believe that brings to us as well as to the patients that we have the privilege to serve. On the hospital system front, I'd say similar. There have certainly been strong relationships across the country with key hospital systems, focusing on helping to transition patients safely and effectively on to care with us, especially when they have a capitated DRG type of payment plan, they are always looking for the ways to help to transition those patients safely out of their facilities. We embed RNs into those hospital systems to help with that transition of care. We believe that, that's going to continue to be a strong point given the national scale we have, but that local responsiveness that we talk about. And that is the balance of the portfolio. We talk a lot about the acute and chronic portfolio that we have. That ability to serve the breadth of products as well as the breadth of patient population just positions us well to support the hospitals and health systems, whether it's an acute discharge for a patient on an IV antibiotic, whether it's supporting a 340B program on some of the specialty drugs, we have a wide range of programs that we work with the hospitals and health systems to enable them to be able to achieve the best outcomes. David MacDonald: Okay. And then just, John, a couple of other quick ones. Just in terms of Advanced practitioner, I just want to make sure I caught that right. Could you just run through, were those pro forma numbers across the entire advanced practitioner 25 locations. Was that just Intramed? Just -- I just want to make sure that I had that correctly, down correct. And then one other quick question. You talked about driving increased utilization of your existing footprint. Can you give us a sense, is it fair to assume that as some of these have matured, that roughly 20% increase that you've seen in nursing efficiency goes higher as these things mature and you further drive utilization within those centers? John Rademacher: Yes. So starting with the prepared remarks, the 25% increase was the Intramed sites as we took that over on a year-over-year basis just in the comparable, continue to make investments into that marketplace as we went through the integration of that asset as being part of the Option Care Health family. So really pleased about that. The rest of the sites are seeing the momentum. We didn't necessarily scale or call out the exact growth on that, Dave, but I just wanted to put it into perspective on the Intramed sites. On the overall efficiencies that we expect, yes, we continue to see growth in our patient census. I mean, as I called out in the prepared remarks, we served over 315,000 unique patients last year. That is an all-time high for this organization. It just shows the strength of the platform and our ability to reach into that. Continue to utilize the footprint, especially in the infusion suites and the infusion clinic, just allows us to drive both capacity and efficiency of the nursing network and continue to drive that forward. So we had called out before about a 20% improvement that we see in the nursing efficiencies over time. And that's part of that equation of where we're seeing the use of those sites to really help us drive the operating efficiency and leverage, but also to increase the capacity of our nursing community. Operator: Our next question comes from Matt Larew of William Blair. Unknown Analyst: This is Jacob on for Matt. I just want to touch on the outlook to start. I appreciate you first guided about a month ago and today reiterated that guide. But just wondering, if you see anything that has made you maybe more cautious on the outlook for the year, whether that be updated numbers, expectations for Stelara. I know you reiterated the guide you had previously given for that. But just what kind of maybe early trends in the first quarter have showed you, maybe any ramping drugs or drug classes or anything from the recent IRA announcements as well as any upcoming biosimilar launches you'd highlight that could potentially affect numbers to the both ends of the guidance range this year? Meenal Sethna: Sure. Jacob, so I'll answer your question. I'll give you the short answer, which is no. We didn't change anything related to our guidance that we provided in January. We, of course, are keeping track of the landscape and the number of puts and takes that are going on, a lot of noise in the news these days. But from where we sit in the plan that we've put together, we still feel very good about the guidance that we've set forward, both from a sales growth perspective as well as profitability. And then we also added in the cash flow guide in that. So we feel -- we haven't really seen anything that would lead us to changing anything in the guide right now. I don't know, John, if you want to speak to trends? John Rademacher: Yes. I think the overall trend is in alignment with our expectations. We had done a lot of planning heading into the year. And certainly, when we were formulating what was going to be that pre-release guide that we put forward. I think what we're seeing at this point in time is that things are trending in alignment with kind of our expectations. As you know, the first quarter is a very busy time with benefit verification and reauthorization and prior authorization for new patients coming on to service. And so there's always a bolus of activity that kind of comes at the beginning of the year. It really takes the quarter to fully shake a lot of that out. But at this point in time, we're very confident in the '26 guide and continue to believe that everything is patterning in line with our expectations. To your broader question, and as Meenal said, there is a lot of noise in the marketplace at this point in time. We're trying to separate the signal from the noise. And again, we don't see anything in '26 that really is changing our perspective around where we see the growth and where we see the opportunities that lie ahead. So I think the team is staying close to any of those developments. But at this point in time, we feel very good with the guidance that we have reaffirmed this morning. Unknown Analyst: Got it. And I want to go back just quickly on the advanced practitioner model. I think in last quarter, you mentioned 24 of your 175 total facilities were equipped this model. I think I heard over 25 this quarter. So just wondering what your target pace for convert earning and opening new sites in 2026 and beyond this. And maybe as a follow-up to that, as you scale both the infusion and these advanced practitional models, what are kind of the key limiting factors for increasing the pace of the new site openings? And maybe what does the plan to invest in those capabilities look like in the next couple of years versus what that looked like in the last couple? John Rademacher: Yes. So as we've expressed before, I mean, we have a pretty big installed base of our infusion suite, and there's kind of a collective approach that we're taking on our infusion clinic build-out. Some of them are new sites that are greenfield that we are building, when we find strategic geographies in which we want to have that capability. And others are the conversion of our existing sites to transition them over and get the licensure, and there's a modest amount of refurb that needs to happen in order to make them an infusion clinic. So we're kind of going about it in both ways as we see the market opportunities and driving that forward. As we called out and as you heard, we have continued to grow that in the fourth quarter, and we expect that we're going to continue that conversion and growth into 2026. I don't know that I'm willing to put a target out there at this point in time. It moves in some way an interesting pace. I think as we've explained before, a lot of it has to do with corporate practice of medicine at a state level and the ability to get credentialing with the payers through that process. And so we're actively moving forward with that. One of the big aspects of where we really can drive the utilization is the investments that we also called out in investing in our commercial resources, having the sales team that is making the call, certainly investing in the clinical resources that are necessary to be able to oversee those clinics and operate within that environment. And then this balance of the operating model where a patient is best served under the practice of pharmacy or where a patient is better served under the advanced practitioner model and balancing those out. So we continue to make investments across all those dimensions. We believe this is additive to our overarching strategy of being a partner of choice and having a choice for patients to select the best site for their care. And so we're going to continue down the pace, and I would expect that you're going to continue to hear us talk about the growth that we're seeing in the existing installed base as well as continue to make additional investments to expand our capabilities and expand the network of advanced practitioner clinics. Operator: Our next question comes from Pito Chickering of Deutsche Bank. Pito Chickering: I guess the first one here, just a quick housekeeping. Can you quantify the Stelara impact you guys saw in the fourth quarter? I just want to be able to model what gross profit growth year-over-year was excluding Stelara. Was that in line with your sort of $20 million to $22 million of EBITDA impact in the fourth quarter? Meenal Sethna: Yes. The short answer is yes. In the end, for Stelara and the headwind that we talked about, which was close to the $70 million or so, it patterned out exactly as we thought. And so if you assume about $20 million of an impact in the fourth quarter, maybe a little more, that's over 100 basis point impact to gross profit. Pito Chickering: Okay. Perfect. And then looking at your split between acute and chronic growth for '26. Just sort of curious how you view the acute growth this year? Obviously, it's been a couple of big years post -- or big year post competitors exiting. I guess how do you view the revenue growth of acute in '26? And then also same question, how do you view the chronic growth in '26? And then the follow-up there from a margin perspective, is there any reason why the margins in '26, excluding Stelara, would change versus the last couple of years within those 2 segments? John Rademacher: Yes. So we expect to continue to see strength in our acute offering. As you called out, Pito, the marketplace continues to be dynamic there, but we believe we're well positioned. And the infrastructure that we have and the capability set really plays well to capture that market demand. I think we have characterized that the industry of those types of product is a low single digit. Our expectations is probably a mid-single digit on that so that we will continue to capture the market demand as it moves forward. Again, that's a step down from the prior year, where we had the competitive closures, but it still is a strong result on that. I would say the profit contribution on the acute would be consistent with what we would expect and what we've seen in prior years. No major changes from that perspective. On the chronic, again, given some of the headwinds of the biosim and the Stelara, we still expect that to be in the high single-digit, low double-digit growth on the chronic standpoint. Again, as you had called out, certainly, we have the headwind of the biosimilar and Stelara impact on a year-over-year basis. But the rest of the portfolio, I would say, is in alignment with kind of what the historical expectations or the historical performance has been from that. We're going to continue to have to fight through a little bit of a mix challenge in the sense we're going to be growing our chronic faster than the acute, and that's going to put some pressure on the gross margin as a percentage aspect. But again, we feel good about the strength and the breadth of the portfolio. And as we called out, we're punching above our weight class in some of that aspect where you're working through the headwinds of Stelara and putting that behind us in 2026. Operator: Our next question comes from Brian Tanquilut of Jefferies. Brian Tanquilut: John, maybe to follow-up on your points to Pito. As I listened to your prepared remarks and heard all the things you were talking about in terms of the drivers of the business going forward, your AI benefits and the fact that your business probably can't be AI. So when we think through all that and the fact that Stelara is behind us now, is it right to think that we should revert back to sort of a double-digit EBITDA trajectory once we get to 2027? John Rademacher: Yes. I mean, look, Brian, we don't give '27 guidance on the day that we gave out '26 as you expect. But the fundamentals of the business, I guess, part of the prepared remarks were around the fundamentals of the business being strong. We believe we're on the right side of the cost quality equation. We believe that we continue to partner with payers and pharma and really have a unique platform for our stakeholders to help achieve their goals as we're achieving our goals. There is -- there will continue to be opportunities as we see the portfolio of products that are entering the marketplace as well as the ability to use our clinical resources to the fullest across that. So I think things are setting up really well for us to continue to drive the business forward. I think we're extremely well positioned to capture that market demand and deepen the partnerships with those key stakeholders. And I think as we move through the year and continue to make progress against the objectives that we've outlined, I am confident in the strength of the position that we hold and really confident in the opportunities that we have to continue to capture market demand and really drive around those new vectors of growth that I outlined. Meenal Sethna: Yes, it's Meenal. Just the other thing I'll add when we put forward our '26 guide, we talked about -- there's a couple of headwinds in there, 400 basis points related to hopefully, the last couple of quarters, we'll talk about Stelara. So 400 basis points headwind on the revenue side. But then with the $25 million to $35 million EBITDA impact we talked about, if you take that out of the growth rate that the guidance implies, that puts us at a double-digit EBITDA. So that's what we're striving for, echoing everything John said about a lot of the initiatives, a lot of the work that we're doing. And we're just really focused on 2026 as a year of execution on a number of different initiatives and investments that we've made. Brian Tanquilut: That's very helpful, Meenal. Maybe my follow-up, as I think about your guidance for the year, what assumptions have you made in terms of biosimilar shifting within the Stelara portfolio or even through other therapies like Tremfya? Or question asked differently maybe, is there upside opportunity as those things occur over the course of the year? John Rademacher: Yes. I mean we entered the year with assumptions around the portfolio and the census of chronic inflammatory disease kind of the broader category, Brian, inclusive of that Stelara, knowing that there were going to be shifts to biosimilars, there were going to be shifts to other products in the portfolio. And some of it was going to be led by the PBMs and payers around their formulary management and the way that they were aligning around those opportunities. I think as I said in a previous question that was asked, I think, it's patterning the way we expected it to or at least close to that, which gave us confidence to reaffirm the guidance today. It's -- those shifts, the first quarter is a really important quarter just because of all the prior authorization and reset that happens through that process. I think as we get through the end of Q1, we'll have a better sense around how everything is going to shake out on that. But at this point in time, it's in alignment with kind of our expectations. There's really nothing else that is on the horizon in 2026 that we think has material impact on the portfolio, either with new product entrants or biosimilar conversions other than the Stelara as we have called out. Operator: Our next question comes from Lisa Gill of JPMorgan. Lisa Gill: John, I wanted to go back to your comments around the expanded formulary. You talked about a strong pipeline in infused and injectable products. Can you maybe just talk about any specific opportunities that you see? I know in the past, you've called out, for example, rare and orphan products and large dollar amounts, but smaller gross margin percentages. Anything that we should keep our eye on as we think about '26? And then just kind of dovetailing into that, when I think about the strategic inventory buys that you talked about, should we think about that also as more of a first quarter impact? Or is that also going to be spread throughout the year? How do I think about the cadence of some of this? John Rademacher: Yes. So I'll start, Lisa. Yes, thanks for the question. I think when you look at the formulary and kind of the opportunities that we see in the pipeline, I would guide us a little bit more towards some of the rare products. The platform that we have, the clinical capabilities -- we had -- and we had announced earlier that we have 2 additional platforms that are going to be starting in 2026. A little bit hard on some of those products to know what the uptake is going to be and with PDUFA dates and things of that nature as to when the actual launch will happen. But we have 2 programs that will come online in 2026 in addition to the portfolio that we have. We think the platform itself is really -- has strength in the pharmacy infrastructure, the infusion suite infrastructure and the clinic infrastructure as well as the clinical competencies that we have to continue to partner deeply with pharma on that. So I think you'll hear more about that as things progress, and those are areas of focus. There are additional products that are coming in, in the chronic space that, again, we feel encouraged about either expanded indications and/or an opportunity for entrance of new products into the portfolio. So look, I'm not going to call out single products for various reasons. But the strength of the team that we have in place that works with pharma manufacturers to identify those opportunities to make certain that we're on formulary or it's a part of our formulary and we're able to bring it in. And in some instances, either through a limited distribution or exclusive arrangement, we're always looking for how to leverage our infrastructure to the fullest and be a really strong partner to pharma as they're looking for channel partners to be able to reach their patient cohorts. Meenal Sethna: Yes. And Lisa, I'll answer the cash flow question for you. In general, we would expect -- and maybe I'll take a step back. I talked about in the prepared remarks that we had -- as we've typically done, we made some strategic inventory purchases. Some -- there were some decisions late in the fourth quarter when we did that. As typical during the year, we'd expect it to get used up. Whether that's exactly evenly through the quarters, it's a little chunkier with cash flow, but I would expect it would go through the year. And just a reminder, I would also say that as we think about cash flow seasonality, we've historically seen, where Q1 tends to be the lightest cash flow quarter tends to be much stronger in the back half. So it's hard to see where the inventory patterns will match in there, but we will comment on it, and you'll see tracking coming through with just inventory balances shrinking throughout the year. Lisa Gill: Just a follow-on to your capital allocation strategy. I've heard both you and John talk about Intramed being very successful. How should I think about '26? Do you see incremental opportunities for another Intramed or other types of tuck-in acquisitions in '26 versus share repurchase? Meenal Sethna: Yes. I mean I'll start with this. As I think about our M&A strategy, we're absolutely -- that's a big focus. We've talked about organic investment followed by M&A. We have added additional resources to really focus on this area. And so we're continuing to evaluate a number of different opportunities that are out there. I just remind folks, right, you see what's above the water line. You don't see all the swimming going on underneath the water line, but there's definitely a lot of activity and M&A remains something that we go after. Intramed-like assets have been terrific for us as we've gone through in the past. So that's definitely a focus area for us. John? John Rademacher: Yes. And I would just echo that. I think that we're managing a pipeline of opportunities at this point in time. And as Meenal said, we continue to invest in that team and the capabilities to assess and then do that. The only thing I will continue to remind everyone is it's got to be both strategic and financially accretive for us as we're looking forward. That's the discipline that we've demonstrated historically, and it's one that we'll continue to maintain as we look ahead. Operator: Our next question comes from A.J. Rice of UBS. Albert Rice: Just to put a finer point on the seasonality, I'm interested on the income statement. You got the $25 million to $35 million gross profit headwind. I think the assumption with the way things played out last year was because you had forward buying that mitigated the impact of Stelara in the first quarter last year, the comp will be particularly tough in the first quarter this year and then get more normalized for the rest of the year. It sounds like you've got forward buying you're doing again this year. So should we think of that $25 million to $35 million headwind as being evenly distributed? Or is first quarter still going to be a tougher comp than the rest of the year with respect to that? Meenal Sethna: Yes. So let me answer both questions, A.J. So one, as it relates to 2026, and I talked about and this hasn't changed that the $25 million to $35 million headwind, we would expect to pattern out fairly evenly throughout the year. So there isn't that first quarter phenomenon that occurred last year. Having said that, when you look at the year-over-year comp, because of what happened in 2025, there is a bit of a year-over-year comp issue in Q1 where it was more favorable in Q1 last year, but not necessarily this year. So hopefully that answers what you were trying to get at. Albert Rice: Okay. No, I got it. I got it. And then I know John mentioned the application of AI and claims processing and things you're doing there. We're hearing providers talk about AI applications in various ways. I was curious when you go beyond that, is there any other applications that you're looking at for AI, whether clinician utilization staffing, other things that would be worth highlighting? John Rademacher: Yes, A.J. I would highlight that we're doing work with some agentic aspects for, as you would expect, call center capabilities and the ability to help better support customer service. We're doing work around workforce optimization and making certain that we have the right resources in the right places. As part of the overarching comments that Meenal made around strengthening some of the things on working capital, we're looking at tools to help better manage inventory and things of that nature. So I'd say it's broader than just revenue cycle manage at this point in time. The use cases that we have are expanding. And these are all, I guess, tools that augment our team. They help our team work more efficiently, more effectively and in instances, reinforce quality through that process. We have not done anything at this point in time to really put it in front of the clinician. We believe that the models are still a little bit immature in order to do that. We may look for opportunities to help support our clinicians in note capture and other aspects. But at this point in time, we have not done anything to put it in the pathway of the clinical protocol. Meenal Sethna: Yes. And the other thing that I'd add, A.J., is just as AI becomes there, I say, more mainstream, et cetera, there's a lot more, as John referred to, there's certain things that are now off the shelf that we're looking at or even when we're working with other vendors and partners where they're utilizing AI and other tools to help us -- help what they're doing for us on efficiencies. Those are other areas that are going on as well. So it's much broader, as John had said, it's much broader than just looking at the revenue cycle management area. Operator: Our next question comes from Joanna Gajuk of Bank of America. Joanna Gajuk: Just a couple of follow-ups. In the prepared remarks, when you talk about payers, you had mentioned 5 new programs with regional and 2 with nontraditional payers. Can you give us a little more color, especially the nontraditional payers, what exactly are you referring to? John Rademacher: Yes, Joanna, it's John. So there are conveners in the marketplace that are either trying to create a better solution for payers themselves and/or direct to employers. So those are the nontraditional partners that we're working with that allow us to expand our reach into the marketplace, but also be a partner across the payer community at the national, regional and the convener level. Joanna Gajuk: So when you work with these conveners and I guess sounds like direct-to-employer relationships, I guess, are these rates comparable to what you negotiated with commercial base or maybe that's better because it sounds like these parties look for solutions and maybe they're willing to pay a little bit better rates. I don't know. Can you give us a little bit of flavor on that? John Rademacher: Yes. I would say they're comparable within the way that the reimbursement, although some of the conveners and some of the, I guess, the more innovative organizations are continuing to take a look at capitated programs and looking for ways to help to manage the patient base in a more comprehensive way. So they're trying to innovate around those aspects, and we're working with them around thinking about new models as well as existing models that they're operating with. So -- but I would say we're seeing that it's -- they're comparable in the reimbursement. And in some ways, they just help us continue to innovate and make certain that we're thinking about the total cost for care in a broader sense. Joanna Gajuk: Okay. That makes sense. If I may, another follow-up. So you were talking on multiple occasions, I guess, around cash flows, but also in terms of the products and portfolio around limited distribution drugs. Just can you give us a sense of, I guess, how many you have and how many, I guess, you added in '25, how many you're adding in '26? And I guess, are you seeing any increased competition for these limited distribution drugs in the marketplace right now or less competition for that matter, but just any additional, I guess, commentary will be helpful. John Rademacher: Yes, Joanna. So we have over 20 platforms that we operate today that are either rare or limited distribution drugs that are part of our portfolio. We had called out in previous calls that we were adding 2 additional programs in '26 as of this point. These are normally -- especially on the rare side, they tend to be higher-priced products. There is some working capital build that comes with that as we're putting inventory into our infrastructure and helping support the commercialization of those products. So that's part of the working capital that Meenal had called out and some of the things that we use cash in '25 and '26 as we move forward. But we feel really good about the platform. When you think about the breadth on a national scale, the access points that we have, the relationships we have with the payers and then the clinical competencies of this enterprise, we continue to believe we are well positioned to compete for those. There are competitors in the space. It's -- as you would expect, in all of health care, it's highly competitive, but we believe that we're creating a very unique platform and have an opportunity to win our fair share of those type of programs as we move forward. Operator: Our next question comes from Charles Rhyee of TD Cowen. Charles Rhyee: Maybe, John and Meenal, a month back when you guys sort of outlined sort of the initial guidance for the year, I think there was sort of an assumption that you'd be looking at sort of -- it was early. You didn't know what your Stelara sense would look like. And so the assumptions you're putting out there, I think you were trying to -- if I understood it correctly, was taking kind of a conservative assumption on that. We fast forward here about 1.5 months, you kind of reaffirmed the guide. Anything about that in terms of what you have done maybe thought of what your census looked like versus what you're actually seeing now? Has anything changed or gotten better or worse? And then, John, I think you mentioned 340B in one of the -- in response to one of the questions earlier. Can you kind of talk about how you support 340B? And what is your -- maybe any kind of exposure you have to the program? I know there's some concerns around -- obviously, there's some regulatory risks that pop up now and then around that. Just curious how you are -- how do you work within the 340B program with your acute care partners? Meenal Sethna: Yes. Charles, why don't I -- I'll take the first part of your question on Stelara. So as we talked a little bit earlier, there's a lot of activity that always goes on in the first quarter with New Year benefit verification and formulary changes and just with a lot of the broader noise across the industry right now, it's been probably a lot more than that. Despite all that, when we look through all the activities and where we are today, we're not really seeing any substantial differences versus what we had assumed a month ago, when we thought about, I'd call it, Stelara and all the different potential formulary options that could be out there for patients. So if there was anything that would have caused us to rethink our guide, we would have incorporated here. But as I think John mentioned earlier, there really isn't anything that's substantially different. And it's still going to take us another month or so through the end of the quarter really to get through all of this new year activity as is pretty typical, but a little more enhanced this year just with other industry noise going on. John Rademacher: Yes. And then, Charles, on the 340B side, again, this is an additive program that we operate in support of our health system and hospital partners. Our model is one in which we either qualify as a pharmacy under the 340B criteria, and we just pass the savings on to the hospital. So like we're -- we certainly dispense the product and are able to get the economics that are normal with that. But any of the 340B savings is just a transfer of those savings back to the hospital. So we help to facilitate that and drive that forward. I wouldn't say it's a meaningful part of our overall economics in our overall program, but we like to support the hospital and health systems. We like to be able to bring them the benefits and the savings that could be generated when they're a disproportionate hospital. And we work with the clearing houses and across that in order to facilitate the savings to be passed on to the hospital. Charles Rhyee: So just to be clear, so that means if there were to be any changes in 340B pricing, that would have no impact for you guys because that's sort of a pass-through on your end? John Rademacher: Correct. Yes. I mean that's the way we've approached it. Charles Rhyee: All right. That's really helpful. And maybe just one quick follow-up on OpEx growth for this year, how should we think about -- I think last year, we saw some elevated expense related to the Intramed acquisition and investments in the business. Can you give us a sense, Meenal, sort of what we should be thinking about in terms of OpEx growth, anything kind of onetime or any things that are coming out? Meenal Sethna: Yes. When I take a step back and maybe I'll answer it in a '25 context and looking forward, when I think about 2025, our SG&A on print does look like it's up a little bit versus gross profit, and that's the lever that we're taking a look at. When you start to strip out, as you point out, Intramed and there's some GAAP-only charges that are sitting in SG&A and you take some of that out, we're actually in line or a little bit down on SG&A growth versus gross profit growth. So that's -- I mean, that's where we expect to trend as we think about going forward. We still have, I'd say, in '26, maybe a little bit more on the investment side that we're doing. So you may see a pattern slightly higher than gross profit. But as we look forward, we look for something closer to a leveraged model versus gross profit. Operator: Our next question comes from Erin Wright of Morgan Stanley. Erin Wilson Wright: I just have kind of one bigger picture, just higher-level question just on the competitive landscape and just thinking about some of the historical tailwinds with competitors exiting the market. I guess, can you talk a little bit about the runway left on that front? How much does that continue in terms of a tailwind for you? And are there other dynamics, I guess, to call out in terms of looking at the landscape and your ability to take advantage of some of those opportunities? John Rademacher: Erin, I think as we're looking ahead, we certainly don't see as big of a significant shift that we've seen over the last couple of years with 2 major competitors kind of resetting their network design and the product portfolio that they were serving. We still believe there's opportunities to take share in the market. We're well positioned. We like the infrastructure that we've built. We love the breadth of the network, but also understand health care is very local, and we have to win at the local level. So we're doing everything we can to be that reliable and consistent partner to be able to help with the transition of care for patients or be able to help them live their best life through the activities of our clinical teams in support of those care plans. So the market in general, I mean, if you take a look at some of the data, the market for infused products is over $100 billion. We're $6 billion of that. So we think there's still continued runway for us to be that partner of choice and to compete vigorously, but know that this is a hustle business, and you got to do it every single day. Operator: Our last question comes from Raj Kumar of Stephens. Raj Kumar: Maybe just kind of thinking about the kind of investment thesis around kind of just the internal spend and kind of the opportunity set that you've talked about around oncology and neuro. As we think about the kind of investment spend in 2026 and the capturing us that opportunity, is that more so that there needs to be internal capabilities that still need to be built out or potentially acquired to capture oncology in the home-based care setting? Or is it kind of more on the sites of care initiatives front in terms of just payer or hospital partner, acute partner education? And then maybe kind of on the AI initiative front and thinking about what was realized on 2025, any way to frame the benefit in terms of, if it drove increased throughput or any cost efficiencies, that would be kind of helpful. John Rademacher: Yes. So let me start with maybe the AI first. So as we had called out, I think the measurable response is when you're able to do 40% of your claim processing without actually having human intervention, you can see the benefits that are driven on that. Again, that allows our team to focus on the higher complexity claims, those that need additional support in order for us to get fair reimbursement for the services that we rendered. So our focus has been around there, but we're seeing those tangible results. And I think you see it in both cost of service as well as SG&A over time, knowing that you've got to invest a little bit ahead of benefit on some of those to be able to drive that forward. On the overall investments in our business, I think we remain a capital-light enterprise. I mean, I think for the next year, we'll be in that $40 million to $50 million range of CapEx as we're looking at the range of opportunities to deploy capital to grow our business. We'll go about your call-out on oncology or others. That's a two-pronged approach. There is investments that are required in the commercial team and being able to reach into the call points. There are some capabilities around the clinical protocols and the clinical programs that need to be developed in support of that. There's certainly the utilization of our infusion suites and our infusion clinics as part of that comprehensive view as well as the ability to transition patients to the home. So I'd say it's across all of those dimensions. And as we're looking at where we deploy our capital and the return we expect on those, we have a disciplined approach that Meenal and team lead to help to us to really assess the value that can be created there. But we think there's a significant amount of opportunities for us to look at those new vectors and continue to invest in the people, process, technology and facilities that will be required for us to win. Meenal Sethna: And the last comment I'll add on that is with all the investments John is talking about, we definitely have made investments in 2025, and you can see that. So you're going to see an annualization of that into '26. And plus like on the commercial resources side, that's an area that we're really leaning into and there's some additional investments we're making. That's part of the comments that I was addressing previously on still a little bit more SG&A growth that's going in ahead of the growth and the benefits we expect to achieve. Operator: I am showing no further questions at this time. I would now like to turn it back to the President and CEO, John Rademacher for closing remarks. John Rademacher: Yes. Thanks, Amber. In closing, I want to highlight the resilience of our platform and strength of our team and the underlying fundamentals of the business. We're well positioned to take advantage of the opportunities ahead of us, and I've never been more confident in the team's ability to capture demand for the extraordinary care and hope we deliver to patients and their loved ones. Thank you, and take care. Operator: This concludes today's participation in the conference today. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Diamondback Energy's Fourth Quarter 2025 Conference Call. [Operator Instructions]. Please be advised that today's conference call is being recorded. I would now like to hand the conference over to your first speaker today, Adam Lawlis. Please go ahead. Adam Lawlis: Thank you, Corey. Good morning, and welcome to Diamondback Energy's Fourth Quarter 2025 Conference Call. During our call today, we will reference an updated investor presentation and letter to stockholders, which can be found on Diamondback's website. Representing Diamondback today are Kaes Van't Hof, CEO; Danny Wesson, COO; Jere Thompson, CFO; and Al Barkmann, Chief Engineer. During this conference call, the participants may make certain forward-looking statements relating to the company's financial condition, results of operations, plans, objectives, future performance and businesses. We caution you that actual results could differ materially from those that are indicated in these forward-looking statements due to a variety of factors. Information concerning these factors can be found in the company's filings with the SEC. In addition, we will make reference to certain non-GAAP measures. The reconciliations with the appropriate GAAP measures can be found in our earnings release issued yesterday afternoon. I'll now turn the call over to Kaes. Kaes Van't Hof: Thanks, Adam, and welcome, everyone, to the fourth quarter earnings call. As usual, we will open up the line for questions. I hope everybody read the letter last night, a lot of good detail in there, and we look forward to discussing. So operator, please open the line for questions. Operator: [Operator Instructions] Our first question comes from Neil Mehta of Goldman Sachs. Neil Mehta: Thank you for jumping right into it. And no surprise, the area we want to dig into here is the Barnett case. And just talk about what you think the opportunity set is you are deploying more capital here in 2026, how you think about the potential returns associated with it and just the mix as well between oil and gas. Kaes Van't Hof: Yes, Neil, I'll give you some high-level thoughts and then turn it over to Al, but it's a pretty exciting reveal of our position in the Barnett. That's a position that was essentially almost 0 acres a couple of years ago. We were able to grow that position without cap raises or press releases or buying the next private equity-backed entity. So I think overall, being able to build a position in our backyard that we understand very, very well is going to be very good for our shareholders long term and good for corporate returns long term. We're not having to pay $3 million, $4 million, $5 million, $6 million of stick to build this position. And that's a testament to the team having belief in the rock. And now that we've put the drill bit in the rock, we found that the returns look very good from a productivity standpoint. The next step is we have to get the cost down. We haven't really moved to full field development. That's going to start here in the second half of 2026. in earnest and pick up in the coming years. So I think it's a good time for us to reveal what we have. We're not done yet, but I wanted to show our investors what we've been up to. And that resource expansion is an important part of our overall story. I'm going to turn it over to Al for some details and what he's found from a technical perspective. Albert Barkmann: Yes, Neil, I think if you look at Slide 12 here in the deck, you can see we've shown the performance of our 2025 Barnett plan here relative to our core development plan. And I think the performance really stands out speaks for itself. And I think when we're able to get the cost down 20% kind of from where we are with our delineation wells here, we think these returns are going to be competitive. So we're pretty excited about the potential here, 900 gross locations, and I think we'll be allocating capital to the plan more going forward. Neil Mehta: Yes. And that's a good follow-up, which is just talk about the product mix here. On Slide 12, you show that there is more gas that comes out of the Barnett, but actually, there's potentially more oil as well. So it's probably a little oilier than some of us would have thought. Just talk about how you're thinking about making sure that you're maximizing the liquids cut out of these barrels. Albert Barkmann: Yes. I think just looking at the absolute oil production, you can see that's even differential, right? And that's what we've got in the plot. The initial GORs are higher, right? So kind of in the 3,000 range. I think kind of what's striking when you compare the 6-month cum oil and BOEs to the 12 months, kind of see a flatter GOR profile, right, through the year, especially relative to the core. So the GOR profile in the core zones kind of ramps up a little faster. And we're seeing a much flatter GOR profile through the 12-month period. So where your core zone is like 80% oil for that first 6 months, it goes down to about 75% oil. The Barnett plan that we're showing here is 67%, basically flat for the first 12 months. So a little different profile on the product mix. But overall, I think the oil productivity speaks for itself and is very competitive once we get the returns where we see them going. Kaes Van't Hof: Yes. And the only one thing I'd add is whether the timing is planned or not, we do have a Permian Basin that's going to have a lot of gas takeaway coming on in the 2027 to 2030 time frame. We're going to have to drill a lot of Barnett wells over that time period. The Barnett's a different type of lease. It's not held by vertical production or production in the core zone. So we got a lot of drilling to do, but getting a good price for our gas and our liquids is going to be a benefit to returns in the 2027 plus time frame. Operator: Our next call comes from the line of [ Gabrielle Cerny ] of William Blair Equity Research. Neal Dingmann: It's Neal. Sticking with the Barnett, could you talk about the well economics there versus the Midland Basin? I guess what I'm getting at is I'm looking at Slide 12, it shows that your Barnett wells, you're talking about kind of a 36 MBOE per 1,000 foot 12-month cum versus 22 for the core Midland, yet you have the -- you talked about maybe the $100 per lateral foot Barnett versus what are you down to, I think, $500 or $550 for the Midland cost. So curious how you're thinking about total returns, Barnett versus just the Barnett -- or the Midland average. Kaes Van't Hof: Yes. Why don't I hit the high level and let Danny talk about how we're going to get the cost down. We -- high level, our core Midland development, which I would put as everything except the Wolfcamp D is close to about $510, $520 a foot. If we can get -- and the Barnett today is at $1,000 a foot. If we can get the Barnett down to $800 a foot and the Barnett oil production is 60% better on a first year cum than the core, then the returns start to get competitive. And I think we're fortunate that the rock has been proven first and then the costs will need to come down. But Danny has a few examples of how we're going to do that. Daniel Wesson: Yes. I mean I think a lot of the cost reductions we're targeting are really just a decision to move to kind of development mode and apply the techniques we've learned over the years developing what we call the Midland core with multi-pad development -- multi-well pad development, simul-frac. And those things are really just a decision to go to that full-scale development and see those cost savings accrue to the Barnett development as well. On the drilling side, we've been pretty conservative in the drilling plan we've laid out in the delineation wells, really just targeting successful wellbores. We have a lot of things we think we can apply in the drilling plans that we can cut a lot of cost out of the drilling part of the well. And also, we think the Barnett, the leasehold we've established in the Barnett sets itself up well for extended lateral development. So we're kind of targeting 15,000-foot laterals in the Barnett. It won't be everywhere, but we hope that the majority of the wells that we drill in that zone will be extended length laterals, 15,000 foot plus foot, which will also help drive down that per foot cost. Neal Dingmann: Great details. And then just secondly, case, my second is on inventory. And by the way, thanks for disclosing. I don't think versus any other companies have this kind of similar details around that. But I'm wondering, could you just address maybe talk about inventory replenishment and reinvestment in your existing asset base as it appears when you add the Barnett to your total drilled feet year-over-year only decreased minimally. So I'm just wondering how you're thinking about inventory replenishment and reinvesting going forward. Kaes Van't Hof: Yes. I mean, listen, we're in a depleting business, right? And we think about inventory every day. Diamondback was a company that went public with very little inventory and had to work for every stick that we added over the last 15 years. So it's something that's top of mind for me and for the team. And if you look at the inventory disclosure we put out, the team did a very good job increasing average lateral lengths last year, up by about 600 lateral feet on average, which is -- that's a big number on a big company. And I think we're going to continue to try to add inventory where we can. If you notice, like I said earlier, all this inventory was added and put in the plan without needing outside capital or press releases, all while still returning a ton of cash back to shareholders. So I think you should expect that to continue. I think we kind of have a philosophy here that no deal on inventory in the Midland Basin should leave Midland or leave Diamondback without us taking a look at it. So we're highly focused on continuing to replenish our inventory. We recognize that it's not infinite. But I think we have a plan to continue to grow it. Operator: Our next call comes from the line of Jeoffrey Lambujon of TPH & Company. Jeoffrey Lambujon: My first one means to hit on the implications from some of the Barnett disclosure while also still keeping in mind legacy Midland core operations. We took note of the strong oil cums from both data sets in the slide as you guys have spoken to already. And obviously, the productivity for the Barnett looks strong as well on an absolute basis. So as you think about that, we were hoping you could speak to your outlook for corporate oil mix over time as you continue to develop your Midland Basin core inventory and work in more Barnett Woodford over time as well. Kaes Van't Hof: Yes. It's funny, Jeff. We have a $3.75 billion budget and $150 million is allocated to the Barnett, but it's getting all the airtime. But that's the market we live in. I think that means that investors trust the inventory that we have in the core, and they trust that we have enough of it. But at the end of the day, what the teams are doing on the core inventory, the vast majority of our budget is very, very impressive. Lateral lengths up year-over-year, productivity in a world where productivity is being questioned on a per foot basis. In many basins, the team was able to increase productivity in 2025 versus 2024 on the oil side. And that just means we're continuing to test things in terms of stage length, stage designs, where we're putting the drill bit, spacing, all the zones that we're developing and the results kind of speak for themselves. I think generally, with the Barnett becoming a bigger piece of the capital pie, oil mix will go down over time, which is why we've tried to focus more and more on our gas marketing strategy and getting better realizations on that front because I think it can really help overall free cash and corporate returns kind of after these pipes come on in the back half of 2026. Jeoffrey Lambujon: Perfect. That's very helpful. And then for my second question, I actually wanted to revisit something that's also not yet factored super meaningfully into guidance, at least for now, but is also exciting to think about, which is the hyperscaler and data center opportunity that you've spoken to in past quarters and on past calls and how Diamondback really offers the full suite of what a counterparty there would be looking for in terms of the surface acreage you added last year, the water supply potential, especially thinking about deep loop and of course, gas or power from your upstream business. So I wonder if you could just get a refresh on how discussions are progressing there and how you're thinking about those opportunities in general. Kaes Van't Hof: Yes, Jere is going to take that one. Jere Thompson: Yes. Jeff, you're exactly right. I mean we continue to be excited about the opportunity as we feel we have all the pieces for a very compelling project. And we're making progress on bringing data centers onto our surface position. I think as you think about Diamondback specifically, the biggest benefit here is our ability to structure a power purchase agreement that provides for material uplift to nat gas pricing. So just another creative tool in the toolbox for us as we are thinking about improving natural gas realizations, which we obviously highlighted in the deck and Kaes alluded to earlier. So a new meaningful in-basin egress solution for us. So we continue to make progress. We're excited about the opportunity. And when we have more to discuss publicly, we'll definitely do so. Kaes Van't Hof: Yes. I think the one thing I'd add there, Jeff, is we're not going to announce anything until it's completely binding and we can talk to our investors about what it means for them. There's been a lot of noise in this space. I still continue to believe given our size and scale and expertise in the basin, we offer the full package and conversations have improved. But we're not going to talk about it in detail until we have those details, but a great question. Operator: Our next call comes from the line of Phillip Jungwirth from BMO. Phillip Jungwirth: I'll also give the Barnett more airtime here. I appreciate you bringing resource expansion back to the E&P sector. But -- so the Midland Basin, it's obviously a large area. I was just hoping you could talk about how you see Barnett variability across either your or other operator wells across the northwestern side of the basin versus Southeast? And why do you think your Barnett well productivity has outperformed the industry to such an extent? Albert Barkmann: Yes. I think the big distinction that we kind of see when you look at the map on Slide 12 here, the wells that are to the western side of the basin and actually up on the Central Basin Platform, which is really where the play began back in kind of the late 2000-teens, that has lower maturity, so more within the oil window. And -- but that comes along with lower bottom hole pressures. And so what we've seen in terms of 30-day IPs and 6-month cums is the well performance in that area where the play kind of kicked off is not as strong and robust is when you kind of move down into the basin and you've got higher bottom hole pressures and you've got more gas in the system. So you're getting higher initial rates. And I think the variability in GOR, we're still kind of delineating around the basin, especially as you move to the east and to the south. And so there is going to be variability in GOR. But I think one of the things that we really focused on from a technical standpoint is where can we find the best resource, the biggest resource and then the potential to drain potentially the Barnett and the Woodford reservoirs with a single wellbore. And we believe we've put together a really strong position in the best resource quality within the basin. Phillip Jungwirth: That's great. And then you called out Diamondback having nearly 2 decades of inventory at its 2026 pace. Last year, there's a lot of talk about peak Permian, who has inventory to grow, who doesn't. But for Diamondback, assuming a green light scenario, just how do you think about a sustainable growth rate that can be achieved for the company over a multiyear period given the depth of resource you have? Kaes Van't Hof: Yes. I mean, listen, I think it's -- that's highly dependent on the macro. But in general, it feels like investors over time, want some form of growth. Now we've done it on a per share basis for the last few years. At some point, organic growth is going to come into the equation. Unfortunately, we're still stuck in this yellow light and this stoplight analogy that we can't shake yet. But I think there's probably a world where if we can efficiently allocate capital and growth becomes kind of the output, that's probably a good decision. I think for 2026, we're starting the year here still in this kind of quasi-yellow light where oil production is the input and then CapEx will be reduced if things go well and held steady if things go as planned. But it could be a world where we hold CapEx flat and see what growth comes out of it. But that day is not today, but there will be a time, and that's why every day, we think about inventory, inventory duration, inventory growth and things like the Barnett, which is getting a lot of airtime today are accretive to that long-term duration story. Operator: Our next question comes from the line of Arun Jayaram from JPMorgan Securities. Arun Jayaram: I also have a follow-up on the Barnett. Yes, just a follow-up on the Barnett. Looking at the 12-month cum plot on Slide 12, it looks like the average well is delivering just under 50% more oil cuts or mix over the first 12 months of the well. I just wanted to see if you could comment on your thoughts on what the Barnett would do for your oil -- in terms of oil growth over time because that's been just a question we've been getting just because there is a little bit higher gas you're getting, but the oil cut is higher than that. And if we could maybe translate that into an oil EUR for an average well based on your test so far? Kaes Van't Hof: Yes. I'll let Al give the EUR commentary. I think the one thing I would say, if you start to run these wells at $800 a foot or close to it, the rate of return relative to the base plan looks very comparable, but the PV is significantly larger. So we look at both of those things, PV and rate of return and try to find a nice balance there. But the key here is getting these costs down makes the returns competitive, particularly in areas with Viper minerals, but then the PV impact is huge. So from an NAV perspective, that's very positive. Now I'll turn it over to Al for some type curve commentary. Albert Barkmann: Yes, Arun. So that 50% uplift that you kind of see at the 12-month time frame, that roughly equates to the uplift that we see relative to the core zones on an EUR basis. So you think about our core zones, those are about 50 BO a foot in the Midland Basin. So right now, in the Barnett, we think we're pretty close to about 75 BO a foot for the ultimate recovery for those wells. Arun Jayaram: That's helpful, Al. Just on my follow-up, I was wondering, case, in your shareholder letter, you mentioned how the company was testing for surfactants. And just give us a sense of how those pilot projects are going? Are you using surfactants in terms of your base production management? Are you testing those in terms of new completion activity? But give us a sense of what you're seeing thus far and how you're using those in terms of your development scheme? Kaes Van't Hof: Yes. It's early in the surfactant game, but it's exciting. We did a 60-well test in the second half of last year, a credit to the team to mobilize that quickly. This went from an idea in June to execution by December, and we got a lot of data coming in from those tests. We focused on the production side for now so that we can try to figure out which variables are working. I do think there's been some discussion about adding this to the front end on your completion. I think we're going to test that. We're also going to continue to test the production side of the business. And from a high-level perspective, in my mind, this was something that no one talked about outside of papers, SPE papers 4 or 5 years ago, and now it's becoming something that can potentially be economic. And I think that is why we put in our last shareholder letter, never underestimate the American engineer because there's still a lot of oil in the ground in the Midland Basin and the Permian Basin that needs to be extracted. It just needs to be extracted economically, and that's what we're working on today. So Al, do you want to talk about the tests? Albert Barkmann: Yes. So like Kaes was saying, we trialed 60 treatments kind of in the back half of 2025. A lot of lab work and technical work going into designing the surfactant for the specific rock types and the specific surfactant types that we're using -- it's pretty early on in the results, but we've seen at least in a handful of the DSUs that we've applied this to some really exciting results. And so the team is taking that information and going back, refining the chemical makeup there and the design of the test and really trying to hone in on the variables that are driving the performance for the program. Kaes Van't Hof: Yes. I think this is all just gravy, right? This is all added production, added reserves to something that we didn't think was possible a few years ago. And I'd say this is B 1.0, Arun, right? This is what Wolfcamp B fracs look like in 2014. So I think we got -- you look how far we've come in 10 years. And again, this is a highly technical organization that's going to work to figure some of this stuff out. Operator: Our next question comes from the line of Bob Brackett from Bernstein Research. Bob Brackett: And I'm going to have to go back to the Barnett just because it seems to be the flavor of the day. If I compare your typical well, it's less than $600 a foot. You've got a path for the Barnett to get from $1,000 a foot to $800 a foot. But the top of the Wolfcamp versus the top of the Barnett are a couple of thousand feet apart. So not a whole lot of vertical depth. what's timing the drilling down there? Or is it on the completion side where those incremental costs are coming from? And what are some potential solutions? Kaes Van't Hof: Yes. Bob, thanks for asking. It's really just a different resource altogether. And we've got to set up a drilling program that's a little bit different than what we do in the Midland Basin core. The Barnett, we're using oil-based mud. There's an extra string of pipe in the vertical portion of the hole. And all that we've been doing, as I alluded to earlier, to derisk any kind of operational issue as we were delineating this play. And I expect we're going to continue to do -- to be a little bit more conservative as we roll into development mode on the drilling side, but we'll start doing things that we know through calculated risk, we can do to cut costs out of those wellbores. And on the completion side, too, there's some additional costs there. The jobs are a little bigger. We're targeting 4 wells a section in the Barnett. So we're pumping larger jobs to try and generate a larger simulated rock volume across those 4 wells. And we've been only doing 1 or 2-well pads, so a lot of single well or zipper fracs. And as we move into development, we're going to move into full-scale 4-well pad development or 8-well pad development on the Barnett and utilize simul-frac, continuous pumping, the things that we've learned from our development in the Midland Basin core over the years. Bob Brackett: That's all very clear. A quick follow-up, if I could. One of your peers had talked last week about international opportunities. I'm curious where do international opportunities sit on your list of strategic priorities? Kaes Van't Hof: Yes, Bob, I mean, it's certainly low from a strategic perspective. I would say a company of our size should start to understand what else is out there around the world and really for the main reason of what else around the world could push us out on the global cost curve. And we've spent a lot of time studying that. Obviously, there's different dynamics above ground and below ground around the world. And I think what that's taught us is we have a very, very good long-duration inventory in the Permian Basin. And now there's things like the Barnett and surfactants and all that kind of stuff that we're going to be talking about a lot over the next 3 to 5 years. And that just kind of points me back towards staying home. And the Permian Basin has been very good to Diamondback, growing our position here. We're basin experts. And there may be good rock around the world, but there's a lot of other issues that come with that rock. So we've learned a lot about what's out there, but there's not a lot of action that we're focused on today. Operator: Our next question comes from the line of John Freeman of Raymond James. John Freeman: You all had a really nice improvement in your leading edge completed feet per day at 4,500. Just maybe some thoughts on what's sort of embedded in the '26 plan and just where you all see that potentially getting to by year-end? Daniel Wesson: John, thanks for asking. Yes, I mean, the core program still continues to really shine. And Kaes put some commentary in his shareholder letter around some of the continued efficiency improvement we're seeing on the drilling side and the completion side. And on the completion side, the team has been working on implementing what they call continuous pumping across all of our simul-frac e-fleets. And really, what that means is we just don't shut down between swapping wells in the simul-frac pad. And we've been averaging 4,500-ish feet a day on those continuous pumping fleets, but we've seen some results above 5,500 feet per day. So we're encouraged by that. We think we still have opportunity to reduce our cycle times this year. And if that comes to reality, we're going to be able to get rid of some frac crews and be able to hopefully complete less wells in the year to achieve our production targets. Kaes Van't Hof: I think one thing I'd add, John, that we're kind of finding out, we're really starting to test different stage length, stage designs, frac designs. And what continuous pumping does is it removes the biggest piece of nonproductive time to swapping between your stages. So we're going to test shorter stages. We're able to do that with less cost. I mean all these things are little wins that accrue to our shareholders. And you think, hey, continuous pumping, it's one thing to do more lateral feet, but what are all the other tangential benefits that are now starting to show their face, and that's what's exciting there, too. John Freeman: That's really helpful. And then just my follow-up, tariffs have been pretty topical of late. Have you all secured or maybe locked in the pricing on all steel-related products for the '26 program? Daniel Wesson: The way our procurement agreements work on the casing side of things, it's kind of a repricing quarterly. With the tariff ruling that was just announced last week, we're not sure how much impact that's going to have on OCTG because that flows through a different law as far as the tariffs go. But we reprice our casing every quarter based on an index price with our supplier. And then on the tubular goods, we do procure those things out in longer lead times if we feel like we've got an opportunity to secure some at a beneficial price. And we kind of watch that market and just make those decisions based on where we think the market is headed. But the tubing side of things have been pretty sticky even through the tariff world. Really, the inflation we've seen has been on the casing side of things. And unless we get some other tariff relief on -- I think it's Section 232, then we don't think those tariff-related inflationary impacts are going to go away. We're just really waiting on or looking to see what activity does in North America to drive casing prices one way or the other. Operator: Our next question comes from the line of Derrick Whitfield of Texas Capital. Derrick Whitfield: Congrats on a strong year-end. I wanted to start with surfactants. From my understanding, the capital efficiency on using surfactants in your workovers is quite exceptional. Could you perhaps elaborate on the degree of uplift you're seeing in production on average for dollars spent? And separately, on the new well side, understanding you guys are very early in the process, but maybe could you speak about it from the data you're seeing from Viper that would suggest that you are seeing an uplift in EURs on new wells? Kaes Van't Hof: Yes. I don't know if we're seeing enough yet at Viper to make that distinction. We don't have all of the private data on designs and what got pumped. But I think if we start to see overall productivity improvements from peers, we spend a lot of time trying to study that and say what can we do better. The thing I would say about our surfactant tests, tested 60 wells. They're fairly cheap jobs, about $0.5 million, and I think we can work those down. What we did was we did the jobs when we had to pull the ESP anyways. So you're having to -- you have some costs and then you just pump some surfactant in water. And listen, we don't even know how much of the wellbore we're touching today, but some of the results are significant. I mean, some of the multi-hundreds of barrels a day uplift from a well that's producing a couple of hundred barrels a day. I'd say on average, we've seen about an average of about 100 barrels a day pop, which for $0.5 million is a high-returning project. I think we got to get smarter on it. We're going to keep testing it. And I think over time, as we refine that analysis, it's going to become a part of our overall development plan and the life cycle of these wells. So that's how I see it today. I look forward to all of the advancements that the teams are going to make. We've made a lot in a short period of time. There's going to be a lot to come in the next couple of years. Derrick Whitfield: Great. And maybe staying on the resource expansion theme, but given you guys are breather on the Midland Basin side, there's been a lot of buzz from industry on both the Barnett and Woodford in the Delaware. While I realize that EOG is chasing a different Woodford concept than Pecos. I'd love your take on the view of that interval and your position over in Pecos. Kaes Van't Hof: I think generally, we've been following it. It's going to be more expensive than the Midland Basin Barnett even. I kind of equate the Midland Basin Barnett to kind of core Delaware type costs, and this is below that. There's been people poking around Barnett and Woodford and the Delaware now for 7 or 8 years, I don't think we're ready to begin a big program in the Delaware on our position. But with the Viper map being as consolidated as it is on the Delaware side, we're going to learn a lot about it as people try to test it. Operator: Our next question comes from the line of Kalei Akamine from Bank of America. Kaleinoheaokealaula Akamine: With respect to the '26 guide here, the disclosures have been simplified. Just kind of wondering if you can talk about the number of targeted drills and TILs expected this year, the DUC backlog that supports that program? And then what kind of conservatism has been baked into the volumes, noting that surfactants and Barnett are kind of new efforts are contributing? Kaes Van't Hof: Yes. Listen, we try to simplify our disclosure to just say, here's the amount of lateral feet we completed or plan to complete. And if we do better than midpoint or towards the low end, that means we have high capital efficiency. So I think our transparency and disclosure is still best-in-class. We have -- certainly have a solid DUC backlog that we can push or pull on depending on the macro, but I think that's going to be a management decision. Right now, the base case is just kind of hold it flat. One thing I'll say about the 2026 CapEx guide, we're kind of guiding towards the lower end of that quarterly average in the first quarter. And I think we expect the same to be for the second quarter. as we get to the back half of the year, I think some of these things that we are talking about a lot today, the Barnett surfactants, Barnett well costs, if those things start to trend our direction, then I think there's a world where CapEx comes down this year. That's just not something I think given our history of conservatism, we want to put out as fact today. So I think there's some goals to be set for the teams, and we're already well on our way to achieving them, but I just don't think they're going to run through guidance yet. Kaleinoheaokealaula Akamine: I guess the follow-up there is just on the number drilled contemplated. And then the second question is just on the working interest in the Barnett. 64% is the lowest in your stack. Wondering if you could talk about any opportunities to increase that interest, whether that's organic leasing or maybe it's inorganic, understanding that the rights could be in somebody else's hands and whether that could be achieved via acreage swap, which contributed very meaningfully to this inventory update. Kaes Van't Hof: Yes. I mean on the working interest side, we're always looking to increase working interest. We've built this position through a few partnerships where our working interest is lower than it traditionally has been, but that doesn't mean there's not opportunities to grow it. So I mean, the position had to be built organically. And that means usually after that's built, you start to work on swaps and trades and netting up and all buying minerals and all the things that we do to add value around the base business. On your second question, the model doesn't show us drawing or building a meaningful amount of DUCs this year. And I think we're still going to post how many wells we drill and complete every quarter. But I think if you think about last year, we ended up drilling more wells and completing less wells than we originally expected. And what the DUC discussion became a discussion that got more airplay than it deserved. Operator: Our next question comes from the line of Kevin MacCurdy from Pickering Energy Partners. Kevin MacCurdy: I guess for my first question, I'll just hit on OpEx. We saw lower OpEx as a partial driver of the EBITDA beat in 4Q, but guidance -- 2026 guidance is for a small increase for both LOE and GP&T. And I wonder if you could address those. Is that just the water drop-down on LOE and gas transportation contracts on GP&T? Or is there anything else in there? Kaes Van't Hof: Yes, that's most of it, Kevin. We sold the EDS system to Deep Blue in fourth quarter. So you saw LOE tick up a little bit. I think we got a couple of things as headwinds this year on LOE, power prices in the basin have gone up. So we got some power that is now unhedged that's going to be priced at a higher number. That's probably $0.10 or $0.20 of hurt. And then we're continuing to spend more and more dollars on workovers, plugging and abandoning vertical wells, making sure our asset base is in good condition on that front. So those are the couple of headwinds. On the GPT side, most of that's your traditional escalators on CPI, but also more barrels -- or sorry, more molecules being taken in kind. And so you're shifting dollars from realizations to GPT. Kevin MacCurdy: Great. And maybe to ask one more clarification question on the Barnett. Will there be a separate rig dedicated to that program? And just to confirm, will those wells be geographically separate from your cube development? Kaes Van't Hof: It really just depends. I mean there will be separate rig lines that we have dedicated to the Barnett. I think it probably makes sense that those rigs just focus on that type of development. But there's areas like Spanish Trail where we have 100% of the minerals and high working interest that we're going to be in the same area as our shallow development. And then there's areas where we don't have it. I think overall, though, we're going to continue to build the position and try to share facilities wherever we can because that's the most efficient form of capital use. Daniel Wesson: Yes. And I'll just add, I think we -- with the Barnett depth and with some of the mud properties and such that we'll be utilizing to drill those wells, it will probably be a different rig package that we're looking at. So we -- those rigs can certainly drill the Midland Basin core, but we're probably looking at a little bit upgraded rig package for those wells. So ideally, we'll have them all on separate rig lines that we may mix in some of our Midland Basin core with. But if we can get days down on the Barnett drilling, we'll mix in more of our core development and probably have less Barnett-directed rigs in particular, at the end of the year. Operator: Our next call comes from the line of Doug Leggate from Wolfe Research. Douglas George Blyth Leggate: I wonder if I could follow up on the last question about the mix of Barnett versus the base business. It seems obviously an HBP requirement here given the relatively new acreage. And I guess the core of my question is the type curve you've shown for the Barnett is presumably a parent well versus a development type curve for the cube development elsewhere. So how do you expect that development type curve to evolve relative to the base business? Kaes Van't Hof: Yes. I mean I think we'll see, Doug. I think we're spacing these wells pretty wide. We have done a few 2-well pairs, and we'll still see what a full section development looks like. But I think in general, the size of the job and the spacing that we're assuming should result in pretty consistent performance. Listen, I'm not going to tell you that every well has been the best well we've ever drilled, but there are a couple in that data set that are probably the highest 6-month cums we've ever had at Diamondback. So I think we're putting a bet on ourselves to continue to improve results and get cost down, and that's a good bet. Douglas George Blyth Leggate: Well obviously, it's early days, but -- my follow-up is on the inventory question. I know there's no precision here, but I want to understand what your intention is in talking about 20 years. Is that a kind of consistent weighted average well quality? Is it maintaining production mix? Or more importantly, is it maintaining free cash flow? How do you want us to interpret that 20-year comment? Kaes Van't Hof: Listen, I think not all inventory is created equal, right? The best -- and if we're doing our job right, we're drilling the best stuff first. And I think you see that throughout the space where productivity per foot, which how we look at it, is starting to degrade depending on the company. And our job is to have the best productivity per foot the longest. And I think you've seen us add in zones like the Upper Spraberry, like the Wolfcamp D, even 5 years ago, the Middle Spraberry and Jo Mill, and you haven't seen significant degradation. In fact, 2025 results were above 2024. So in a world of decreasing productivity, our ability to maintain that productivity consistently and longer is, I think, a winning proposition. So certainly, as you get further down our inventory, we're going to have lower productivity. I'd be lying to you if I said otherwise. But the teams continue to work on ways to reduce costs, drill better wells, better frac jobs, get better well performance out of areas that we thought were Tier 2, Tier 3, 3, 4, 5 years ago. So in general, it's about doing the best stuff first and maintaining that sustaining free cash flow that you'd like to talk about. And I think we can do it longer than anybody. Operator: Our next question comes from the line of Scott Hanold of RBC Capital Markets. Scott Hanold: Kaes, if you can give us some color and context on your view of Diamondback's position in the industry going forward. I mean, historically, you all have built your position through successful M&A. And obviously, this -- it feels like this quarter, there's been a little bit of a shift to more resource expansion organically. Can you just give us a sense of like what you're seeing in the landscape that sort of drives the shift from where Diamondback historically been? Kaes Van't Hof: Yes. I mean, Scott, there's no doubt that there's been a ton of consolidation both in the Permian and elsewhere around the U.S. and it's been top of mind. I mean your website, the RBC website continues to continues to shrink in terms of the number of tickers. And I think generally, there -- things have moved towards basin champions. And I think in the Permian, there's going to be independent basin champions like Diamondback. There's going to be mineral champions like Viper, and there's going to be surface champions like some of the other companies out there. So that natural consolidation has led us to say, hey, we have a ton of acreage and a ton of resource. We should probably start to spend some more dollars improving that existing resource. So we're not out of the M&A game. But as we said in the letter, the opportunities are fewer and further between. And therefore, we're going to be doing more things like the Barnett, more things like testing surfactants. But don't get it wrong, there's not a deal that happens in the basin without us knowing about it. It's just that there's not 10, 20, 30 deals left to do. Scott Hanold: And my follow-up is on your reserve report. You all mentioned there were some revisions to some of the numbers in there. And I know some of it is price related, but you did mention some performance-related revisions. Can you just give us a little bit of context behind that? Kaes Van't Hof: Yes. I mean the majority of the reserve revisions, and it's interesting that reserve reports are now becoming something people read again in detail. The majority of our revisions are due to price. The rest of the majority of our revisions are due to PUD, we call PUD downgrades, but it really just means we're bringing in wells that we acquired or PUDs that we acquired and bringing those to the front of the development program and in general, we try to keep a very low PUD balance. We try to -- the SEC rule is 5 years of development. In general, we're kind of averaging 3 years of development and what we put in our PUDs. And right now, Diamondback, from a booking perspective, we're 70% PDP, 30% PUDs. And I think as we do deals like Double Eagle last year or Endeavor the year before, some of our existing PUDs get taken out and new PUDs get put in. But from a performance perspective or PDP performance perspective, there have not been meaningful changes to the reserve report. Scott Hanold: Okay. So the individual wells are still holding true. It's just a shift in the PUDs moving in. Is that right? Kaes Van't Hof: That's right. Just moving your best wells that you have remaining up. Operator: Our next call comes from Leo Mariani of ROTH. Leo Mariani: I wanted to just revisit the Barnett here quickly. Can you give us a rough sense of the number of wells that you guys are going to be drilling or completing here in 2026? And can you just talk a little bit about what you kind of need to do to hold that position, say, over the next 5 years? Is there going to be a meaningful step-up in activity in '27, '28? Albert Barkmann: Yes, Leo. We expect that to ramp up kind of through the end of the year. Like Kaes mentioned before, we expect to kind of allocate some activity to the plan in the back half of the year. So roughly, we're looking at drilling about 30 wells this year, popping probably closer to 10, and then that ramps up significantly in 2027, where on a gross basis, we're probably looking at more like 100 wells for that program. Leo Mariani: Got it. Okay. And I guess is that the type of pace that would kind of hold everything together over the next couple of years? Just any color you can provide around lease terms or anything like that on the asset? Kaes Van't Hof: Yes. That's a general pace, and we can do it in a capital-efficient manner. Leo Mariani: Okay. Appreciate that. And then on continuous pumping, obviously, you talked about that. I think you're kind of increasing the amount of activity moving in that direction. You mentioned potentially being able to drop crews at some point down the road. Do you see that as a potential meaningful capital savings if you can get to the point where you are dropping crews at some point, say, later this year or next year? Daniel Wesson: Yes. I don't think that it's going to drive a ton of cost savings from our service providers. There's additional equipment requirements to be able to do so. There's a little bit of savings on some of the dumb iron, just the rentals that are out there as you increase cycle times. But the big benefit is really, as Kaes kind of mentioned, is some of the stuff we can do to optimize the completion without adding additional costs from the additional well swaps and that kind of thing, but also the increased cycle time -- or sorry, the decreased cycle time that impacts your water out frequency and you're able to bring wells forward in the plan, which is only maybe a onetime effect, but really the water out frequency and the length of time that you're watering out offset pads is a pretty huge benefit to the full year cycle time. Operator: Our next question comes from the line of Charles Meade of Johnson Rice. Charles Meade: I want to ask a question around nomenclature because in your -- we've been talking about the Barnett here and in your presentation talk about the Barnett. But in your shareholder letter, you referred to it as the Barnett and the Woodford. And so I wonder if we could -- you could help me explore a bit how this play has evolved. If we go back to the late teens and when you guys had the Limelight prospect, that was pretty clearly a Barnett Mississippian target there. But it sounds like as you guys are going into the more of the basin center here that it's a Woodford and Barnett target. And it sounds like maybe you guys are landing in the Woodford and trying to frac up into the Barnett. I wonder if you could comment, is that directionally correct? And more generally elaborate on how the play has evolved for you guys? Albert Barkmann: Yes. I think that's good commentary. So the Barnett and Woodford are distinct reservoirs, right, and have their own distinct properties. The initial play, the Limelight play, when you think back to the 2017 time frame, that was truly a Barnett play. There's some nuance across the basin with the zone that divides the 2 reservoirs. So the Mississippian Lime sits between them. It changes in thickness pretty materially as you move across the basin sort of north to south. And so up at the Limelight position, we had a pretty thick Miss Lime section. And so those 2 reservoirs were separate and distinct. And then as you move kind of into some of the areas where we've been delineating more recently, the Miss lime is materially thinner, and we're able to frac through it. But generally, we're targeting the lower Barnett and able to drain the Woodford in some of these areas where you've got that thinner Miss lime section. Charles Meade: Got it. That is helpful. And then, Kaes, this may be for you, if we go back to your stoplight metaphor. I think you -- and I appreciate you really made it clear that you thought that the red light scenario had -- seems like it's receded a bit. And I think the unspoken flip side of that is that the green light scenario is a little closer. But can you elaborate a little bit more on that? Does that mean that the green light scenario is closer than the red light? Or is it closer than before, but you're still on balance, more likely to slow down. Just you fill out that metaphor. Kaes Van't Hof: Yes. It's a metaphor we can't seem to shake. But in general, I think it explains the situation pretty well. I'd just say, I think there were periods of time over the last 6 months where we were all much closer to the red light scenario in terms of crude price. Now there's a lot of things impacting crude prices over the last few months. But in general, I think talking to our investors, they're very supportive of this plan to keep production flat and maximize free cash and wait for the green light scenario. And I think just generally, we've been talking about this oversupply for -- some people have been talking about it for 2 years. And it just hasn't seemed to happen as aggressively as some expected. And I think as we turn to higher demand in the summer and driving season and trading the spring months in crude, people start to -- will start to find reasons to be less bearish. Now I could probably be wrong. But in general, we just feel more confident about the macro after a couple of big shocks last year on the supply side and the demand side. Operator: [Operator Instructions] Our next question comes from the line of Paul Cheng from Scotiabank. Paul Cheng: Gentlemen, 2 questions. One, in your D&C or well cost now you're already down in your legacy operations, say, in Midland $550 or so. So where is the biggest opportunity to drive that down further? Is it coming from further improvement in drilling or completion? I mean you're already extremely efficient over there or that is going to allow you that to have better maybe reduce downtime? And so just give us some idea that where should we see from there? That's the first question. Daniel Wesson: Yes. Good question, Paul. I think on the drilling side, it's -- we've really been able to show quarter-over-quarter efficiency gains. And I think it's just more of that, getting more consistent in those ultrafast wells, right? We talked about in the letter some wells that are sub-6 days, and we're still averaging over 8 days spud to TD. And so how do we get that average from 8.5, 9 days down to 7 days, and that drives meaningful cost savings on the drilling side. And then on the completion side, it's -- we're continuing to go faster, and we talked a little bit earlier about continuous pumping and what that means for us. But it's also working on the supply chain of the completion side, what can we do around fuel, what can we do around other supporting services to get more efficient and drive some of the debt cost out of that business. And we're working on a lot of those things every day. These are not big chunks of dollars, but it's a lot of little things that add up to big chunks of dollars. So we're still grinding away on the core business. And like Diamondback has always done, we're not going to lit up on that grind, and I'd expect to see more dollars flow out of the core business as we go throughout this year. Paul Cheng: Do you think over the next several years, you will be able to more than offset the inflation and drive that $550 number down, say, towards the $500 or $525 in the next, say, 3 or 4 years? Daniel Wesson: Well, the $550 is a mix of all of our Midland Basin zones. So that includes Wolfcamp D and some of the deeper stuff that in Barnett. And so yes, I think certainly, some of those deeper zones that are higher cost today, we're going to see some material cost reductions in them as we continue to deploy our best-in-class execution prowess to those zones and learn about them more and put the bid in them more. So yes, I do believe we'll see the $550 come down materially. But also in the older stuff that we're doing, the Spraberry, shallower Wolfcamp zones, I don't know what inflation will do with -- it's really going to be largely driven on activity. But our goal every day is to continue to work to execute better and more efficiently and drive cost out of our supply chain through what we consume. And then the variable cost, if we can execute better than everybody else, we'll have better variable costs than everybody else. And that's always been our focus and will continue to be our focus going forward. Paul Cheng: The second question is a quick one. I know the impairment charge is noncash price related primarily. And also you have about 130 million barrel of the reserve revision due to the price. But $65 WTI last year is really not that low. So still a bit surprising you have reserve write-down and also impairment charge. Is it driven from the -- or is that all basically in the legacy Diamondback asset or is from Endeavor or from Double Eagle? Kaes Van't Hof: Yes, Paul, I mean, listen, fair value accounting is what it is. And fortunately, for us, the Endeavor deal was very well received and that deal was put on the books in September of 2024 at $80 oil and $4 Henry Hub. And I don't think there's an investor out there that would say, hey, that was a bad deal. So unfortunately, when you put something on the books at $80 and then you average $64 for a year, the market says you have to -- the accounting rules say you have to have a write-down. It's unfortunate. But at the end of the day, I think I stand with all of our investors that we're very excited and happy that we did the Endeavor deal and the accounting rules will be what they are. Operator: At this time, I'm showing no further questions. I would like to turn it back to Kaes Van’'t Hof for closing remarks. Kaes Van't Hof: Well, despite no prepared remarks and starting immediately, you guys all were able to ask 65 minutes worth of questions. We appreciate your interest, and thank you for the time today. Operator: Thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.
Operator: Good morning, everyone. Welcome to our full year 2025 results media briefing. Today, we have with us our Deputy Chairman and Group CEO, Mr. Wee Cheong; and our Group CFO, Mr. Leong Yung-Chee. As usual, Mr. Wee will begin first by giving a broad overview of how our franchise has performed, the operating landscape we are operating in, and then Mr. Leong will then go into more details on the financials and business performances. After both presentations, we'll be taking questions from the media. So I would now like to invite our CEO to get us going. Mr. Wee, please. Ee Cheong Wee: Good morning. Happy year of the horse. Thank you for joining us today. Well, as we enter 2026, the global environment continued to remain very fluid, geopolitical tensions, ongoing shift in supply chains and evolving trade and tariff. However, operating conditions in our core markets have remained broadly supportive. Across ASEAN, momentum towards deeper regional integration is building up. We look at trade, capital flows and cross-border investments continue to expand, reinforcing the region role as a key growth engine. This create opportunities for well-positioned regional bank like UOB to support clients across ASEAN. Now against this backdrop, we delivered a resilient full year operating profit of $7.7 billion in 2025, 4% down. Our diversified business model remains a core strength. Net interest margins moderated as rates declined but strong fee momentum across wholesale and retail businesses helped to offset the impact, lifting our full year fee income to a record high. On a quarter-on-quarter basis, trends were positive. Net interest income increased 4%, margin rose to 1.84% as we lowered funding costs. Net fee income was up 2%, while expenses remained flat. On the asset quality front, following our portfolio review in the third quarter, we proactively strengthened our provision buffer. Credit trends improved in the fourth quarter and are moving in the right direction with NPL ratio low at 1.5% and total credit cost at 19 basis points. Our balance sheet remained strong with higher CET1 ratio at 15.1% and robust liquidity ratio. The Board has recommended a final dividend of $0.71 per ordinary share, bringing our full year dividend to $1.56 per share. This represents a payout ratio of around 50%. In determining the final dividend, we excluded the preemptive provisions of $615 million recognized in the third quarter last year. In addition to our regular dividends, we also returned excess capital to shareholders through a special dividend of $0.50 per share, paid over 2 tranches during 2025. We remain committed to our capital return plan announced last year ongoing till 2027. Our diversified income stream helped ensure earnings stay resilient even in uncertain conditions. And we see promising momentum in our ASEAN strategy. We see increasing contribution from our ASEAN-4 markets across both wholesale and retail business. In fact, just for your information, if you add the ASEAN-4 total income is up 5% year-on-year versus the group total income down 3%. So the ASEAN is actually positively trending up. Now let me talk a little bit about the wholesale banking. It also delivered a solid growth in trade, transaction-related activities and deposit growth. For trade, I think 2024, we generated $36 billion, 2025, $45 billion, actually a growth of 23% year-on-year. Global markets also benefited from active client hedging amid market volatility. Customer-related treasury income hit a record high. Retail banking delivered healthy growth across card billings, up 6% year-on-year. CASA up 12% and high net worth AUM up 6% as we deepen customer relationship across the region. Our wealth business, our wealth franchise continued to scale with net new money inflow lifting AUM to $201 billion. And the invested AUM mix continued its steady increase. Our digital wealth momentum, this is dealing with the mass affluent market actually remained very, very strong with sales more than double year-on-year. That is actually applied through our TMRW apps. Just to tell you the volume, I think for 2024, we generated $1.57 billion. For last year, we generated $3.84 billion, up by 144%. That is through our digital platform. Now looking ahead, we expect the region growth to continue to be powered by structural trends, including digitalization, infrastructure investments and deepening regional innovation. We are confident that our enlarged regional scale, stronger platform and capabilities, we are well placed to grow in tandem with the region. At UOB, our strategy is clear and consistent. We are deepening our strength in connectivity, enhancing our expertise and digital capabilities to support the flow of trade, capital and investment across ASEAN and Greater China and with the rest of the world. We are also unlocking synergies such as through our One Bank program across wholesale and retail customer base, strengthening our digital wealth platform to enhance our services. With our strong balance sheet, network and franchise, we are well placed to support our customers through cycles and capture emerging opportunities. Our guidance for this year is low single-digit loan growth. Full year NIM of 1.75% to 1.8%, high single-digit fee growth, low single-digit operating cost growth, total credit cost of 25 to 30 basis points. Thank you for continuing to support us. And now I invite my CFO, Yung-Chee, to share more. Yung-Chee Leong: Thank you, Ee Cheong. Good morning, everybody. Let me take you through the financials update. So for the full year 2025, our net profit came in at $4.7 billion on the back of operating profit of $7.7 billion. The fee income for us was at a record high. What you see there is the net fee income number. On a gross basis, that number actually came up to $3.5 billion. On net interest margin, I think this is something that comes up quite often in terms of media and analyst questions. Our full year NIM was 1.89% on the back of continued pressure on benchmark rates. But actually, what's interesting is if you look at on the right side, the fourth quarter NIM for us was at 1.84%. If you recall, our third quarter NIM was at 1.82%. I can discuss more on the NIM in a subsequent slide. On trading and investment income, we have all-time highs for customer treasury income but the overall trading and investment income for the full year came in slightly below $1.6 billion compared to the year before because last year was exceptionally well. Next please. If I go through some of the numbers on this page, maybe specifically for fourth quarter, if you look at the operating profit line, we generated $1.8 billion of operating profit, slightly below quarter-on-quarter. But if you look at the net profit line, it's $1.4 billion. Our expenses remained stable at roughly $1.5 billion. And total credit cost for the quarter was 19 basis points. Next, I'll go through some of the segmental breakdown in terms of the financials. If you look at our group retail operations, profit before tax was at $2 billion. This income was largely supported by double-digit growth in wealth amidst some of the pressures from lower rates as well as market competition. Our credit cards business continued to achieve new highs. On the bottom right, you see that the gross card billings grew by 6%. On the left side, the corresponding cards income, this is net, it's at 1%. But on a gross basis, that figure is actually 8%. So both wealth as well as cards business is demonstrating strong growth. The credit card business for last quarter or for the year effectively was because of our loyalty rewards alignment in Thailand. But that was a onetime cost. So going forward, we expect that to more closely mirror our gross rate. Asset quality for the retail business remains sound. Maybe I'll move to wholesale banking next. On the Wholesale Bank, profit before tax declined amidst lower rates and keen competition. Our transaction bank continues to power about 50% of wholesale bank's income, driven by largely very encouraging trajectory in our CASA business and our trade business. As CEO mentioned earlier on, our trade loans actually grew by 20-over percent in the year. If you look at the bottom of the total gross loans, I think you will see the trade numbers growing from 35% to 45%. That's more than a 25% growth year-on-year. Elsewhere for the wholesale banking business, if you look at our deposit growth as well, at the bottom, you see the deposit growth at 7% but our CASA portion of the deposits grew double digits, leading to overall CASA ratio for the wholesale banking business now at [ 6. ] So retail's CASA is 57%, wholesale at 60%. Overall, the bank's CASA ratio is now at about 58.5%. Next on global markets. Year-on-year, our global markets business grew 23%. This is again an all-time high for us for our global markets business. It's largely led by customer treasury activities from hedging as well as wealth demand. The noncustomer portion of the business was positioned to capitalize on liquidity and trading conditions. So there is some normalization in the fourth quarter but year-on-year, you saw a 23% growth in this line of business. Next, I'll go through some of the specific financial categories. Let's talk about net interest income first. Overall, net interest income inched down by about 3% on the back of largely interest rate movements but it's also negated by the fact that our average interest-bearing assets grew. So at the bottom, you will see $477 billion to $495 million. That's demonstration of the loan assets that we grew over the year but it was not enough to mitigate the pressures from benchmark rates. Net interest margin, however, for the year, even though it's at 1.89%, if you look at the quarter-by-quarter trends, third quarter net interest margin, we reported at 1.82%. Fourth quarter, we reported at 1.84%. The red bar is actually showing the pressures and effects of the asset repricing, both because of rates but also keen competition. The green bar is the actions that we've actively taken to mitigate some of the funding costs. And we've also done some changes in mix in order to balance the requirements of having the right NII versus NIM outcomes. On this page, what's interesting to note as well, a natural question would be, although that's a reported fourth quarter, where is exit NIM today? As of the end of January, our exit NIM is at 1.82%. So you will see that NIMs are sort of bouncing around that level already, giving us some confidence in terms of where NIM and SORA rates are looking like for 2026. Next page. We mentioned earlier on that our fee income is at a record high. This page shows that year-on-year, our fee income grew 10%, and it's consistently across all categories, whether it's in terms of our loan, our wealth, credit cards as well as others. Next. Expenses. We have continued to maintain very disciplined on our cost while prioritizing some of the technology and regulatory investments. Year-on-year, our overall cost actually fell 2%. But when you look at it from a cost-to-income ratio, it picks up because income actually fell. Next. On performing assets. Our NPL ratio remained broadly stable. It dipped slightly to 1.5%. If you look at the bottom of the chart, you will see that our NPA formation has come off from the $800 million in third quarter. It is now just shy of $600 million. The trend is for NPAs to continue downwards for us. We did have some spike in the third quarter but it's now getting better. Next page on the provisions. So again, our third quarter provisions caused a spike in terms of the specific credit cost as well as total credit costs. But for the fourth quarter, this trend has normalized. Specific credit cost is now at 26 and our total credit cost at 19. And if you recall, our guidance previously on total credit cost was a normalized range of 25 to 30. Next, on provision coverage. With the exceptional provision top-up that we did in the third quarter, we brought our coverage up to 1%, and it remains at 1%. What's also interesting is NPA coverage at the bottom from 100% to 97%, but our unsecured NPA coverage actually went up to 254% once you include the collaterals into consideration. Just to give you a snapshot on where the key hotspots are. We highlighted earlier on that the key hotspots for us in terms of credit costs are in Greater China and in U.S. We indicate here the size of the loans in those markets as well as the credit costs associated with it. So on the left-hand side, you would see that for Greater China, the credit cost from 2024 to 2025 went from 40 basis points to 72 basis points, whereas in the U.S. from 173 to 110 is still elevated. But directionally, we have taken active steps to restructure to recover some of the impaired assets in that country. On the right side, it shows you what we have actively done to increase the provision coverage. So for Greater China from 1%, we raised it to 2.1% and in the U.S. from 0.8% to 4.7%. What this goes to show you and to assure our investors is that the provisions that we put aside for these 2 hotspots are more than adequate for us to navigate any potential issues coming from these hotspots. The following page talks about the customer loans going up 4% year-on-year. It's stable quarter-on-quarter. I think I can probably move a bit quicker through this page. Funding. From our liquidity and funding positions for our continued CASA growth, it continues to remain strong with our LCR at 147% and NSFR at 116%. These are all comfortably above minimum requirements. Our CASA deposits, as I mentioned earlier on, on an aggregate basis is now at 58.4%. Next on capital. Capital position remains robust with CET at a healthy 15.1%. Even on a fully diluted basis with Basel IV requirements is 14.9%. This allows us the ability to continue to deliver steady and sustainable returns for our shareholders. On the last page I have is on dividends. As mentioned earlier on by CEO, our core payout ratio continues to be 50% as we committed. And this includes the adjustment that we did, when we did the provision for Q3, we said we would adjust it so that shareholders will not be worse off. Overall, the payout ratio at 50% means a total dividend for us at $1.56. The final dividend component of that is $0.71. I would also mention in terms of the capital return plan that was committed to shareholders in February of last year, $3 billion. Of the $3 billion, we have already done more than 50% executed, $1 billion of which was in the form of special dividends and another $2 billion in the form of share buybacks, of which we have completed 1/3 of the plan. So in total, more than 50% of that capital return plan has been done, and we are well on track to execute on the rest of it across the next 2 years. That brings me to the end of the presentation. Maybe we open up for questions. Operator: Thank you, CFO. We will now take questions. [Operator Instructions] [indiscernible] Unknown Attendee: [indiscernible] with Bloomberg. I have 3 questions today. My first is for Mr. CEO. Why did you revise down fee income growth for 2026 to high single digit from a year earlier, a range of double digit and high digit. Ee Cheong Wee: So what is your question? Yung-Chee Leong: The fee income growth, we had revised down to high single digits. And I think the backdrop of it was our loan growth for the year for 2026, we expect it to be low mid-single digits. But in terms of fee income, there are multiple components. There's the loan component, there's credit cards, there's wealth, both credit cards and wealth and customer treasury, investment banking, all those are all still demonstrating very strong growth. The primary reason for that adjustment was more because of more conservative loan growth outlook. Unknown Attendee: And where do you see UOB's 2026 growth trajectory from here? And what are some of the biggest risks you're anticipating? Ee Cheong Wee: Well, I think the market is very uncertain, right? Because this is something that is a little bit beyond our control. But the ASEAN we are talking about, I feel quite confident. As you can see, the ASEAN-4 actually [indiscernible]. So we continue to focus on connectivity, continue to focus on less capital-intensive activities. Trade. You still need to trade, cash management. So these are all the initiatives we want to make sure that we are able to weather rather than just purely based on loan growth. It is very uncertain. Nobody is sure. Unknown Attendee: And lastly, how you will be using AI to boost productivity? Ee Cheong Wee: I think he's on top of this. I think definitely, we train our 20,000 people. We tied up with the industry expert at Accenture, see how we can spearhead AI initiative. I think it's a tool. I think it's important. It's an important tool. I want to train my people to make sure that they are taking full advantage of the tool to increase productivity. Unknown Attendee: Have there been or do you anticipate any changes to headcount due to automation in the workforce? Ee Cheong Wee: I think certain job, maybe you can't avoid it, right? I think our challenge is we do have HR initiative program to make sure that we are able to convert some of these. I think important is this environment, we -- the last thing we want is to get [ free of cost ] to our staff to give them the opportunity to learn as much as possible. If they learn, I think that will be -- to me, I think that is most important, learn as much as possible, take full advantage of AI. And we have a dedicated unit to look at AI to see how we can transform that. And then if we hit a certain optimum scale, then we know how to reallocate our people, make better use. So at the end of the day, the ownership is the first thing. Yung-Chee Leong: If I could add to that, of our 30,000-over staff, most of them have all been given AI tools at their fingertips already today. And the only countries that have not been rolled out to is because of regulatory considerations. So any country that allows us, we have already rolled those tools out to our staff. And about 20,000 of our staff have already gotten some of the basic training in terms of AI. We have set up an innovation academy to roll out training programs for our staff. Now we see these tools as enablers to enhance productivity, to help us gain insights into customer behavior, to improve service quality for customers, et cetera. It's not a tool for cutting headcount. So the focus continues to be enhancing client outcomes. It's about enhancing our banking relationships with customers. It's also helping our staff with advice-driven solutions so that we can enhance their productivity. Operator: Any other questions? Maybe Asian Banker, Russell. Unknown Attendee: Russell from the Asian Banker. Firstly, congratulations, Ee Cheong and Yung-Chee on the resilient set of results, I mean your strategy on fee -- driving fee income from the retail side and the wealth side has really paid off. My question is on the trade loans. So recently, during last year's ASEAN conference, there's been talk about the global supply chains and how businesses are moving from cost and efficiency to more resilience and responsiveness. Trade loans has been a huge part of your growth. How has that allocation shifted between trade on the intra-ASEAN side and Asia and Greater China? How has that shift changed over the past year? And how has your bigger scale in the region contributed to [ your FOB ] having a greater advantage in this space? Ee Cheong Wee: Well, actually, the trade loan constitute about 13% of our total loan. It's not that big. So we are actually working on that because it's more capital friendly, right? And also short term, right? Even the volatility, this is why we are emphasizing on that. The growth is actually double digit. But in terms of percentage of our total loan is about 13%. Yung-Chee Leong: That's right. So to give you a deeper sense on that, our overall loan portfolio grew 5% but the trade loans component of it, that 13% grew at 26%. So the speed at which trade loans are growing, again, this reflects our connectivity, the whole ASEAN trading economy, that growth remains very resilient. So despite what you hear about the geopolitical tariff situations and so on, I think there's active realignment of supply chains and the trade loans actually demonstrate that. Why we concentrate on trade loans, even though the margins are slimmer is that trade actually encourages a lot of other activities that are cross-selling in nature. For example, if you do trade, they tend to be cross-border. Cross-border requires FX. If you are doing the FX, then you could pretty much package together interest rate hedging, cash management. So the broader wallet associated with trade isn't because of trade alone, but it actually has implications on how we shape the business. So trade continues to be a very active, very important focus for us driving our ASEAN footprint. Unknown Attendee: And then another question, if I could add. On the SME banking side of things, I think you're anticipating single-digit loan growth for this coming year. How is that impacting how you conduct banking with SME clients? Are you pivoting more towards fee income for that? I understand that the UOB has quite a whole entire ecosystem for SME clients. Ee Cheong Wee: I think generally, I would say we are very much market driven, right? SME customer because of the market uncertainty, they themselves also take a wait-and-see attitude. It's not like I want to give them loan to waste. They are also cautious, right? And we also share our experience, our advice, what should they do? And if you look at even today with the latest tariff, right, from Singapore 10% to 15%, that is overnight thing. So they also have to wait and see but it's something that they cannot plan. So this is where you will be, we are right by our customers. We have to help them to how to restructure, how to prolong the tenure, how to help them to grow. This is where our franchise value is, right, rather than just focus on ourselves. Operator: We take a question from [ Wei Han ] from BT. Unknown Attendee: Wei Han from BT [indiscernible]. May question is on the tariffs that you mentioned. And also I think in January, we sort of saw the Venezuela crisis fairly short lived but how does all this sort of impact your ASEAN outlook for 2026 and the opportunities you sort of see there? Ee Cheong Wee: I think definitely, I don't have a final number yet because it just a but [indiscernible]. But the whole intra-regional trade is also irregardless of U.S. look at China trade with ASEAN, I think the number seems to be quite encouraging within ASEAN. So we have no choice. We have to support each other. I still think that is quite robust. You can see from the trade volume. Last year, we started this and this year. And then, in fact, the tariff be even higher. Today, we try to equalize. And the fact is if we equalize everybody, then there's no competitive advantage or disadvantage to understand because now U.S. Supreme Court say everybody is 15% of tariff. There is no advantage to you or disadvantage. Yung-Chee Leong: If I dial back a little bit in history as well. We sat here in April last year reporting on first quarter results, 2 weeks after Liberation Day, and we were like, oh, no, all this tariff being announced, what's going to happen? And if you look what happened in the subsequent quarters was, yes, there was some dampening effect in terms of loan growth because customers in general, corporates took a step back. We had to reassess and realign our supply chains and where do we position our capital and where do we place our factories and so on. So loan growth did dampen. But by and large, the activities continue. Trade continue. The supply chain shifted, which is why you see year-on-year, our trade loans, our growth in those activities continue to be double digit. So fast forward to now, you see realignment in tariffs again. I think there will be some time required for the system to absorb, comprehend and react to it but we are confident those activities will continue. As in the company's business activities, we'll find a way to navigate through that and continue. The important thing is for us to stay focused on helping our customers navigate that. Unknown Attendee: So the credit cost, can we look at Slide 14 again? Because over there, you've broken down your Greater China and your U.S., okay, hotspots. So of the Greater China hotspots, what is Hong Kong CRE? Is it all -- is it -- and what portion you don't have to give us a rough double digit -- low double-digit teens, that sort of thing for Hong Kong versus China itself? And is it all CRE for both those buckets? And also for the U.S. bucket, were they -- were you lending directly -- were they mortgages? Or were they like loans to funds because you had a financial institution group customers. Yung-Chee Leong: Okay. A couple of questions. Maybe I'll deal with the U.S. one. It's a little bit easier. The hotspots have been commercial real estate, right? We do lend. Unknown Attendee: All those billion, whatever billion was the... Yung-Chee Leong: Not all of that is commercial real estate. That's our loan book. Unknown Attendee: The $45 billion and $17 billion is the loan book. Yung-Chee Leong: That's the loan book of our business there, right? That's not the problem loans. If that was problem loans, we will be. No, no, that's the size of our loan book there. But in terms of the problem that we've been facing, specifically in the asset class of commercial real estate. And that's only a small fraction of that. Unknown Attendee: A small fraction as in 1%, 2%. Yung-Chee Leong: Yes. 1% approximately. So it's specifically commercial real estate. And your other part of the question was, are these to clients, are these to funds? It's a good mix. Some of it are to our clients whom we support network clients from Asia who have decided to operate in the U.S. There are some who are our global financial institution sponsor clients as well. So there's a good mix of that. Coming back to Hong Kong, I think the similar question. You mentioned about mortgages and so on. We actually do not have a mortgages -- significant mortgage book from Hong Kong. The problem assets, again, are commercial real estate related. We don't give the breakdown on how much of that is Hong Kong versus China. Unknown Attendee: Okay. So in the -- so what is your outlook for -- I mean, I know you said it's normalized but what is the outlook for the asset quality this year? Yung-Chee Leong: I think given some of the macro conditions, I think there is still some potential challenges to be navigated, right? But that said, I think we have preemptively already anticipated many of these. So what we see in our pipeline, what we see are the potential hotspots, we have, in the last quarter, put aside that $615 million of provisions because we were anticipating some of these. So what I would say is that our buffers that we have put aside today allow us to navigate these potential hotspots for us and stay within our guidance of credit cost between 25 to 30 basis points. Unknown Attendee: Okay. So can I ask one more question. You had a small write-back in 4Q of [ 69 million. ] What was that? I mean, was that a recovery? Or was that... Yung-Chee Leong: Let me check on that. Unknown Attendee: In the fourth quarter. And also, DBS... Yung-Chee Leong: Yes, there was a write-back. Unknown Attendee: Also on the other part, your peer has been very open about how much it has in management overlay. And I think at one point, you also -- one peer but you have also talked about your overlays in the past, which were -- I mean we don't have to give the exact number, $1.358 billion but it used to be above $1 billion towards the $1.4 billion area. So could you just give us an idea of whether it is around there below or above just. Yung-Chee Leong: I think we'll stick with not giving that information as we have not given it before. But again, I'll emphasize that the GP buffer that we put aside is 1%. And if you look between Q3 and Q4, even though we raised it to 1% at Q3, it's 1% at Q4. Unknown Attendee: Okay. So does that have to calculate? Yung-Chee Leong: Yes, it's 1% at Q4, and it's enough to support our guidance. Yes. That's actually something very important to note. The unsecured number, which when you look at credit cost, there are quite a number of metrics to look at, and it looks at different things. The unsecured number is after taking collateral into account, what is the portion that is unsecured? How much coverage do you have against unsecured? So at 25%, we are actually very well covered in terms of the exposures to unsecured. Operator: Any other questions? [ Rei ] from Reuters. Unknown Attendee: I am [ Rei ] from Reuters. Just a question. You mentioned about ASEAN growth. There's also been some headwinds facing the Indonesian market in recent times. How do you see that impacting the business and the outlook for the market? Ee Cheong Wee: I think we have to focus on long term. Every day, you talk about short term, very difficult to manage an organization like this. But short term, I can tell you, Indonesia, our loan exposure is 3% of the total loans, 8% in Thailand. Thailand also going through all the volatility. End of the day, I think we have to take a look at the whole ASEAN, Indonesia being the biggest country in ASEAN, 300 million population. There is enough opportunity for us. Obviously, it's a selective customer choice. And I still think there are opportunity there, okay? And the fact is today, if you look at most of the foreign banks, they already exceeded the market. Most of them all they slowed down. That actually gives us a lot of opportunity being closer to the ground, being able to navigate a lot more nimble and faster. But having said that, our focus is still basically on trade, right, so that we are a little bit more flexible. But unless the customer is good, yes, we're prepared to give a term. So the overall, if you can see the growth despite all these tariffs, ASEAN-4 is actually growing quite well, right? We still can continue to grow because we have a very small market share. If you look at Indonesia, 300 million, 3% I can grow to 5%, right? Thailand, yes, going through the up and down, but I think I believe things are stabilized. You can see the portfolio quality seems to be sustainable. Yung-Chee Leong: And Vietnam, is still exhibiting high single digits in terms of GDP growth. And so I think we look at the region as a whole, there are continuing opportunities for us to.. Ee Cheong Wee: And it's a portfolio, right? It's not like you be only confined to a hope. Yung-Chee Leong: I think just to address Chanya's earlier question on Thailand, not to forget Thailand. I think the stability there actually encourages FDI as well. So it's definitely a country that we are very optimistic about as well. We -- our operations last year, we had onetime credit costs as well as loyalty rewards. Those were behind us. We actually believe that the Thailand operations this year will contribute more significantly for us. Unknown Attendee: You say Thailand will attract more FDI. Yung-Chee Leong: The political stability, I think encourages more FDI. And it will solidify its position as one of the key nodes in the supply chain in this region. Ee Cheong Wee: ASEAN is still generally quite attractive. You look at the family officers coming in. We're talking about trillion. And I think these are the kind of liquidity there. And ASEAN, I think, is a little bit more flexible. Yes, there are some political risk. But in terms of structuring, in terms of union, in terms of -- I mean, and cons. You tell me, which region is better? You tell me, U.S., Europe, where? So we are in this region. So we are -- and it's proven. And we are just dealing with ASEAN, which is within our reach, it's easy for us to. Unknown Attendee: If I can add one question, the net new money has been quite positive. Do you see that much growing in 2026? Ee Cheong Wee: No, I think it will continue to grow. It will continue to. And this is something that the bank is making a big effort to see how we can not only just supporting loans, right, how to -- because we do have a very strong private banking, our investment advisory unit within the private bank has actually done very well. As I -- just now in my speech, the digital platform. These are people, like every one of you, the average size [indiscernible]. People put money, they're able to generate good return, 144% in terms of growth. And this is just the beginning. In terms of number of customers, it's still quite limited. But in terms of volume. So this is where I see the power of distribution and also the trust that the customer have with us, not only just Singapore, the whole region. Yung-Chee Leong: The wealth income grew 14% year-on-year. So that's an area we think continues to be a highlight and bright spot that we want to focus on coming to 2026 as well. Unknown Attendee: Ask about coal financing. Do you still -- do you finance current customers of yours who decided to buy a coal plant? Yung-Chee Leong: We have stopped financing new coal plants or new projects involving coal since a few years ago, I don't remember, which year. Unknown Attendee: Including nickel. But let's just focus on coal for the time. Yung-Chee Leong: So we have stopped financing new coal projects or new clients doing coal projects since a few years ago. We can come back to you on which year.. Unknown Attendee: 2 years ago but we will confirm the year. Yung-Chee Leong: However, that said, if existing customers with existing facilities with coal, our priority is to help them transition out of it. So while not doing anything new or more, the existing facilities that we have to clients, we are actively -- every time we refinance we actually put in encouragement, incentives for them to transition. Unknown Attendee: I think you asked about nickel. Unknown Attendee: No, no, no. I think nickel plant is powered by coal. Unknown Attendee: So how far down the -- what is it? What are those things? Yung-Chee Leong: The problem is a value chain. Unknown Attendee: The value chain you say nickel plants are powered by coal. So do you finance the nickel plant? Yung-Chee Leong: It is difficult to answer that precisely. So let me give you an example, right? So if we finance coal mining equipment companies, they are not doing coal-fired power plants but they're doing equipment. But equipment can be used to mine other types of products as well. So do you not finance that? So I think you have to be quite deliberate here. We are very focused on addressing climate considerations, coal-fired power plants, right, CFPP. So those are areas that we have very specifically deliberately articulated what we will do, what we will not do. But it's a slippery slope to then start broadening that definition out to many others because you need coal-fired power plants to do power generation for power companies and to use start financing power companies. So it's hard. Ee Cheong Wee: So our commitment was made in 2022, about 4 years ago. Unknown Attendee: With what's happened in the U.S., are you still committed to your -- that road map to whatever net zero or... Ee Cheong Wee: Yes. Yes. We are still already withdrawn. We are still -- I think it's the right thing to do. We are facing it. We are doing it in a more practical way. The environment is for the future. It's not because of the regulation we are doing. Operator: Any other questions? Unknown Attendee: I mean just to touch back on the AI. Can you give us some insight as to which parts of the bank are furthest into AI adoption? Is it wholesale? Is it bank retail banking? Yung-Chee Leong: We are going -- I can give you some examples but it cuts across the bank in multiple areas. I think what's important for us is now to focus on foundation and knowledge layers that we built, and we can then use that to quickly replicate across other parts of the bank. But some key areas of use cases, for example, are in customer servicing, contact centers and branches. Maybe one practical example is every time you have trouble, you call a contact center and sometimes you get a run around, right? This person can help you and frustration among customers grow. But part of the problem is because the attrition rate with customer service contact center operators are fairly high, they get yarded by customers all the time. It's not a pleasant job. Attrition rate is high. They are not well trained. They don't have enough knowledge and they don't address questions. And with AI tools, can you just imagine that if we are able to curate faster, better responses, whenever a query comes in, what is the appropriate knowledge and response to deal with that. That helps us address the questions, hopefully at one touch rather than multiple touches. So accelerating that knowledge-based accumulation of testing, making sure the models are correct and we are responding correctly, that's important. Part of the challenge for us is unlike U.S. where it's a homogeneous market, everybody speaks the language in the same tone and the same accent. When we use these tools to help accelerate for our staff, the listening tools sometimes misread what is said because of the different accents and expressions. So the accuracy continues to be refined, and we need to make sure that, that's done in a speedy manner to address. So sort of customer servicing is just one aspect of it. AML, KYC preventing frauds and scams, anticipating, looking at the data analytics to look at where there are new modus operandi. How do we circumvent that? That's very useful cases of our AI team is focusing on as well. So just a couple of examples to share. Unknown Executive: We have deployed it across all our branches. Okay. So when they answer very complex thing like state accounts all assisted by the AI. So it's always with the right set of terms and conditions. So it's all deployed. Unknown Attendee: So you still have a human interface. But the human interface is helped by AI. Yung-Chee Leong: Yes. Yes. One example is people will call up to us what's your latest promotion rate for a certain product, right? And the promotion rates do change because we do have promotions at different times of the year. So it's important to make sure that the operators who are interfacing with customers have the most up-to-date and most accurate information at every interaction. Unknown Attendee: Have you -- those positions that are being -- I know like the AI is helping on function. Have you stopped hiring for new roles in those departments? Yung-Chee Leong: Not at the moment. I think given the economic climate, I think we have been very disciplined overall with our headcount but it's not targeted specifically at job archetypes. So you did see -- there's income pressure definitely in the macro sort of state. You have seen our slides on cost discipline. So that cost discipline actually extends across the bank. It's not about specific roles. Ee Cheong Wee: The human cost, you can actually see is coming down. Partly, we want to make sure we are able to contain we're able to train all these people rather than keep increasing. And end of the day, you have a situation where, as you say, AI, are you going to retrain people, keep it within ourselves, we train them so that the damage will less. Operator: Maybe we'll take one last question. Unknown Attendee: Kevin from [indiscernible]. Just 2 quick questions. I think one is on what's your interest rate outlook in terms of interest rate cuts from the Federal Reserve in the coming year? And the second one is whether or not there's any comments on the potential sale on UOB Asset Management was reported by Bloomberg a couple of months back. Ee Cheong Wee: House view is interest rate likely to cut maybe [indiscernible] but if you look at Singapore interest rate, it's already overdone. So how much would that -- I think it's quite stabilized at this point. Asset management, I think is on top of this. Yes, I think market is aware that we are -- we are looking at it. This is not something that we want to see who are the strategic buyer because end of the day, UOB, we want to have a platform to distribute what is the best product for our customers. On the stand-alone, scale is one thing but we want to make sure we offer the best product for our customer. That's our choice. Operator: Right. That's all. Thank you very much, everyone, and have a good day. Good rest of the week. Ee Cheong Wee: Thank you. Yung-Chee Leong: Thank you.
Operator: Good day, and thank you for standing by. Welcome to the SPX Technologies, Inc. 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. 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'd now like to hand the conference over to your speaker today, Mark Carano, Chief Financial Officer. Please go ahead. Mark A. Carano: Thank you, operator, and good afternoon, everyone. Thanks for joining us. With me on the call today is Eugene Joseph Lowe, our President and Chief Executive Officer. A press release containing our fourth quarter and full year results was issued today after market close. You can find the release and our earnings slide presentation, as well as a link to a live webcast of this call, in the Investor Relations section of our website at sdx.com. I encourage you to review our disclosure and discussion of GAAP results in the press release and to follow along with the slide presentation during our prepared remarks. A replay of the webcast will be available on our website. As a reminder, portions of our presentation and comments are forward-looking and subject to safe harbor provisions. Please also note the risk factors in our most recent SEC filings. Our comments today will largely focus on adjusted financial results, and comparisons will be to the results of continuing operations only. You can find detailed reconciliations of historical adjusted figures from their respective GAAP measures in the appendix to today's presentation. Our adjusted earnings per share exclude intangible amortization expense, acquisition and integration-related costs, nonservice pension items, and changes in the estimated value of equity security, among other items. Finally, we are meeting with investors at various events during the upcoming months. And with that, I will turn the call over to Gene. Eugene Joseph Lowe: Thanks, Mark. Good afternoon, everyone, and thank you for joining us. On the call today, we will provide you with an update on our consolidated and segment results for the fourth quarter and full year of 2025. We will also provide full year guidance for 2026. We had a strong close to the year. We grew full year adjusted EBITDA and adjusted EPS by 21% with strong performance by both segments. In addition, we continue to advance our value creation initiatives. Organically, we made further progress on our efforts to expand capacity within our HVAC segment to meet the growing demand for our highly engineered solutions. During the fourth quarter, we completed the purchase of a new 459,000 square foot facility in Madison, Alabama, which will have capabilities to produce our data center and custom air handling solutions. Inorganically, we recently announced the additions of Thermalek, Air Enterprises, and Ron Industries to the HVAC segment. These strategic acquisitions strengthen our position in the attractive electric heat and engineered air movement markets. Also, today, we are introducing our 2026 midpoint guidance, which implies approximately 20% adjusted EBITDA growth at the midpoint. Turning to high-level results. For the fourth quarter, we grew revenue by 19.4%, driven by the benefit of recent acquisitions and organic growth in both segments. Adjusted EBITDA increased by approximately 22% year over year, with 50 basis points of margin expansion. As always, I would like to update you on our value creation initiatives. Demand for our custom air handling and data center cooling products remains strong. To capture the growing demand, we are investing in expanding capacity at several of our existing HVAC facilities, including Ingenia’s Maribel and Cooling Products’ Olathe locations, and have recently added two new facilities to further accelerate our expansion efforts. During last quarter’s call, we announced the addition of a facility in Tennessee that will produce Tamco highly engineered aluminum dampers, which are seeing strong demand within the data center market. Production in this facility is expected to begin by the end of this quarter and steadily ramp throughout the year. Additionally, in Q4, we completed the purchase of the facility in Madison, Alabama, that will have flexible manufacturing capabilities to produce both our custom air handling and data center solutions, including our new Olympus Max product. We expect to have assembly capabilities toward the latter half of this year and initial production capabilities in 2027. We expect the expansion-related investments across all of our HVAC facilities to require approximately $100,000,000 of capital in 2026, in addition to approximately $60,000,000 invested in 2025. We anticipate these investments will enable nearly half of our HVAC segment’s revenue growth in 2026 and add roughly $700,000,000 of incremental capacity once at full production, supporting substantial growth in both data center and custom air handling volume. We have also continued to advance our inorganic growth initiatives. During 2026, we completed two strategic acquisitions in our HVAC segment that strengthened our positions in the attractive electric heating and engineered air movement markets. I am very pleased to welcome our new colleagues to the SPX Technologies, Inc. team. In the engineered air movement market, Air Enterprises and Ron Industries, only the air handling segment of Crawford United, advance our strategy to build a market-leading position by expanding our portfolio of custom air handling solutions and enhancing our capabilities with the coil offering. The combination of complementary technologies, design capabilities, and manufacturing footprint strengthens our ability to serve customers in the attractive healthcare, institutional, and commercial markets. Thermolac, located in Montreal, is a natural extension of our electric heat strategy, adding a complementary custom duct heating solution and broader geographic reach to enhance the value we deliver to customers throughout the North American commercial, industrial, and multifamily markets. The combination of Thermolac’s exceptional service, quality, and strong Canadian presence with our established electric heat channels in the U.S. provides significant opportunity for growth. And now, I will turn the call over to Mark to review our financial results. Mark A. Carano: Thanks, Gene. Our fourth quarter results were strong. Year over year, adjusted EPS grew by 25% to $1.88. Full year adjusted EPS grew by 21% to $6.76, or toward the upper end of our guidance range of $6.65 to $6.80. For the quarter, total company revenues increased 19.4% year over year, driven by the acquisitions of KTS, and Sigma and Omega, as well as organic growth. Consolidated segment income grew by $27,000,000, or 21%, to $156,000,000, while consolidated segment margin increased 30 basis points. For the quarter, in our HVAC segment, revenue grew by 16.4% year over year, with 5.5% inorganic growth and a modest FX tailwind. On an organic basis, revenue increased 10.3%, with solid growth in both cooling and heating. Segment income grew by $17,000,000, or 18%, while segment margin increased 40 basis points. The increases in segment income and margin were largely driven by higher volume and associated operating leverage. Segment backlog at quarter end was $585,000,000, up 22% organically year over year. For the quarter, in our Detection and Measurement segment, revenue increased 26.3% year over year. The KTS acquisition contributed growth of 23.2% and FX was a modest tailwind. On an organic basis, revenue increased 1.7%, primarily driven by higher project volume. Segment income grew by $10,000,000, or 27%. Margin increased 20 basis points. The increases in segment income and margin were primarily driven by higher volume, including the benefit of KTS. Segment backlog at quarter end was $350,000,000, up 43% organically year over year. Turning now to our financial position at the end of the year. We ended the year with $366,000,000 of cash on hand and total debt of $502,000,000. Our leverage ratio, as calculated under our bank credit agreement, was approximately 0.3x at year end. Including the effect of the recently announced acquisitions, leverage ratio was 1.0x. Full year adjusted free cash flow was $294,000,000, reflecting a 90% conversion of adjusted net income, inclusive of the approximately $60,000,000 invested to support our capacity expansion. Moving on to our guidance. Today, we introduced full year 2026 guidance inclusive of the recently announced acquisitions: Thermalek, and Air Enterprises and Ron Industries. Now Crawford United’s industrial and transportation products businesses are not included in our guidance. They will be reported in discontinued operations while we seek a suitable buyer. We anticipate total company revenue in a range of $2,535,000,000 to $2,605,000,000 and segment income margin in a range of 24.6% to 25.1%. We expect adjusted EBITDA to be in a range of $590,000,000 to $620,000,000. At the midpoint, this implies year over year growth of approximately 20% and a margin of approximately 23.5%. Our adjusted EPS guidance range of $7.60 to $8.00 reflects approximately 15% growth at the midpoint. In our HVAC segment, including the recent acquisitions, we anticipate revenue in a range of $1,800,000,000 to $1,840,000,000 and segment margin in a range of 24.5% to 25%. In our Detection and Measurement segment, we anticipate revenue in a range of $735,000,000 to $765,000,000 and a segment margin in a range of 24.75% to 25.25%. As a reminder, growth in 2026 will be impacted by the execution of projects in 2025 totaling approximately $20,000,000 that were originally slated to execute in 2026. For Q1, as a percentage of our full year 2026 guidance midpoint, we expect revenue and segment income for both segments and adjusted EPS to be similar to the prior year. As always, you will find modeling considerations in the appendix to our presentation. And with that, I will turn the call back over to Gene for a review of our end markets and his closing comments. Eugene Joseph Lowe: Thanks, Mark. Current market conditions support our 2026 outlook, which implies significant growth. Within our HVAC segment, we continue to see solid demand in key end markets. Our strong backlog of highly engineered solutions and increasing production capacity further reinforce our confidence in HVAC’s growth opportunities. In our Detection and Measurement segment, we are seeing improving global market conditions, which is supportive of growth in our run-rate businesses. For our project-oriented businesses, front-log activity remains steady, and backlog is at record year-end levels, yet with a higher percentage of multiyear projects. In summary, I am pleased with the close to 2025 and our strong full year performance. As we look to 2026, we expect to continue to drive additional shareholder value through both our organic and inorganic initiatives, including our continued efforts to expand capacity to meet the growing demand for our HVAC solutions, integration of our recent acquisitions which further scale our HVAC platforms and strengthen our positions in key end markets, and an active pipeline of attractive acquisition opportunities. With these initiatives and a solid demand backdrop, we are well-positioned for another year of 20% growth in adjusted EBITDA in 2026. Looking ahead, I remain excited about our future. With a proven strategy and highly capable, experienced team, I see significant opportunities for SPX Technologies, Inc. to continue growing and driving value for years to come. With that, I will turn the call back to Mark. Mark A. Carano: Thanks, Gene. Operator, we will now go to questions. Operator: Star 11 on your touch-tone telephone, and wait for your name to be announced. To withdraw your question, please press star 11 again. Our first question comes from Bryan Francis Blair with Oppenheimer. Bryan Francis Blair: Thanks, guys. Solid finish to the year. There understandably remains a lot of focus on your team’s data center exposure. So I guess to level set on that front, how much did data center revenue grow in 2025? What percentage of revenue is now driven by data centers? And how is your team thinking about DC sales growth within your initial 2026 guidance? Eugene Joseph Lowe: Thanks, Bryan. I will start there. We are seeing substantial growth. We had talked about some of the numbers we would share previously that 2025 would be about 9% of revenue. It is in the neighborhood of $200,000,000, maybe a little bit more than $200,000,000. That is up quite a bit. We had given the number of 7% prior. And we would anticipate that to be, as we said, low double digits, say, 12%. So we would expect nice growth here, probably in the 50% neighborhood for our data centers going into 2026. Mark A. Carano: That is very encouraging. Bryan Francis Blair: And maybe offer a little more color on the strategic state of Air Enterprises and Ron and Thermalek within EAM and electric heat, respectively. They seem like very down-the-center kind of deals for your team. How do the assets strengthen HVAC positioning overall? How should we think about commercial synergies and the ability to accelerate growth going forward? And what exactly have you baked in for revenue and profitability in the initial 2026 outlook? Eugene Joseph Lowe: I will start on the strategy side. With Crawford United, their air handling units—really two pieces. The bigger piece is Air Enterprise and the custom air handling. They have a great product, a blue-chip customer base. They have a different style of product, lower leakage, and I would say they are viewed as a premium provider in this market. You can go to their website—you will see all of the blue-chip customers that basically have them, oftentimes, as basis of design. So it is a little bit different flavor of a product versus Ingenia, but a very high-quality product and one that we are very excited to have as a part of our portfolio. We think we can help them grow. We think we can help them operationally. We also think we can help them in the building of the channels there. The Ron component of that is somewhat smaller. That is the coil manufacturer—coils for the custom air handling units. We like that because we can use that not only for Air Enterprises, but also for Ingenia, which we predominantly buy outside. We have a lot of coils and coil usage increasing across our product lines in HVAC, and this is just going to give us more confidence. We see some nice growth there, not only within our own businesses, but within our customers, where we have a very strong position, particularly the Tamco business. So operational synergies and channel synergies there. With Thermalek, this is a real no-brainer. We are very strong in duct heating, as we have talked about with Indeeco. We invented duct heating. We have the original patent. Very strong position in the U.S., but very low in Canada. Thermalek is the leader for duct heating in Canada—very complementary. They have a very good brand, a very good channel. We really like the team, a great leader there, really engaged workforce. And we think that they have a variety of products that they do not only sell in Canada. The majority of their business is Canada—let’s say approximately two-thirds. We think we can help them grow more in the U.S. And then we see some products that we have not been able to successfully sell into Canada, and we think we can really leverage the Thermalek channel. So we see some nice channel synergies on both sides there. Additionally, we have a good lean process and operational experience. They are also very capacity constrained. We believe we can help them grow as we look ahead. Mark, do you want to make any comments on the numbers? Mark A. Carano: Yeah. Bryan, let me add to that—your question of the impact on 2026. We have disclosed a few numbers out there. There is also some publicly available information out on some of the businesses with respect to Air Enterprises and Ron. But what I would guide you to is, you know, $35,000,000 in revenue at the Thermalek business and something in the low $80,000,000s for the Air Enterprise and Ron business combined. That is on an annual basis. Obviously, we are going to own both of these businesses for eleven months, so that kind of gets you to something just shy of about $110,000,000. Segment income margins for both these businesses are slightly higher than our segment average. Bryan Francis Blair: Understood. Very helpful. Thank you. Operator: Our next question comes from Andrew Obin with Bank of America. Andrew Obin: Hey, Gene. Hey—how are you? Maybe I know a lot of people will be talking about HVAC. I will ask about Detection and Measurement. A couple of things. A) This $20,000,000 pull-forward of revenue—how should we model it in 2026? And part two of the question, how should I think about the growth for the business? The backlog is up organically 45% if I heard it correctly. Eugene Joseph Lowe: Let me start. We had a project—very nice backlog, as you have seen from our press release—record year-end backlog. We have $350,000,000 in Detection and Measurement, up more than 40% organically. We feel really good about how that business is doing. But we had a project that was in 2026; the customer pulled it forward. So if you do the math, that makes 2025 higher by approximately $20,000,000, and 2026 $20,000,000 lower. It is about a 5% growth headwind. That is the reason we are more flattish. If we look across the business—about two-thirds of this business is run rate—we are seeing nice growth in our run-rate business, GDP-plus growth rates. And then on the projects, we have a lot of projects and a lot of backlog. If you look at 2027–2028, that is the reason that we are more flattish. Mark, do you want to give a little more color? Mark A. Carano: I think Gene touched on the top line. If you do the math—he gave you a little bit of it—look at what the impact of that shifting of that project had on 2026. Had it not shifted into 2025, it would have been mid-single-digit top-line growth in 2026. Andrew Obin: My question was a little simpler. Should we model it in Q1, Q2? Or should I take this $20,000,000 out versus normal seasonality? Mark A. Carano: It was in the back half of the year. That is where you should look to adjust it. Andrew Obin: Right, but then it was pulled forward from—Is all the impact in Q1? Sorry—should I just take $20,000,000 out of Q1 versus what I would normally ask? Is that simple? Mark A. Carano: That is probably the right way to think about it. The D&M business has a project element, and the way these projects gate and how they fall within the quarters can move around on us. But that is a reasonable approach. Andrew Obin: And on Olympus Max—you have described it as your most successful product launch ever. Could you tell us about feedback, any update on bookings, and applications beyond data centers? We have been getting questions about the NVIDIA announcement—does it tie in at all to that, or is that more about PUEs? A little more color would be great. Eugene Joseph Lowe: If anything, I am feeling more bullish than on our last earnings call. The punchline is we have a winner here. We believe we have advantages on tonnage and flexibility—specifically, our dry unit can be upgraded to an adiabatic after the fact to add a lot more thermal heat exchange, which gives you flexibility. We have integrated controls, which is a differentiator versus our competitors, and more robust mechanical equipment. We have already been awarded with three customers—material amounts—and we feel good. We targeted $50,000,000 of bookings last year; we did get that, and we are converting that to revenue this year. We feel really good as we look to 2027, 2028, 2029. We have one customer that has already locked up multiple years of growing demand and a lot of activity that we feel good about. I feel very good about the Olympus Max, and I think it is the right solution for the market. Andrew Obin: Well, congratulations. Thank you. Eugene Joseph Lowe: Thanks. Operator: Our next question comes from Ross Riley Sparenblek with William Blair. Ross Riley Sparenblek: Hey, good evening, gentlemen. Sticking on the Olympus Max, what can we read through from the new Rubin announcement and the way that this market is heading? Do you get a sense that this will be the predominant cooling approach going forward, or will there be a mix for water cooling as well? Eugene Joseph Lowe: Thanks, Ross. When the Rubin announcement came out—it can run at lower water temperatures—and that caused some concern for whether you need a chiller. There are some different variations. There may be circumstances where you need fewer chillers or not need chillers, but we are not aware of circumstances where the Rubin chip would reduce the need for external heat rejection, which is where we play. So the Rubin chip really has no negative impact on us. I would say there is actually some positive impact in some of the architectures we have seen. As chips move toward AI chips like Rubin, they generate a lot more heat—and that heat is linear. The more electricity, the more kilowatts, you are going to need more cooling towers. That cooling tower could be adiabatic, dry, or a normal Marley cooling tower. Historically, the bulk of the data center market has been done with air-cooled chillers; we do not really participate in that market. As the heat loads get bigger, they are moving more toward water-cooled chilling and free cooling—very attractive opportunities for us. Basically, the more compute power, the more heat—you need more cooling towers. We feel well-positioned with the trends we are seeing. Ross Riley Sparenblek: That is very helpful. And then on lead times—it takes a couple of years to build a data center, and cooling is often one of the last things installed. If you are booking orders now, should we expect that to compound into 2027, 2028? Eugene Joseph Lowe: There is a set of hyperscalers we work with, and they have different methodologies. Some will lock you up for four or five years, and you have very clear visibility on future demand. We feel very good about that trajectory. Others lay out the plan; although you do not have a PO in-house, they will release POs on a more quarterly basis but will vigorously validate that you have capacity and quality. You get different levels of visibility across customers, but we are growing a good amount in 2026 and expect nice growth into 2027 and 2028 with what we are seeing. There is a lot of activity, and we have a good set of solutions to meet that demand. Ross Riley Sparenblek: Sounds exciting. I will pass along. Thanks, guys. Eugene Joseph Lowe: Thanks. Operator: Our next question comes from Joseph O'Dea with Wells Fargo. Joseph O'Dea: Hey, Gene. Can we start on the capacity additions? I think you said when you are at full production, that would equate to roughly $700,000,000 of revenue potential—just wanted to confirm that. And then the timeline to reach full production and how much those capacity adds will contribute to revenue growth in 2026? Mark A. Carano: You are correct—that is what we said: $700,000,000. It is going to take some time to get to that full production level, particularly at our Madison facility. Both the Tamco facility and Madison will take time to ramp—some of that driven by equipment lead times and then by getting them into respective production processes. Tamco will come online at the end of Q1 and ramp through the year. Madison will come online in the second half of the year for assembly only; it will not be in a production phase until 2027. Big picture, it will be sometime in 2028 before you see full production capacity on those two expansions. We have also been making incremental investments in a couple other facilities as part of that collective investment to meet data center and custom air handling demand. Joseph O'Dea: That is helpful. And then on the D&M margin expansion in 2026—up about 140 bps at the midpoint—can you bridge that, given you talked last quarter about some initiatives that would require investments? Mark A. Carano: I would bucket it in two areas. One is mix we will see across the business next year, driven by the project mix and the margin profile of those forecasted for 2026—that is close to two-thirds of it. The balance—the other third or so—is continuation of cost optimization initiatives: leveraging engineering, R&D, sourcing, some footprint rationalization—really a broad portfolio of actions across the segment to drive more efficiency. That is how we break it down. Joseph O'Dea: That is helpful. Thank you. Operator: Our next question comes from Jamie Cook with Truist Securities. Jamie Cook: Hi, good evening and nice quarter. First, a flip question on HVAC margins. You imply the top-line growth is fairly healthy and the organic growth is healthy. I think margins at the midpoint are up about 25 basis points, which is less expansion than what you saw this past quarter and this year. Any commentary on that? And second, on the M&A pipeline—you have been very active. How should we think about further M&A potential given the strength you have seen so far? Mark A. Carano: On HVAC margins in the guide, as we suggested previously, there will be start-up costs related to bringing these plants online in 2026. These are temporary in nature and around a 50 basis point impact. As we ramp these facilities to full capacity, we will get operating leverage that outstrips the initial costs, but as you stand up any plant, there are costs required. Eugene Joseph Lowe: On the M&A pipeline, we are very pleased with the two transactions in Q1—great fits and value accretive. Even with pro forma leverage, we are about one time on net debt to EBITDA, so we have a lot of capacity. There is a lot of activity in the areas we have highlighted—engineered air movement and electric heat—as well as a number of Detection and Measurement platforms. The pipeline remains very full, and we see a good probability of more opportunities to invest in growth this year. Operator: Our next question comes from Amit Mehrotra with UBS. Amit Mehrotra: Sorry about that—still learning how to ask questions on calls, clearly. Hi, guys. Thanks for letting me ask a question. On non-data center end markets within HVAC and also in D&M—there is anticipation of some procyclicality. Are you seeing that in real time—have orders perked up? Any color outside of normal procyclicality would be helpful. Eugene Joseph Lowe: We track where we are seeing strength and softness. Across HVAC, areas of really nice strength include data centers, healthcare, power, heavy industrial, aftermarket, and institutional/higher ed. Areas a little softer as we look at 2026 would be battery automotive, semiconductor, chemical, and commercial real estate—which is still active but at a lower level. Put it together, and we see pretty solid growth even outside of data centers. Also, the end of Q4 and the first seven weeks of this year—we have had a nice start to bookings. Amit Mehrotra: Thanks. And Mark, on overall earnings growth—you are forecasting another strong year, and capacity is layering in as we progress. Can you help with cadence—how earnings growth evolves through the year as capacity comes online? Mark A. Carano: We gave some color on Q1 in the prepared remarks. Stepping back to first half versus second half, I would expect a similar cadence to last year on a percentage basis for revenue, segment income, and EPS. The capacity expansions will ramp incrementally each quarter, with benefits more evident in the back half. Amit Mehrotra: And anything around backlog or orders—particularly in data centers—suggesting elongation of typical lead times? Eugene Joseph Lowe: With large data center customers, cooling is mission critical—they give you a lot more visibility than a local hospital or commercial building. You know what is coming earlier, but our lead times have not really changed much across our businesses—pretty similar to where they have been. Amit Mehrotra: Very good. Thank you. Operator: Our next question comes from Joe Giordano with TD Cowen. Joe Giordano: Thanks for taking my questions. Appreciate the color on warmer liquid used for cooling. I am curious what a move to significantly higher voltages in data centers would mean—current goes down, less copper, less heat per unit of compute. As we move into next-gen architectures, any implications for you? Eugene Joseph Lowe: All the shifts we have seen generate more heat. If you look at kW per rack and electricity going into data centers, I have not seen anything decreasing. You are seeing gigawatt-scale data centers—massive electricity—and electricity correlates well to heat, which correlates to the amount of cooling needed. If there were an invention that significantly reduced electricity, that would reduce the amount of cooling towers needed. I am not aware of any such invention. Joe Giordano: Anything we should think about in terms of tariffs—any changes there—and the volatility you are seeing in metal prices? Mark A. Carano: Timely question. For us, tariffs during 2025 were not a material impact. We largely offset through price, sourcing, and CI initiatives. We will keep a close eye on it, but our model is largely U.S., largely in-country-for-country on sourcing, and our North American businesses, particularly Canada, are covered under USMCA. Not overly concerned today. On metals, we watch prices, but a large part of HVAC is configured or engineered to order—we are taking orders and pricing/manufacturing in real time—so we do not have long lead-time exposures for steel and aluminum. Joe Giordano: Thanks, guys. Operator: Our next question comes from Jeff Van Sinderen with B. Riley Securities. Jeff Van Sinderen: Hi, everyone. Back to data centers—what are you hearing from customers? What are they asking for most—what is top of mind—and how is that evolving? Eugene Joseph Lowe: At a high level, demand is increasing, and several hyperscalers are pushing for acceleration. Demand with existing customers and in new bid situations remains very robust. Jeff Van Sinderen: Circling back to supply chain—any areas you think might be increasingly tight this year? Any potential bottlenecks? Mark A. Carano: Looking across our supply chain, nothing jumps out as a material concern today. Eugene Joseph Lowe: As we grow, we go line-item-by-line-item through bills of materials to ensure we can scale up—we have gone through that as we always do, and we do not see red flags today. Jeff Van Sinderen: Good to hear. One more—different topic: trends you are seeing in drone detection and jamming for that business line and the outlook there? Eugene Joseph Lowe: Our Controp business plays in a niche with a very effective product. The drone detection world has many players—many trying residential or stadiums—and we have seen a lot of those belly flop. We are playing more on the military side predominantly and have a very good solution there. We have one primary competitor—a German company we know well—and we compete effectively. There is a good amount of activity, but nothing dramatically higher or lower—pretty steady. Jeff Van Sinderen: Okay. Good to hear. Thanks for taking my questions. Operator: Our next question comes from Walter Scott Liptak with Seaport Research. Walter Scott Liptak: Hi, thanks. Good evening, guys. The CapEx is going up quite a bit. Can you talk about the timing of the cash out for the CapEx and the fairly big range—what could drive pluses and minuses to getting all that capital spending done this year? Mark A. Carano: The plan is to meet the CapEx guidance for the year—it is important and relates to the plant expansions and stand-ups underway. If any shift occurs, it would be timing of equipment deliveries. We are watching that carefully with a great team focused on it. Not concerned today, but that is the primary swing factor. Walter Scott Liptak: And on the capacity going in—you mentioned some hyperscalers trying to lock down capacity. Is the CapEx there to meet that, or within the $700,000,000 run-rate, is there room to grow projecting future demand levels? Is there a phase two of this data center HVAC build-out? Eugene Joseph Lowe: It is nice to have hyperscalers with increasing demand over the next couple of years. With these expansions, we think this is approximately $700,000,000—about $550,000,000 for data center and about $150,000,000 for custom air handling, predominantly Ingenia. This gives us runway over the next couple of years. Where we sit today, we do not see an imminent need for additional expansion in the next couple of years. If there is accelerating demand, we will evaluate opportunities, but we feel very good about this expansion and the flexibility it provides over the next several years. Walter Scott Liptak: Okay. Great. Thank you. Operator: Our next question comes from Bradley Thomas Hewitt with Wolfe Research. Bradley Thomas Hewitt: Hey, guys. Thanks for taking the questions. It looks like you are guiding to about low double-digit organic growth in HVAC in 2026. You mentioned 50% growth expected in data center, and if we adjust for Ingenia revenue growth, it seems like the implied growth rate for the rest of the segment is around 3%. Is that in the right ballpark, and how do you think about puts and takes to growth in core HVAC ex-Ingenia and ex-data center? Mark A. Carano: Your math is directionally right—low single-digit growth in the non-data center, non-custom air handling parts of the business. Bradley Thomas Hewitt: Great. And on D&M, you are guiding margins to 25% at the midpoint versus the Investor Day target of 22% to 24%. Is that still an appropriate medium-term target, or should we think about 25% as a baseline upon which you can layer normal incrementals? Mark A. Carano: Great question. Some of the margin improvement is related to mix; some is related to structural opportunities we are pursuing to drive the overall margin profile up—those should be durable. If you do the math, that pencils out to around the top of the 22%–24% range we guided a couple of years ago. For now, we are not changing the target profile, but we will revisit as we go through the year and into next year. Operator: That concludes today's question and answer session. I would like to turn the call back to Mark A. Carano for closing remarks. Mark A. Carano: Thank you all for joining us for today’s call. We look forward to updating you again next quarter. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.